MicroVision Inc (MVIS) 2002 Q4 法說會逐字稿

Good afternoon, my name is Katie and I will be your conference facilitator. At this time I would like to welcome everyone to the Microvision year-end financial results 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 period. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, press star then the number 2. I would now like to turn the call over to Brian Heagler, director of investor relations. Please go ahead, sir

Thank you. I'd like to welcome everyone to Microvision's 2002 financial results conference call. With us today are Rick Rutkowski, chief executive officer. Steve Wylie, president, Richard Raisig Chief financial officer. Tom Sanko vice president of marketing, Andrew Lee, vice president of sales, and Tom Mino, chief executive officer of Lumera. We'll begin with an overview of our financial results for the fourth quarter and full year of 2002 and then we'll be available to take your questions. The information in today's conference call includes forward-looking statements regarding year-end results, projections of future revenues, plans for product development and production volume, future development contracts and commercial arrangements, growth in demand. Future product benefits and future operations. As well as statements containing words like believes, expects, anticipates, target, plans, will, and other similar expressions. These statements are not guarantees of future performance. Known and unknown risks and uncertainties and other factors may cause actual results to differ materially from the future results implied or expressed in the forward-looking statements.

Such factors include our ability to raise additional capital when needed. Market acceptance of our technologies and products, our financial e and technical resources relative to those of our competitors, our ability to keep up with rapid technological change our dependence on the defense industry and a limited number of developmental contracts, government regulation of our technologies, our ability to enforce our intellectual property rights and protect our proprietary technologies, the ability to obtain additional contract awards, the timing of commercial product launches and delays in product development, the ability to achieve key technical milestones in key products, potential product liability claims and other risk factors identified from time to time in the company's SEC reports. Including our most recently filed registration statement on form S3.

Except as expressly required by the federal security 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. I'd like now like to turn the call over to Richard Rutkowski

Good afternoon. Thanks for joining us this afternoon. We're pleased to report significant growth in revenue for the year-ended 12-31-2002 versus 2001. We did report an increase of 48 percent to 15.9 million compared to 10.8 million for the same period in 2001, especially gratifying I think though was with that 48 percent increase in revenue we were able to post a 92 percent gain in gross profit and there are a variety of different reasons for that. Some had to do with the contract mix, including a larger number of contracts commercial partners. Based on technology maturity we were able to bid fixed cost contracts with more confidence and meet and beat our budgeted estimated numbers for those contracts. So we expect to see strong gross margins going forward. The gross margin on the contract business on average was about 55 percent gross margins across the company last year and we think that intrinsically that is a very strong business in and of itself and of course additionally we are getting a lot of product pipeline value out of that. i.e., the subject matter, technical subject matter of these development contracts in many cases are specific products or technologies that find themselves in our commercial product pipeline. So we're pleased with that aspect of the business model is working.

We did have much more ambitious targets coming into the year. Obviously the business environment did not, business climate did not improve as many folks had forecasted and it remained difficult in the IT spending category in particular. So that was a partial contributor to not achieving those more lofty goals. In the fourth quarter in particular, you'll see that our revenue was down versus the 2001 quarter and we reported 3.2 million compared to 4.3 million for the same period in 2001. That was largely due to delays in three contracts. Two at Microvision, one at Lumera. All three of those contracts have since been signed and executed so we are looking very rapidly to be back on track here in Q1.

This year and targeting sequential growth going forward. Another component of that fourth quarter and our annual numbers being slightly lower than where we had hoped was the delays, the production delays associated with the Flic bar code scanner. As you can see from the text of the press release, we're making excellent progress at this point in wrapping up production and also getting those units out into the channel and booking orders. We're seeing tremendous and encouraging momentum with the product. We think we've a real sense of affirmation and validation, having attended three trade shows beginning since September and signed the nine resellers and distributors that you've seen identified over the last several weeks we're encouraged that Flic can be an important component of 2003 revenue going forward in spite of the hiccup in the fourth quarter of last year.

Most of the revenue for the year was derived from work on development contracts, with the U.S. military and for the first time this year in a meaningful way with commercial partners, including BMW, Johnson and Johnson and Cannon. Again, that mix was partially responsible for the increase in gross margin and we're very encouraged with the commercial development contract outlook for 2003 and beyond. We really have seen some significant critical mass activity mounting there. I'm going to ask Steve Wylie later on to talk to us about the activities in Asia and we'll talk to some extent about some of the new developments that are outlined towards the end of the press release in that regard as well.

The consolidated net loss for the 12 months also showed very strong progress. We reduced net loss by 22 percent to 27.2 million, or a $1.93 per share, compared to the net loss of 34.8 million or $2.85 per share for the same period in the prior year. For the fourth quarter, we reported a consolidated net loss of 6.9 million or 46 cents per share compared to 7.8 million or 61 cents per share for the same period in '01. The consolidated results do include Microvision as well as our subsidiary Lumera for the three and 12 months. A portion of that loss attributable to Lumera was $258,000 or two cents per share, and $957,000 or seven cents per share respectively compared to 141,000 or a penny per share and 3.0 million or 25 cents per share for the three and 12 months ended December 31, 2001, respectively.

The company, including Lumera ended the year with 15.2 million dollars in cash, cash equivalents and investment securities and a contract backlog of 2.6 million. We did subsequent to year-end, as I mentioned, sign a series of additional contracts valued at 2.8 million. One of those actually also includes a $600,000 option component to it, which we expect we will realize as well. So we're generally pleased with the going in position in terms of contract revenue for the year. One of the things that I think you will see this year is more consistent contract activity through the year, in particular we saw in the very first part of this year a couple of very small contracts in automotive following up on work that we had done on work with BMW we are seeing broader sponsorship with more players in the industry. We're currently negotiating some potential follow on contracts and right now it appears as if that will continue to be a source of revenue through this year and potentially lead to some of the significant product pipeline activities as well. So as we mentioned here. We expect to see activity through the year on both existing and new projects in this arena. Automotive, consumer electronics as well as medical and our traditional defense activities.

