Microvision Annual Meeting Presentation Notes

Here are my notes from Mr. Rutkowski's presentation at today's annual shareholder's meeting. As always, MVIS Blog is not responsible for transcription errors. More from the meeting to come later today.

Microvision Annual Meeting Notes

RR: Welcome to meeting. Introduce directors. Declares meeting formally opened. Elect individuals to BOD.

Forward looking statements disclaimer. Limited in what we can say in this meeting. Not a lot of substantive updates. Will be coming in due course in the coming weeks. Will try to add some depth and color to positive developments that have occurred recently. Big picture. What we believe we have here and the array of products and products in development arounnd the room is a product pipeline that can grow significantly. This is starting to be recognized. IEEE Spectrun, Gilder. Gilder increasingly vocal about the company's prospects.

What are they recognizing about MVIS potential? Potential truly vast, broad array of products. See entire world of computing move into a mobile paradigm. Platform technology, enable multiple products. MVIS breaking the mold a little bit. Historically, the flat panel display business has not been a great business. Demanding rate of change. How to achieve performance requirements at reasonable cost. Reference announcements made by competitors. Have been successful partnering with leaders in various product segments. Canon, Ethicon most significant design win to date -- structured through production -- BMW/Audi in the Auto HUD development. Behind the scenes sponsorship by Tier 1 automotive suppliers. GD $4.4M development contract announced today to advance the state of the Spectrum system.

Last year was a tough year. We did start to see contract revenue get back on track. Record backlog worked hard to rebuild. Significant developments, guided in last call there would be a substantial increase in product revenue. Ethicon-Endo $12.1M contract w/ options. Awarded $1.2M contract for 165 Nomads. $4.4M contract by GD for Air Warrior. Synergy between Air and Mounted Warrior.

Interview with Bill Gates, talking about Nomad and how it fits in their mobile strategy. Has turned into a growing relationship that is important in many ways to develop partnerships with system integrators and ISVs. Technical success across the board -- laser camera, auto-hud, consumer/EVF 9 megapixel display, ultra wide field of view,
laser printer. Achieved astonishing tech breakthrough for laser print engine. Satisfied customer there.

Ramping Nomad and Flic. $4k product hands-free wireless computer. Same channel as rugged notebooks. tablets. WiFi. Dealer Managment Systems, remote instrument readout. Handhelds are not a good option in the mfring and mro environments. Reality is handhelds don't work on factory floors. They're moving and manipuluating tools. Validation is that see-through is vitally important. MVIS is unique in that regard. How to take the product where we want it to go. Hope to do 100k pieces a year. Channel development, limited resources to develop large sales force. Existing channels for software and systems integrators and service and support. Takes a little bit longer, staff of 7 people. Looking for partners to leverage their application delivery and systems solutions. Continue to expand the footprint of the channel and develop the product presence. Build awareness. Awareness is high, go out and harvest. Targeting co-marketing distribution agreeements. Get into eco-system of ISVs and systems integrators. Continuing to see good leads come out of Microsoft MEDC conferences for distribution partners. Looking for killer app that is easy to understand to get that wedge into the door - first early adopters and then up the ramp. Integration with existing tools, leverage large installed base. More to report as we go.

Army has significant challenges. $56B for maintenance annually. Early start in Nat'l guard, installing 37 Nomad units, good possibility for follow on orders second half of this year. Number of vehicles and aircraft to maintain is enormous. Maintainers using e-tools. Immediately able to recognize marginal benefit of Nomad. Army had tried to use a competing solution, advantages of Nomad obvious. The people best able to recognize benefit of Nomad are people who have been trying to use something else. Try to prevent adoption of other tools first. Increased understanding of limitations of notebooks in this environment.

Nomad in Iraq, crew can say topside and still see GPS and other data. Spiral development running development and modifications and improvements parallel with deployment. Respond to feedback to improve the product. Proud of level of responsiveness to military from ND100 to ND2500. $1.2M order purchase 165 Nomads to go to Iraq for Mounted Warrior. Provide functionality to M1 Abrams, Bradley fighting vehicles and others. Tactical intelligence systems total market 50-60k units. $4.4M air warrior contract for helicopters. Spectrum SD2500 made tremendous impact to military. Impression is stunning. Immediately see superior image quality of Spectrum. Next phase toward further miniaturization of Spectrum.

Flic parallel effort with Nomad. Saw that barcodes starting to commoditize. Folks looking for simpler solutions. Seeing barcode scanners in doctors offices, file management, work in process on small part assembly lines. Seeing bardcode scanners used in conjunction with low cost mobile devices. Model is very viable, taken some time to get it going, first quarter results good, looking for additional growth. Similar challenge to Nomad. 16 ISVs, 80% of sales. 640,000 MSFT channel partners. Product has potential to $25-35M product. Next-gen 2D barcode product accelerates growth. Continue to believe this is a 2-300M/year product franchise (combined Nomad/Flic) looking a few years out.

Believe strongly that Ethicon is the beginning of a trend. Contract through production, targeting in other arenas. Objective is design win, get designed into customer products. Go to market strategy couple with tier 1 suppliers to team with them similar to Ethicon. We've been understated regarding laser printer. Starting to look more like significant product opportunity. Challenge is to create a very wide scan angle, very close in. Incredibly wide scan angles compared to other areas, synergistic values in other projects as well. Move from single beam scanning to array system of scanning. Continue to qualify the business case, can it produced in volume. Touch on laser microcamera.

