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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>/in/edgar/work/20000814/0000912057-00-037066/0000912057-00-037066.txt : 20000921
<SEC-HEADER>0000912057-00-037066.hdr.sgml : 20000921
ACCESSION NUMBER:		0000912057-00-037066
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20000630
FILED AS OF DATE:		20000814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MICROVISION INC
		CENTRAL INDEX KEY:			0000065770
		STANDARD INDUSTRIAL CLASSIFICATION:	 [3679
]		IRS NUMBER:				911600822
		STATE OF INCORPORATION:			WA
		FISCAL YEAR END:			1231
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-Q
			SEC ACT:		
			SEC FILE NUMBER:	000-21221
			FILM NUMBER:		697280
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		19910 NORTH CREEK PARKWAY
				CITY:			BOTHELL
				STATE:			WA
				ZIP:			98011-3008
				BUSINESS PHONE:		4254156847
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		19910 NORTH CREEK PARKWAY
					CITY:			BOTHELL
					STATE:			WA
					ZIP:			98011-8239
</MAIL-ADDRESS>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>a10-q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934.
                  For the quarterly period ended June 30, 2000

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from ___________ to ____________.

                         COMMISSION FILE NUMBER 0-21221

                                MICROVISION, INC.
             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>

<S>                                               <C>
               WASHINGTON                                       91-1600822
(State or Other Jurisdiction of Incorporation     (I.R.S. Employer Identification No.)
            or organization)

</TABLE>

            19910 North Creek Parkway, Bothell, Washington 98011-3008
                    (Address of Principal Executive Offices)

         Issuer's telephone number, including area code: (425) 415-6847

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No

As of July 24, 2000, 11,827,443 shares of the Company's common stock, no par
value, were outstanding.


                                       1
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                                               Page
                                                                                               ----

<S>                                                                                             <C>
Item 1 - Financial Statements

          Consolidated Balance Sheet at June 30, 2000 and December 31, 1999                      3

          Consolidated Statement of Operations for the three and six months ended
          June 30, 2000 and 1999                                                                 4

          Consolidated Statement of Comprehensive Loss for the three months and six
          months ended June 30, 2000 and 1999                                                    5

          Consolidated Statement of Cash Flows for the six months ended
          June 30, 2000 and 1999                                                                 6

          Notes to Consolidated Financial Statements                                             8

Item 2 - Management's Discussion and Analysis of Financial Condition                            10
          and Results of Operations

Item 3 -  Quantitative and Qualitative Disclosures About Market Risk                            26

                                     PART II
                                OTHER INFORMATION

Item 2 -  Changes in Securities and Use of Proceeds                                             27

Item 4 - Submission of Matters to a Vote of Security Holders                                    28

Item 6 -  Exhibits and Reports on Form 8-K                                                      30

</TABLE>


                                       2
<PAGE>

                                MICROVISION, INC.

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

                                                                                   JUNE 30,               DECEMBER 31,
                                                                                     2000                    1999
                                                                                     ----                    ----
                                                                                  (unaudited)

<S>                                                                               <C>                       <C>
ASSETS
Current Assets
   Cash and cash equivalents                                                      $   13,277,200            $  2,798,000
   Investment securities available-for-sale                                           41,116,900              29,369,400
   Accounts receivable, net of allowances of $78,000 and $60,000                         886,800               1,024,500
   Costs and estimated earnings in excess of billings on
      uncompleted contracts                                                              860,000               2,000,400
   Current restricted investments                                                      3,375,000                 650,000
   Other current assets                                                                1,790,000                 847,700
                                                                                  --------------           --------------
      Total current assets                                                            61,305,900              36,690,000

Long-term investment, at cost                                                            623,600                 623,600
Property and equipment, net                                                            3,798,300               3,054,700
Restricted investments                                                                   951,000               1,100,000
Other assets                                                                             101,400                 150,700
                                                                                  --------------           -------------
     Total assets                                                                 $   66,780,200           $  41,619,000
                                                                              ===================      ==================


LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY

Current Liabilities
   Accounts payable                                                                 $    820,500           $   1,453,100
   Accrued liabilities                                                                 2,286,300               2,000,100
   Billings in excess of costs and estimated
      earnings on uncompleted contracts                                                  177,000                 167,000
   Current portion of capital lease obligations                                          326,600                 220,800
   Current portion of long-term debt                                                      49,300                  46,900
                                                                                  --------------           --------------
        Total current liabilities                                                      3,659,700               3,887,900

Capital lease obligations, net of current portion                                        293,000                 279,400
Long-term debt, net of current portion                                                   316,200                 341,500
Deferred rent, net of current portion                                                    233,900                 214,800
                                                                                  --------------           --------------
        Total liabilities                                                              4,502,800               4,723,600
                                                                                  --------------           --------------

Commitments and contingencies                                                                 -                       -

Mandatorily redeemable convertible preferred stock, no par value, 1,600 shares
   authorized; 0 and 1,600 issued and outstanding                                             -               1,536,000
                                                                                  --------------           --------------

Shareholders' Equity
    Common stock, no par value, 31,250,000 shares authorized;
       11,785,568 and 10,140,733 shares issued and outstanding                      115,954,100              75,518,300
    Deferred compensation                                                            (1,415,500)               (213,100)
    Subscriptions receivable from related parties                                      (689,200)               (349,100)
    Accumulated other comprehensive loss                                                (30,300)                (60,600)
    Accumulated deficit                                                             (51,541,700)            (39,536,100)
                                                                                  --------------           --------------
      Total shareholders' equity                                                     62,277,400              35,359,400
                                                                                  --------------           --------------
      Liabilities, mandatorily redeemable convertible preferred
         stock and shareholders' equity                                           $  66,780,200           $  41,619,000
                                                                              ===================      ==================

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                                MICROVISION, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED JUNE 30,               SIX MONTHS ENDED JUNE 30,
                                                       ---------------------------               -------------------------
                                                         2000                1999                 2000                1999
                                                         ----                ----                 ----                ----
                                                                (unaudited)                              (unaudited)

<S>                                                  <C>                 <C>                    <C>                 <C>
Contract revenue                                     $   1,176,000       $   1,392,900          $  3,285,500        $  3,694,500

Cost of revenue                                            883,900           1,539,500             2,351,400           3,249,100
                                                   ----------------     ---------------      ----------------      --------------
   Gross margin                                            292,100            (146,600)              934,100             445,400
                                                   ----------------     ---------------      ----------------      --------------

Research and development
   expense                                               4,524,900           2,590,900             8,124,300           3,472,700
Marketing, general and
   administrative expense                                3,512,100           2,513,700             6,003,000           4,235,400
                                                   ----------------     ---------------      ----------------      --------------
        Total operating expenses                         8,037,000           5,104,600            14,127,300           7,708,100
                                                   ----------------     ---------------      ----------------      --------------

Loss from operations                                    (7,744,900)         (5,251,200)          (13,193,200)         (7,262,700)

Interest income                                            843,800             142,500             1,295,700             188,900
Interest expense                                           (31,300)            (70,000)             (108,100)           (106,900)
                                                   ----------------     ---------------      ----------------      --------------

Net loss                                                (6,932,400)         (5,178,700)          (12,005,600)         (7,180,700)

Less:  Preferred dividend                                         -            (73,400)                     -            (73,400)
       Noncash beneficial conversion
          feature of Series B Preferred Stock                     -                   -                     -         (1,148,000)
                                                   ----------------     ---------------      ----------------      --------------

Net loss available for common
   shareholders                                      $  (6,932,400)      $  (5,252,100)       $  (12,005,600)      $  (8,402,100)
                                                   =================   =================    ==================  =================

Net loss per share available for common
   shareholders - basic and diluted                  $       (0.60)      $       (0.74)       $        (1.09)      $       (1.27)
                                                   =================   =================    ==================  =================

Weighted-average shares outstanding -
   basic and diluted                                    11,530,800           7,073,800            11,000,000           6,596,400
                                                   =================   =================    ==================  =================

</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

                                MICROVISION, INC.

