Dawn Goetter - Director, Marketing Communications Alexander Tokman - President & CEO Stephen Holt - CFO.

Andrew Uerkwitz - Oppenheimer Tom Szulist - No Limits Capital Jeff Harvey - Private Investor.

Welcome to the Q1, 2014 Microvision Incorporated Conference Call. My name is Donna and I will be the operator for today’s call. (Operator Instructions). I will now turn the call over to Dawn Goetter, Director of Marketing Communications. Ms. Goetter, you may begin..

Thanks. I'd like to welcome everyone to Microvision's first quarter 2014 financial and operating results conference call. In addition to myself, participants on today's call include Alexander Tokman, President and Chief Executive Officer; and Stephen Holt, Chief Financial Officer.

The information in today's conference call may include forward-looking statements, including statements regarding benefits under existing contracts and the negotiation of future agreements, our competitive advantages, progress with prospective customers, projections of future operations and financial results, product development, applications and benefits, availability and supply of product and key components, market opportunities and growth in demand, plans to manage cash used in operations, as well as statements continuing words like believe, goal, path, expects, plan, will, could, would and other similar expressions.

These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission under the heading Risk Factors Relating to the Company's Business and our other reports filed with the Commission from time to time.

Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changes in circumstances or any other reason. The agenda for today's call will be as follows, Alex will report on the operation results.

Stephen will then report the financial results. There'll be a question-and-answer session, and then Alex will conclude the call with some final remarks. And now, I'd like to turn the call over to Alex Tokman.

Alex?.

Thank you Dawn. Good morning and we appreciate you joining us today for an update on Microvision’s business results for the first quarter of 2014.

This quarter we made significant progress on our three primary operating goals for 2014 which include first component display module development with our Fortune Global 100 customer, supporting this customer with their commercialization efforts and supplying them with key components.

Second, building pipeline of consumer and automotive product opportunities for Microvision’s both the market partners that will provide display engines that will incorporate our PicoP display technology and finally ramping our supply chain for high value production of Microvision’s specific components in the second half of this year.

Starting with the Fortune Global 100 customer, many of you know that our customer announced in February that it aims to bring a high performance, high definition image quality display module to market for use in pico projectors as well as other devices with projection functionality.

We have been close with supporting the development of this module which incorporates Microvision’s patented PicoP scanned beam display technology. Most of the original development milestones have been completed and we expect to complete the remaining development work in the second quarter of this year.

We expect this will be followed by commercialization support activities for our Japanese customer. Currently we’re engaged in commercial negotiations while the development program continues through the spring of 2014.

Now moving to other consumer electronic opportunities, business development efforts are focused on developing the relationships interest capabilities and commitments from the key stakeholders needed to enable the pico projection ecosystem which includes engine manufacturers, consumer electronic product OEMs and major retailers.

In Q1 we made considerable progress in this area and we’re concurrently developed a go-to-market path with several OEMs and major retailers that are interested in the variety of consumer electronic products utilizing our PicoP display technology.

As a part of this effort Microvision has produced numerous prototype end user product demonstrators to show superior performance of our pico projector that is built around our technology.

We have also completed direct consumer studies to provide OEMs and retailers with data and ideas after type of products that they could offer that will be successful in the market.

PicoP display technology as many of you know can enable an end user experience with features such as high definition, always in focus images, display it on a gigantic screen with laser brightness that are not attainable from other PicoP projectors.

And that are well suited for the mobile video consumption that research shows consumers are now making part of their regular infotainment routine. Now moving to automotive segment, we’re continuing collaborations with both a Tier 1, global supplier and a leading global vehicle OEM for head-up display.

Our goal is to deliver a prototype head-up display system to the vehicle OEM in the second quarter of this year. These programs are in the evaluation and test phases which are critical steps to have a new technology adopted and embedded for embedded automotive applications.

Let’s focus briefly on UPS; we announced in March of 2014 that we will be supplying customized PicoP display modules to UPS to outfit a distribution facility in the United States. The PicoP display modules to be a part of a new package guidance applications aimed at increasing processing efficiency in real time package sorting and routing.

Microvision expects to deliver the modules to UPS in the third quarter. Once Microvision delivers units and UPS completes it's evaluation phase we expect that companies will discuss possible next steps which could include additional deployment of Microvision’s technology across UPS.

This development highlights an important point for every Microvision shareholder, the PicoP display technology and platform that we developed few years ago was defined and designed to be suitable for other applications beyond consumer and automotive products.

