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Neonode, Inc. (NASDAQ:NEON)

Q2 2012 Earnings Call

August 7, 2012, 10:00 am ET

Executives

Garth Russell – KCSK Strategic Communication

Thomas Eriksson – CEO

David Brunton - CFO

Analysts

(James Mezedeith) – Cowen & Company

Jay Sirvatsa – Chardan Capital

(Peter Cardillo – Peter Company)

Orin Hirschman – AIGH Investment

Daniel Gelbtuch - HTR

Operator

Ladies and gentlemen, thank you for standing by and welcome to Neonode's second quarter 2012 earnings conference call. All lines have been placed on mute to prevent any background noise. (Operation instructions). I would now like to turn the conference over to Mr. Garth Russell, the KCSK Strategic Communication. Sir, you may begin your conference.

Garth Russell

Thank you. Before turning the call over to management, I'd 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,' 'sense', 'will,' 'guides', 'confidence,' 'targets,' 'projects,' and other similar expressions are typically used to identify forward-looking statements.

These forward-looking 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, and other operating results which include but are not limited to the risk factors and other qualifications contained in Neonode's annual report on Form 10-K, quarterly reports on Form 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 to 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 measures.

In our press release with the financial tables issued earlier today which is located on our website at www.neonode.com, you'll find our definition of these non-GAAP financial measures or a reconciliation of these measures that are disclosed as non-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 now be considered an addition and/or instead of GAAP measures.

At this time, it is my pleasure to turn the floor over to Thomas Eriksson, Chief Executive Officer of Neonode. Tom, the floor is yours.

Thomas Eriksson

Thank you, Garth. Good morning, everyone, and welcome to our second quarter conference call. With me today is David Brunton, our CFO. Today I will give you an overview of our performance for the quarter ending June 30, 2012. Then David will walk you through our financial results for the same period. Also after prepared remarks, David and I will be available for questions.

To start with, let me express my excitement regarding our unique position with the OEM. Thanks to the high performance in which (inaudible) offered, Neonode is regarded by many in the industry as the go-to provider of what we anticipate will be one of the preferred (inaudible) any type of device in the years to come.

I'm please to note that in the past 18 months, our customers shipped approximately 10 million units in (inaudible). We see all of the (inaudible) established the notion (inaudible) components and not in what we can do with our recently launched MultiSensing controller chip which I'm (inaudible) is a true game-changer for entire market.

The amount of interest (inaudible) from delivered technology mainly (inaudible) into other markets such as mobile phones, tablet, office equipment and (inaudible). The MultiSensing controller chip has made (inaudible) possible. Last quarter, I talked about our controller chip that was going into mass production and now I want to report it's now in full mass production and shipping to our customers.

Our next important mission is is (inaudible) qualification. We now have an (inaudible) qualified technology which makes it possible for us to deliver state-of-the-art solutions to the automotive industry. Our success in this space show that our technology has clear advantages over existing touch technologies and as we deliver a compelling solution together with our hardware partners.

We also started development of the next generation controller chips for further cost reduction for our customers and higher integration for larger systems with new function. We also have got some projects ongoing with special versions of the controller optimized for different products (inaudible).

I want to talk to you a little bit about progress with our custom design (inaudible). More than anything, I look at the (inaudible) as a good measure of future growth. I already talked about the importance of the controller chip has been verified with a number of (inaudible) this year. They reported 17 design wins last quarter

In this quarter, we now opened an additional 23 design wins which makes a total 40 design wins so far this year and (inaudible) 800% of the design wins are in the growth markets like (inaudible) entertainment systems, toys and games, and also office equipment. Some will go into production this year but the majority next year.

Also look at actual customer contracts and I think this is also an important metric to our success. As previously reported in the first quarter of this year, we signed four customer contracts. During this quarter, we signed another three contract and another one in July. So of today, we have a total of 20 customer license agreement signed and several more in the pipeline.

These are all (inaudible) strategic markets. What really excites me about this is that we've signed eight license agreements in 2011 and already during first six months this year, we have signed another eight. It's important to note that our customers typically use our touch technology in several different products in different categories.

Our customers are constantly developing second and even third-generation products incorporating our technology and I believe this confirms how satisfied our customers are with our technology and our ability to service their needs.