                  CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED JUNE 30,               SIX MONTHS ENDED JUNE 30,
                                                  ---------------------------               -------------------------
                                                  2000                 1999                 2000                  1999
                                                  ----                 ----                 ----                  ----
                                                         (unaudited)                                (unaudited)

<S>                                            <C>                 <C>                  <C>                     <C>
 Net loss                                      $  (6,932,400)      $  (5,178,700)       $   (12,005,600)        $  (7,180,700)
 Other comprehensive income -
    Unrealized gain on investment
      securities available-for-sale                   33,300              21,300                 30,300                28,300
                                            ------------------   -----------------    -------------------    ------------------
 Comprehensive loss                            $  (6,899,100)      $  (5,157,400)       $   (11,975,300)        $  (7,152,400)
                                            ==================   =================    ===================    ==================

</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>

                                                   MICROVISION, INC.

                                          CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                      SIX MONTHS ENDED JUNE 30,
                                                                                      -------------------------
                                                                                    2000                      1999
                                                                                    ----                      ----
                                                                                              (unaudited)

<S>                                                                            <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                    $    (12,005,600)           $  (7,180,700)
   Adjustments to reconcile net loss to
       net cash used in operations
       Depreciation                                                                     515,800                  277,100
       Noncash expenses related to issuance of stock, warrants,
          options and amortization of deferred compensation                             669,600                  126,900
       Noncash deferred rent                                                             19,100                        -
        Changes in:
            Accounts receivable                                                         137,700                   89,100
            Costs and estimated earnings in excess of billings
                on uncompleted contracts                                              1,140,400                 (528,900)
            Current restricted investments                                           (2,725,000)              (1,950,000)
            Other current assets                                                       (942,300)                (158,000)
            Restricted investments                                                      149,000               (1,100,000)
            Other assets                                                                 49,300                   11,400
            Accounts payable                                                           (632,600)                 170,300
            Accrued liabilities                                                         663,200                1,319,500
            Reserve for project costs                                                         -                  457,000
            Billings in excess of costs and estimated earnings
                on uncompleted contracts                                                 10,000                 (505,300)
                                                                                ---------------          ---------------
                Net cash used in operating activities                               (12,951,400)              (8,971,600)
                                                                                ---------------          ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Sales of investment securities                                                 40,560,000               21,144,100
      Purchases of investment securities                                            (52,277,200)             (23,393,100)
      Purchases of property and equipment                                            (1,013,900)              (1,453,700)
                                                                                ---------------          ---------------
         Net cash used in investing activities                                      (12,731,100)              (3,702,700)
                                                                                ---------------          ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Principal payments under capital leases                                           (126,100)                 (66,600)
     Principal payments under long-term debt                                            (22,900)                  (9,800)
     Increase in long term-debt                                                               -                  420,000
     Payment of preferred dividend                                                            -                  (73,400)
     Payments received on subscriptions receivable                                       56,500                        -
     Net proceeds from issuance of common stock                                      36,254,200               13,231,300
     Net proceeds from issuance of preferred stock                                           -                 4,770,000
                                                                                ---------------          ---------------
        Net cash provided by financing activities                                    36,161,700               18,271,500
                                                                                ---------------          ---------------

Net increase in cash and cash equivalents                                            10,479,200                5,597,200
Cash and cash equivalents at beginning of period                                      2,798,000                2,269,000
                                                                                ---------------          ---------------


Cash and cash equivalents at end of period                                       $   13,277,200             $  7,866,200
                                                                              ==================        =================

</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       6
<PAGE>

                                MICROVISION, INC.

                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>

                                                                                      SIX MONTHS ENDED JUNE 30,
                                                                                      -------------------------
                                                                                    2000                      1999
                                                                                    ----                      ----
                                                                                             (unaudited)

                                    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<S>                                                                              <C>                       <C>
Cash paid for interest                                                           $      108,100            $     106,900
                                                                              ==================        =================

<CAPTION>

                          SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

<S>                                                                              <C>                       <C>
Property and equipment acquired under capital leases                             $      245,500            $      75,000
                                                                              ==================        =================

Beneficial conversion feature of Series B Preferred Stock                        $            -            $   1,148,000
                                                                              ==================        =================

Conversion of preferred stock to common stock                                    $    1,536,000            $   4,334,000
                                                                              ==================        =================

Payment for exclusive license agreement by
   issuance of common stock                                                      $      377,000            $           -
                                                                              ==================        =================

Exercise of stock options for subscriptions receivable                           $      396,600            $     167,600
                                                                              ==================        =================

