MicroVision Inc (MVIS) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter Microvision Incorporated Earnings Conference Call. My name is Sean and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. (OPERATOR INSTRUCTIONS). I would now like to turn the presentation over to your host for today's call, Miss Tiffany Bradford, Investor Relations Specialist. Please, proceed.

Thank you. I'd like to welcome everyone to Microvision's First Quarter 2008 Financial Results Conference Call. In addition to myself, participants on today's call include Alexander Tokman, President and Chief Executive Officer, and Jeff Wilson, Chief Financial Officer.

The information in today's conference call may include forward-looking statements, including statements regarding projections of future operation, product development, introduction, applications, and benefits, business partnering expectations, market opportunities, and growth and demand, as well as statements containing words like "believes", "estimate", "expects", "anticipate", "target", "plans", "will", "could", "would", and other similar expressions. These statements are not guarantees of future performance. Actually results could differ materially from the future results implied or expressed in the forward-looking statement.

Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are in included in our most recent annual report on form 10K 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 publically 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 no like to turn the call over to Alexander Tokman.

Thank you, Tiffany. Good afternoon, everyone. And thanks for joining us today. Generally, it will be similar as in previous earnings calls. I will give you a synopsis on the operating results. Jeff will highlight financial results. And then we'll come back to Q&A.

Overall, first quarter operating financial results were solid. We completed several important developments, business, and financial milestones that should allow us to move closer to the goal of commercializing high volume consumer and automotive products based on proprietary PicoP display engine technologies.

First quarter was all about getting ready for the initial introduction of our accessory product. The key element of this plan includes the following factors; first, it's gauging and validating the PicoP momentum at major mobility trade shows and conferences. The second one is maturing of our core platform technology. The third one is strengthening global supply chain and finally, fourth, progress and commitment with customers. Let me touch on each one individually.

So let's start with validating the PicoP momentum. As you know, we have successfully unveiled at 2007 CES, our show prototype which is a PDA-sized fully self-contained battery operated full color laser projector which is intended for mobile device applications. Immediately after CES, the momentum was continued with strong showings at two other premier industry trade shows. One was World Mobile Congress in Barcelona and the second one was the CGI Wireless Show in Las Vegas where in addition to demonstrating our stand-alone prototype, we also exhibited in private meetings the first PicoP embedded display that was placed inside a fully functional prototype mobile device.

We continued to see very strong interest from perspective partners, several of whom are already evaluating our technology for their accessory and embedded consumer applications.

Let me highlight what we -- our progress on the second item which is maturing our core platform technology. We've made important progress on miniaturization and power reduction roadmap for the accessory and embedded products by completing several key milestones on ASIC development. As you know, ASIC is an integral component of our electronic subsystems which we said we're going to miniaturize this year and reduce power.

On the supply chain front, you already know that we cannot execute our go to market strategy alone. As a result, we have been partnering with very strong and world renowned supply chain partners and in the first quarter we took additional significant steps in enhancing our supply chain structure to support this global commercialization of the PicoP enabled products as we signed development agreements with two new high volume manufacturing partners to further strengthen the go to market strategy.

In terms of progress and commitments with customers, you're all aware that earlier in the year, we have announced a development contract with one of the world's leading consumer electronic conglomerates to accept Microvision's Pico projector prototype display for the use with a variety of mobile devices which include mobile phones, laptops, personal media players, and digital cameras. We have the deliverables and this specific customer is marketing the solutions to their customers.

In Q1, we also conducted initial evaluations with several key customers to understand the full viability and risks associated with the creation of this exciting market and application and so far we've got positive results. This is -- all of this is helping us to develop far more plans with prospective OEM customers that we believe would lead to commercialization of this new and exciting class of products.

Other highlights for the quarter include some of the deliverables we've made in the area of automotive display. Subsequent to the end of the first quarter, we delivered four contracts, a prototype instrument, plus our display that is PicoP display engine to one our of global tier one automotive customers. This tier one customer plans to use the deliverables of this project to gauge the interest and market the solution to their customers who are leading car manufacturers in Europe and Asia.