Application such as UPS could result an important standalone growth segments for us in the future.

Now moving to supply, the success of the customer activities I just described is predicated on having a high quality, high volume supply of key Microvision components that could be delivered to consumer electronics and automotive players at competitive market costs.

In 2013, we developed new supply sources for MEMS and opto-mechanical engines to facilitate the offering of a standardized display solution that could provide OEMs with a quick time-to-market for products incorporating PicoP display technology.

Our goal is to help our supply chain partners to prepare for high volume production of Microvision’s specific components starting in the second half of this year. Finally, a brief note on cash used in operations.

In the first quarter of 2014 we maintain low cash usage in operations of 2.9 million while focusing on commercialization of our technology with our partners. With that insight on the financials, I will turn over to Steve for more details..

Thank you Alex. The numbers I’m about to share are included in our press release and in the 8-K filed today which are available on the investor page of our website. First a couple of highlights, in the quarter Microvision raised 12.8 million net of issuance costs in an offering of common stock and warrants.

Additionally Microvision continued it's management of cash used in operations with a reduction in the quarter of 16% compared to the same period in 2013. First quarter revenue was 1.2 million compared to 1.8 million for the first quarter of 2013, Q1 operating expenses were 4.3 million compared to 4.6 million in operating expenses in Q1 of 2013.

Our first quarter operating loss was 3.1 million which is 16% lower than our Q1, 2013 loss of 3.6 million. Microvision’s first quarter 2014 net loss was 8 million or $0.23 per share compared to 3.7 million or $0.14 per share in the first quarter of 2013. The 8 million first quarter 2014 loss includes a $5 million loss on the exchange of warrants.

Excluding the exchange of warrant loss which is a non-cash item, the net loss would have been 3.1 million. Cash used in operating activities in Q1 of 2014 was 2.9 million and this compares to 3.5 million used in Q1 of 2013. Cash and cash equivalents on hand at March 31, were 15.3 million, backlog at the end of the quarter was 1.6 million.

That concludes the financial results. We will now open it up to questions..

(Operator Instructions). Our first question comes from Andrew Uerkwitz from Oppenheimer. Please go ahead..

Just kind of thinking longer term here, how should we start to think about when the multiple of these projects start to come online and then ramp in your volumes.

How that would play out with your OpEx and kind of give us if you could couple of clues on how we should think about how to model Microvision for the next 8 to 12 months?.

It's a great question Andrew. It's not easy -- there is no easy answer at this point in time because as you know we’re pre-revenue right now and working on commercialization of specific to Microvision’s components at the same time supporting our go to market partners with the development of their engines and their products.

So there is multiple variables at play and more than half is controlled by our partners and not necessarily by Microvision, therefore it's difficult to eye ball at this point in time.

I think the best reply we can give you at this point in time is that monitor our update on a market wins, monitor our updates on the developments regarding Fortune Global 100 customer, potentially you’re going to hear more developments on the engine front and as well as some updates on the developments with OEMs and major retailers but I think once we’re able to articulate this you will be able to put together a more compelling story and more or less more effective within one of this possible --.

Just one last question, on the automotive front can you give much color -- they just normally do in the past.

How is that looking from a new customer perspective? Are you still engaged with multiple OEMs there?.

Right now we’re focusing primarily on two and the reason is not lack of interest, the reason really is prioritization of resources about 90% of our resources are focused on consumer electronic opportunities because they have quicker path to market and quicker path to revenue margin.

So we put in majority of resources on this front, however we did hand pick several key activities (indiscernible) that have greater future impact and we’re focusing on those.

One of them is the Global Tier 1 supplier who is basically one of the major suppliers to, one of the largest car manufacturers in the world and the second one we’re actually dealing directly with car manufacturer themselves who are interested in head-up display and we’re going to be delivering modules to them and systems to them this quarter and then waiting for their feedback in next steps..

Thank you. Our next question comes from Tom Szulist from No Limits Capital. Please go ahead..

First question, lumen output, what do you estimate that the first consumer products maybe as far as lumen output?.

Right now we’re looking at the product will be somewhere between 25 and 35 lumen and keep in mind these are laser lumen which are much brighter than equivalent LED lumen.

So we have done a series of blind observer studies in the past and it's clearly shown that our laser pico projector at the same and see brightness looks almost 50% to 100% brighter than it's counterpart with LED and related technology. So we feel pretty good about this.