(Inaudible) I know you are interested the status our customs. Last quarter, I talked about a (inaudible) portfolio in IT and I would like to update you on that. We are now in a unique position in (inaudible) and we have excluded it for a long time. We are in the process of creating a stand-alone business unit at Neonode to monetize (inaudible) technology and I'm extremely thrilled about this opportunity.

I believe the future (inaudible) for our customers will be how well they can bring (inaudible) experience to the different type devices. We have retained the firm (inaudible) as a special council for this new business unit in addition to our general council (inaudible).

I'd like to update you on what we're doing on the technology front. As I mentioned before, we're now working on the next generation controller chip and customized version of it (inaudible) exploring new areas (inaudible) using our technology. Such as (inaudible) in an underwater usage and various (inaudible) function.

Another exciting thing is to be known (inaudible) directly in an application process and removing (inaudible) controller. This set-up greatly improves the response time and gives our customer products real-time performance. Of course, all our technology (inaudible) do not go anywhere without the robust sales and marketing force.

On the sales and marketing side, we are recently investing setting our a presence in Tokyo thus expanding our business in Japan. We're also looking at opening a (inaudible) in customer support (inaudible) in China.

Today we have note the presence in expanding in Japan (inaudible) the United States and South Korea and we have grown head count in (inaudible) marketing in all of those offices and locations.

As a market outreach, we have been (inaudible) technology (inaudible) Telecom Conference in New York and on the Transpotting (inaudible) Conference in Boston and actually today, we are one of the keynote speakers at the enlarging display in Santa Clara in California.

In addition, we have (inaudible) on the CS and Mobile World Congress in early 2013 with our own (inaudible) presence and watch out for future announcements related to this important trade show. Please come and visit us.

I will now turn over to the call to Dave Brunton, our CFO, to add more detail to our financial results for the second quarter part of 2012. (Inaudible).

David Brunton

Thanks, Thomas. I will begin by going through our results for the quarter ended June 30, 2012 and then move to the six months. Our net revenue for the second quarter of 2012 increased 598% to $2 million compared to $283,000 for the same period in 2011. Our net revenues for the quarter just ended include $1.6 million of license fee revenue related to ereader product shipments by five customers; Amazon, Barnes and Noble, Sony, Cobo, and Onyx.

This compares to $56,000 of license fee revenues related to ereader product shipments by Sony in the quarter ended June 30, 2011. In addition to license fees, we also recognized $377,000 of customer development projects related engineering fees in the quarter just ended compared to $227,000 in the same quarter of 2011.

Our cost of revenue for the second quarter of 2012 increased 108% to $494,000 compared to $238,000 for the second quarter of 2011. This increase is due to an increase in our engineering development activities related to the new customer projects that are expected to come to the market in future quarters.

I think it's important to note that we did not incur any costs of revenues related to our license fees. Our license fees revenues basically have a 100% gross margin and as our future license fee increases as a percentage of our total revenue, we anticipate that our total growth margin will increase.

Our product R&D for the second quarter of 2012 increased 287% to $1.5 million compared to $382,000 in the second quarter of 2011. As Thomas previously stated, we have seen an increase in design wins and development activities in the first half of 2012. This increase in R&D reflects an increase in staffing in our offices in Sweden and in the US to service these accounts.

As of June 30, 2012, we have 25 employees in our R&D groups compared to ten on June 30, 2011. Included in R&D expense for the quarter just ended is $178,000 of non-cash stock option and warrant expense compared to $72,000 for the same quarter in 2011.

Our sales and marketing expense for the second quarter of 2012 increased 373% to $1.7 million compared to $363,000 in the second quarter of 2012. Again, this increase is due to an increase in our staffing levels along with marketing activities. As of June 30, 2012, we have 11 employees in our sales and marketing groups compared to four on June 30, 2011.

Included in sales and marketing expense for the quarter is $918,000 of non-cash stock option and warrant expense compared to $23,000 for the same quarter in 2011.

Our G&A expense for the second quarter of 2012 increased 84% to $1.7 million from $921,000 in the second quarter of 2011. This increase is related to an increase in staffing. We added accounting staff in both our offices in Sweden and the US. Plus, we also saw an increase in the overall cost related to our SEC and NASDAQ compliance and legal expenses related to customer contracts.