Some of you know the history on some of our defense contracts. I think for some of you who may not know the company well, one of the strategic elements that is really working for us is the ability to bring technology to certain stage of development and then secure sponsorship to leverage that development as we push the technology through the product pipeline. So with respect to our Nomad product, our Gen1 as an example was funded out of our internal R&D funding. The Gen 2 product we secured substantial contracts from the Army and the Navy, which are very consistent with what we're targeting for the Gen 2 product and largely helped to underwrite productization of our commercial product which is now in the pipeline. We see that same sort of theme repeated with respect to some of the work we've been doing with Cannon and others. What you'll hear from Steve, I think, is that we've very successfully last year built our first prototype systems of a full color miniature display using LEDs and micro scanning chip. We were immediately able to secure development funding on the basis of those early prototypes which has helped to defray the development costs and a substantial way. We see that trend continuing and I think the exciting news there is that again very significant momentum and we'll get into some of the specifics that are driving interest in that market.

So really we can think of the business very much in this way that we have, as we look at 2003 as an example, we will have our contract business and we, as I say, expect to see continued strong gross profit contribution from that. We will be driving product top line growth we now feel strongly this will be a pretty strong sequential quarter to quarter activity with respect to the Flic bar code scanner, based on the reception that that product is getting in the market. We have probably a more conservative outlook with respect to Nomad this year, based on our experience last year. Although Tom is going to talk about some real success we're having in identifying applications and having identified some of those applications in marine navigation, general aviation, medical and other categories, working on channel strategies with partners there as well. But because of the fact that this is very much an emerging market, as you recall we've talked in the past about the sales cycle variability and so on. We're having a more conservative outlook with respect to that product. And really focusing on the more straightforward blocking and tackling associated with Flic.

Just to sort of put some data points around that, the strategy with the Flic bar code scanner is to come into a market that is very much moving in the direction of low cost solutions with probably the lowest cost solution in the marketplace, especially at its performance points. What we would like to do with that product, we were talking about a market that is about a billion dollars large. And so if we can capture even a very small percentage, one or two percent of that market over the next 12 to 24 months, on an annualized basis, we think we've got a real success from a ramping of that product standpoint. Another key component for '03 will be the introduction in the second half of the year of the wireless version of the Flic scanner. Our MSRP on the flick bar code scanner is currently 129 dollars. We've not yet priced the wireless version, but it will be substantially higher than that and with a substantially higher ASP to go along with that as well. But that will become a revenue driver as part of that sequential growth in the second half of the year as well.

I should note here that as I mentioned earlier we're having very strong pull from the channel, great reception from both the channel and end user customers. We've had repeat orders already. We're seeing the order book starting to mount. So we're really encouraged with the base product. What we're also encouraged by and we hear this from NCR as well as others in the channel is that this is really a unique offering in that we have an upgrade path available from the base configuration to the wireless configuration. And that is one of the things that has proven to be very attractive about the product as well. We actually have had one channel partner come back to us and give us an indication again from a single channel partner of annual volumes in the 30,000 to 50,000 unit range starting out. So we're very encouraged that that product can have a strong reception when we introduce it later in this year as well.

As I mentioned, we're working very hard on the channel footprint, we've been very successful, it’s a classic regional distribution model in the bar code space. You have a very structured channel. It has multiple tiers to it. We're working on a very straightforward fashion and again seeing real success. We're very happy with the relationships that we've created with companies like Wave and Tault and Mobility and Abraham in addition to our private label relationship with NCR.

As I mentioned we have ten distributors currently and resellers throughout the US and we do anticipate being able to announce a number more in the US and abroad. Many of these are going to be companies that are going to be very recognizable to people who follow the bar code space, they are distributors of other kinds of bar code products and accessories and printers and so its as I say an established and very conventional channel strategy in some sense. We are as I mentioned before ramping production volumes successfully within the next several weeks we will attain production volumes well in excess of a thousand units per week with yields at 90 percent or better. We're feeling very good about the yield prognosis going forward and we think we'll continue to expand production very rapidly throughout the year so that by fourth quarter we should be in a mode where we're producing several thousand units a week. And on an annualized basis that is likely to be a couple hundred thousand units a year. And that was as I say a little bit of the delay here that we experienced in fourth quarter was transitioning that production as we've talked about in the past from our internal production to our offshore manufacturing partner in Singapore.

We now feel like the prognosis is very good going forward. Tom could you talk a little bit more about in terms of what we're doing driving in demands for the Nomad display and how our strategy has kind of matured over the last six months or year and what you see the outlook for going forward.

We've talked in the past about having three major application categories and we continue to work those categories, refine them and discover adjacent applications and those are first of all targeting navigation. Second of all electronic performance support and otherwise known as a maintenance day and third of all real time monitoring and we have some extremely strong applications and potential needs customers in those categories. Rick mentioned a few earlier. I'll just recap. We've talked about medical and surgical before. A computer assisted surgery system with Nomad at the center of that. Automotive and truck maintenance as an another very promising category and this is all about head up hands free, high productivity for that maintenance technician and higher quality as a result of that. General aviation both for private pilots and we've got some very interesting developments going on in the government with respect to general aviation type applications that basically provide a very effective, very cost-effective head up display for all sorts of applications. Marine navigation, we’ve been working with FRUNO, the worlds largest supplier of marine radar on applications with Nomad so that the pilot of a ship or a boat would be able to navigate head up and hands free and actually be able to walk around the boat and still be able to see what’s going on. And a new one that we hadn’t talked about before, which is very interesting when you think about it is crane control. These large cranes that are used in construction and in shipyards and a lot of other places have a real problem where the operator needs to keep an eye on information like the load and the engine and things like that to avoid an accident while keeping an actual eye on the load and this is the real time monitoring category and we've got some exciting application trials going on in that area.

So last year was really all about discovery and development of applications and solutions. What we've discovered is that Nomad is the keystone product in a rather complicated hardware, software connectivity solution. Because it’s an early market, we’re building the market, we are going to be building that solution as well. So that’s really what 2002 was all about. 2003 is about taking what we have learned, refining and refocusing down. What we are doing now is concentrating our efforts on specific trials in each one of these areas with large end users and OEM’s typically in which we can evaluate the value proposition. That is, what is the return on this investment How do we measure that, is it productivity, efficiency, quality, safety, and the once we measure that there's a go no go decision about going forward.

One of the things that's interesting as you look at these several different applications and the channel strategies that go along with them, Tom mentioned general aviation and marine navigation and that in April in fact we'll be seeing the Nomad appear in select, FRUNO dealerships. FRUNO is probably the market share leader in marine radar systems. They have a significant penetration into that market in their dealership has a significant footprint. The parallel between that and general aviation is really the distribution channel model which is we have essentially, what is essentially a retail channel here in both cases. That's the real terrific news. If you go for general aviation, if you go to the aircraft spruce and specialty catalog you can find you can buy the Nomad complete electronic flight system, compact system for $8,900 dollars or so.

