David Brunton - Head of Corporate Investor Relations Thomas Eriksson - CEO Lars Lindqvist - CFO Remo Behdasht - VP Business Development & Strategic Alliances Gunnar Fröjdh - VP Automotive Group

Hello, everyone. Thank you for standing by. And welcome to Neonode's Second Quarter Ended June 30, 2016 Earnings Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to David Brunton, Neonode's Head of Corporate Investor Relations. David, please go ahead and start the conference.

Welcome, and thank you for joining us. On today's call, we will review our three and six months ended June 30, 2016 financial results and provide a corporate update. Our update will include details of customer activities, technology developments, and other items of interest. Before turning the call over to Thomas, I would like to make 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-looking statements do not guarantee the future performance that may involve or subject to risks, uncertainties and other factors that may affect Neonode’s business, financial position and 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. At this time, it is my pleasure to turn the call over to Thomas Eriksson, Chief Executive Officer of Neonode. Thomas, please go ahead.

Thank you, David, and good morning everyone. First, I would like to introduce the team we have on the call today. We have Mr. Lars Lindqvist, our CFO; Mr. Remo Behdasht, who is running our AirBar business; and Mr. Gunnar Fröjdh, who is running our Automotive Group. They will provide an update on the respective business units later in this call. We’ll start today’s call with some comments from our CFO, Mr. Lars Lindqvist. Please go ahead, Lars.

Thanks Thomas. I wanted to direct your attention to the 10-Q and earnings press release filed earlier today. I am pleased to tell you that our quarterly license fee revenue increased 25% over last year, and we have 13% increase in total revenues for the first half of the year. We expect our license fee revenue to continue to increase, and up cost efficiencies to result in a lower operating cost structure. On top of this, we expect to have revenues from AirBar starting in the third quarter. All-in-all, at the start we believe to be profitable in the fourth quarter. As expected, our NRE fees decreased compared to last year. For the past few quarters, we have been talking about fundamental change to our business model from fully custom designed, that include NRE fees to standardized sensor modules to generate less NRE fees. We’re now marketing sensor modules to all our existing and new customers. Last year, our existing customers shipped 11.3 million devices, and in the first-half of this year, 7 million devices were shipped using our technology. Over time, we believe the next generation of these devices will use our sensor modules. In addition to the licensing and embedded module business, we are very excited about the market release of AirBar, our first consumer electronics product, the touch enabled notebook PCs. We expect our sensor modules and consumer electronic products to generate more revenue and much higher gross margin dollars than are currently royalty paid license fees. And we expect to see continued growth in all our market segments. As a result of our new strategy and business model, we improved the overall cost efficiency of our operations. Our total operating expense for the quarter were $3.5 million compared to $3.8 million for the first quarter of 2016, a decrease or a reduction of 1%. This operating cost reduction is a direct result of the transition from custom design solutions to standardized sensor modules. Reporting further the other cost efficiency effects over the coming quarters, our total operating expense target is $3 million per quarter, which we expect to reach in the fourth quarter. To finance our growing manufacturing and distribution module business, we are looking into various financing opportunities. Now, I would like to turn the word back to Thomas.

Thank you, Lars. With respect -- over the past few quarters, I’ve been talking about the transition from pure licensing to selling completely fully tested sensor modules. Our customers have been asking for this and have seen the potential in our technology. Over the past few years, we have been investing in research and development to provide our technology and capitalize that into our multi-touch modules. This includes developing new ASIC, new software a new laser based optical component and selling out state of the art robotic production facility. So, what does this mean? We have developed a touch and gesture optical sensing technology and packaged it into single module that can be integrated into product as a single component. This means that integration of our solution will be significantly simplified for our customers. The first product that we delivered to customers using our embedded sensor module is AirBar. We are on plan to begin shipping AirBar by the end of this month. Remo will go into greater details later on the call about AirBar. I am also very excited that we signed an agreement supply of tailgate sensor modules with U.S. auto OEM. This is great start. Gunnar will provide some color about our automotive business later on. So what does it mean in real finance terms? Exchange from pure licensing providing sensor modules will increase our revenue and margins, and also reduce our total costs. And let me show you how. We’re currently working with some of the largest OEMs in the world, and to-date collectively these customers have shipped over 38 million devices with our technology. Right now, we have the technology, customers, and volume, but licensing our technology, we’re still leaving the largest part of the value chain profit to the component suppliers and manufacturers. We…

Thank you, Gunnar for that great update. So I’d like to now move over to an interesting AirBar update by Remo Behdasht. Remo, go ahead.

Good morning, everyone. AirBar is cost effectively touch enabled non-touch notebook PC. The existing PC market is estimated by Microsoft to exceed 600 million units worldwide. After that another 140 million notebooks sold every year and you have a huge market opportunity for AirBar. We believe we can capture 5% to 10% of this market. Over the last year, we have worked to complete AirBar as a product and established a global distribution network to ensure AirBar is available to all PC users. With Ingram Micro, the world’s number one technology products distributor to access leading retailers globally, we are working with the biggest and the best and setting out sales up to take full advantage of the AirBar opportunity. Our strategy is to fulfil and ship AirBar to our U.S. and European customers as the first push through retailers via Ingram Micro. This will be followed up by most of Asia, India, China, and then the rest of the world. For the U.S., we will bring AirBar to the market through an impressive line up of retailers including Amazon, Best Buy, Walmart, Dell.com, Newegg and many more. All of these retailers will range AirBar via the online stores initially and move to their physical stores where possible soon after. When an AirBar customer places an order on Amazon, Best Buy, Dell, or Walmart online stores, Ingram Micro will actually fulfil and ship the orders to each customer. For the AirBar customer, it will be as though the product comes from the retailer’s owned warehouse. This is how we’ll achieve unlimited scalability because through this model we can consolidate our inventory yet give all retailers access to AirBar seamlessly. In Europe, we will launch via Amazon, Media Markt, Saturn, and a series of key European retailers. We believe this roll…

Thank you, Remo. I also like to thank everyone for listening to our call. We will keep you posted with our progress. And I would like to say have a very good day, and thank everyone.

Thank you for participating in today’s conference. This does conclude today’s call. You may now disconnect.