As of June 30, 2012, we have six employees in our G&A group compared to four on June 30, 2011 and included in our G&A expense for the quarter just ended is $1.2 million of non-cash stock option and warrant expense compared to $88,000 in the same quarter of 2012.

Our adjusted EBITDA as defined in our press release issued earlier today was a $1.1 million loss for the second quarter ended June 30, 2012 compared to a loss of $1.4 million for the same period in 2011. Please review our earnings release issued this morning where we provide a reconciliation of net loss to EBITDA.

The net loss for the second quarter of 2012 was $3.4 million or $0.10 per share on 32.9 million basic and diluted shares of stock compared to the loss of $2.7 million or $0.10 per share on 27.6 million basic and diluted shares of stock for the same period in 2011.

I'm now going to move on to the six months ended June 30, 2012. I'm going to summarize the six months since the variances are generally caused by the same factors that I just discussed in the quarterly results.

Our net revenue for the first six months of 2012 increased 282% to $3.1 million compared to $822,000 for the same period of 2011. Our net revenues for the six months just ended include $2.5 million of license fees related to product shipments by the same five customers previously mentioned. This compares to $577,000 of license fees related to product shipments by Sony for the same period ended June 30, 2011.

The Sony revenue for 2011 includes $475,000 of license fee revenue related to products actually shipped in the fourth quarter of 2010 that was previously included in deferred revenue and that we recognized into revenue in 2011.

In addition to license fees, we also recognized $645,000 of engineering fees related to customer projects in the first six months of 2012 compared to $245,000 in the same period of 2011. Our cost of revenue for the first six months of 2012 increased 89% to $743,000 compared to $393,000 for the same period in 2011.

Product R&D for this first six months of 2012 increased 229% to $2.2 million compared to $658,000 in the first six months of 2011. This increase in R&D is primarily due to an increase in staffing. Included in the R&D for the six months of 2012 is $187,000 of non-cash stock option and warrant expense compared to $109,000 for the same period 2011.

Our sales and marketing expense the first six months of 2012 increased 252% to $2.5 million compared to $750,000 for the same period of 2011. Included in sales and marketing for the first six months is $943,000 of non-cash stock option and warrant expense compared to $48,000 for the same period 2011.

And our G&A expense for the first six months increased 50% to $22.7 million compared to $1.8 million in 2011. Again, this increase is the same as I discussed earlier. Included in the G&A expense for the six months ended is $1.2 million of non-cash stock option and warrant expense compared to $315,000 for the same six month period in 2011.

So adjusted EBITDA as defined in our press release released earlier today was $2.6 million loss for the six months ended June 30, 2012 compared to a loss of $2.2 million for the same period in 2011.

The net loss for this first six months of 2012 was $5 million or $0.15 per share of32.9 basic and diluted shares of stock compared to a loss of $12.4 million or $0.50 per share on 25 million basic and diluted shares of stock for the same period in 2011.

Now I'm going to move onto the balance sheet. As of June 30, 2012, we reported cash of approximately $11.3 million compared to $12.9 million as of December 31, 2011. In addition, we have $1.7 million of accounts receivable related to customers' second quarter sales and as of June 30, 2012, we have a working capital of $10.7 million compared to working capital of $13.6 million at December 31, 2011.

Our total shareholder equity stood at $10.9 million as of June 30, 2012 compared to $13.7 million as of December 31, 2011 and as of June 30, 2012, we had 32.9 million shares of common stock plus 5.2 million warrants and 1.2 million stock options outstanding for a total of 38.9 million fully diluted shares of stock outstanding.

Let me finish up with a comment about our expectations for the remainder of 2012. First, I would like to say that I, like Thomas, am also excited about the momentum we are seeing with the design wins that we have garnered during the first half of this year. These design wins represent new products of customers that will serve to diversify our customer base and firmly place us in new product categories.

Although I feel these wins are expected to generate revenues in 2012, the vast majority of these design wins will begin to generate revenue in 2013. We know we are the market leaders in touch technology for ereaders and for 2012, we are highly dependent on this market for revenue.

So far this year, we have seen some softness in the overall ereader market and now feel that the ereader market will most likely be significantly smaller in 2012 than originally estimated by our customers and various market studies in December, 2011.