The strategy then and what you'll also see, those who are maybe own planes you're probably seeing a lot of press about the Nomad, a lot of positive press. I ran into one of our Flic distributors yesterday happens to be a pilot. He said I'm seeing lots of positive press. The reason I mention that is the key to now driving sales through those channels is really about a consumer level awareness. And we're going to be using both editorial as well as some targeted marketing communication strategies and continue to do that to create that awareness and pull in the channel but the steps of having set up those channel partnerships are significant entry points in that. I want to now draw a contrast to some of what you talked about with respect to, for example, automotive maintenance repair and overhaul. It's slightly different process. We'll be co-marketing with the other solution partners. A lot of the work we do with Siemens, for example, is really aimed at delivering not just displays, but complete information technology solutions to these performance support or maintenance repair overhaul kinds of applications. Those will include wireless connectivity, other kinds of portable platforms. Software solutions and so on. What we've seen there that is really encouraging is we're in dialog with three of the major auto makers in the world, two European and one Japanese auto maker, who really do understand the fundamental premise, the value premise of head up and hands free and wearable solutions.

As I've mentioned before it's a step wise function. What has been happening in the last couple of years is almost all the auto makers have been trying to find ways to push information into the maintenance bay. Many of them have tried to use pen tablet based kinds of systems or other kinds of hand-held systems and of course the trade off there is that you get the benefit of having the information there. The problem is how do you hold something with your hands while you're trying to manipulate tools and instruments in those maintenance bays. The industry has now reached the convergence point where they recognize clearly. We will have some significant trials. I think we're going to publish some data coming out of those trials. We'll probably be able to talk about who some of those launch customers might be in the coming months, and we're very encouraged by the kinds of numbers that very senior buying influences in these organizations are talking about going forward.

There will be improvements to the product in both form factor and performance and cost going forward. And we think that is going to further stimulate that market as well. So I think we continue to see this, now to sort of piece the two together in terms of a growth strategy. What we see with Flic is something that can move up a revenue curve very quickly because you can penetrate a small percent of an existing large market. What we see with Nomad is more of an opportunity to really ride the crest of the wave as the market emerges here and we deliver key enabling technology to that market. For those of you who are really interested in that sort of due diligence, if you were to contact Siemens and talk to them about what's happening in this category of augmented vision you would hear it very much that kind of rhetoric. Our position in, our consortium is unique. We're one of two I think U.S. companies in the consortium. It's because we have this unique enabling component of the display that allows for this see through sort of phenomenon and bright light readability. So we continue to believe this is strategically important technology, strategy here is to gain a dominant share in an emerging market. The way we model it internally those curves cross. The Nomad is the shallower curve on the front end turns up more steeply crosses over with the Flic curve. That takes you to the discussion really of the product pipeline and our recently announced agreement with Cannon, which we also see becoming a growth driver this product category of micro displays for digital cameras and camcorder view finders.

It appears to be the launch application for our color micro display for consumer markets. Our relationship with Cannon is very much focused on the development of these products to achieve a mixture of price and performance that is unique in the industry and essential to integration in this category, to design wins in the category.

Again, a little background for those of you who are newer to the story. We believe the unique selling proposition here is the ability to deliver six to eight times the resolution of what you would find in a miniature display and a camera today in electronic view finders at only a 40 percent increase in price or so. It's playing very well in the industry, because what you have is today is a tremendous bottleneck. You have cameras that are routinely two and three mega pixels, if you want to go into a camera store and experience it for yourself. What you want to look for is a camera that is four or six times optical zoom lens or higher. And most brands, Nikon, certainly Minolta, Olympus, you'll find there's an electronic view finder. I'm not talking about the one inch panel on the back. I'm talking about actually in place of the view finder that you hold your eye up to, instead of it being a lens configuration an optical configuration you'll look in there see flat panel miniature display.

You'll see immediately that you're looking at resolution that's a fraction and in fact a very small fraction of what the camera is delivering or what you might see on your computer screen. So you really have no ability in that camera to preview those imagines effectively. The reason that we're seeing them in the high zoom cameras is because in a high zoom camera, the optical view finder becomes problematic from the standpoint of alignment or what we call parallax alignment. It also is problematic just from the standpoint of increasing bulk and cost as they're trying to reduce the overall bulk of these cameras. New features like on board signal processing to emulate filters, optical filters things of that nature will continue to be significant drivers for higher quality view finders. So the reception has been very warm and very fast. And I think there's sort of a competitive message in here.

Why is it that I go today and I can buy a camera that is anywhere from 600 to 1200 or 1400 dollars. So certainly not a low end camera but we call an enthusiast or pro-sumer camera the best miniature display I can get in the camera has about 60,000 color pixels, a fraction of what you're used to looking at. The reason is there exists this trade off today in the ability to produce high resolution miniature flat panel displays at costs that are compatible with these kinds of consumer products. I think the best way to capture it, Steve, is with the anecdote that we heard from not Cannon but another one of the leading companies that we're in dialog with, which was, and they said this to us. We've concluded that every camera with the high zoom lens capability requires an electronic view finder. We've also concluded that the quality of the existing miniature displays is so poor that we may have to abandon the idea. And so, again, this is the reason that we're seeing this kind of momentum. Steve, maybe you can talk to us a little bit about that momentum, about some of the things you've been doing in Asia with respect to not only launch customers and development partners, but also production and manufacturing of these high volume displays.

I'm pleased to touch on that. A couple points on Cannon. It's interesting for me this is building on work that was conducted last year. It's essentially a phase two work with Cannon. And we believe this is clear validation of the interest in and value of are very unique micro display solutions. I also note in the press release is a comment by the senior executive, Cannon executive, where they talk about us enabling a new generation of innovative imaging products and that's what you referred to, on board signal processing.

The opportunity is to be very disruptive in these markets and as such we recognize that and we have been active, more generally, in the marketplace, defining specific applications particularly for EVS and particularly the one you mentioned for the high zoom camera and have been qualifying customers or partners. And I think we can announce that we've qualified multiple customers for our RSD at its current level of performance. For digital still camera and for digital camcorder. So it's extremely encouraging.