Deferred compensation - stock grants, warrants and options                       $    1,872,000            $     247,300
                                                                              ==================        =================

Unrealized gain in investment securities available-for-sale                      $       30,300            $      28,300
                                                                              ==================        =================

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       7
<PAGE>

                                MICROVISION, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2000

Management's Statement

The Consolidated Balance Sheet as of June 30, 2000, the Consolidated Statements
of Operations and Comprehensive Loss for the three and six months ended June 30,
2000, and June 30, 1999, and the Consolidated Statement of Cash Flows for the
six months ended June 30, 2000 and June 30, 1999 have been prepared by
Microvision, Inc. (the Company) and have not been audited. In the opinion of
management, all adjustments necessary to present fairly the financial position,
results of operations and cash flows at June 30, 2000 and all periods presented,
have been made. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. You should read these
condensed financial statements in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31,1999. The results of operations for the three and
the six month periods ended June 30, 2000 are not necessarily indicative of the
operating results that may be attained for the entire fiscal year.

Principles of Consolidation

The consolidated financial statements include the accounts of Microvision, Inc.
and Lumera Corporation, its majority owned subsidiary. Lumera Corporation is
engaged in the research and development of technologies related to non-display
applications. All material intercompany accounts and transactions have been
eliminated in consolidation.

Net Loss Per Share

Basic net loss per share is calculated on the basis of the weighted-average
number of common shares outstanding during the periods. Net loss per share
assuming dilution is calculated on the basis of the weighted-average number of
common shares outstanding and the dilutive effect of all potential common stock
equivalents and convertible securities. Net loss per share assuming dilution for
the periods ended June 30, 2000 and June 30, 1999 is equal to basic net loss per
share since the effect of potential common stock equivalents outstanding during
the periods, including convertible preferred stock, options and warrants
computed using the treasury stock method, is anti-dilutive.


                                       8
<PAGE>

The components of basic and diluted earnings per share were as follows:

<TABLE>
<CAPTION>

                                              THREE MONTHS ENDED                    SIX MONTH ENDED
                                                   JUNE 30,                             JUNE 30,
                                         2000                    1999            2000                1999

<S>                                       <C>               <C>               <C>              <C>
Numerator:
Net loss available for common shareholders$  (6,932,400)    $  (5,252,100)    $ (12,005,600)   $  (8,402,100)
                                          ===============   ===============   ===============  ==============

Denominator:
Basic and diluted weighted-average common
    shares outstantding                      11,530,800         7,073,800        11,000,000        6,596,400
                                          ===============   ===============   ===============  ==============

Basic and diluted net loss per share      $        (.60)    $        (.74)    $       (1.09)   $       (1.27)
                                          ===============   ===============   ===============  ==============

</TABLE>

As of June 30, 2000 the Company had outstanding options and warrants to purchase
3,373,000 shares of common stock.

Shareholders' Equity

In March 2000, the Company redeemed 1,600 shares of Series B-2 mandatorily
redeemable convertible preferred stock and issued 100,000 shares of common
stock to the holder thereof.

In April 2000, the Company raised $25.0 million from the issuance of
500,000 shares of common stock to Cree, Inc. and General Electric Pension Trust.
At the same time, the Company entered into a two year, $10.0 million extension
of an agreement with Cree, Inc. to continue development of semiconductor
light-emitting diodes and laser diodes for application with the Company's
proposed display and imaging products. The Company must pay $4.5 million during
the first year of the extension in four equal quarterly payments, the first of
which was made when the extension was signed. The Company has pledged
investments of $3.4 million as security for a letter of credit, which will be
used to fund the remaining payments under the first year of the extension.
During the second year of the extension, the Company is required to pay the
remaining $5.5 million in four equal quarterly payments.

In April 2000, the Company raised $7.5 million from the exercise by a
private investor of a warrant to purchase 418,848 shares of common stock at a
price of $17.91 per share.

In June 2000, the Company raised $1.9 million from the exercise by a
private investor who is also a director, of an option to purchase 100,000 shares
of common stock at a price of $19.20 per share.