That being said, our short-term revenue is less than we expected when we made our guidance in the last quarter of 2011 in part because we, along with everyone else, overrated the ereader market growth. If this softness persists, and shortfall in our customers' ereader sales for 2012 will have a negative effect on our overall 2012 total revenues.

Now I would like to close and turn the call back over to Thomas for some closing comments.

Thomas Eriksson

Thanks, David. To recap, Neonode has continued to gain momentum of its ability in the market that will allow the company to (inaudible) growth in 2012 and beyond. We're not only securing new design wins but we are also aggressively investing in our business to meet customer designs and remain on the leading edge of touch solution.

We would like to take the opportunity to thank our customers, partners, investors, and our talented team here in Sweden and United States, all our employees for their trust and support. This conclude the prepared remark and will now open the call for questions Thank you very much.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of (James Mezedith) – Cowen & Company.

(James Mezedeith) – Cowen & Company

We were wondering why – what is behind the big increase in share-based compensation and warrant-related expense.

David Brunton

Yes, the company issued approximately 1.5 million stock options to certain employees last quarter, actually on April 26th was the date, so that's the reason.

(James Mezedeith) – Cowen & Company

And then also it looks as though G&A, when you back out that amount of share-based compensation that went into G&A, it looks like G&A ticked down in the quarter.

David Brunton

Yes, that's true. That compared to last year, last year we had – we were ramping up our patent expenses for attorneys and we had some opening costs for some offices and things like that. So you're right.

(James Mezedeith) – Cowen & Company

So we should think about this level as a run rate more for the – that would be more appropriate for the next few quarters?

David Brunton

I think yes, right around here, yes.

(James Mezedeith) – Cowen & Company

And the same vein, it looks as though, again, backing out the share-based compensation that R&D ticked up quick substantially. And I understand lots of design wins and lots of work for customers on the – in support of those efforts. But is this a run rate that we should be thinking about?

David Brunton

Yes.

(James Mezedeith) – Cowen & Company

Any news on the printer product that you've discussed?

Thomas Eriksson

We have several ongoing projects with some large OEMs and anticipate the first one to come out this year in the markets. Several – we are involved with several other projects including a lot of projects also from the same customer coming out, the products, next year. So it's growing and we are (inaudible) now with customers being Japan and just feel that's part of the reason we opened an office to support these customers locally.

(James Mezedeith) – Cowen & Company

But just to be clear, is there any revenue from that in the third quarter?

David Brunton

I would say there's going to be – the first release is probably towards the end of the third quarter. So if it is, I would say it's going to be fairly minor. It's probably more of a fourth quarter event, this first release.

Thomas Eriksson

Yes.

Operator

Your next question comes from the line of Jay Sirvatsa – Chardan Capital.

Jay Sirvatsa – Chardan Capital

In terms of the (inaudible) as you look …

David Brunton

We can barely – I'm sorry, we can barely hear you.

Jay Sirvatsa – Chardan Capital

All right, the question was on the e-reader market. As you look beyond the second half, what are some of the catalysts you expect you would need to see in order to feel comfortable that the market will be back up to the levels that you expected earlier this year?

Thomas Eriksson

It's coming from tablets, which is sort of all in all tablets in the way of using (inaudible) based products. We announced a few of them coming to market, Oregon Scientific is, for example, one of them.

And then you have sort of the new generation of e-readers coming to market which is sort of a tablet style which we don't know how well they're going to do. And then you have the printer, office equipment product from earlier this year and hopefully also some automated product.

It's a mix of different products. We hope to see some mobile phones coming out this year but it's highly dependent on our customers and their final launch plans for them.

David Brunton

All right, let me follow up to that because you were asking specifically about the e-reader market. And I think in my opinion what's going to make a difference to come back for it to sort of get to the levels – I’m not – first of all, I'm not sure it will.

I think maybe everybody's sort of overstated it a bit. But I think the – if it does come close, it's going to be because of expansion outside of the US and I think most of our customers have moved fairly aggressively in Europe and there's a lot of economic uncertainty in Europe right now and I think that that's affecting it.

So I think the success is going to be primarily how well they do outside of the US, in Japan, in the rest of Asia and Europe. So that's how I see it unfolding.

Jay Sirvatsa – Chardan Capital

In terms of competitive landscapes, can you give us an update on what changed, if anything, and how do you see yourself competing going forward with some of the incoming players out there?

