MicroVision Inc (MVIS) 2007 Q2 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Microvision Incorporated 2007 Second Quarter Earnings Conference Call. My name is [Camey] and it will be my pleasure to be your coordinator today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session toward the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to the Chief Financial Officer, Mr. Jeff Wilson. Please proceed, sir.

Thank you. I would like to welcome everyone to Microvision's second quarter 2007 financial results conference call. In addition to myself, participants on today' call include Alexander Tokman, President and Chief Executive Officer.

The information in today's conference call may include forward-looking statements, including statements regarding projections of future operation, product development and production, application and benefit, future benefits of contract arrangements, market opportunities, and growth and demand, as well as statements containing words like "believe," "estimate," "expect," "anticipate," "target," "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.

I would now like to turn the call over to Alexander Tokman. Alex?

Thank you, Jeff. Thank you for joining us this afternoon. The agenda for today will be as follows. We will start with the operating results. I will provide you with some color on some of the more important developments. Jeff then will provide the financial summary and we will close with the Q&A session.

Recall I just looked at the last quarter transcript and the last statement from me was that we told you that we were getting ready for the Society of Information Display and we were going to delight you as well as our customers by the progress that we expected to see in the second quarter. Well, the results are in and I am pleased to say that we have made significant progress in all important areas of the business including new business development, technology, and operations and financials.

Let me just begin with the business development area first.

Our business development efforts during the second quarter resulted in several new customer contracts including the joint development agreement with Motorola as well as new development contracts for aerospace and eyewear applications. The Motorola development effort was announced subsequent to the end of the quarter, focused on developing Pico Projector Solutions for mobile application based on our core technology.

We were also awarded a $3.2 million contract by the US Airforce to provide a lightweight, see-through full-color eyewear display prototype. We certainly believe that this solution will be beneficial to our armed forces and it also will serve as the first necessary step on the way to the consumer applications.

We also signed a new commercial product development agreement with the leading transportation company to develop a PicoP based display solution for aerospace application.

Let me now touch on some of the developments on our technology and supply chain front.

We have shown a progress in both of these areas. First, we developed and successfully unveiled at the Society of Information Display conference a new wide angle PicoP display that we believe better addresses consumer needs. This wide angle Pico Projector was developed based on direct customer feedback and it creates a full-color WVGA image with approximately four times the viewing area of our previous SVGA display while still maintaining its original (inaudible) form factor.

We have also completed and announced a successful integration of a green laser from OSRAM Opto Semiconductors, and as you know, previously we have announced similar type of compatibility with Corning and Novalux green lasers.

We also during this quarter formally introduced Oerlikon Optics as one of the high value manufacturing partners for PicoP after originally announcing this joint development effort at the end of last year. We have been collaborating with Oerlikon to optimize the design for manufacturing of opto-mechanical engines, and as you know we are targeting this for the consumer and automotive applications. InfoCom served as a platform for this formal announcement.

Finally, we introduced a new barcode product based on our core MEMS technology. ROV, our new laser based barcode scanner incorporates core MEMS scanning beam technology and it was introduced earlier at the Microsoft Mobile and Embedded DevCon Conference. This scanner was developed for use with mobile applications to provide a simple and affordable point of scan capability to our customers. The initial feedback on beta units has been positive.

Before Jeff covers summary of the financials, let met just touch upon it. We exercised the right to call our publicly traded warrants raising in the process over $34 million to fund our continuing operations, all of it without an increase to the company's fully diluted common shares outstanding. And our quarterly and first half financial metrics have improved in every category over the same time last year and Jeff will outline these to you next.

Thank you, Alex. Just going over the first six months results. For the first six months ended June 30, we reported revenue of $4.9 million compared to $4.4 million for the same period in 2006. And for the quarter, we had revenue of $2.7 million compared to 1.9 million for the same period last year. As of June 30, our backlog was $7.7 million compared to 1.5 million for the same time last year.

Operating loss for the six months was $12.3 million compared to $14.4 million for the same period last year, and for the quarter we had a loss of $6.3 million compared to $7.8 million for the same period last year. Also the net loss available for common shareholders, we report a loss of $9 million for the first six months of 2007 compared to $10.9 million for the same period in 2006 and $2.2 million for the three months ended June 30 as compared to $11.2 over the same period in 2006.