We believe we will be disruptive and we will have customers, and significant customers. On the camcorder that's interesting, too, the camcorder performance has clearly improved, digital camcorder performance has improved over the past year and will continue to all the way up to HDTV, high line performance levels. And as such the electronic view finder that you see in a camcorder today is less and less appropriate. And so we've been contacted by two or three digital camcorder groups that are looking for better solutions. We absolutely believe that our approach is of great interest to these large consumer electronics and camera companies. And of course, as we develop out an EVS, high volume EVS solution for cameras, camcorders, this engine is a basic engine and can be applied to other consumer electronics, entertainment, gaming, et cetera, applications. So we've also began discussions with perspective partners in those areas.

On the manufacturing side, we've been active, of course, and in the past we've reported that we begun establishing component manufacturers in Asia. Mems fabrication, for example. Recently we moved forward to developing the completion Asian supply chain and specifically for a high volume electronic view finder product line. We've recently hired an Asia based general manager of international procurement to support this activity. I can also report a highly positive response to our initial investigations for partners. The partners within and throughout this supply chain. And a response in several very large multi-nationals that clearly appreciate the potential for high volume manufacturing of our EVS solutions.

Couple points I would adhere with respect to scaling too high volume production out and end driving cost out of this. Key elements of that strategy are going to involve some integrated sub system components. And within Asia there are a variety of people, some of well known companies doing innovative stuff with packaging of micro optical devices. So as an example, integrating the LED’s and combining prisms on to a tiny ceramic chip is something we've seen come out of Asian component companies. There's really a good match at this time because of some of the value-added that is being sought by some of these folks for creating these kinds of sub assemblies and solutions. What's happened, the dynamic that we've seen happen is as we've gotten this pull from camera makers and potential customers, clearly that has -- we've seen the interest level of production partners rise accordingly. And in at least one case you have companies that are vertically integrated and represent both, potentials for product partners and customers, sales make digital cameras and camcorders and also manage very significant component level businesses as well. And that's been especially gratifying to see the interest level really go up dramatically just in the last three months. And we are now actively looking at proposals to manufacture a variety of the different elements of the system and we've got, we've had strong interest from both Taiwan and Japan and actual turnkey of the integrated engine as well.

So, again, I think confidence level in terms of being able to scale to the volumes that would be required to meet these demands is growing. And obviously the strategy would be to take advantage of those kinds of partnerships. Just to sort of talk about that demand curve a little bit. We see that the digital still camera piece of the market, independent of camcorders, and by the way another part of this market is also the high end video cameras, camcorders used in professional production studios. That piece of the market is about, projected to be about 40 million units a year by 2005. Our strategy would be to try and penetrate up to 10 percent of that market within that time frame and then see some additional growth beyond that, but also see new applications using the same core engine in other kinds of consumer products. And we talk in our press release, for example, about ongoing activities and we used to talk about this a lot back in the heady days of the Internet, mobile Internet and 3G were really hot topics. Well, it's still very much a pressing issue in the world of wireless.

We've recently in fact signed a memorandum of understanding with one of the largest suppliers in mobile handsets in the world. And what we're doing there again is getting back to product concepts. We're talking about both hand-held and wearable kinds of configurations of these kinds of devices. And again the value premise here is really one of breaking that log jam which devalues the content. When I look at content on a two inch screen, the value of that content is severely limited to both me as the user and to the content provider and of course the network operator is trying to collect fees from both of us. And so his ability to drive his own revenue is in turn severely limited.

We've also been asked by one of the major network operators for this reason to begin defining product concepts and doing usability testing, the ergonomics of these devices will be critical to market acceptance, but we do expect as part of that ramp, and it might be the 2005 and beyond sort of time frame that we will see new kinds of mobile devices integrating these kinds of miniature display technologies as well. But the work we're doing now is we think very important. These reference designs, these concept designs and testing them for usability with consumers is going to be an important component of it.

Our ability to gain and maintain share in that is really predicated upon the same issue that drives in the digital camera space, which it's all really about pixels per penny. And the fact that we can deliver six to eight times the resolution of what you see in the market today for marginal increment of increased cost. That's obviously key resolution is going to be key enabler for these kinds of applications. Again we view some of these new developments as more pipeline related activities. Obviously the focus for launch is the digital camera domain. We've got a growth market with a defined problem and challenge that is being embraced and we're seeing strong pull from the market. In terms of some of our other pipeline activities, what we see continuing to drive growth beyond '04 and out. And we think we can get on a very steep curve with this.

I'll take you back to a moment to what I described with reference to the Flic bar code scanner the strategy being there to quickly gain a few percentage points over the next several years of a billion dollar market and put ourselves on a very nice growth curve with respect to that particular product line. The follow-on piece though relates very much to one of the things we described in our press release as a new development. That's the introduction of two dimensional laser cameras. The strategy there is very much again now riding the emergence of a wave. Interesting dichotomy in the bar code space is that while we have liquidity and commodity sorts of momentum in one D bar coding applications and devices, in the world of 2 D we've got a pent up demand situation because of a performance trade off that exists with existing cameras.

We recently demonstrated -- by recently I mean about a week ago, for the first time a prototype of a laser camera which is, by the way, based on the same micro scanners that are in the Nomad and the consumer products prototype. So we're getting to stay very focused on our technical core competencies. The resolution of the system was just outstanding. It exceeded our expectation. We took both monochrome and full color oranges to put in sort of a market driven perspective at the resolution we've achieved in this initial proof of concept demonstration we'd be able to read codes at a small fraction of the size of the smallest code that, two dimensional code that would be recommended today and used with the CC D&C MOS cameras that have been marketed.

The significance of that is this is really all about real estate and storage density. The whole drive towards two dimensional codes is all about being able to get more information on a smaller space. That's particularly important when it comes to small parts like printed circuit board, semi conductor chips and things of that nature where the bar code can't be larger than the size of the product itself. And as supply chains become more and more horizontal it's important. Another key attribute in those environments is to be able to engrave or emboss the code right on the part. We get asked a lot about RFID tags and what's going to happen in the market. There's absolutely a roll on the market for radio frequency ID. The beauty of bar codes, the reason that bar codes will continue to be a significant and even dominate form of storing and capturing information, is that the storage medium is essentially free. When you make a consumer product, you put it in a package and you print stuff on that package. And so it costs nothing for you to print some coded information as part of your, essentially as part of your package design. The same is true in an awful lot of electronics manufacturing, things are molding, things are engraved. Things go through lithographic process so the ability to put information about batches and sequences and dates and all of the kinds of things that want to be tracked in the supply chain and do it at a very, very low cost is inherent in the bar code scanning mechanisms.