                                       9
<PAGE>

ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Forward-Looking Statements

The information set forth in this report in Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and Item 3,
"Quantitative and Qualitative Disclosure about Market Risk," includes
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act for 1934, as amended (the "Exchange Act"), and is subject to the
safe harbor created by that section. Such statements may include, but are not
limited to, projections of revenues, income or loss, capital expenditures,
plans for product development and cooperative arrangements, future operations,
financing needs or plans of the Company, as well as assumptions relating to the
foregoing. The words "believe," "expect," "anticipate," "estimate," "project,"
and similar expressions identify forward-looking statements, which speak only as
of the date the statement was made. Certain factors that realistically could
cause results to differ materially from those projected in the forward-looking
statements are set forth below under the caption "Considerations Related to the
Company's Business. "

Overview

The Company began operations in May 1993 to develop and commercialize technology
for displaying images and information onto the retina of the eye. Retinal
scanning display technology creates a high resolution, full motion image by
scanning a low power beam of colored light to "paint" rows of pixels on the
viewer's eye. In certain applications, the image appears in the viewer's field
of vision as if the viewer were only an arm's length away from a high quality
video screen. The retinal scanning display technology can also be used to
superimpose an image on the viewer's field of vision, enabling the viewer to see
data or images in the context of his or her natural surroundings. In each case,
a high resolution, bright image is created.

In 1993, the Company acquired an exclusive license to the Virtual Retinal
Display, a specific type of retinal scanning display, from the University of
Washington and entered into a research agreement with the University of
Washington to further develop the Virtual Retinal Display technology. Since
completing its initial public offering in August 1996, the Company has
established and equipped in-house laboratories and transferred the research and
development relating to the Virtual Retinal Display from the University of
Washington to its in-house laboratories. The Company has continued to develop
the Virtual Retinal Display technology as part of its broader research and
development efforts relating to the retinal scanning display technology.

The Company currently has several prototype versions of the retinal scanning
displays, including monochromatic and color portable units and a full color
benchtop model. The Company expects to continue funding prototype and
demonstration versions of products incorporating its technology through at least
the end of this year.


                                       10
<PAGE>

In conjunction with developing the retinal scanning display technology, the
Company is developing components that can be integrated into different product
offerings. The Company has defined the following key product offerings for
further development:

     -   High Performance -         High fidelity displays for use in general
                                    simulation avionics, medical and
                                    entertainment applications
     -   Compact -                  Lightweight, see-through, wearable systems
                                    for hands free applications in the
                                    industrial, medical, and defense markets
     -   Microdisplay -             Highly miniaturized display systems to be
                                    incorporated into OEM products including
                                    cellular telephones, personal digital
                                    assistants, and digital camcorders/cameras
     -   Image Capture -            Systems to capture data such as bar code
                                    readers, scientific images and surgical
                                    cameras
     -   Projection -               Fixed systems to replace desktop computer
                                    monitors or rear projector systems

In June 2000, the Company demonstrated its first miniature display utilizing
three microminiature light emitting diode lamps to create a full-color high
resolution video image.

During the six months ended June 30, 2000 the Company sold additional
engineering prototype units of its first commercial retinal scanning display
product. Sales of production version retinal scanning displays may not occur
however, until substantially later, if at all.

Plan of Operation

The Company plans to introduce a production version of the retinal scanning
display in 2001. To support the product introduction the Company has produced
engineering prototypes of the commercial product. The Company has sold five of
these units to customers for product testing and integration. Other units are
being used by our sales and marketing groups to demonstrate the technology to
future potential customers and to obtain customer feedback.

The Company also intends to continue entering into strategic relationships with
systems integrators and equipment manufacturers to pursue the development of
commercial products incorporating the retinal scanning display technology.

The Company also plans to continue to pursue, obtain and perform on development
contracts. The Company expects that such contracts will further the
development of the retinal scanning display technology and lead to commercial
products. The Company also plans to invest funds for ongoing innovation and
improvements to the retinal scanning display technology. These innovations
and improvements include developing component technology, building additional
prototypes, and designing components and products for manufacturability. The
Company intends to continue hiring qualified sales, marketing, technical and
other personnel and to continue investing in laboratory facilities and
equipment to achieve development and production objectives.