Eyewear displays, on the eyewear display arena, we also delivered five advanced prototypes, helmet mounted display to the general dynamic customer under the Mounted Warrior contract. These prototypes are being used by GE to market see-through color capabilities of a soldier worn helmet mounted display to military and federal customers with the objective to gain stronger understanding of this segment's market viability and develop a commercial product.

We've made some progress on the barcode scanner front. As you've seen probably yesterday, we announced a relationship, a master distribution agreement with Brightpoint. Brightpoint is one of the world's largest distributors of wireless products and they will be distributing our MEMS ROV scanner. This product was developed specifically to support the growing mobility market and the agreement will allow us to leverage Brightpoint's global distribution to increase penetration for this new product. Many of you know, some of you don't, but Brightpoint is a global leader in the distribution of wireless devices and it provides customized logistics services to the wireless industry. Their customers include all the known mobile operators and we expect to support Brightpoint in achieving higher penetration of our new barcode scanner.

At this point, I'd like to pause and let Jeff give you highlights -- financial highlights. And we'll come back for Q&A.

Thank you, Alex. For the first quarter of 2008, we had revenue of $2.6 million compared to $2.2 million for the same quarter last year and as of the end of the quarter, we had a backlog of $1.9 million compared to $6.9 million last year. As Alex discussed during the last part of 2007 and the first quarter of 2008, we completed work on several development contracts. Right now those customers have those prototypes that we developed and they are using those as demonstrators with their customers and developing their go to market strategy for those products. So that's kind of the reason for the decline in the backlog. We also reported an operating loss for the first quarter of $7.1 million compared to $6 million for the same period in 2007. The increase in the loss is primarily attributable to increases in headcount in research and development, strategic sourcing, and business development as well as R&D as we prepare for the initial commercial product introduction of our accessory product.

We also reported a net loss of $5 million for the first quarter of 2008 compared to $6.9 million for the same period in 2007. The improvement in the net loss is primarily due to the reduction in the value of warrants that were issued to investors in the debt financings in 2006. As you recall, those are reported a liability and as the warrants decrease in value, the liability becomes less and it comes up as a non-cash gain below the operating income line.

Our net loss per share for the quarter was $0.09 compared to $0.16 for the same period in 2007. Our net cash use in operating activities was $5.3 million for the first quarter compared to $5.6 million last year and we ended the quarter with $30.1 million in cash, cash equivalents and investment securities.

Alex?

Thank you, Jeff. One thing of note that we forgot to mention. As a part of the master distribution agreement with Brightpoint, we also received the initial purchase order for several thousand units.

Alright? Let's start the Q&A.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Darice Liu. Please, proceed.

Good afternoon, guys. The first question has to do with the Pico prototypes. Early last month, you stated that the Company had a limited supply of these prototypes for customer trials. Can you give us an update on, one, how many trials are currently running and the initial feedback from those trials and, two, an update on ramping capacity for additional trials?

Good questions there. Let me try to provide as much color as I can. We indeed see the initial trials that we run in Q1 and even first portion of this quarter limited by number of units which, again, gated by some of the long lead development time on some of the components and to date we had several units that we were able to build in our possession. We conducted initial trials with four different customers. Most of the feedback we received so far has been positive.

There is expectation on our side as well as on the strategic supply chain partner side that the long lead components would become available in greater quantity in this quarter and especially in third quarter. We would extend these limited trials and create extended trials, we would populate larger number of units of our lead customers to fine tune go to market strategies to get better understanding on the product requirements and to determine what their plans would be in commercializing these products late this year, early next year.

In terms of the which components -- which components are responsible for a limited number of units, most importantly, you know, it's no secret that one of the newer technologies being developed is green laser and we've seen a great progress by two of the largest semiconductor companies in the world in maturing their green laser technology, but designs at this point are small. We expect this to change, obviously, in second quarter and moreover in the second half of this year.

Okay. And just a follow up. You mention the initial trials are with four different customers. Of those four, are three of the four with the guys you've already signed contracts with. Or does that exclude them.

