Hello everyone, thank you for standing by, and welcome to Neonode’s Third Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. At this time for opening remarks and introductions, I would now like to turn the call over to Daniel Gelbtuch, Director of Investor Relations. Daniel, please go ahead and start the conference.

Welcome and thank you for joining us. On today’s call we will review our third quarter financial results and provide a corporate update. Our update will include details of our design wins, technology developments and new customer agreements that we recently announced. The prepared remarks will be provided by Thomas Eriksson, our CEO and David Brunton, our Chief Financial Officer. Before turning the call over to Thomas and David, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts are forward-looking statements. The words anticipate, believe, estimate, expect, tend, will, guides, confidence, targets, projects and other similar expressions typically are used to identify forward-looking statements. These forward statements do not guarantee the future performance that may involve or are subject to risks, uncertainties and other factors that may affect Neonode’s business, financial position, other operating results, which include but are not limited to the risk factors and other qualifications contained in Neonode’s Annual Report on 10-K, quarterly reports on 10-Q and other reports filed by Neonode with the SEC to which your attention is directed. Therefore, actual outcomes and results may differ materially from what is expected or implied by these forward-looking statements. Neonode expressly disclaims any intent or obligation to update these forward-looking statements. During this call, we may also present certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, non-GAAP net income and certain ratios that use these metrics. In our press release with the financial payables issued today, which is located on our website at www.neonode.com, you will find our definition of these non-GAAP financial measures or reconciliation of these non-GAAP financial measures with the closest GAAP financial measures and a discussion about why these non-GAAP measures are relevant. These financial measures are included for the benefit of investors and shall not be considered in addition to and not instead of GAAP measures. At this time, it is now my pleasure to turn the call over to Thomas Eriksson, Chief Executive Officer of Neonode. Thomas, please go ahead.

Good morning everyone and welcome to our third quarter 2012 conference call. With me today is David Brunton, our CFO. We will give you an overview of our performance for the quarter ending September 30, 2012. I will talk about our business highlights and David will walk you through our financial results. After the remarks, David and I will be available for questions. To start with, I would like to highlight that our design activities for our Multisensing optical touch technology is very intense, as our 58 year-to-date design wins indicate, the software technology is about to ramp in high volume office equipments, handset, toys, and automotive market. While it’s difficult to size and time the ramps for our new markets, we are increasingly confident that most design wins will gain revenues over the next 6 to 18 months. Most importantly, our business is starting to expand beyond [inaudible] into new higher volume markets, due to in large part to our first low power Multisensing controller manufactured by Texas Instruments. It has been shifting in volume since May 2012. Not only does our controller replaced most of the chips and discrete components, it also lower our customer’s building material costs and improve performance, but also continue high volume markets for Neonode. At this point, I want to talk about some of our near-term challenges. Some of our customers have postponed and/or discontinued their anticipated product launches in 2012. Consequently this has been a negative effect on our near-term revenues. In addition, as we previously noted on our second quarter investor call, E-reader market which for the time being drives the majority of our revenues, has been softer than expected in 2012. Moreover Amazon who has been a significant customer this year did not include our technology in their latest Kindle.…

Thanks Thomas. I will begin by going through our results for the quarter ended September 30, 2012, and then move on to the nine month period. First, I’m going to discuss some high level growth related activities that have served to increase the company’s overall expense levels in 2012 as compared to 2011. Salaries and benefits are approximately 55% of our total expense. In 2011, we had on average approximately 20 full time employees throughout the year. That number has increased to an average of 38 employees through the first nine months of 2012 and we currently have 45 full time employees. We hire highly skilled optical, mechanical and software engineers to work with our customers in their product design efforts as well as to develop new and exciting technology and intellectual property. In the future, as our customer wins increase, we expect to continue to hire engineers to support our customer’s requirements. We also increased our marketing and IP legal budgets from virtually nothing in 2011 to approximately $600,000 in the first nine months of 2012. We have focused our efforts to produce marketing materials for our sales department and to increase our participation in industry trade shows like CES and Mobile World Congress. The development in IP protection of new innovation is one of our core values and we have increased our budget to support these efforts. And of course, our travel expense has been seeing significant growth as our customer base and global reaches increased in the first nine months of 2012 as compared to 2011. Keep these items in mind as I discuss the period-to-period comparisons since they are the primary cause of the expense increases for both the quarter and nine months just ended. Our net revenue for the third quarter of 2012 increased 30%…