So other features of this laser camera are not only the ability to read that code in a compact size. But one of the very real aspects of the market constraint today is that people can't read those two dimensional codes quickly because if there's any relative motion in either the thing that you're scanning or your hand that you're scanning it with or even in a fixed mount system it's very difficult to get a good read. So the small aperture and fast shutter speed. By that we talk about the individual speed of that scanning beam, modulating at very fast speeds, as it moves across the image, that makes our system relatively immune to motion blur. Smaller size lower peak power requirements. In the case of the recent DEM administration we did we were evaluating it from the standpoint of medical imaging and uniformity of illumination and color gamut were key features and advantages as well.

So to put this in context, again, Flic and Flic Freedom introduced low cost solutions into an existing marketplace. The 2D bar code product is meant to stimulate growth in a pent up demand space. And we would look for very rapid growth following the introduction of those products, because you are a growth, again a growth enabler and therefore potentially kind of a dominant share strategy as opposed to what we see with Flic. What I'm trying to do is get to you visualize how some of these curves map together. And obviously what we're trying to do from an enterprise standpoint is build premium value around that sort of accelerating growth curve and the kinds of premium value-added we can have because of the proprietary and disruptive nature of these technologies.

Another product pipeline activity that we're just exceedingly pleased with is our work in the automotive arena. We're especially grateful to BMW for being such a strong and vocal champion of our efforts. They have exerted substantial pull, not just on us but also on potential development partners, including a number of the tier one suppliers that provide them with electronics systems and sub systems, and some of those who aspire to provide them with sub systems. So it's a really terrific dynamic. But we're probably more conservative than our friends at BMW about this we're again viewing this as sort of a pipeline activity. We're hearing aggressive statements about production certainly decisions being made to move into production kinds of time lines.

The types of systems that we build -- again, I want to emphasize here. Virtually everything we did in the last year around our automotive prototypes was based on the core Nomad platform, the core micro scanning platform that is used in all of these technologies. We can take the engine out we've used it in dash panel displays, even a rear seat entertainment system. The current focus has more to do with control services and dash kinds of applications, which is there's gratifying to us because that's where the volume is certainly. Those are standard features in automobiles as opposed to head up displays and rear seat entertainment which are emerging categories.

We'd love to see something emerge here where we can really target something that gets us into volume production. From the perspective of what all this means in 2003, what it means is that we expect to see continued development contract activity contributing to the overall development and that that development is highly synergistic with a variety of other things we're working on. In particular, both this development which targets a very high volume low cast scanning projection system or micro projection system or the work we're doing with Cannon and planning to do with others on the consumer display, feed directly into something we've just announced today which is feasibility work that we're doing with a major display manufacturer.

This company is also significant in the world of printers, which incorporates our micro scanning technology to enable rear and front projection displays for both specialty and mass market applications, including large screen 12. Some who follow the display space will know there's significant trade offs when you get into 40 and 50 inch displays, all you need to do is go to the good guys or retailers to learn this for yourself. If you want something that is flat you can buy a plasma displayed. If you're happy with 40 inch you can get them from three to 4,000 if you want 60 or more you're talking about still $10,000 or $15,000 in plasma. Plasma has in addition to being cost prohibitive has other sorts of lifetime challenges associated with it.

On the other hand, if you want more affordable not constrained with space what you'll probably look at very quickly is the CRT system. When you see these 40 and 50 inch rear projections enclosures that are a little bit bulky they're mostly based on an architecture that incorporates three cathode ray tubes in the architecture. I can't talk about the specific architecture here. It does not involve direct laser illumination of the screen, because the power requirements are significant in order to do that. We do see that as a longer term very viable approach but we think it's going to be a unique and disruptive architecture. Our early partner here on the feasibility work has referred to it as a cornerstone technology and has -- I think Steve talked about some very aggressive potential go to market strategies in terms of the kinds of numbers that they see in particular in this television space.

This is becoming an area of real interest in Asia. Of course, the display arena has historically dominated by Japanese now Taiwanese and soon to become Chinese and Korean companies. The interest is not only the fact that they're a substantial center of gravity in the space but as China opens up and begins to build out, you're got a green field marketplace for these kinds of systems. They will likely implement broadcast standards that are higher quality than NTSC, PAL or CCAM and others in the country. Again demand for higher resolution projection kinds of systems can really be significant as that market opens. So we'll be gratified to talk more about this relationship, this first turn prototype will happen very rapidly here. I believe Steve it's several weeks, isn't it?

That's correct.

Before we demonstrate it. We will likely be publishing on this as we move into the spring. And moving into fall on phase of this contract. Again, we're treating it very much as upside today until we have better visibility on the product path and time lines but we have a world class partner signed up already and a couple of others who are very keen to see the results of this first work. One other point I want to make about agility here involves another variant on the Nomad. We've done I think a really good job of extracting value from that investment that we've made in development.

We had a call from a major supplier of military vehicles. Armored vehicles and things of the like. They described the problem to us with their thermal weapon sites in the Army vehicles. Basically the miniature cathode ray tube that was at the heart of this was problematic from the point of voltage, it's a high voltage display. Lifetime as you know phosphors do age, and especially when they are bombarded by electrons, and so what we were able to do in a matter of 90 days is turn the Nomad display from a monochrome red display to monochrome green display by using a blue violet laser in conjunction with a foster.

In essence what we've done is we've improved upon a wonderful technology which is the cathode ray tube. We've gotten rid of the vacuum. We're now hitting that phosphor with an optical signal which is far less destructive to the phosphor. We've also managed to reduce the drive by thousands of volts, certainly 10s of kilo volts and also the package size which is a key constraint in these vehicles. Bottom line we now have a Nomad configuration that is addressing a potentially significant replacement market as well as a new builder market in not just military armored vehicles but a variety of other kinds of systems.

These monochrome green kinds of displays are used in a variety of systems. This is essentially like a little rear projection system with an optic on the front of it. The driver of the vehicle sits about a foot or two away from this, looks at that optic and sees the thermal weapon site. Today we're referring to it as pipeline activity. Lot of business development work going around that for 2003. If that's successful, we could see some more meaningful numbers associated with that and begin to incorporate it into the baseline growth curve.