Two of the four customers are the same customers that are also pursuing the embedded applications. If I would just set the context, not all of the OEMs we've been working with are interested in both embedded and accessory solutions. Some of them are interested in one or the other. Some of them are interested in both. And so the embedded development should be treated independently from the accessories. So the four customers that we've conducted the initial limited trials on accessory, two of them are also interested in the embedded applications.

Okay. And then in terms of milestones, for companies like you who are in the midst of product development, your stock will move more in advancement than announcements. During 2008, what type of benchmarks should we be looking for?

Excellent question. You're probably asking this question and many people on this call have the same type of question. It's all about -- what are the key factors that drive the timing of our commercialization strategy? Four elements. Number one is customer interest and levels of commitment. That's number one. And how do you track our progress? We talked about the initial limited trials in Q1 and early Q2 with the goals to give these customers sufficient amount of tools to mature the commitment within their organizations, followed by wider trials in late Q2, early Q3. The second item is our own readiness and obviously, we have to be ready. We've been progressing our integrated Photonics Module design. We have been progressing on our ASIC milestones, as well as the system design and general image quality issues that we need to address to get this product to market. I think you're going to see some of the communications that may come up at trade shows within the next few months as well as some of the more significant agreements with these strategic supply chain partners that will bring these key components with us to market.

In terms of -- the third component is obviously the long lead. What are the long lead items? We talked about green laser and I can talk more about green lasers but the good news is there is this universal commitment to get this technology to market by 2009 with early availability by end of 2008 by two of the largest and well respected semiconductor companies. So we feel good about that but obviously there are risks.

Finally, our customers go to market -- as you know, each customer has its own product launch window. So we need to time our commercialization strategy with their product launch window to ensure that we're in sync. All of these four will be updated as we progress into the ultimate goal. So, again, getting more customer commitments is wanting to either get in more supply chain players on board and announced by names, you can hear who they are finally is the second indicator.

Maturing the technology and reducing the power and size of the accessory device to the product configuration. As you know, SHOW that we demonstrated at CES and other shows is about 20% to 25% larger than the ultimate product will be and has 40% more power than the ultimate will be. So all of these reductions are happening as we speak throughout the year.

Darice, did I answer your question?

Yes. You did. Just a follow up on that. In terms of -- you mentioned progress of your ASIC and that's translating to a better form factor as well as better power consumption. Can you give us a benchmark of what it was in 4Q and what is in 1Q and what you need to get it to?

Again, excellent question. Let's start with the application requirement. What the application requirement calls for, based on the direct user feedback and the OEM feedback we have solicited to date is that accessory device must function on its own for 2.5 hours without recharging. And 2.5 hours obviously comes from watching a long movie. That's what our target is. The SHOW prototype that we demonstrated could function without recharging for 1.5 hours. So we are reducing the ultimate power of this device by 40%. I think we were talking about five more during CES so if you subtract 40% it will get you somewhere around sub three watts. On the accessory. Obviously, embedded targets are much more aggressive than this.

Your next question comes for the line of Joel Achramowicz. Please, proceed.

Thank you very much. Good afternoon, Alex and Jeff.

Hi, Joel.

Obviously, it's difficult to get a feel for -- we sense that you're making progress along this extrapolation towards where you want to go. And it's hard for us to have a clear substantive demonstrations of that. We have to take some of that by faith in the sense that you're close to your operating team and you're obviously close to all your partners. I guess the thing that I'm interested in knowing is whether your confidence level for definitely introducing and releasing to the market an accessory device prior to the end of this current year, do you still feel confident that you can -- I'm not talking necessarily about the actual sales, but the ability to launch it formally into the marketplace before the end of the year. How's your general feeling on that?

If you look, Joel, if you look at the four key critical success factors that I just described that drive and determine ultimate timing of commercialization strategies. So, first, customer's level of commitment, provided in the second half, our own readiness, readiness of our supply chain partners, specifically green laser, and then finally the launch windows for the customers. The end of the year still represents a stretch target for us. The -- we want to be ready and the goal is to make sure that when we're ready, the launch windows of our customers are consistent with this strategy. How many units are we going to have by the end of the year? It's still to be determined and we obviously will update you throughout the year and it's ultimately going to be determined on the quantity of the green lasers we'll be able to receive from our partners.