Thanks, David. To recap, Neonode continues to gain momentum and visibility in the market that will allow the company to further accelerate growth in 2012 and beyond. We are not only securing new design wins but we are aggressively investing in our business to meet customer demands and remain on the leading edge of touch solutions. I would like to take the opportunity to thank all our customers, our partners, investors, and our very talented and dedicated employees for their trust and support. This concludes our prepared remarks and we will open the call for questions. Thank you very much.

Thank you. [Operator Instructions] Your first question comes from Rob Stone of Cowen & Company. Rob Stone – Cowen & Company: Hi guys, a couple of questions if I may. Thomas, first of all on the smartphone I sort of reference design, I would assume that intended to help accelerate some of these handset design wins. Can you comment about how that potentially would influence time to market for a handset design?

Hi, Rob. So, yes, this platform recently launched its target being not only low cost handsets, but also high-end handsets. It’s just that we think the performance and the feature level we have suits both for all of these types of devices. So, we keep rolling out and we’re working actively with some of the bigger companies in the industry with this solution. And, it’s going into products that are going – hopefully coming out in the market next year. Rob Stone – Cowen & Company: Okay. And, with respect to the user interface design business, you mentioned a lot of the factors and number of wins overall, can you provide any color on what types of products or sectors you’re getting traction with the UI design piece?

It is in all other segments we see that. We see that a lot of customers are asking us for help to improve the overall user experience and not only for the touch, but adding new type of functions that we have in our solutions, for example proximity sensing. So, and that has an impact on the user interface and you need to do modification to that and we’re helping customer to implement this function and it goes from anything – from low-cost products to high-end devices. And, it’s very interesting business because we also have in fact some IT on it and we based that business on that and we sort of developed as we go. Rob Stone – Cowen & Company: Okay. You mentioned that the chip that was jointly developed with TI has been in volumes since May, do you have a sense of what proportion of the currently shipping products are now using that chip?

All of our design wins this year is using this chip. So, we have discontinued our previous solution and using this in full scale now. We are seeing development on the next generation chip together with our partners for improving performance more, adding more functions, and reduce the cost even more. Rob Stone – Cowen & Company: Okay. Couple questions for David by me. The cash was up sequentially notwithstanding the loss and it looks like that was because of deferred revenue, can you comment?

Yes, we actually received substantial pre-payment in one of the automotive clients that we signed and announced earlier. So, they felt strongly enough when they signed the agreement that they would give us a substantial pre-payment. That’s where that came from. Obviously, there is a little bit of also pre-payments associated within RE and they haven’t been working on. So, we haven’t recognized the revenue yet too, so. Rob Stone – Cowen & Company: Okay. And finally can you comment on how many 10% customers you may have had in the quarter any other color there?

Yeah, you’ll see that in the 10-Q that’s going to be released this morning. We had three same ones Amazon, Sony, Kobo. Actually four, Barnes & Noble for the quarter. Rob Stone – Cowen & Company: Okay. So, Barnes & Noble was back over 10% in the quarter?

Yes. For the quarter they were. Rob Stone – Cowen & Company: Great. Thank you.

[Operator Instructions] Your next question comes from the line of Orin Hirschman of AIGH Investment Partners. Orin Hirschman – AIGH Investment Partners: Can you give a little bit more color just in terms of that payments for the automotive customers, is that a prepayment against royalties per se?