As I mentioned we developed a series of product prototypes to entice retailers and consumer electronic OEMs and every time we show our models they are always surprised by how bright of an image they can get out of such a small tiny device..

Now at the annual meeting last year I believe you had a kindle that was retrofitted with one of your projector engines.

Have there been improvements from what you had shown at the last shareholder meeting?.

Absolutely, you’re going to see significantly improved the brightness looks better than what you’ve seen last year. The image quality looks superior from what we have shown a year ago and if there is chance that you attend shareholders meeting this year, you will be very, very impressed with the progress plus we have a broad map.

We’re not done, we have a roadmap for 50 and 100 lumen devices. So we’re on track to do that..

Now where do you see the biggest risk factor in being able to have a product come to market, is there any technological issues, it still have to be resolved and when we’re talking about obviously your Fortune 100 Company has been revealed that it's Sony.

Are there any bottlenecks or any technological issues that are refraining from us progressing to the next step?.

Right now Tom, unlike in the past where green laser was the biggest limitation we had in n-inhibitor to us. Right now I don’t see any major technological barriers for us to get into market.

I think really the only -- if you want to call the barriers time, time for others to develop their product, to socialize their concepts internally within their innovations to decide what they want to build and to build it and once you can sell it successfully. That’s really the largest risk and it has nothing to do with Microvision..

Now in one of your recent press releases after your fund raising, you stated that you’re starting to do pre-production ordering and starting an internal ramp for I believe it was 700,000 units.

Where do you stand with the progress on that ramp?.

We’re continuing to ramp our supply chain partners for Microvision specific components to be ready for mass production in the second half of this year. That’s our goal.

We have made a decision to do this, we monitor outside activities obviously on a daily basis and so far we haven't made any adjustments so we feel pretty comfortable right now about the investment -- decision on investing into this earlier this year and we continue to do this.

As we learn more, as time progresses if we determine that we need to the volumes will be even larger when we anticipate we will investment more in this..

Now when we talk about, in your press release you said it would take about 3 to 4 months to ramp to volume production, theoretically if you were to receive order for 1 million or 2 million of these units, is it possible for you to be able to ramp to those kinds of numbers or is that something will take?.

The short answer is yes.

The partners we’re dealing with are world class winners in their specific expertise areas, we haven't announced yet our supply chain partners because as per our agreements we want to do the announcements where as we get closer to commercialization but once you see you already know who produces one of the engines for us and that’s a major world winner in technology such as Sony and we have several other very compelling component supplier that once we articulate them and they become public and you see there are major players in the mobile industry..

And one additional question, I see that in awful lot of patents they are being filed applications and I’m wondering is there a way to talk about some of these patent applications and grants because it seems like the intellectual property that you’ve tends to be a hidden asset that a lot of people aren’t aware of what you have here..

It could be a double edged sword because once you start emphasizing certain things you give competition essentially.

You point to sort of things that they can start assessing further and find any potential weakness or strengthens whatever you see, you really what you want to do with the intellectual property when we’re developing is to convince your go-to-market partners that your IP is valuable and unique and my partner, it is Microvision, they will benefit longer term because they will not be able to get this from anybody else and that’s what we have been doing..

I also saw recently here that Osram announced a 50 lumen green LED. Have you started to see additional LEDs being provided from other suppliers besides Sony? Like Osram and who else is in the field of producing these green LEDs now..

You’re probably referring laser diode, right?.

Correct..

Yes, absolutely. There are three green and blue laser manufacturers right now capable in producing commercial volumes of green and blue lasers and Osram is one of them and each one has steadily improving the performance of their green lasers and every time they do this which is normal cycle.

It allows us to go to higher and higher brightness for example in 2010 when we first introduced our first product the green laser did not allow us to go beyond 10 but then performance of the lasers somewhat improved, we went to 15, now we’re at 35 and pretty soon we already have results in the lab that show that we can go much higher than what we have today and that’s part of our roadmap and it's part of our collaboration with our name and unnamed partners.

So the good news, there has been significant progress on the green laser landscape and it seize become a barrier as it was in the past..

And heat being an issue not -- or is it an issue or not an issue at this point? The heat generated from these laser LEDs?.

It's a relative term, you’re always going to have heat generated when you increase the brightness and when you try to compact too much stuff into a small space which is a small device so that’s part of life now.

How you manage in terms of whether you can create a successful product or not and luckily for us we have some significant advantages on a heat dissipation and heat generation versus LED and DLP or LED LCOS based systems because we use single (indiscernible) because we use lasers.