The net loss per share was $0.21 for the first six months of 2007 compared to $0.40 in 2006 and loss of $0.05 per share in 2007 compared to $0.38 for the second quarter of 2006. The net loss available for common shareholders for both six month periods included gains from sales on our investment in Lumera. We had a gain of $6 million in 2007 and $7.3 million in 2006.

One of the other big swings was the non-cash expense associated with the liability accounting for the warrants issued from former note holders. For the three months ended June 30, we had an expense in the current quarter of $1.9 million in 2007 compared to a gain of $1.2 million last year. And for the six months period, we had an expense of $2.6 million in 2007 compared to a gain of $3.1 million last year.

As we have discussed in the past on the warrant - liability accounting for the warrants moved inversely to our stock prices. If our stock price goes up, we record additional expense associated with those warrants.

On another note, we ended the quarter with $17.2 million in cash, cash equivalent investment securities, included in that is $6 million from the conversion of $2.3 million of the public warrants. Subsequent to the end of the quarter, we received an additional $28.1 million from the conversion of additional $10.6 million warrants. Alex?

At this time, I think we are ready to open for questions.

Thank you very much. (OPERATOR INSTRUCTIONS) Your first question comes from the line of Joel Achramowicz with MDB Capital Group. Please proceed.

Thank you very much. Good afternoon Alex and Jeff.

Good afternoon. Hi Joel. How are you?

It's very gratifying to see the balance sheet look so pristine now obviously in the wake of the warrant exercises and getting some of those really awful derivatives off the books. So, congratulations in that regard. Also having all that additional liquidity is certainly great, must be also gratifying. But obviously the most I was concerned about the technological and business development issues going forward, Alex, I mean this is obviously a question that most of us don't want to ask.

When will we get an indication of some of the critical metrics and commitments and involvement with the Motorola deal and how can we measure that in terms of milestones going forward. And in addition to that, it would make sense I would think for you to hurry up and cord another partner or two so that you can play the partners off against each other? I've had stocks in the past where a large company like Motorola has signed an agreement and has delayed significantly and really screwed up a company's operating model.

So, any clarity you can provide in that area would be valuable. And also finally, Jeff is there any way we can forecast these stock-based compensation issues, they are very lumpy. That's all I have for now.

I will take the last one first on the stock-based compensation. Going forward now as I talked about, they are based on the Black-Scholes value of the warrants and the Black-Scholes value of course varies with the stock price, and so they are very difficult to predict on a go-forward basis, it's basically a remodeling of the stock price.

Joel, let me come back, you asked several different questions most of them I believe everybody wants to get answers to, so let me provide as much clarity as I can staying within the bounds, so I will start with Motorola. So, basically you all know that based in the press release that we will be working with Motorola to develop Pico Projector Display Solution targeted for mobile applications that would be leveraging our Pico Projector. The first step in this development effort is to integrate our latest version of the PicoP inside a function in mobile device for demonstration purposes.

Why is this important? This is the first necessary step before you go to productization commercialization because you need to get a valuable feedback from the enduser so you can ensure long-term success of something. Unfortunately, I cannot give you the timing of our developments with Motorola independently of this. I can tell you that as I mentioned earlier our target independently of the development with Motorola is to introduce an accessory product by the end of '08 and embedded solutions in the first half of '09. So, I hope this will cover your question on Motorola.

The second question was about new contracts and what is the time and then viability of these. Based on what you've just seen most recently, specifically the agreement with Motorola, we are not precluded with working with other customers on similar applications and we are currently in negotiations with several handset manufacturers and consumer electronic companies and we expect to enter additional agreements in the future.

Thanks Alex. And just one quick follow-up on that. Might we see something at CES in January that might involve both you and Motorola?

I can't. Again, Joel, I cannot refer answer specifically as related to the agreement with Motorola. All I can tell you look at our history. If you look the past CES in January of this year, if you look at what we did at SID, our goal is to delight you every time we are going to come to these large trade shows, and so far if the history then you predict the future. You can see that we have been delivering. So, expect something from us at CES, I can't tell you what it is yet at this point in time.

Thank you very much. By the way, I don't want to discount. Congratulations on making your target before the end of summer a major deal that's very good news. Thanks very much. I will get back in the queue.

Thank you, Joel.