                                       11
<PAGE>

Results of Operations

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1999

CONTRACT REVENUE. The Company earns revenue from performance on development
contracts and sales of engineering prototypes. Contract revenue in the three
months ended June 30, 2000 decreased by $217,000, or 16 %, to $1.2 million from
$1.4 million in the same period in 1999. For the three months ended June 30,
2000, 93% of revenue was derived from performance on development contracts.

During the three months ended June 30, 2000, the Company completed work on its
two largest development contracts. After completion of work on these contracts,
the Company received a contract modification for $7.8 million to perform
additional work on both contracts. The beginning and end of a contract term are
typically the low points of activity on a contract. The beginning of a contract
term is normally used for planning and subcontractor selection. The end of a
contract term is normally used for final demonstrations to the customer and
report writing. This lower level of activity during the three months ended June
30, 2000 was the primary reason for the decline in revenue from the same period
in 1999.

The backlog of development contracts at June 30, 2000 was $6.9 million, all of
which work is scheduled for completion during the next twelve months. The
Company's customers include both the United States government and commercial
enterprises.

COST OF REVENUE. Cost of revenue includes both the direct and indirect costs of
performing on development contracts. Indirect costs include staff and related
support costs associated with building the Company's technical capabilities and
capacity to perform on development contracts the Company expects to enter into
in the future.

Cost of revenue in the three months ended June 30, 2000 decreased by $656,000,
or 43%, to $884,000 from $1.5 million in the same period in 1999. The decrease
is attributable to lower direct cost and overhead cost allocation to cost of
revenue in the three months ended June 30, 2000 than in the same period in 1999.
The lower level of direct cost is attributable to the timing of the performance
on development contracts as discussed above. Research and development overhead
is allocated based on relative direct labor cost incurred in cost of revenue and
research and development expense.

The Company expects that the cost of revenue, on an absolute basis, will
increase in the future. This increase will likely result from additional
development contract work that the Company expects to perform. As a percentage
of contract revenue, the Company expects the cost of revenue to decline over
time as the Company realizes economies of scale associated with higher levels of
development contract business.


                                       12
<PAGE>

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense consists of:

         -        Compensation related costs of employees and contractors
                  engaged in internal research and product development
                  activities,
         -        Laboratory operations, outsourced development and processing
                  work,
         -        Fees and expenses related to patent applications, prosecution
                  and protection, and
         -        Other operating expenses.

Included in research and development expenses are costs incurred in acquiring
and maintaining licenses of technology from other companies. The Company has
charged all research and development costs to cost of revenue or research and
development expense.

Research and development expense in the three months ended June 30, 2000
increased by $1.9 million, or 75%, to $4.5 million from $2.6 million in the same
period in 1999. The increase reflects continued implementation of the Company's
operating plan, which calls for building technical staff and supporting
activities, establishing and equipping in-house laboratories, and developing and
maintaining intellectual property.

In April 2000, the Company entered into a $10.0 million extension of an
agreement with Cree, Inc. to continue development of semiconductor light
emitting diodes and laser diodes. The Company is required to pay $4.5 million
during the first year of the extension in four equal quarterly payments, the
first of which was made when the extension was signed. The Company has pledged
investments of $3.4 million as security for a letter of credit, which will be
used to fund the remaining payments under the first year of the extension.
During the second year of the extension, the Company is required to pay the
remaining $5.5 million in four equal quarterly payments.

The Company believes that a substantial level of continuing research and
development expense will be required to develop commercial products using the
retinal scanning display technology. Accordingly, the Company anticipates that a
high level of research and development spending will continue. These expenses
will be incurred as a result of:

         -        Hiring additional technical and support personnel,
         -        Expanding and equipping in-house laboratories,
         -        Acquiring rights to additional technologies,
         -        Subcontracting work to development partners, and
         -        Other operating expenses.

The Company expects that the rate of spending on research and product
development will continue to grow in future quarters as we:

         -        Prepare for the expected introduction of the Company's first
                  commercial product in mid 2001,
         -        Accelerate development of microdisplays to meet emerging
                  market opportunities,
         -        Expand the Company's investment in bar code reader
                  development,
         -        Continue development of the Company's retinal scanning
                  display technology, and
         -        Pursue other potential business opportunities.


                                       13
<PAGE>

MARKETING, GENERAL AND ADMINISTRATIVE EXPENSE. Marketing, general and
administrative expenses include compensation and support costs for sales,
marketing, management and administrative staff, and for other general and
administrative costs, including legal and accounting, consultants, and other
operating expenses.