But you do expect to receive at least some minimal production?

We expect to see a minimal amount to get us -- to populate a small number of units in the market. That's our goal. This is the goal of our laser suppliers and to date, we're going to -- again, we're going to update you as the information develops. But right now, it's still a stretch target goal that we want to achieve.

How do you feel necessarily about -- the previous caller asked a question, I think, with regard to your demonstration units. Obviously, with regard to SHOW and whatever minimal integrated devices that you have. I haven't seen them. I don't know how many you have. But do you feel -- I guess the question is do you have enough demonstration units, both of the accessory device as well the rudimentary integrated device to engage with prospective customers in critical -- very critical focus groups or to begin establishing a marketing plan for the device in terms of your targeted market sectors and this kind of thing?

In reality, you're never going to have enough units that you would really like to have at any given time. We have -- we feel we have a sufficient minimum amount which we can use to progress with our primary customers to the next level. So, basically, keep them engaged, keep them committed, and develop then firmer go to the market strategy with them for the end of the year, early 2009. So that's the -- this is what we're using these units in the first quarter and, again, end of Q2 we anticipate to have a larger number of units where we can do wider trials in Q3 to actually get all the necessary feedback to access final product configuration, get final feedback from the end user as well as all of the important players in this ecosystem.

Keep in mind that this is not -- what we're trying to do is to process another single event, because the ecosystem is pretty complex. When we get and market these prototypes with our customers, they have to get the same feedback from their customers and there are three layers of customers, or their customers, in this ecosystem. You've got end user, you have content provider, and you have carrier. So this is why first we need to convince them and we believe we're doing a pretty good job with the limited number of units we have.

The second step in this process is for us to convince their customers and get the necessary feedback to confirm that, indeed, this is what they are looking for and this is what they would be willing to pay for.

Yes. And obviously, you need to -- hopefully we'll see that progress and we'll see some kind of significant step function.

We- this is -- we're trying to get firm commitments in Q3. So we have to do a little leg work at the end of Q2 and early Q3 to start getting this feedback because that's an essential component of the go to market strategy and again, to date, we have all reasons to believe that we're moving in the right direction. Obviously, to your questions, would we benefit from having more units at this time? Absolutely.

And of course you're using your cash relatively wisely but I don't expect your operating expenses will decline considering that you're going in these launch modes. Obviously, execution is a critical factor here because inevitably you'll drain that cash. But obviously, if we see some significant traction that will hopefully support the stock.

That's a fair statement. We finished this quarter with $30 million and we feel we have a sufficient amount to get us through the year. Each dollar is spent only on the critical activity. It's not wasted on any other items. And you're right. You can see that the first quarter of these year, the operating expenses are higher than they were a year ago. But not much higher from the fourth quarter. And this is part of our evolution as a Company. Any Company goes from being a technology Company to becoming a products Company and you need to invest into additional R&D resources that are familiar with high line manufacturing and you need to get a strategic sourcing team in place. You need to get the right team that can close some of these remaining contracts.

Good luck. I've got to get another call. I'd like to talk with Jeff after the call. Good luck going forward, guys.

Thank you.

Your next question comes for the line of Jed Dorsheimer. Please, proceed.

Hi. Thanks. Alex, a couple questions. I joined late so you may have already mentioned this. What is the performance of the embedded, the integrated product that you're showing as a demonstrator or working with your customer as a demonstrator?

Jed, this is the byproduct of our collaboration with Motorola that was announced July of last year. So basically, we created together, we created functional cell phones with embedded projectors. Both teams, specifically Motorola, are using with their customers in private settings to gauge their interest, to better understand the fundamentals of this application from mobile operators, from content providers, and finally, from the end user to determine what is the -- what is the finally configuration that would serve well to all the people involved. They're in the process of collecting this information and we're facilitating, helping them when they need us and we're also doing some external validation on our own.