Your next question comes from the line of Jed Dorsheimer with Canaccord Adams. Please proceed.

Hi. Thanks and congratulations on signing Mot. Couple of questions. First off, Alex, aside from this Mot deal, I was wondering if you could maybe give us a little bit of general perspective on, I guess hypothetically speaking, in terms of signing these types of deals, would there be NREs that are involved in? How would the revenue share go in developing the product, again not speaking directly to Mot, but just in general terms?

Good questions, Jed. Typically, there is no deal that would be identical to the other because the business models will differ depending upon what each player would contribute to the table. In some cases, we would expect to provide full Pico Projector Display engines. In some cases, we would provide subset of it because given OEM partner may have already built an electronic solution specifically for the video processor especially if our device will be embedded inside their device.

And finally, there is also some interest to get some critical components from us no one else has to-date. Based on what I described to you, we expect to have all three different flavors of deals. And again, I can't go into the details on Motorola, but our goal is to pursue common solution and common solution if we provide full display engine that serves the needs of multiple customers. In terms of NRE question, again the amount typically differ depending on the objectives, timings, and the scope of the deliverable, but yes, typically NRE is an integral component of the deal that we signed.

And again, the amount is what's going to differ depending on how far or how close we are to a specific productization effort and also it's going to depend heavily on anticipated volume from a given partner. So, for a longer-term stability and higher estimates from a given partner, we might be -- we may be willing to take less of an upfront investment for a guarantee on larger volumes later on.

Great. And then just looking at the cost of an embedded solution, do you feel confident that you can get around $50 type of price point, two to three years out, given the roadmap that the laser providers are giving you?

Well, this is a tough figure that you just specify. If you are referring to the standalone accessory, keep in the mind that we have been deriving our targets based on existing consumer models if we stick to a consumer segment for a second.

And ASP for these products is anticipated to be anywhere between 400 to 200 obviously in high volume, from there we use the common known metrics on margins for the OEMs and for their dealers and derive for the transfer price is supposed to be and the transfer price actually would be higher than the $50 based on this analysis. Obviously, in high volume, may be five years following the introduction, the expectations is that we can reach the figures that you just mentioned and they would be primarily driven by reduction in prices on the green laser as well as the blue laser.

Great. I'll pass it on. Thanks.

And your next question comes from the line of [Bob Checkland] with Parallax Institutional. Please proceed.

Good afternoon gentlemen. How are you?

Good. Good afternoon.

Congratulations on all of your milestone achievements. It's wonderful, keep up the good work. My one question is in order for Motorola to embed the IPM in [systems], the IPM needs to be repackaged. Can you give us an update on how the progress is going on the repackaging?

Well, Bob, let me start with first rebuttal. We never said that this is going to be an embedded solution. And, again, we had in place an agreement with Motorola that details of this specific development are not disclosed. So, we haven't specified whether it's embedded, accessory, or any other permutation.

However, general question, if you are asking what we are going to do with the final Pico Projector and how we are going to embed it inside the final envelope of a given customer, that is the subject to each of the development agreements that we are seeking to answer to. So, it would differ for the most part depending on configuration of a device that we are trying to be part of. If it's a cellphone from OEM X, they're going to have one type of layout. However, most of them will have to adhere to certain form factor requirements that are predicated by our designs, and most of them so far have shown willingness to adjust to our form factor limitations.

Very good. Thank you very much, Alex.

Your next question comes from the line of Joe Dubrof with Morgan Stanley. Please proceed.

Hi Alex, Jeff, congratulations on the Motorola deal. Two quick questions for you. One, can you address your organizational development as far as, you know, any additional staff that you have either brought on or thinking about bringing on business development or other areas? And two, can you give us, you know, with some of your or most of your contracts that you've announced or deals that you've announced in the past, the other party has remained a little secretive for competitive advantage, can you give us a little color on why Motorola was willing to go ahead and put their name out there?

Okay Joe, two separate questions, let me begin with the first one. Organizationally, you know, when I came in, I think at the end '05, our composition was, we had about 170 employees and about 56 engineers. As you know this organization is moved by our technical talent and our ability to innovate. A year later or so, we are today and today we are essentially composed of 130 employees, just around 130 employees, of which 80 are engineers.