Yes, exactly. It’s a license fee prepayment. Orin Hirschman – AIGH Investment Partners: So meaning for example, they were $2 for fee, they basically prepaid part of that.

Yes. Orin Hirschman – AIGH Investment Partners: Okay and you’re going to keep it on deferred until they actually begin going into production?

That’s right, I mean, that’s how the deferred revenue works on the license fees, so then they will report to us with a normal means of reporting on a quarterly basis and based on the number of units it will be recognized revenue. Orin Hirschman – AIGH Investment Partners: Is there something proprietary for that particular design while they were willing to do that and do a prepayment, what’s the motivation for that?

I don’t know what their motivation was for that. Do you know Thomas, I mean, if they – we ask them if they would prepay just sort of as an indicator of how strongly they felt about putting the automotive product out and they said, yes. So, we took it. Orin Hirschman – AIGH Investment Partners: Any idea when they go into production?

I believe the scheduled time is probably at earliest towards the end of next year, maybe 2014. Orin Hirschman – AIGH Investment Partners: And they were still willing to do prepayments [inaudible].

Yes. Orin Hirschman – AIGH Investment Partners: Okay. A couple of other random questions, can you update us on the progress of the patent evaluation process that you point in manual in general what’s going on with the patent side?

It’s going quite well. We’ve been working on this for a long time and as you know, we are a part of the business around this and we’re seeing that based on – this is not something we’re going to conclude or end, these are continuous work with our advisors which currently today is [inaudible] to form a strategy for us. We are looking at all different opportunities at the moment and we have grounded [inaudible] and we also have a lot of things pending in our pipeline. I don’t think this 40 companies going to be very interesting going forward where we sort of add new things that is not only in our sweet spot, but other things as well. And, the company as you know, have a history of developing a lot of different user interface innovations. So, this is kind of the really interesting to see how it evolves. Orin Hirschman – AIGH Investment Partners: Without disclosing anything that – you’re precluded from disclosing at this moment, but are you happy in terms of what the patent valuation is bearing out compared to what you believe do you have?

Yes. I mean, we were happy. I think as you know, this is a very complicated business and, we as a company have to be very careful in what we do and what we say. We’re taking this really seriously and doing a very good ground work to look into this, but more importantly, this is not the single thing we’re doing. We’re looking at a lot of different opportunities surrounding user interface in general. Orin Hirschman – AIGH Investment Partners: And then, just one question relating to the emerging UI business and industrial design business. Can you give us any additional update, is that a business that’s in addition to your touch business – for your touch business in terms of being additional license fee or it helps drive – just drive the infrared business, how should we view that?

Yeah. We’re looking at three different revenue streams for us going forward. I mean the user interface is off to a design and the touch and the sort of the man-machine interface that we’re doing are highly coupled together and/or all of them are very important to bring really good and responsive products to the market. So, that’s why we think that all of these three components are going to be really important for us, as a company going forward, and we believe we’re going to be successful in all of the three segments. Orin Hirschman – AIGH Investment Partners: But again that would be additional license fees on top?

We believe so, yes. Orin Hirschman – AIGH Investment Partners: Okay. And, it sounds like you do have – do you have your first customers yet, are these sort of some differentiation?

Yeah. As I said in the script, we have – actually working on a few projects where the customers – we’re helping the customers with helping them with user interface design, but also their industrial design. The customers have to take a look at the products where that sort of blend into the user interface and make sure that we make a really attractive design with our technology. I mean, as you know, we’re a licensing company. So, it’s in our interest that our customers are bringing out exciting, interesting and good looking products to market. So, if they’re successful, we’re also going be successful in terms of collecting royalties from them. Orin Hirschman – AIGH Investment Partners: Okay. If there is any – have any of those had additional royalties just for the UI aspect yet?