Can you talk to what the power range is of this product as well as the size?

The power range on this prototype is really very similar to what we introduced on the stand-alone. What the target power for the embedded engine is sub two watts. So we were always starting at 1.5 watts and that's what we're pursuing right now as a part of the ASIC development roadmap. So we have actually two developments ongoing concurrently. One is to get the electronics for the accessory for the earlier launch and then to have a more efficient and smaller electronics for the embedded within the next six to nine months.

And so, I guess on the ASIC, where are you in that process? Have you already done a first spin or are you still in the design? And could you also give us color on what geometry and which foundry you'll be using?

I won't be able to provide the name of these partners. But I can tell you that, yes, we completed first spin on several accessory ASICs and we're in the process of second turn.

Alright. And what was the erosion with this after the first spin?

Just -- it's a collection of things. These ASICs contains for the most part our core IT. Basically this is -- you know this well. I don't know if everybody else does. But what we bring to the table in additional to mirror, we also provide all these system parts that would co-originate the life propagation between mirror and laser and other components. So our systems controls and are now smart, are sitting inside these ASICs. So as we get more feedback from the customers on image quality improvements, all of these are fed into the ASIC and as well are spinning these, we incorporate new features to improve the performance of the product.

Alright. And then on the green laser, the prototype, are you using a Vixel there?

No. This is -- the frequency -- the solid state is probably five years. At least five years away. So all of the players right now are pursuing frequency doubling to achieve the wavelengths necessary to produce green color.

Alright. Fantastic. I'll pass it on. Thanks.

Thank you.

Your next question comes for the line of Chris Smithheel. Please, proceed.

Thanks for taking my call, guys. Quick question on the positive results you received on your risk evaluation from your potential customers. I was wondering if you could go into a little bit more detail on that, on the feedback you got?

Let me see. Let me just collect my thoughts for a second, Chris, and see what I can say. Fundamentally, we've been evaluated against other technologies, similar technologies, and so far we've been given very favorable feedback once we get evaluated technologies that compete for the Pico projection market. So we're deemed as having advantages in brightness. We're deemed as having advantage in resolution. We're deemed to have a better performance in terms of infinite focus. So some of the key attributes that determine the mobility products success, we've been succeeding in these. There's obviously some open questions from everyone today as to what will be the ultimate power. But when we show our power reduction roadmap, it's believable enough where people say, "We understand you're at five watts. But we understand how you're going to three and 1.5 with the accessory and embedded." And that makes us, so far, pretty successful.

Okay. That kind of leads me into my next question and the kind of dynamic between your laser suppliers and the ASIC roadmap. How much of the -- is there any pushback from your laser suppliers on waiting to see that you can actually develop this ASIC that can deliver on the power consumption that you're targeting? Is there any financial commitments that they would be making in advance if you could deliver those in terms of manufacturing? Are they waiting to invest in manufacturing before you can develop these ASICs?

No. These are independent concurrent events. So, basically, we're working in conjunction with laser manufacturers to improve their performance for these applications. I'll give you an example; SHOW prototype that we have exhibited at CES contains earlier version of a green laser from one of the major -- a green laser manufacturer. Based on the feedback we're getting from our customers, we're providing that critical feedback back to them and they go and modify and improve functionality of the device which benefits all the people involved.

So in terms of the relationship to ASICs, there's no relationship in terms of one is waiting for another. It's strictly within our timeline. We need to understand the requirements of the green laser so that if we need to manage the stability of these devices over time, et cetera, that functionality will be included inside our ASICs. So, again, the timeline is, first, you put something together, get customer feedback. Based on this feedback, you modify and you instruct your partners, specifically in this case later suppliers to modify something in their design to improve the overall functionality. That's the cycle we've been pursuing so far and we've been pursuing successfully.

Great. And then, going back to your advantages that you've gotten feedback from your customers, are you still the leader in the most thin option for mobile projector?