So we took great measures of reducing SG&A and improving our position on the development side to get us faster to market. In terms of the BD talent, we have been upgrading the BD team over the past six months, and we have new people on board who already contribute to various important projects. Second question is related to, I believe, to Motorola, and please rephrase your question, because -- I remember it was about Motorola...

That's right. You know, you have an unnamed aerospace contract, but why with the Motorola were they willing to go ahead and give their name?

Fair question. I have told you many, many times, not to you specifically, but during these earnings calls, it's very uncommon for a large company to disclose their intention early in the development process. Large companies typically take low risk approach, get all their ducks in a row and three-four months before commercialization they've launched.

Motorola decided to do otherwise. I think it's a tribute to the technology. I think it's a tribute to their innovative spirit. And I believe it's, you will not see many of these announcements from us or from other smaller companies where a large partner is typically ready to introduce their names this early in the process. So we are pleased and we are going to make sure that this project is successful as far as we are concerned and we know that Motorola is also very serious about it.

Thank you, guys.

Your next question comes from the line of Will Grace with Stark Investments. Please proceed.

Hi guys. Great job. It sounds like the turnaround et cetera is in full progress. Just, as you clean up the balance sheet here, I just want to know, how you guys think about the cash burn going forward. Clearly the deal that everybody is talking about, how should we think about that going forward in terms of requiring resources, particularly cash from the company?

We are going to double team that I will begin and Jeff will finish. Basically if you look at our balance sheet as reported, we are operating burn around $6 million plus, down from last year same time. I will call it to further reduce this despite the fact that we've just, we have a large amount of cash to take us into 2009. We are still going to watch meticulously how we spend this cash and ensure that it extends as far as possible and only spend on the important activity. Jeff, do you want to add anything?

No, I'd just say, as we have in the past, we will monitor our cash requirements and the markets and look at that at the appropriate time.

Is there any change in resources going forward?

I don't think we expect any significant changes in the short-term. Obviously as you get closer to product introduction, you will have to continuously monitor that, but certainly over the short to mid-term I wouldn't expect anything.

Okay. Thanks a lot.

Your next question comes from the line of Randy Huff with ProEquities. Please proceed.

Good afternoon fellas. I will add my seconds and thirds to the great work you are doing. My question is to - speaks to the progress being made by your three or four partners in the integration of the MEMS technology with the laser technology in particular the green laser, and could you give us some flavor or some color, Alex, as to the timeline that you thought that might be achieved, if you've said it in the past, I don't recall what it is?

Good question, Randy. Let me just start from the end. If you assume that with our target for commercialized and standalone Pico Projector at the end of '08 and embedded in the first half of '09, if you start walking backwards, the main supply chain needs to be fully ready at least three months prior to that event, which means that the design for manufacturing activities has to be completed and validated sometimes by the middle of the year and design for various configurations of these Pico Projector needs to be frozen sometime early in 2008.

There are obviously risks. This is a real world. This is not a utopian world. We realize there is lot of risk that may inhibit us in adhering to these timelines, but what we are doing very rigorously, we are identifying these risks proactively and engaging our supply chain partners to resolve these issues before they become issues. So, we are working right now on several critical items that may inhibit us a year from now. We are already identifying these and we fully engage our green laser partners as well as the OEMs for the opto-mechanical engine to resolve these issues to mitigate the path and the risks to market.

Okay. Could you comment, I know it's a risk talking about risks and a risk in anything you would say in response to this question, but are you satisfied with the progress to-date coming out of those sources?

I am a difficult person to be satisfied. To be honest, I am never satisfied unless it's something that's bulletproof. So, am I satisfied with the progress? I am satisfied with the progress we are making. The engagement from the supply chain partners has been exceptional. So, when the problems do occur, they immediately respond and we solve these together. So at this point, I feel pretty good and again we monitor this on a weekly basis. So, things can change, but at this point we feel strong about where we are going and we feel comfortable that we can solve most of these issues before we commercialize this product.

Okay, good. Thank you. And the second question if I could. I don't believe you commented on anything relevant to hedge up display for the automotive market. Could you give us an update knowing that the form factor and power constraints that you see in the smaller applications like handheld mobiles is not anywhere as critical in that environment. So could you give us an idea where we are in that endeavor?

Absolutely. As you know we have to-date two existing development contracts with the automotive Tier 1 integrators, one is with the company called Viscion and we are executing predefined deliverables and so far we are on track to what we committed to deliver to this specific customer.