Marketing, general and administrative expenses in the three months ended June
30, 2000 increased by $1.0 million, or 40%, to $3.5 million from $2.5 million in
the same period in 1999. The increase includes increased compensation and
support costs for employees and contractors. The Company expects marketing,
general and administrative expenses to increase substantially in future periods
as the Company:

         -        Adds to its sales and marketing staff,
         -        Makes additional investments in sales and marketing
                  activities, and
         -        Increases the level of corporate and administrative activity.

INTEREST INCOME AND EXPENSE. Interest income in the three months ended June 30,
2000 increased by $701,000, or 492%, to $844,000 from $143,000 in the same
period in 1999. This increase resulted primarily from higher average cash and
investment securities balances in the three months ended June 30, 2000 than the
average cash and investment securities balances in the same period of the prior
year.

Interest expense in the three months ended June 30, 2000 decreased by $39,000,
or 55%, to $31,000 from $70,000 in the same period in 1999. The decrease
resulted from a decrease in interest paid on the non-recourse receivables
assignment facility, which expired in September 1999.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1999

CONTRACT REVENUE. The Company earns revenue from performance on development
contracts and sales of engineering prototypes. Contract revenue in the six
months ended June 30, 2000 decreased by $409,000, or 11%, to $3.3 million from
$3.7 million in the same period in 1999. For the six months ended June 30, 2000,
88 % of revenue was derived from performance on development contracts.

During the six months ended June 30, 2000, the Company completed work on its two
largest development contracts. After completion of work on these contracts, the
Company received a contract modification for $7.8 million to perform additional
work on both contracts. The


                                       14
<PAGE>

beginning and end of a contract term are typically the low points of
activity on a contract. The beginning of a contract term is normally used for
planning and subcontractor selection. The end of a contract term is normally
used for final demonstrations to the customer and report writing. This lower
level of activity during the six months ended June 30, 2000 was the primary
reason for the decline in revenue from the same period in 1999.

COST OF REVENUE. Cost of revenue includes both the direct and indirect costs of
performing on development contracts. Indirect costs include staff and related
support costs associated with building the Company's technical capabilities and
capacity to perform on development contracts the Company expects to enter into
in the future.

Cost of revenue in the six months ended June 30, 2000 decreased by $898,000, or
28%, to $2.4 million from $3.2 million in the same period in 1999. The decrease
is attributable to lower direct cost and research and development overhead cost
allocation to cost of revenue in the six months ended June 30, 2000 than in the
same period in 1999. The lower level of direct cost is attributable to the
timing of the performance on development contracts discussed above. Research and
development overhead is allocated based on relative direct labor cost incurred
in cost of revenue and research and development expense.

RESEARCH AND DEVELOPMENT EXPENSE.  Research and development expense consists of:

         -        Compensation related costs of employees and contractors
                  engaged in internal research and product development
                  activities,
         -        Laboratory operations, outside development and processing
                  work,
         -        Fees and expenses related to patent applications, prosecution
                  and protection, and
         -        Other operating expenses.

Included in research and development expenses are costs incurred in acquiring
and maintaining licenses of technology from other companies. The Company has
expensed all research and development costs.

Research and development expense in the six months ended June 30, 2000 increased
by $4.6 million, or 134%, to $8.1 million from $3.5 million in the same period
in 1999. The increase reflects continued implementation of the Company's
operating plan, which calls for building technical staff and supporting
activities, establishing and equipping in-house laboratories, and developing and
maintaining intellectual property.

In April 2000, the Company entered into a $10.0 million extension of an
agreement with Cree, Inc. to continue development of semiconductor light
emitting diodes and laser diodes. The Company is required to pay $4.5 million
during the first year of the extension in four equal quarterly payments, the
first of which was made when the extension was signed. The Company has pledged
investments of $3.4 million as security for a letter of credit, which will be
used to fund the remaining payments under the first year of the extension.
During the second year of the extension, the Company is required to pay the
remaining $5.5 million in four equal quarterly payments.