I think this is what gives us ultimate advantage. You may rack and stack every attribute we discuss but the bottom-line -- who can get inside a handset without making the handset look like a pregnant device? To date, we're the only Company who are able to show a device that is seven millimeter or less that can actually fit inside a mobile handset. Any other technology that's being discussed to date show thicknesses of ten millimeters and higher. Anywhere between 10 to 25 millimeters and we believe, based on what customers told us, that this is insufficient to get inside a cell phone.

Sure. And lastly, a financial question for me. With the order from Brightpoint, is that going to reduce your burn rate later in the year at all?

The Brightpoint, we've got a deal for a 4,000 initial deal, 4,000 units. The recognition practice is such that we can recognize revenue once we sell it through. Obviously, we're counting on revenue from ROV this year to alleviate some of the pains with the burn rates. Yes.

Is there any way you can quantify it?

We're not providing guidance at this time. We'd like to stick to this policy at this point in time.

Okay. Thanks.

Once we become a true product Company, we'll give you a lot more credible guidance on each portfolio.

Got it.

Your next question comes for the line of Jack Ripstein. Please, proceed.

Hi. Good afternoon. Thanks for taking my call. I just wanted to get kind of a synthesis of some of the timeframes that you guys have been discussing on the call, just so I understand. So if we could break it down into the two products -- one, the embedded and, two, the ancillary device? The timeframe I heard was a stretch goal for the end of the year and I assume that's for the ancillary device. And what the embedded timeframe would be? And then also, if you could in greater detail discuss burn rate and syncing the balance sheet up to that goal and just a housekeeping question -- I saw investment securities. Can you walk us through what portion of the cash is in that and what that's comprised of?

Let me kick this off and Jeff will pick up the tail end. Yes. So the accessory stretch goal target is still end of the year and, again, it's going to be primarily driven by some of the long lead items, components that comprise the final application. Based on everything we've heard from long lead supply chain partners, specifically green laser manufacturers, they still want to produce some volume for end of 2008 to allow us to do this. The embedded product is targeted for about nine months later. Why there is a gap between the two? Typically, it takes additional time to integrate something into a larger envelope, specifically, this envelop determines investor design of a core product of any company. So if you introduce yourself inside a cell phone or personal media player or a laptop, you need to kick off a program. It's a longer term program that takes your byproduct and then integrates it into the final core product and that's why the delay's in place.

In terms of the cash, we've been very prudent with cash over the past several years and as you know, we only spend it on a vital few programs and so far we've held up our part of the bargain by reducing it in 2007. We expect, although we don't expect this level of reduction that you've seen in 2007, we expect to use every dollar, $30 million that we have today, spend on the accessory and embedded proliferation to stick with the target timelines that we articulated.

Jeff? Anything else?

I think you had a question about -- what was the other question?

My other question was about the investments on the cash line. Just a lot of companies have been getting hurt with liquidity in terms of being in auction rates that aren't performing, that were performing in, say, December, and then all of a sudden in March are having problems.

Right. So the $30 million in the K, we had -- just because we had some exposure on the auction rate securities. As of now, we have about $3 million in auction rate securities. They are all AAA rated, insured auction rate securities right now.

Okay. So you have pretty much liquidity across the board there?

Yes. The rest of the portfolio is in highly liquid commercial paper, money market type investments.

Okay. Great. Thank you very much.

Your next question comes for the line of Brian Alger. Please, proceed.

Hi, guys. Good afternoon. Quick question with regards to the backlog. There was a reference in the press release on an annual basis. I'm wondering how the backlog trended quarter on quarter?

From Q1? Or from the end of the year?

From the December quarter to the March quarter. What went on with the backlog?

So at the end of the year, we had a backlog of about $4.1 million and then at the end of March, we talked about $1.9 million.

How much of that is for product sales versus contract revenue?

We don't typically disclose that. It's mostly contract revenue.

Okay. Great. And, Alex, I think you talked about getting a several thousand unit order for your ROVs. What's the going ASP for those products?

It's typically not disclosed. It ranges based on the volume and the discount we provide to these -- I can't give you an exact price because -- the retail price is $299.

Retail's $299? Okay. Great.

Although average selling price is much less than that.

Understood. That's close enough. That's good ballpark for me.