The second customer has been unnamed to-date and we are focusing on the different application of Pico Projector. This specific customer is seeking to integrate a tiny projection display inside the instrument cluster board to improve the user friendliness of the cockpit and we are progressing nicely in this area also. Obviously we are encountering challenges, but so far we will be able to solve anything that came our way and we feel comfortable as we can take these projects to the next step.

Okay, good. And did you ever gave us a timeline on when that might be a real instrument in whatever automobile company you wind up dealing with?

The only timelines we've provided were given to us by the customers and they target 2010 car model and again 2010 car model is dependent on where you are introducing it in US 2010 models go out to market in 2009, in Asia and Europe, it's typically 2010. So, right now as our partners are seeking pulling customers of this technology for them as the list gets firmer and we understand whether this end customer is located in the States, Asia or Europe will give you more color and more clarity on when this is going to be available.

All right, good. And last question if I might. You visited I think you commented on the last call during the SES Conference earlier this year with a significant number of parties that have an interest in your technology - our technology and yet we have heard of two or three or four relationships or five, whatever it is, but the number was much larger as far as meetings.

Have you seen any other things now that people are more aware of the technology that are surprisingly - surprising and interesting applications of the technology, not to say that you don't have enough on your plate already, but other things that we can be kind of dreaming about that might have cropped up in the last six months as a result of those meetings.

Absolutely Randy, there is our team. We actually have a pretty creative team inside Microvision on marketing and engineering team and we have several new exciting applications that we are thinking of in the areas of gaming as well as other entertainment areas. Customers obviously come back with their ideas, most of the time to be honest with you, it's already something we have considered and we are just trying to validate and solidify the application, better understand the work flow so we can design a product that is best suited for specific customer demographic growth.

Okay. Well, thank you very much, and I look forward to the next call and another quarter of great progress.

Thank you very much.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Jeff Harvey with Janney Montgomery Scott. Please proceed.

Yeah, good afternoon. Just to follow-up on that, I thought that you -- I have a couple of questions, also had signed an agreement with the Japanese electronic company in the past?

We stated that we signed one of our OEM partners, which is a large...

Asian.

Asian manufacturer, not Japanese.

Okay. As far as the green laser is concerned, I just want to clarify this. You announced that you completed integration of it. So how much further work needs to be done with the green laser for a Pico Projector? Is it complete or is there a lot more work that needs to done with that?

What we announced is that we made Pico Projector compatible with the OSRAM's green laser. I told many a times in the past that our success is heavily predicated on diligent contingency paths and so we are not relying on the single source supplier for critical component because we are becoming very dependent on their success.

And what you have heard from us so far an acknowledgment by our supply chain partners is that we took the initial important step on making sure that their components are compatible with our design and now we are in the process of completing the final detailed design on the components and the engine before you start ramping the manufacturing capacity and commercializing. So we are in development stage. You know, I always told everybody that you have several phases before you get the product, you've got definition phase, design phase, development phase, manufacturing phase, and commercialization phase.

But at least you have the prototype that you know that works at this point?

That's correct.

Okay. Now, you haven't talked at all about your barcode scanner business and since we get all these other things on the plate, what is the game plan with this division?

Well, we, you know, as I mentioned we introduced our new barcode scanner that is based for the first time on our core technology. We are excited about the initial feedback on this product. There is a huge untapped market that we are trying to address in the mobility stage that requires a simple to use inexpensive device for data capture and transfer. We have been developing a funnel of large customers. A typical profile of a customer could be something the company of $4 billion or $5 billion in revenue that is typically ranked on the top of the list as a Microsoft reseller, HP Platinum reseller, et cetera. The growth plan is to integrate growth with key mobile application providers and...

I guess I just get concerned that you put too much effort into that division when these other applications I think over the long-term will give you such a greater return for the investors.

Well, Jeff if you paid attention to what I spoke in the past couple of earnings call, we've actually done already something about this. We developed capabilities in India at a company called NeST where we source most of the development and support of the barcode scanner from India.

That's right.

And that is the step to I think what you are alluding, but we've already done that.

Okay. And how many shares of Lumera do you currently have now?

About 237,000 shares.

237,000 shares. Okay, great. Thanks very much.

No problem.