Our system efficiency is much higher which allows us to produce and dissipate fraction of the heat that the others do at high brightness..

Thank you. (Operator Instructions). Our next question comes from Jeff Harvey, Private Investor. Please go ahead..

In the past thinking of patents it seemed to me that there was discussion of potentially trying to monetize some of these patents as it may not be important in your future development, is there more considering to that?.

We are continually looking for opportunities in this area and we do have some interest but some of the offers we are receiving it did not meet our expectations, so we will continue to assess and explore this opportunity and when something important comes out we obviously communicate to you and everybody else..

In the past you’ve indicated that they were potentially I guess 50 companies that would potentially be partners for your technology but seems at this point we only have really two and I’m wondering what do you need to do speed up as process to get more companies signed up for your product..

Well let me just refresh everybody, we did have interest once from core statistic companies but given our size of our company and size of how many people we can’t even close to enable this many opportunities.

Once remember as I had mentioned to you over the past five calls we purged that with to total five opportunities and we put all our efforts on the first top five and off the top five that we discussed a year ago we announced developments on three out of top five and we are working on the other opportunities in parallel [ph].

So it's not just two opportunities we’re looking at, we’re looking at essentially the coalition of go-to-market partners there include major retailers, consumer electronic OEM and engine manufacturer.

So we’re looking at each opportunity as a go-to-market path when you have three separate players combined together that will utilize Microvision’s technology to launch their products to market. We have been announcing few of those because the others were not ready to announce but it doesn’t mean that we only work on two opportunities..

Thank you. We have Tom Szulist from No Limits Capital with a follow-up. Please go ahead..

The interactivity, were you able to interact with your field of vision using additional invisible projection within? Are pursuing or is anybody pursuing any activities that would include that?.

So the feature that Dawn [ph] was referring is that Microvision’s has developed a technology which allows you to do air touch of the objects that you project for example imagine of yourself when you are projecting an image of something, let’s say is a PowerPoint presentation or it's a game and today you’ve to use cell phone controls to move the object.

We develop technology that you can use your finger in the air to articulate all the object just like keyboard on your touchscreen. People who we showed this technology really, really like it and that it's part of the product roadmap for several people we’re discussing the product definitions with. So it's actually part of the product roadmap.

So yes there is a little interest and it's staged as part of the roadmap for the product introductions..

And is it realistic to think that we maybe seeing a consumer product released by the end of this calendar year this year, is that a high probability or is it still too early in the stage of development to expect to see something of that nature?.

For this specific feature?.

For this not the interactivity just for straight projection..

Well it's a loaded question, you’re going to get me in trouble with our partners but what I can tell you is that we can’t comment when they will introduce their products even though we know what timelines are, we can’t say anything until they are ready to communicate.

I think you can use your judgment by listening to what we’re doing about our supply chain, so our supply chain is being positioned to be ready for something like this in the second half of this year.

What everybody else will be ready we will see but right now we can’t say that something is going to happen on -- outside of Microvision to take the components to where we’re ramping right now from us as well..

Thank you. We have no further questions, I will now turn the call back to Alexander Tokman for closing remarks..

Again thank you for joining us today.

We’re pleased with strong measurable progress Microvision has made in the first quarter specifically completing the development milestones with our Fortune Global 100 customer to help them create their pico projection module that has potential to be incorporated into many different and exciting product categories.

Progressive and targeted consumer electronics and automotive activities, ramping our supply chain to provide high volume low cost PicoP components and continued aggressive management of cash used in operations.

Now as we’re building momentum and moving this year into commercialization phase our primary focus is to help companies to incorporate our technology into their products so they can offer consumers pico project solutions not seen or available before. The new market data further supports the need for what we would offer.

According to the Global Video Index in fourth quarter of 2013 it was report from Ooyala, the share of time spent watching videos on tablets and mobile phones has increased over 700% in the past two years and 160% over the past one year.

At the end of last year more than half of mobile phone user’s time spent watching videos that were longer than 30 minutes, what does it mean to us? Larger screen will be a must have feature for mobile devices and we expect that Microvision and our partners will offer video solutions that consumers will embrace.

As you know everybody in Microvision working tirelessly on your behalf and we thank you again for joining us today. On behalf of Steve and Dawn, have a good day and we will speak to you soon..

Thank you ladies and gentlemen this concludes today’s conference. Thank you for participating. You may now disconnect..