On the defense front as well, literally just in the past week and including today we performed a series of flight tests with the Spectrum display. This is a full color see through system. Again a color variant of the Nomad. The flight test was part of a contract awarded to Microvision by the Army. It was tested at Fort Houstas Virginia in a UH6-DL Black Hawk. And this is an important moment for the company. The flight test went swimmingly, both in terms of rugged-ization which is a key aspect of this. Can we fly this in a high vibration environment in particular and will in fact the basin integrity of the unit hold. That went exceedingly well. This has been on about three or four sorties a day on three separate days so far this week. There will be additional flight testing. That was the key component. The other was functionality. One of the problems they're trying to address with this system, they're using a moving map display for tactical intelligence in the helicopter. Unfortunately, that display resides in the back seat and in effect you have the back seat talking to the front seat to describe situational awareness information. There's a real problem. They've attempted to move the display into the front seat. Because of the vibration, the pilot is not able to see the display at all. It's completely out of focus and blurred to him. The pilot reported -- and I made a note of this somewhere -- that the image stability was outstanding and I think the quote was even in a two-g- turn. So again this is a really important milestone. This is the first flight test a Microvision scanning display in a helicopter environment, which is one of the more demanding environmental environments that you will see.

So we do think this is a candidate for can accelerated production. The problem being addressed here, I referred to tactical intelligence one of the key aspects is to minimizing blue on blue causalities or what we commonly refer to as fratricide, friendly fire. It's a significant problem. It's about knowing who is where on that battle field. And the way the system works is by essentially you've got a computer tied into a GPS system with a moving map that is updated by intelligence sources to allow the pilot and the people in that aircraft to have up to the moment information about those kinds of positions. So in terms of looking again at our growth model, we would typically look at military production being something that's going to start to drive growth in the 2005, 2006 kind of time frame.

The potential here, the opportunity here, if we continue to be successful with this and we can get the kind of sponsorship, is to accelerate that somewhat because this is a significant problem. And by the way this is what military refers to as an appliqué. This can be integrated into an aircraft very easily. It's a carry on kit with very simple interface adaptation that can be accomplished in a matter of a day to these helicopters. These kinds of solutions are being sought by the military. Very pleased with what Tom Minow has been able to achieve at Lumera in the past year. In recent months in particular I think what's gratifying is you're seeing that momentum in your development process. Two package devices, one electro optic modulator for potentially telecom applications. More recently a phase shifter also aimed at a variety of defense applications for phased array systems across a range of applications. So maybe you can tell us a little bit about Lumera.

Lumera team continues to make significant progress in both the material and product areas as we solidify the company's proprietary polymer platform strategy. Recent accomplishments include synthesizing at Lumera our own materials for electro applications greater than 100 and demonstrating the scale up capability for those materials of up to 100 grams a week, which is critical from the standpoint of being able to produce hundreds, thousands, 10s of thousands of devices. A lot of the information you read about these kind of materials that is typically published by organizations like universities and laboratories, when they publish this kind of information they're talking about half gram kind of quantities of material and they're only interested in making it work and showing that it has capability.

What we're trying to do is show that we have capacity to make that again and again at very high quality and very high purity and what we have shown in recent months is the ability to scale up these materials to the hundreds of grams kinds of quantities which is significant when you start thinking about processing wafers with these materials and an average wafer might use a half a gram of material. You're talking about being able to manufacture hundreds of wafers per week and turning them into final product devices we've not only demonstrated the ability to scale up the material but we've proved in the processing capability to transfer that material from bottles into working products and we have unique capability in-house. We are currently have applied for four patents in two of the materials area and two in the processing area, which enables this capability to capitalize on the performance of the materials and the device performance at the end of the line. And again that's unique to us.

We have competitors that will announce performance of materials, but the ability to provide those materials in quantities are very high quality, very high level does not exist it does exist within Lumera. We've also provided improved prototypes of the 10 gigabit EO modulator for certification for Metro Telecom market applications. That means we've put things into systems for Telcordia Qualifications which takes several months but we have results up to 2,000 hours that shows the materials and the devices are stable at that period of time, which is, again, a major milestone for polymers in optical applications.

In the past there's been concern about thermal stability and optical stability and right now we're showing over thousands of hours so far and as we continue to test we'll show over TNZ of thousands of hours that we do indeed have a stable platform for the manufacturer of optical and other components. As Rick mentioned, we recently announced an RF phase shifter product which we designed and developed in-house which has significant power and performance advantages. This has resulted in discussions with two major companies regarding phase to Ray radar applications and we will be holding meetings over the next month with those companies to discuss the applications and the development of these phase shifters into their systems.

And the real advantage here is we can do things at about 17 to 30 volts that currently takes 100 to 200 volts in systems. And I think all people that understand these complex systems understand that the lower the power, the lower the thermal load, the better it's going to be from a standpoint of the overall system design.

Especially true in these phase to ray systems because the key word there is an array. When you're building an array the number of single shifters that voltage is cumulative you're building an array with hundreds of phase shifters in it, each one is driving in 100 volts it becomes prohibitive very quickly.

Plus many of the applications are airborne and satellite. So again there's a huge advantage to the steps that we've taken as far as improving the performance at very low voltages and very low power. So we're very optimistic about the ability to work with one or two major companies in this area, and obviously we don't have an in-house phased array design group. But by partnering, and this has been our strategy that the platform technology applies to by partnering with people that see the advantage of this and accessing their design capability for the product will develop a market for the materials and the processing of those materials which is where we have the expertise.

Also, we are currently negotiating three new contracts with two government agencies and one government contractor, which will result in approximately one and a half million dollars in development funds that will be expended over the second half of 2003. We probably will close all three of those contracts on the next fiscal quarter. One may close this quarter. The other two in the second quarter. So we're also out there being recognized and in two of these cases we're sought out after a presentation, we made an SPIE to do additional work for government agencies and government contractors in the polymer and chromo fore area.

We are quickly becoming a recognized leader in the ability to transition from the research phase of these materials into the development and production phase of these materials in a very short period of time. We have already provided samples of advanced materials to the government and advanced devices for the government. In the case of the devices for radiation testing, in fact that radiation testing has been completed and we have successfully passed all of those radiation tests with little or no impact on the performance of the devices. So it's been a very aggressive quarter in the past three months. It's been very satisfying and the accomplishments speak for themselves. And I think the rewards will come the second half of this year and through 2004.

Thanks very much, Tom. I think we're ready to turn it over to questions. I apologize we went a little bit longer than we had hoped to with the commentary. But we will allow time for questions

q-and-a.

If you would like to ask a question press star and the number 1 on your telephone keypad. We'll pause a moment to compile the Q and A roster. First question comes from Daniel Ernst with Rodman and Renshaw.