Your next question comes from the line of Jeff Miller with JMG Capital. Please proceed.

Hi guys. Again, like everyone else, great news about signing Motorola and meeting milestones. I just had a couple of quick follow-ups. I think you said that, you had a goal of introducing an accessory product, is it the beginning of '08 and embedded product in '09?

No, accessory was end of '08 and embedded early '09.

Early '09, end of '08 and early '09, okay, great. I just wanted to verify, was the $6 million plus cash burn, was that for the first half of '06 or is that for the second quarter?

The second quarter.

Second quarter.

Okay, that's what I thought. So, it seems like with your Lumera stock remaining and 4$5 million of cash, do you guys feel confident now that you guys have liquidity to get you through to first products being introduced?

We are pleased that we have liquidity to take us into 2009 at the current burn rates. As we mentioned, Jeff mentioned earlier, we have sufficient burn room. However, as we get closer to commercialization, we may look at other options to further enhance our go-to-market strategy, we may need some cash to do things we have on plan today.

Okay. But for right now, liquidity you have it through into '09, is that correct?

Through 2008.

Through 2008?

Yes.

Okay.

So if you just extrapolate the current burn rate, yeah, you would get end of 2009, but we are saying we are comfortable for 2008.

Okay, great. Thanks guys. That's all I have.

No problem Jeff.

Your next question comes from the line of Brian Alger with Strata Capital. Please proceed.

Good afternoon guys. Thanks for taking my question. Just some housekeeping, a lot of the questions have been asked. But in terms of the share count, Jeff, can you update us in terms of where we are to-date now that the warrants have come in for a basic share count? And then if were to kind of extrapolate going forward to when we finally do get profits, what would the fully diluted share count be, just basically trying to figure out what's the appropriate kind of market cap valuation that we are looking at right now?

And then just as a clarification Alex, I think you said that your target, not necessarily for Motorola, but the target for the company in general is to get your first product out into the market by the end of 2008 for the PicoP, I just want to clarify to make sure that that's the first time that we should be thinking of actually seeing product revenues?

Yes, Brian, let me start with your last question and Jeff will jump in for the first one and I will double team up. Yes, we've started in the standalone accessory Pico Projector for the end of 2009, so that is correct.

On the share count, at the end of the - current share count is about 56.6 million shares outstanding so that's with the warrants conversion complete. We have about 5 million shares in employee and board options and about another - little bit under 5 million in other private warrants associated with the previous financing. We have another 10 million shares in the fully diluted number which brings you to just right at 67 million shares.

Okay, great. And the employee options, are those all in the money at this point?

Most of them would be. There might be a few that are not, but for the most part, yes.

Okay, great. Just one final one. In the situation where you are getting NREs in kind of a co-development type of role, how does that equate in terms of expenses. You are getting the revenue in, you are spending a little bit in terms of the R&D effort towards that, what typically does an NRE flow through in terms of an operating profit generation?

If you look at our financials, historically we've had a gross margin on the NRE contracts of between 40% and 45%.

And is there any operating expenses that are assigned to those also?

Below the line like SG&A and...

Operating expenses.

No, those, no. Not specifically, no.

Okay, great. Thanks guys.

Please standby for your next question. Your next question comes from the line of [Chet Bennett] with [Duke]. Please proceed.

Hi guys. A little energy to the story. Could you tell me how much cash you have on one hand right now?

Well, if you look at the press release, you would see that we ended quarter with $17.3 million.

In cash.

And then in investments. And subsequent to the end of the second quarter, we converted the remaining warrants for additional $28.1 million.

So, you are looking at about $45 million?

Well, I think we also spent something between end of second quarter and to-date.

Okay. I have a question. I have been to your website for the PicoP Projectors and I was wondering if you had an idea of how much one of these items will cost for consumer?

I think it's going to be strictly driven by an application and the price is going to be obviously established by the OEM. But, our initial studies, direct user studies have shown that a $300.00device with functionality that is exhibited by what we are describing today would be desired by about 90% of the participants in these studies who took this test.

Now, you could use this as a regular TV or you look at up your cable box, that's right?

You can think of it as a projection terminal that could be connected to a variety of the devices that output video. So yes, it could be one of the applications.

