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Microvision Reports Third Quarter 2005 Revenue of $3.3 Million

Microvision Reports Third Quarter 2005 Revenue of $3.3 Million and Year to Date Revenue of $12.0 Million, up 27% and 62% (Microvision Only) over 2004

Company continues to exhibit strong year over year revenue growth, increased backlog and reduced operating losses

BOTHELL, Wash.--(BUSINESS WIRE)--Nov. 2, 2005-- Microvision, Inc. (NASDAQ:MVIS - News), a leader in light scanning technologies, today reported financial results for the third quarter and first nine months of 2005, continuing its trend of achieving double digit year over year quarterly revenue growth and reduced operating losses. The company reported revenue for the three months ended September 30, 2005 of $3.3 million, an increase of 27% over the $2.6 million (Microvision only) reported in the same quarter last year. Revenue for the first nine months of 2005 was $12.0 million compared to revenue of $7.4 million (Microvision only) for the same period in 2004, an increase of 62%.

Product revenue increased to $1.2 million for third quarter 2005, more than double last year's third quarter and up 10% from second quarter 2005 and was comprised of $782,000 from sales of the Nomad System and $368,000 from sales of the Flic scanner. Product revenue for the nine months ended September 30, 2005 was $2.8 million, up 52% from the $1.8 million recorded in the same period last year and was comprised of $1.7 from sales of the Nomad system and $1.1 from sales of the Flic scanner. Contract revenue for third quarter 2005 was flat at $2.2 million versus the same period last year. For the year, contract revenue continued to demonstrate strong growth with year to date revenue of $9.2 million, up 64% (Microvision only) from the same period in 2004.

As of September 30, 2005 backlog totaled $4.9 million, up 53% when compared to $3.2 million (Microvision only) for the same period last year. The backlog for the current quarter was comprised of $4.6 million for development contracts and $276,000 for the Nomad System and Flic scanner.

The company reported an operating loss of $6.9 million for third quarter 2005 and $18.3 million for the first nine months of 2005, an improvement of $1.6 million and $5.1 million (Microvision only), respectively from the same periods last year.

The company's consolidated net loss available to common shareholders for third quarter 2005 includes non-cash items totaling $5.1 million or $.23 per share. The third quarter loss included a one-time, non-cash charge of $3.3 million or $0.15 per share resulting from the July 2005 restructuring of the company's $10 million senior secured notes and a one-time, non-cash charge of $1.2 million or $.05 per share associated with the August 2005 conversion of $5 million of preferred stock to common equity. Other non-cash charges include Microvision's share of Lumera's net loss in the third quarter and nine months which was $610,000 or $0.03 per share and $2.5 million or $0.11 per share, respectively. Beginning in July 2004, Lumera's results are accounted for under the equity method of accounting. Prior to July 2004, Lumera's operations were consolidated with the company's results. The company reported a consolidated net loss available for common shareholders of $12.6 million or $0.56 per share for third quarter 2005 compared to $10.1 million or $0.47 per share in the same period in 2004. The company reported a consolidated net loss available for common shareholders of $24.7 million or $1.13 per share for the first nine months of 2005 compared to $25.3 million or $1.18 per share for the same period last year.

As a result of the debt restructuring and preferred stock conversion, the company reduced its debt by $5.0 million. In addition,subsequent to the end of the quarter, the company's noteholders converted $1.8 million of their notes to common stock. The company ended the quarter with $1.4 million in cash and cash equivalents.

"While revenue for the third quarter fell short of more aggressive targets, we continue to show solid year over year growth for the quarter and nine months," stated Microvision CEO Rick Rutkowski. "In addition to posting year over year revenue growth for the third consecutive quarter, we once again improved operating losses and increased backlog when compared to last year. Our lower than expected revenue in the third quarter was partially attributable to lower contract activity, which in part was due to a delay in completion of a development contract. Product revenue was up sequentially and year over year and was driven by the delivery 85 Nomad ND 2500 systems to General Dynamics in the quarter, completing the 165 unit order for the U.S. Army.

"While we continue to focus on the identification of strategic accounts and the development of channel partnerships for commercial sales of the Nomad 2100 Expert Technician system in transportation maintenance segments, we are also refining our strategy on qualifying customers within this space, upgrading our ability to measure and communicate the economic benefits of the product and focusing more on training, acceptance and post-sale support," said Alexander Tokman, President and COO of Microvision. "Focus on specific applications supported by quantifiable ROI and favorable content will be the key to growth of the Nomad system as the productivity tool within the MRO space. We are exhibiting the Nomad system this week in Las Vegas at the Automotive Aftermarket Parts Exposition, highlighting both these applications. We are encouraged with our initial success in the military vehicle maintenance market. We now have installations in two Army Reserve Regional Readiness Command Centers with a third installation scheduled for next week. In parallel to these efforts, we are actively evaluating additional applications for the Nomad system with an eye toward potentially launching new sales efforts early next year.

"Flic has built a solid base of business over the last several quarters and we expect to be able to leverage that success. Our focus is on developing channel partners in mobility and consumer household applications. We signed a co-distribution agreement with Bitz & Pixels to co-market the Flic scanner with media collector software, our first bundled Flic scanner solution that Microvision will offer for sale. This, in addition to our distribution arrangements with IntelliInnovations and Delicious Monster, represents entry points into the consumer household market for bar code-enabled personal computer applications. We also continued progress on a reference account installation of Flic scanners into a large hospital that is part of a national chain. We expect to use this reference account to enable us to enter the healthcare market for bar code scanners in 2006 to take advantage of the FDA unit-of-use mandate, which requires drug manufacturers to place 1D bar codes on individual doses of medication."

"We continue to make measurable progress toward commercialization of several OEM products," stated Rutkowski. "We recently announced that we signed a nonbinding letter of intent with Bosch to formalize our ongoing collaboration towards bringing a laser scanning HUD to market. We are encouraged at our prospects of receiving additional development contracts leading to a potential design win.

"Work is progressing on our laser camera development project with Ethicon Endo Surgery. We expect to complete our first development phase later this year.

"We are continuing to develop our strategy with respect to opportunities in the very high volume consumer markets, including gaming and other mobile devices. We are pursuing opportunities to partner with one or more leading companies to develop a range of uniquely powerful consumer display solutions for both wearable and projection devices."