I have a few questions. If you don't want to repeat parts of it, no problem. You talked about the gross margin and what your goals there are and what your goals are for yield. Can you give us an idea of where you think break even revenue is and I understand that it's affected by mix. But can you give us some idea there. You spent a lot of time talking about leveraging elements of technology that you've already developed and bringing them across platforms. And can you just talk about where you think that goes and what does it do to R&D and you talk about R&D versus the development contracts you're getting. Can you give us some sort of guidance on what the R&D expenditure is and your ability to just commercial lies parts or technology you've already developed versus having to spend more on research.

I'll start at the top there. Our target gross margins for Flic and really generally as a rule of thumb is in excess of 50 percent. Obviously with an early production, we aren't achieving that. There's some inefficiencies there. We should be achieving that pretty rapidly here. And especially you refer to yields as those climb. I mentioned I think in the press release and in my commentary that we expect to be at 90 percent yield pretty quickly. I think we expect to get up, Bill, to 95 plus percent on a normalized basis and get very, very high yields on this product as we go. So I think that yield is attainable. And I think the gross margin is attainable.

With Flic, we also have -- and for the sake of being somewhat conservative in planning, we don't calculate a lot of the gross margin contribution from the accessories, but the plastic docking station and the belt clip and the boot are high margin items. They're low cost items. But they're high margin items for us. So that mix will bump that margin up some. We also have a cost reduction effort scheduled for Flic to further increase that gross margin. The gross margin ought to be, you can certainly use for a rule of thumb with respect to flick freedom, the wireless, similar kind of 50 percent gross margin target. We may be able to exceed that as well. I think, Dan, help me was your second question about a break-even across the board for the company?

Yeah.

That is dependent upon mix to a certain extent. If you look at our current cost profile and assume that sort of gross margin philosophy that I described, you're going to get into high 40s, low 50s, again depending on mix. This sort of gets into your next question, which is about leveragability of the platform technology and in particular the role some of these contracts are playing in it. There's an element of leverage in our cost structure that relates to contract development. One of the things we're happy about is that we are seeing the gross margin trend that we are on the contracts, but as importantly, the contract mix, the number of contracts and actual growth in contract revenue is an important contributor to that as well.

The reason for that is in the best case what we want to do is in effect underwrite some of our existing R&D with new contracts. In other words, we're focused on doing R&D that is largely aimed at some commercial product, a certain pipeline. When we go out and win a contract, what we like to be able to do is move our costs from the internal R&D line up to the direct cost line on that contract, which has a twin effect of generating gross margin and in effect reducing R&D costs as well. So I think if I were making, in the model that I just outlined to you, I guess I would conceive that contract revenue would have to comprise probably in the range of 16 to 18 million of that high 40s kind of mix to get us to profitability.

At a lower number you'd be a little bit short of that. At a higher number you could cross over more quickly. While I'm on that subject I think there's some upside this year and next in contract revenue. And I know a lot of the activity Steve is working on in Asia. We're looking for some potentially significant contributions to nonrecurring engineering expense. And also on some of our activities in the image capture, we have on the table now some very significant proposals.

We also have in the pipeline a couple million dollars worth of options that commercial partners, a commercial partner can exercise. The way that works is that we've done some proof of concept work for this particular partner. What they have asked us to do -- what they've negotiated is a series of short run stand still options that allow them to have a product definition phase that they can engage in. While before we proceed to the next phase of development. In order to compensate us for opportunity costs of standing still during that period of time, we've negotiated those options. The way those options would hit the books is they won't be recognized as revenue they would be recognized as an offset to our cost structure. So those would have some upside impact in terms of the cash flow impact of those as well, because I think in our base plan we make the assumption that those won't be exercised. Today, I think we've got a good chance of seeing those exercised.

Just a follow-up on the R&D line. Do you have a target for the year for R&D? Budget?

It's early to say because of the level of activity, if you look at what we did last year, it was in the range of 13, 14, between 13 and 14 million, 14 and a half million with about two and a half plus coming from commercial. If I've got that right. Last year as I mentioned before was the first year of commercial. Now, this year we think that's going to grow. We have some IV visibility on it. But the conservative thing to do is to assume that may or may not happen and look at that as being flat, up or down marginally. And I think that's reasonably a safe kind of assumption to go going forward. There's some upside to that in some of the elements I've just mentioned. But we'll get better visibility as we go, because one of the things we're seeing, more activity, a larger number in the mix, what we saw last year was we had some large contracts but we also saw a number of smaller contracts that developed throughout the year. So we started last year looking at a lower number for the contract side as well.

Thank you.

Your next question comes from Josh Silverman with Vertical Venture.

I just jumped on, if I missed this can you give me a little bit more details about the advantages of the rear projection?

As I mentioned, the marketplace situation on rear projection displays today is really a cost performance one. You have a discontinuity. You can go buy a 35 inch television for about 600 dollars for a brand name 30 inches when you jump up to 40, 52, 60 inches you get into the $1,500 $2,000 range. If you're talking about rear projection you quickly get up to several thousand dollars or more if you're talking about plasma displays. So this is really about cost performance. There's been a lot of talk and alot of effort in the last two years in particular around the TI, the Texas Instruments deal , P Solution, for those kinds of applications and also around liquid crystal on silicon as a potential candidate. The challenge there has really been about achieving overall reductions in the system costs to make them competitive with the CRTs which dominate kind of the affordable solutions.

So there's some performance advantages we can create a non pixilated display. It's very pleasing to look at. It will give you apparently higher resolution even if I've got the same number of picks he wills, for example, because of the non pixilated nature of this. It appears to be high resolution. You'll also have the ability, if we compare it to liquid crystal silicon systems or DLP based systems, the challenges in those systems have to do with the cost of the panel and the cost of the optics which are driven by the size of the panel. And I can't say too much more about this without giving more than I intend to away about the specific architecture.

What it enables us to do is to impact very positively in cost reduce both the optics and the light force, which we will include in the optics and other components of the system by using the scanning technique. So it is potentially something that's very disruptive. We'll know a lot more in just a few weeks when we demonstrate this. As I said what's kind of exciting is that the partner that we're aligning with this is also a big name in flat panel display. They know the liquid crystal world intimately they're a huge supplier of liquid crystal displays in Asia and a big name in optics and imaging. This is generally one of the things we're thrilled about is the quality of the partners that are knowledgeable about the competitive space and alternatives that we're operating with. So I hope that speaks to your question.