Okay, I think you will probably get a lot more for it than that. Another question, I was looking at and studying the technology of cellphones and I was really interested in the device maybe going into the cellphone I guess some of the people are too, what time period would you -- you could probably give a rough estimate when you could get maybe the chip small enough where it would actually fit into a handheld device?

Oh, our target has become -- we consistently communicate our target to get inside a device such as cellphone in the first half of 2009.

Did you do anything special to convince Motorola to make this announcement on their handheld device?

I can't comment on Motorola, but independent of Motorola, this is what we set as our target. And, although the risks are there but we have been consistently reducing them on the way to commercialization, so we are still standing by the start.

And this is a non-exclusive deal, is that right?

I can't comment on the details, but what I can tell you is that we are not precluded to work with others on similar application.

Okay. And I guess that's it. I appreciate it. Thanks so much.

Thank you.

Your next question is a follow-up question form the line of Joel Achramowicz with MDB Capital. Please proceed.

Thank you very much. Very quickly Alex and Jeff, in your discussions with Motorola in continuing this agreement and the collaboration here, I mean have you talked with operators or Motorola customers either in advance of striking the agreement or during, recently in terms of their interest in trialing either an accessory device or an embedded form factor?

Short, answer is yes, Joel. Since the middle of last year, to be honest with you, when we met the value chain for the mobile space, we quickly realized that we need to get engaged tightly with the mobile carriers and we have done this over the past nine months. We have seen strong interest from global mobile carriers specifically in Asia and in Europe and we are just beginning into see a pull from within the United States.

So is it accurate to presume that if you do have a demonstration unit whether it's in accessory form factor or ideally a handset form factor that - I mean some of these operators would be excited to trial that, wouldn't they in some regard?

You know, if you use Apple iPhone as an example and Apple's deal with Verizon, I would say, yes because think about this. It's a revenue generator for the mobile carriers in US. I mean if you rack and stack all of the global mobile operators and call your upper - right upper quadrant stars and your lower level dogs and then you have cash cows, then all of the mobile carriers from US have fallen into a dog category.

They are suffering from the existing competition and they are fighting for these customers with very low ARPU and that they need differentiation, and the differentiation comes in the form of a tiny projector whether it's connected to the cellphone or embedded inside the cellphone, which allows your right to subscribe to mobile TV and download content that typically you would not download because you can't see it on a 2-inch screen.

Okay. So speaking of the iPhone, are you targeting Apple?

Joel, we have a list of about 25 target customers and that list has been containing Apple, yes.

Got it. Congratulations. Good luck on your report guys. Bye, bye.

Thank you.

Ladies and gentlemen, this concludes our Q&A session for today. I would now like to turn the call back over to Mr. Tokman for closing remarks.

Well, what can I say? I hope that all of you have followed us in 2007 and even before since the beginning of 2006. I can concur that our go-to-market strategy, the progress and the results we've made have resonated well with the market winning customer suppliers as well as yourself.

If you take a look briefly at our first half report card, we have cash to fund the operations going into 2009 from 34 million conversions of our public warrants. We are debt free. We have simple cap structure. We have very strong backlog. We have matured and improved our core technology, a tiny Pico Projector, and we have broadened support from our supply chain partners, most recently announcing OSRAM and Oerlikon developments.

We have signed our first consumer OEM, Motorola, after inking automotive, aero and air force contracts early in the year, all of which we believe serve as a strong validation point that what we are doing is something that people start taking very seriously. We executed very successful consumer electronic and Society of Information Display shows and most recently you've seen, we now have two analysts covering us, which we expect this list to grow.

Looking forward into the second half of the year, our goal is to continue to build on the strong momentum that we have started in the first half and to continually delight you with new progress in all key areas. This involves continuously strengthening the existing customer funnel and look for new partnering opportunities, delivering on customer commitments on the existing contracts, evolving and maturing the PicoP technology platform, evolving and maturing on global supply chain that was architected in the mid 2006. All of these areas are tightly linked together and each serve as the enabler to accelerate the path to market for high volume to consumer and automotive products for us.

I just want to - before I close - I just want you to know that there is a team in Redmond, about 130 people from today that has given 110% addressing very tough issues to make good on the commitments we made to you, to our customers and to each other. And on behalf of this team, I would like to thank you for your continued support.

Thank you for attending today's conference. This concludes the presentation. You may now disconnect and have a great day.