Brian, to your question on the backlog, it's a very important question. One of the things that everybody has to keep in mind, the contract -- the joint development agreements and contracts that we won and executed on in 2007 and a portion of 2008, as we deliver these outputs, our prototypes in each of these segments, whether it's automotive, eyewear, or projection display, are being used by our customers to market to their customers. So whether this is a car manufacturer or a military and government institution or carriers and content providers. So we're in the process of evaluation and support of our customers in marketing the solution to their customers. We anticipate that a significant portion of these contracts will be the next step on commercializing each one of those solutions which we plan or we hope will result in further contracts.

Okay. Great. And just going through a checklist here of clarifications that's I've picked on. Jed asked earlier with regards to the green laser not being a big -- I think you stated that's its frequency doubled. And that the solid state equivalent of a green laser is probably five years away. What does that do in terms of your planning for power reductions and commercial viability for unit volumes?

Obviously, again, for people who don't understand the difference between frequency doubled and solid state laser -- solid state devices are typically less complex and cheaper. And they're much more difficult to achieve at these wavelengths. So the power -- the anticipated power from the green laser, even with frequency doubling is included in the final power ratings that I had discussed earlier. So, again, for the accessory device, three watt would include everything. It would include green laser, every other light source as well as all of the electronics and optics for the embedded solution. Again, when we talk about 1.5 watts for the embedded device, it's inclusive of all of the components including the green laser.

Right. Great. And then just one final one and this was an issue raised by another caller earlier, it's fairly obvious you guys are going to have to raise money, whether that's through debt or doing a share offering. I'm curious. If you hit your targets and if you get the reception that you're hoping for, how much money do you think you're going to have to raise in the third quarter in order to facilitate building up your initial accessory products?

This is a topic we don't intend to discuss in much detail because we can't. We're continually reviewing these options that are available to us and we intend to raise money when conditions are favorable and when it's the right time for the Company.

Obviously you're not going to wait until you run out of cash. And you're hoping to manufacture these things for introduction early next year which gives us an obvious timeframe in terms of when you have to raise money. I'm just curious as to how much money it's going to take for you guys to get the initial volumes up and running.

How much it's going to take will depend obviously on the ramp, the access to other working capital lines, how much our suppliers and customers finance of that. So it's something that we are continually monitoring and modeling and evaluating as we go through time.

Good. Guys, I look forward to seeing you at the SED show.

Thank you, Brian.

Your next question comes for the line of Joe Dubroth. Please, proceed.

Hi, Alex, Hi, Jeff.

Hi, Joe.

Listen. You talked about having green lasers in greater quantity towards the end of the year. Those things don't -- at least not until five years from now -- grow on trees. Have you been given some sort commitment from those suppliers, that they're going to have them to you and have they made the financial commitment to start building whatever foundries or ordering equipment? Can you see the commitment from them?

This is a great question, Joe. Let me start with the good news. There is a universal commitment to get this technology to market by 2009. With early availability at end of 2008, again, by two of the world's largest and most respected semiconductor companies. This commitment has been supported at the highest levels within each organization and the support is not just words. There's a significant -- and when I say "significant" I really mean significant -- budget and resources that have been allocated by both companies to actually execute these programs. We, as you know, have synced our development programs with them and have been guiding each other in this development and overall, the technological progress over the past 1.5 years has been nothing short of outstanding by both of them.

Now the pragmatic assessment. Anytime you incubate and develop a new technology in-house, you need to transfer it to your contract manufacturing partners and technology transfer is a complex process. This carries scheduling risks. Again, at this time, we wanted to run this. At times, both parties run into challenge but so far they've been able to work around various difficulties and, again, it's a constant, ongoing monitoring that we have with both of them to ensure that our timelines are synced with each other.

I'm going to assume that these world-class semiconductor manufacturers are not committing these mass amounts of man power and dollars without some sense of comfort on their own that there is an end customer out there.