Yes. It does. Thanks.

Your next question comes from Jeff Harvey with Jay Montgomery Scott.

Couple questions. Did these recent contract wins give you any leeway as to when you need to raise additional funds and can you give us some sense as to when you think you're going to need to do that.

The strategy we've been using in the market that we've been experiencing for the last couple of years is to be really poised to go at any time. As you can see, we've got outstanding shelf registration statements that have been continuously effective for some time. We've also been fortunate in that several of our existing investors have come back to the table and continued to do so. So we can access capital opportunistically and quickly, as we said on the call here we have a number of fundamental developments that we think are positive. So we are really poised at any time to access necessary capital.

With our balance sheet where it was at year-end. If we were to raise another 10 to 15 million dollars during the course of the year, that would take us through the year and likely into part of '04. Lumera has requirements they've been successful raising money privately in the past. The last round that they did Cisco led. So Tom, as he mentioned has a variety of strategic and financial investors that he's in dialog with as well. So we feel quite comfortable, certainly not complacent. The only reason we've been comfortable is we've been very proactive about ensuring we have financing sources on tap at all times and as I said we've had existing investors who have been very successful with the company and are prepared to reinvest again. And that's –

I was thinking given where the stock is and who knows what's going to happen here in this lousy market that it would seem to me that you have a little more time at least to hopefully take advantage of better things.

Certainly if some of the things develop that I mentioned to you, for example on the contract side, I mentioned those options that would positively impact cash flow. I mentioned some of the proposals that we've got out there. If we saw who got that up side on the contract business, the impact can be profound because you get that double bang. You get to allocate what are currently below the line costs direct costs on the contract. If it's done right you get a very high effective cash flow yield from a contract. In the case of a couple of these contracts, we are getting inherently really good cash flow yields just because the way we've negotiated the contract. In one case of about two million dollar plus contract, I think the gross margin is on the order of 80 percent or so.

Part of that has to do with the nature of what's being funded there. And so I guess in short, if we are successful, if we do see these kinds of sort of upsides developing, that would very positively impact requirements for additional capital and move us more rapidly towards that break even number. And that's really sort of the same component of the same question that Dan asked about what that model might look like in the mix of contract versus product revenue. If we do see extraordinary growth in contract revenue that will have a very positive effect in that regard.

The other question I have there's a company down in Portland, OR called Max BIZ developed an enhanced vision system for pilots. Does it make any sense to talk to them about somehow incorporating their technology with your head up display to give the pilot really a complete package?

I'm going to let Tom Sanko answer that because he's raising his hand. He's saying we know them.

We know those guys we've been talking to them for a while. We're already on that.

I think in general it's true that there's a lot of partners in the aviation space where there's real compatibility with the system. One of the things, we had a meeting a few weeks ago the portfolio manager who was also retired Air Force pilot. And he said to me he said I understand exactly what you're talking about, because I've got this little hand-held GPS system. It's a beautiful thing. He said the problem I'm in cloud cover I get nervous looking down at that thing in the palm of my hand or on the seat next to me, because I don't like to take my eyes off the window view.

So what that suggests to you folks who are making these kinds of GPS systems, electronic flight systems are all candidate partners for us. The system we have today is a fully redundant system. So it's terrific as a safety to a part of how we position it it's a fail safe in case your vacuum pump gauge goes down. That's one of the flight instruments that frequently fails and it's an important flight instrument to have. And so that's a nice feature of it.

We're moving towards functionality that will give us a whole approach kind of vector system on the display. That system as it is currently supports a GPS plug in to it as well. So as we see functionality expand, the list of potential partners, OEM partners for that expands as well. Another factor that's going to influence that, and we won't do it until early next year, is to FAA certify the system, at which point it will be eligible to be used as a primary flight reference as opposed to a back-up system. But the safety story is an important one it's very compelling. We're just starting to as I said before build that awareness to create pull among those end users and that we've got a terrific channel partner in aircraft, Spruce and Specialty. So we're pleased with the progress we're making in the general aviation domain.

Thanks very much..

That's the last question, I suppose. So we'll go ahead and move again to concluding remarks and apologize for going a little bit over what we intended. Again, I think we're certainly pleased about 2002 and particularly the gross margin progress. Although as I said we did have loftier aspirations coming into the year in terms of our top line growth. We think in 2003 we're a little more seasoned going forward. We also, though, are really excited about the prospects for the Flic bar code product, beginning to drive revenue and to drive it sequentially over the next several quarters. We're getting really strong feedback from our channel partners and the product really seems to be hitting a sweet spot in the market.

We actually had a nice letter from one of our distributors, really describing what it's doing for its customers. A simple message was that my customers are really looking for cost containment solutions, not improved performance. The market historically has been emphasizing improved performance. So this really comes at the right time for this market. This is a product that there's a lot of channel incentive in. So we're again really enthused that we can move this out and do great things with it in the next several quarters. What's equally exciting in the go forward, we've kind of gone through it, we think the Nomad will start to gain traction. We're identifying some compelling launch applications and a variety of different chapels that have different dynamics to them. So we think that can be a significant grower later this year and into next year and then next year entering with the targeted launch of our first products in the consumer domain and we could see some very, very rapid growth there.

And what to me is very powerful about this is if you look at the quality of the partners that we're working with, whether it's BMW or Cannon or NCR or some of the others that we haven't been able to, Johnson or Johnson, some of the others we haven't been able to yet. They're sophisticated, they're very discerning, very knowledgeable about competitive solutions. Cannon, for years, had their own internal effort building miniature ferrel electric crystal displays. They in fact marketed a wearable display using ferrel electric crystal displays they built themselves they probably had the best FLC technology in the world. When I asked them why they abandoned it they said because it couldn't be competitive.

So this is a company in particular that is exceedingly well informed about competitive alternatives, exceedingly well informed about optics and the cost of bringing products to market and development requirements. And we're thrilled to be aligned with them in the way that we are. And I think you'll be pleased to see some of the developments going forward and some of the names that may emerge over the coming weeks and months during this year. It's just a very, very exciting time. It's obviously been as one of you just alluded to a moment ago in the question there, the stock markets are lousy. The economy generally is not been a thrill. But I will tell you there's an awful lot of buzz around this place and people are up beat and motivated because we're seeing the small successes, the many small successes that lead to what we think is going to be a very big success. I thank you for joining us today.

This concludes today's Microvision year-end financial results conference call. You may now disconnect.