Thomas Eriksson

We (inaudible) successful (inaudible) started the different segments. So if you looked at automotive segments, we have a very competitive solution. We are at a very interesting cost. We give them the performance. They can use our technology with gloves and pens on any object and we have a very good transparent solution that you need in our automotive environment.

And on top of that, we have automotive, qualified parts that you need to have to sell to this market. And recently we have gained a lot of momentum in that (inaudible), actually signed with some larger players, the Tier 1 companies and OEMs in that field.

In office equipment, like printers, we are replacing with (this tier) technology because our technology gives a very good user experience. It's very rapid and even in products like that you won't have a very good feeling.

And also we give them a lower cost even on a (inaudible) solution with functions like you can have buttons on the screen and things like that. So in terms of mobile phones, I think you're seeing that a lot of companies are actually selling most of their mobile phones in the feature phone or low-end segment including companies like Samsung and Nokia.

And that's the (street) we are working into. We think that our solution is the best solution right now for these customers. They can see extremely low builder material and they're replacing receptive solution with our technology.

And of course, the end user can experience extremely large ceiling and using this (inaudible) technology. And you can see our technology sort of shifts from resistive capacity. You can see the transition to optic in almost the same level of difference in using it.

This is some of that – to keep it short, these are some of the things we are seeing growing a lot and we really – our technology makes a huge difference compared to what we are competing in.

Operator

Your next question comes from the line of (Peter Cardillo – Peter Company).

(Peter Cardillo – Peter Company)

Just curious, wondering if the company would be open to perhaps a future strategic alliance or perhaps a direct buyout. Has anyone ever approached you?

David Brunton

No, not to this point. I mean, you never say never. I mean, we don't have anybody knocking on our door at this point and if it's – if anybody ever does and it's an extremely attractive offer to us and the shareholders, the board would definitely, probably look at it.

(Peter Cardillo – Peter Company)

And one last question, I noticed that cash was being burnt somewhat a little bit fast there and, of course, you do have a little over $9 million in working capital. Is that going to be sufficient to get you through until you get earnings ramping up?

David Brunton

Yes.

Operator

Your next question comes from Orin Hirschman – AIGH Investment.

Orin Hirschman – AIGH Investment

I just wanted to go back to what you mentioned about office equipment that – is it one customer that starts in Q3 and the second customer in Q4 or is it – I wasn't clear on that.

David Brunton

Repeat the question again. When we say that – are you talking about the design wins?

Orin Hirschman – AIGH Investment

No, actual design wins going into production.

David Brunton

No, there's actually several of them going into production this year. The point we were trying to make – and I think Thomas said it and I repeated it – is that we wanted to make sure the expectation of everybody out there in the market and the listeners on the call is that the design win, as you know and we've talked about before, to get into production take anywhere from six to 18 months and automotive might even take 24 to 36 months depending on the model.

And so the design wins that we got earlier in the year on some of the products will go into production, are scheduled to go into production this year. But the vast majority, the expectation should be that it's going to be 2013.

Orin Hirschman – AIGH Investment

Do you think in Q4 that you would still be skewed towards e-readers whether it's enough of the design to production that you see revenues …

David Brunton

Oh, I think you should anticipate that this year the majority of revenues is going to come from e-readers. Certainly starting next month we have an expectation of additional products coming into market.

We have no control over that, as you know. And so to the extent that they do very well, our dependence on e-reader will be lessened But it was still – this year is still a majority, for sure.

Orin Hirschman – AIGH Investment

One follow-up just in terms of the automotive market, where you have very specific advantages on the qualifications on prolonged (costs), when does that actually begin to ramp for you (inaudible)?

Thomas Eriksson

It's starting to ramp for us beginning of next year with after-market product, meaning the products that you can install in the car as an accessory and the end of next year in products are meaning in cars and growing a lot for the coming years.

So typical cycle for a car is five to six years, so it's a very long-term and very nice business for us.

Orin Hirschman – AIGH Investment

But do you feel confident that you actually will have OEM non-asset market meaning built into the cars during the next year?

Thomas Eriksson

As David said, that's up to our customers and exactly when they intend to launch their product and that might change. But it looks very positive, yes.

David Brunton

It would be very – towards the very end of the year at best and it would be limited models for next year.