Absolutely, Joe. Absolutely. They're actually doing a lot more proactive assessment than you would ever expect of a component manufacturer. Not only they solicit our customers and others directly at the highest levels within the organizations to get the independent assessment. We're also introducing them to some of our customers to get direct feedback so that they understand that this is -- this is a real market pool and not a Microvision concocted story. So, both of these are happening and I guarantee you, no one would invest amounts that they're investing to date without having assurance that they will be successful. It's not, in their minds, obviously, it's not "if", it's "when". And they're trying to make sure that when is synced with our introduction timeline.

Your previous caller, he's asking about raising money and mentioned third quarter and you're going to ramp this thing up. But, not to put thoughts in his mind or read his mind, but it sounded like he was sort of convinced that you guys were going to have to foot the bill for the entire manufacturing process. That never seemed to be the case for me. He mentioned contract manufacturers. You mentioned partners. So, the dollars you raise -- am I assuming correctly that you are not going to be spending the entire nut manufacturing this and you will have some partners?

Not in that sense, Joe. We still -- we partition and try to distribute costs around our architected supply chain and the strategic partners are defined by their contribution to this common cause. So we don't treat people or supply chain players as pure contract manufacturers which is the model where we have to pay for everything. We've been given certain advantages. First, market, more advantages for certain market share perfection guarantees in exchange for them coughing up some of the dough to cover these expenses.

Are any of these partners of yours potential sources for your next capital raise?

Good question. I can't give you the answer.

I knew you wouldn't. Alright. Last one. Can you give us some idea -- listen, what are we? April 24. You've got a timeline. What comes -- when do the ASICs get completed? When are the green lasers up? When do you expect to hear -- when can we get some names from these companies you're working for or working with?

Joe, our goal is to get some of the names become available in Q3. Definitely Q4. This is the part of the commercialization strategy and, as you know, again, I've stated several times in the past, there's nothing to gain for anybody who we're engaging with in acknowledging their plans -- commercialization plans to the rest of the world. There's nothing to gain and everything to lose. And an unfortunate part of being the small public company that we are, we have to disclose a lot of these things to keep you guys happy. But it doesn't help us with our competitors because they want everything that you know and makes our job more difficult.

Okay. I'd like you, if you could, just to give us, all the people on this call, a sense of your confidence level that you are ultimately going to be able to make this a very successful venture and Company.

Joe, nothing has changed since 2006. Remember when it all started? People are just as engaged and energized, even more so, from 2007 results. I don't know if -- I probably never mentioned this. But one of our metrics is retention of employees and top talent and we beat industry standards by a mile in terms of retaining the top talent and all the employees and keep them energized. If that's not a good sign, then I don't what is.

Okay. Thanks, guys. You all have a good night.

Ladies and gentlemen, in the interest of time, we will now end the Q&A session. I'd like to turn the call back over to Mr. Tokman for closing remarks.

Thank you, again, for joining us this afternoon. We're looking forward to Q2 and beyond. The goals are clear. I think we've stated this repeatedly. We need to complete the development of the longer lead items, specifically ASICs. We need to continue to retire the supply chain risks, specifically related to the longer lead items and green laser. We will continue to continuously strengthen the existing customer funnel and look for new partnering opportunities. And, again, it's our desire to acknowledge these publicly and to keep you informed but in many case it's not been possible at this point in time.

Also, don't forget that we have other interesting activities in pipeline. We have automotive and eyewear strategies that we've been pursuing quietly while all the focus has been on Pico projectors. And we've made some great strides in both segments and expect to continue to do so. And again, any time information comes in that you need to know, we'll make sure that you're aware and educated in time.

The team has remained dedicated to completing all the necessary steps to achieve all the priorities that we've articulated during the last earnings call and, again, we're focused and just as excited as we were last year and more so than a year ago because 2006 was a tough year. Now it's a cakewalk compared to what we had to endure in the first year. Obviously, it's not going to be an easy year. We're dependent on others to be successful and what we're doing rigorously, we're engaging every entity that we're dependent on in this go to market strategy and proactively managing risks and issues to ensure that we can stick to the timeline as much as possible.

At this point, I would like to break and, again, thank you again for joining us and I look forward to talking to all of you in three months.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.