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Thursday August 3, 4:21 pm ET

Microvision Completes $27 Million Financing and Hits Important Organizational and Financial Milestones
Continues its Progress on Turn-Around Initiatives


REDMOND, Wash.--(BUSINESS WIRE)--Aug. 3, 2006--Microvision, Inc. (NASDAQ:MVIS - News), a leader in light scanning technologies, today reported operating and financial results for the second quarter and first six months of 2006.
For the six months ended June 30, 2006, the company reported revenue of $4.4 million compared to $8.7 million for the same period in 2005, and $1.9 million for the three months ended June 30, 2006, compared to $4.7 million for the same period in 2005. The reduced year-to-date revenue versus last year was primarily due to the reductions in commercial contract revenue. Product revenue from the sale of Flic bar code scanners increased 41% and 55% for the three and six months respectively from the same periods last year. Microvision ended the quarter with $22.1 million in cash, cash equivalents and investment securities.

"I am very encouraged by what we have accomplished over the first six months of the year," said Alexander Tokman, President and Chief Executive Officer. "Our operating report card for the first half of 2006 was solid. We had success in meeting several important objectives we articulated in February including:

-- Defined and rolled-out our business strategy focused on a new
embedded scanning engine called Integrated Photonics Module or
IPM(TM)

-- Allocated a large portion of engineering resources to
accelerate the Company's head-up display (HUD) and
embedded miniature projector (PicoP(TM)) programs that are
at the center of our high volume products development and
commercialization strategy. As a result, we have developed
several novel IPM designs that could substantially reduce
the form factor and power consumption that are critical to
success;

-- Entered into a development and funding agreement with a
laser OEM to assert more active control in the development
of an improved green solid-state laser light source
optimized for use in all high volume scanning applications
pursued by Microvision;

-- Secured a $915,000 Air Force contract and commenced the
definition and design effort for a color eyewear
application;

-- Completed largest financing transaction in the Company's
history by raising $27 million despite a difficult capital
market;

-- Hit first half operating loss targets through rigorous
management of expenses despite lower than planned first half
revenue;

-- Made significant progress on revitalizing the Flic product
line;

-- Increased Flic revenue for the first half by 55% over the
same period last year;

-- Added enhanced connectivity software tools to enable the
important mobility segment for the second half revenue
growth;

-- Reduced Flic quality related costs by 15% as a result of
the improved product and transactional quality; and

-- Implemented operating mechanisms focused on Lean
initiatives resulting in improved transactional quality;
currently executing on projects that will cut Flic
order-to-fulfillment cycle time from approximately 40 days
to 8 days.

-- Completed a detailed marketing assessment on the viability of
the Nomad product line.

-- We have concluded that although there is a demand for
see-through heads-up display applications in several
market segments, the current product's ergonomics and cost
structure are inhibiting its growth and acceptance in the
commercial segments. As a result we have taken steps in
recent weeks to dramatically reduce our expenditures for
Nomad as a product in its current configuration;

-- From this market assessment we are establishing the
requirements for the next generation IPM-enabled color
eyewear product;

-- Our existing installed base of Nomad customers will
continue to receive timely support and service.

-- Reconstituted Microvision Board of Directors.

-- Added three new Board members with extensive expertise in
the areas of global supply chain and operations,
technology development and commercialization and finance.

-- Executed restructuring and reorganization of the company.

-- Realigned Marketing, Sales and R&D and Supply Chain
organizations to reduce sales, marketing and
administrative expenses by 25% in 2006 and cut executive
team by 30%;

-- Hired a new vice president of research and product
development to expedite a roll-out of the product
development discipline inside Microvision. Overall in the
first half we assembled a new executive team including new
CEO, CFO, VP of Marketing & Sales, VP of Strategic
Marketing, VP of R&D, President, Asia Sales & Marketing
and head of HR;

-- Provided incentives to all employees by reallocating a
large share of salary, bonus, and options pool to
employees below VP levels and reset employee stock
options;

-- Completed a new evaluation and goal setting process for
employees focused on accountability and performance.

-- Moved to new location in Redmond with minimal disruption
to operations.

"In the first half of 2006 we focused heavily on developing a sustainable commercial contract revenue funnel consistent with our IPM strategy that was implemented earlier this year. These efforts are expected to yield development agreements during the second half of 2006 that will lead to commercialization of high volume HUD and PicoP applications. However, these agreements may not be signed in time to allow us to recognize as much revenue this year as we had originally planned.

"Achieving our goal of reducing the operating loss by 30% for the total year is largely dependent on achieving our revenue goal and maintaining aggressive cost management. We continue an aggressive cost management of sales, marketing and administrative expenses and expect to reduce these expenses for the full year by at least 25%.

"While our key goals for the year are both to reduce the burn rate and accelerate the IPM products roadmap, we will make trade-offs that provide the opportunity to accelerate our time to market. An example of this trade-off was the recently announced second half funding of a laser OEM to accelerate the development of solid state green laser for high volume products."

Additional Detail Regarding Financial Results.

For the six months ended June 30, 2006, the company reported revenue of $4.4 million compared to $8.7 million for the same period in 2005, and $1.9 million for the three months ended June 30, 2006 compared to $4.7 million for the same period in 2005. The reduced year-to-date revenue versus last year was primarily due to the reductions in commercial contract revenue. The Company earned $4.5 million during the first six months of 2005 from work performed on a contract with Ethicon compared to $663,000 during the first six months of 2006.

Product revenue from the sale of Flic bar code scanners increased 41% and 55% for the three and six months respectively from the same periods last year. Sales of the Nomad system to the US government in second quarter 2005 included a $560,000 one-time sale not repeated in 2006. As of June 30, 2006, backlog totaled $1.5 million compared to $6.8 million at June 30, 2005.

The company reported an operating loss for the six months ended June 30, 2006, of $14.4 million compared to $11.4 million for the same period in 2005 and $7.8 million for the three months ended June 30, 2006 compared to $5.8 million in the same period in 2005. The operating loss for the three and six months ended June 30, 2006, includes $154,000 and $647,000, respectively, of severance costs and $565,000 and $982,000, respectively, of non cash compensation costs associated with the adoption of FASB 123® that were not included in 2005.

The company reported a loss available for common shareholders for the six months ended June 30, 2006, of $10.9 million compared to $12.1 million for the same period in 2005 and $11.2 million for the three months ended June 30, 2006, compared to $5.0 million for the same period in 2005. The net loss available for common share holders for the three and six months ended June 30, 2006 includes a one time $3.1 million charge associated with the conversion of the company's preferred stock in May 2006.

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