Operator

(Operator Instructions) Your next question comes from the line of Daniel Gelbtuch – HTR.

Daniel Gelbtuch – HTR

I was wondering if you could update me on the Windows RT ramp and how you're infrared optical solutions accommodate and/or exceed its requirements.

Thomas Eriksson

You said Windows 8? Was that corret?

Daniel Gelbtuch - HTR

Yes, Windows 8, particularly Windows 8 (inaudible) and how your solutions accommodate the requirements and/or exceed it. I believe you had a whole slough of feature sets that eclipse that of typical new (inaudible) solutions.

Thomas Eriksson

Yes, so we're working on the qualification process with that company and on top of that we are doing very interesting things with keyboards, for example. So our technology can be used in controlling a keyboard instead of mechanical switches.

And that's – with that solution you can build extremely thin, even transparent keyboards using our technology. That interesting thing is that we can actually replace a mouse pad that traditionally has been using capacitive technology.

But we can also (inaudible) the mouse pad on top of a keyboard or even inside a keyboard, so you can sort of take away this reserved space you have for a mouse pad.

And proximity sampling is something else our controllers support, so we can have ways of waking up a device in a very interesting way as getting closer to your notebook or tablet that our technology is sort of alone to support.

Another interesting thing that we give these sort of OEMs that want to build this product is that our technologies also support pressure sensitivity. So it can detect, for example, how hard you hit the key or how hard you're pressing on your touch surface.

That interesting thing is that, I think I've mentioned before, is that our technologies also support passive handwriting at high resolution, so if you have used, for example, a Sony eReader, you can see that it actually can use any object to write on it. And this is something these OEMs can use and get virtually included in our controller at the moment.

Daniel Gelbtuch - HTR

And as it relates to the handset market, I was wondering if you could update us on your ongoing development of the optical technology particularly as it relates to the raised frame height.

I know that you have a very thin bezzle or requirement to begin with but I wonder how that's developing going forward.

Thomas Eriksson

Yes, we have been working for such a solution and also including IT on it to sort of support flush surface. We also, on top of that, have something in pipeline that can actually be used under water, so you can use it for divers and other products or water proof products which capacity (inaudible) doesn't support today.

These are some of the things we are doing there. So I think does that answer your question?

Daniel Gelbtuch - HTR

Yes, it does. And I guess just talking about the current height requirement is how much, just 0.4 millimeters or …

Thomas Eriksson

Yes, if you look at the (song) projects we're doing, it's about 0.5 millimeters. But if this not traditional based on (inaudible) with a glass or covered glass or a plastic overlay if you need that and it looks extremely nice and we have some other interesting industrial designs for these companies.

The most important thing for the companies working in this sector, like feature phones and local smartphones (inaudible), the cost of the system. The other important thing is the power consumption where we have – we believe the most lowest power consumption in the industry and we can even have (stuff we call) always on, which is that you can have it touch active even if the phone is in standby mode, thus removing an (inaudible) on your product.

And that's where we see that industrial design is a lot of things you can do with that not imitating other companies. So it's a lot of things happening there on top of what you have seen on market today.

Daniel Gelbtuch - HTR

And finally last question, getting – moving back to I guess the Ultra Book market and the RT market, in terms of costs for capacitive, do you have any clue where the capacitive touch screen solutions are for 10 inch and above or, I guess, 12 inch and above for laptops and for larger tablets?

Thomas Eriksson

I think you can look at the capacity market. There is sort of very low cost capacitive products using plastic, not glass. And there is sort of high end solutions like you find in Apple iPads for example.

So the price range can be very big, actually. But a 10 inch tablet would cost $25 to $30 for a very low-cost solution where we can see our solution to be a solid term dollar solution now with our using the chip controller.

So and of course, the other thing that we can give our customer is an extremely high-speed scanning, so for example, our chips support up to 1000 frames per second. So you can have a very extreme responsive user interface that you do not see in products today where the capacity sensor is scanning maybe 80 to 100 frames per second on a 10 inch display.

Operator

At this time, there are no further questions. I would not like to turn the floor back over to Mr. Thomas Eriksson for any closing remarks.

Thomas Eriksson

Okay, thank you everyone for joining us for this call. We'll keep you posted on our progress in 2012 and have a very good day.

Operator

Thank you. This concludes your conference. You may now disconnect.

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