Laser Focus World wrote an article on laser camera. Turn a display into a camera. Send beam out and sample it, almost the way a dvd player is sampling a disc. Do this from small diameter - 3-5MM camera. Optics are simple, can zoom; image quality does not degrade when zoomed in. Narrow angle to zoom in. Much better color, far truer than 3-chip CCD. Using a single fiber versus a bundled fiber approach. With conventional ccd or cmos need a pixel at each pixel site to detect infrared and uv. Can integrate a therapeutic beam.

JNJ/Ethicon #1 in core markets of endoscopes. AGR is 10-15%. Olympus holds dominant share. Other OEM targets. Cars, cameras, game consoles, to portable hybrid kinds of devices to portable DVD players. Each of these is display limited. Soon will be able to put movies on portable storage. Next iPod to provide movies, logically. Not content to watch movie on 2 inch screen. Auto has become display limited. Its dangerous to look at center console. Minimize driver distraction as more information goes into vehicle. BMW has been successful with LCD panel head up display. Drivers love the HUD! Take rate is higher than expected. Focus group results, consistent data from OEMs. Good news is that BMW is struggling with contrast, daylight readability, nighttime transparency, heat generation and size. Can't go from 5 series to 3 series due to size. 84% compound annual growth rate .4M annually by 2010. Mature ASP likely to be $200. $800M annual market by 2010. Growth potential beyond that. Project forward that HUDs are going to grow over a number of years. Higher contrast, smaller package, see through better at night, better flexibility in terms of alignment. Use software to modify scan rate.

In consumer electronics, cameras, games, dvd players, mobile device. Embedded engine in wearable form factors. Want HDTV. Minimum of 8x resolution better than current solutions. Competitors got a lot of play for 2 design wins with 1/4 VGA resolution. 60,000 color pixels in a package that looks like something Philips built in 1995, called the Scuba. Hopes it doesn't taint market. Combine performance with aggressive and demanding price targets. Why don't they deliver SVGA product? Would cost 10 times as much. Another competitor has SVGA product but is $900, well outside what consumers can handle. 9M display goes to this market. Important conceptual breakthrough, a little close to the vest with this. How to get this thing to look like 80-100" display? How to produce the image as well as magnify it? You've seen these big VR helmets. Sticking wide angle lenses in front of your eyes to create large image. Need 8 or 10 of these wide angle lenses since light refracts at different angles. It's a fundamental problem. The only way to get around it is our new system. Uses curved mirror, no lenses, effect of very wide field of view. It's challenging, we haven't built one of these yet. Will share more as patents are prosecuted further. Overcome fundamental limitations in wide angle, field of view, aiming higher than HDTV, 1280 x 720, 5 times field of view of competitors.

Laser printer been understated . Daunting technical challenges. Acheived major milestones recently, starting to see path to commercialization. Working hard, achieving success. Multiple major opportiunities in OEM development, consolidate position as leading provider of microscanning in the world. Build patent portfolio. Patnered with world leaders in key product categories, technical team deserves a lot of credit, stunning achievements, all the credit in the world to them, LMRA provides financial flexibility. Did sell $2.2M worth of LMRA stock. Conclude presentation.

What are we doing to drive awareness of MVIS?

Our clients do not want to telegraph to competitors what they are doing. We do have a lot to talk about and make more visible and you'll see us doing more of that.

Let's design 'Nomad-lite' for information addicts and push e-mail.

Design concepts allow to modify on the fly for desktops or movies or emails. Second optic that pop into that system. Get into the world of mobility it's about input output. Interesting developments emerge.

When do we fund development of a prototype 9 megapixel display?

To achieve this system requires substantial electronics. The more to show off the better.

You mention competitors are getting design wins of lesser resolution product. What are current limitations for MVIS in consumer products?

Approach to very high volumes is based on new architecture. Increase performance reduce cost, work to do in integrated electronics. What's happening is competitors are plateauing, competitors design win was not with Sony or Nintendo or MSFT, with 3001 ad. Which is not a mainstream effort, I don't think. Price-performance is the ultimate limiting factor for competitors.

Future financing?

LMRA stock and private placements. Tough market to do secondaries, private placements one of few ways to do things quickly. Private placements are ostensibly not allowed to trade in shares as terms are being negotiated. LMRA asset used as debt instrument, sold $2.2M worth. Anticipate when we will have positive fundamental developments. Want to be transparent as we can around financing strategy without giving up the advantage.

How do we expect to raise operating captial, how much dilution?

As little as we possibly can. Want to get max value from share holdings in LMRA.

Status of LMRA developments for LMRA product?

Status of developments is contained in their material. Exciting developments in bio-chip area. Will have more to say. Enthused about status of products. Recent announcment of electro-optic modulator. Stop short of saying too much about LMRA other than we continue to think it's a tremendous investment.

What's happening with Nomads in the dealerships?

Dealers are purchasing them on behalf of the mechanics. Different models will emerge as we leverage channel partners. Product is useable, wearable. Climb adoption curve, continue to push to find early adopters. When you see the product with an early adopter who is using it, you will get a great sense of confidence about where it can go. Mechanics of executing in marketplace.

Timeline for MicroHUD commercialization?

Looking at 2008-2010 model years depending on OEMs. Looking at aftermarket to accelerate timelines and go into marine, trucking, railroad, small business aircraft. Thanks for coming and being there. We're excited about what we see and hope you share that enthusiasm.