Not yet. It’s currently under negotiation. Orin Hirschman – AIGH Investment Partners: Okay. Just another couple of quick questions, housekeeping questions. Your non-cash, Dave, your non-cash EPS number as it compares to the cash EPS that was on the first call?

I don’t remember, what do you mean by First Call? Orin Hirschman – AIGH Investment Partners: I mean on the earnings estimates that were out there.

I believe – you mean from the analysts? Orin Hirschman – AIGH Investment Partners: Yeah.

I believe it was $0.05 loss on a non-cash basis, for the quarter and we’re at actually $0.04 loss. Orin Hirschman – AIGH Investment Partners: Okay, you obviously mentioned that there is some follow-on activity with some of your e-book e-reader customers. Does this mean tablets and other kind of products because they’re happy with you on the e-readers?

Yes, exactly. I think we said this before in the past – most if not all of our customers at this point are doing multiple products and multiple designs, and it’s not always in the same product category. So, most of the e-reader players out there today area also in the tablet markets for sure, and if they aren’t there, they are going there. And so, we’re working on all of those kind of multiple products and some of them are also moving into the phone side business, and you also have own guys that are moving into tablet side. So, there is certainly multiple products going, yes. Orin Hirschman – AIGH Investment Partners: Okay. And finally, just you mentioned the wins and loss of the equipment. Can you give additional color as to whether there are multiple wins within both individual customers meaning that you’re getting the penetration within the customers?

Definitely, in fact one of the customers has double-digit.

Your next question comes from the line of [inaudible].

I came on the call a tiny bit late, and I do apologize if this question has already been asked. I was just curious about the regions of activity for the handsets?

This is worldwide with the some of the top companies we’re working with, anything from United States to Asia.

We’re talking about what regions now U.S., Europe?

Yeah, you mean the region for their products or region of the company.

For the products?

The product is worldwide.

Okay, is there any specific activity that you’re seeing stronger than others?

Yeah, it’s not limited to any market. These companies we’re working with our launching products on all sort of markets, but I think in terms of volume, the most interesting business for us going forward going to be the feature phone or the low cost smartphone market, which is billions of devices of opportunity for licensing company like us to scale up to business we believe that’s where we’re going to have our market and move from there. And, these devices are seen selling to all sorts of markets, but mainly concentrated to emerging markets like Asia, India and Africa.

All right, thank you very much.

Your next question is a follow-up from Rob Stone of Cowen & Company. Rob Stone – Cowen & Company: Hi, I just wanted to get a little better sense I think Tom as you suggested that you will be scaling up operating expenses particularly as you need more engineers to support design win. Can you give us a sense of how much you maybe planning to add the headcount in 2013?

Yeah, I think the growth of that just going to be the same as this year. So we probably end up with about 60 to 70 for next year. Rob Stone – Cowen & Company: 25 or so maybe?

Yeah. Rob Stone – Cowen & Company: So adding 25?

Yes. Rob Stone – Cowen & Company: Okay. And as you think about category of anything in counting this design win activity. What constitutes a specific win, especially if you have multiple wins within a company? Is that different products or different products families or how do you carve it out?

Well, it could be both, but typically it’s when a customer comes to us and they either issue a statement of work that has a very specific detail for a product and let’s take the office equipment. The large OEMs that are selling printers out there have multiple product lines. They are all printers, but they are multiple, right. Inkjet and laser jet etcetera, etcetera and all kinds. So those typically run on a few type of platforms, but they have different design wins for each model, because they are all different. And so we have to do work with each one. They issue a statement of work. We then work with their team to get that product into development. That’s what a design win is to us. Rob Stone – Cowen & Company: Okay. Thank you.

Okay.

[Operator Instructions] At this time, there are no further questions. I would like to now turn the floor back over to management for any closing remarks.

Hello, we want to thank you all for joining us for this call. We’ll keep you posted on our progress in 2012 and in the future. And have a very good day. Thank you.

Thank you. This concludes today’s conference. You may now disconnect.