                                       15
<PAGE>

The Company believes that a substantial level of continuing research and
development expense will be required to develop commercial products using the
Retinal scanning display technology. Accordingly, the Company anticipates that a
high level of research and development spending will continue. These expenses
will be incurred as a result of:

         -        Hiring additional technical and support personnel,
         -        Expanding and equipping in-house laboratories,
         -        Acquiring rights to additional technologies, and
         -        Subcontracting development work to development partners.

The Company expects that the rate of spending on research and product
development will continue to grow in future quarters as we:

         -        Prepare for the expected introduction of the Company's first
                  commercial product in mid 2001,
         -        Accelerate development of microdisplays to meet emerging
                  market opportunities,
         -        Expand the Company's investment in bar code reader
                  development,
         -        Continue development of the Company's retinal scanning
                  display technology, and
         -        Pursue other potential business opportunities.

MARKETING, GENERAL AND ADMINISTRATIVE EXPENSE. Marketing, general and
administrative expenses include compensation and support costs for sales,
marketing, management and administrative staff, and for other general and
administrative costs, including legal and accounting, consultants, and other
operating expenses.

Marketing, general and administrative expenses in the six months ended June 30,
2000 increased by $1.8 million, or 42%, to $6.0 million from $4.2 million in the
same period in 1999. The increase includes increased compensation and support
costs for employees and contractors. The Company expects marketing, general and
administrative expenses to increase substantially in future periods as the
Company:

         -        Adds to its sales and marketing staff,
         -        Makes additional investments in sales and marketing
                  activities, and
         -        Increases the level of corporate and administrative activity.

INTEREST INCOME AND EXPENSE. Interest income in the six months ended June 30,
2000 increased by $1.1 million,or 586%,to $1.3 million from $189,000 in the same
period in 1999. This increase resulted from higher average cash and investment
securities balances in the six months ended June 30, 2000 than the average cash
and investment securities balances in the same period of the prior year.

Interest expense in the six months ended June 30, 2000 increased by $1,000, or
1%, to $108,100 from $107,000 in the same period in 1999. This increase resulted
from interest related to new long-term debt incurred for leasehold improvements
in the new facility and additional capital leases.


                                       16
<PAGE>

Liquidity and Capital Resources

The Company has funded operations to date primarily through the sale of common
stock, convertible preferred stock and, to a lesser extent, contract revenue. At
June 30, 2000, the Company had $54.4 million in cash, cash equivalents and
investment securities balances.

Cash used in operating activities totaled $13.0 million during the six months
ended June 30, 2000 compared to $9.0 million during the same period in 1999.
Cash used in operating activities during the six months ended June 30, 2000
includes the additional use of restricted cash of $2.7 which will be used to
fund future payments to Cree, Inc. under the research agreement discussed
above. Cash used in operating activities for each period resulted primarily
from the net loss for the period.

Cash used in investing activities totaled $12.7 million during the six months
ended June 30, 2000, compared to $3.7 million during the same period of 1999.
The increase in cash used in investing activities resulted primarily from
investing the proceeds from financing activities during the same period. The
Company balances the maturity dates of the investment portfolio to its
expected cash requirements.

The Company used $1.0 million for capital expenditures during the six months
ended June 30, 2000 compared to $1.5 million during the same period in 1999.
Historically, capital expenditures have been used to make leasehold improvements
to leased office space and to purchase computer hardware and software,
laboratory equipment and furniture and fixtures to support growth. The Company
expects capital expenditures to continue to increase significantly as the
Company continues to expand operations. As of June 30, 2000 the Company had
commitments to purchase approximately $2.6 million in leasehold improvements and
additional laboratory equipment.

Cash provided by financing activities totaled $36.2 million during the six
months ended June 30, 2000, compared to $18.3 million during the same period in
1999. During the six months ended June 30, 2000 the Company raised $36.3
million, net of cost, from the issuance of common stock. The following is a
summary of the net proceeds from issuance of common stock during the six months
ended June 30, 2000:

         -        $24.0 million, net of issuance costs, from issuance of
                  500,000 shares of common stock to Cree, Inc. and General
                  Electric Pension Trust,
         -        $7.7 million from the exercise of warrants to purchase 437,824
                  shares of common stock,
         -        $1.8 million, net of issuance costs, from the exercise of an
                  option to purchase 100,000 shares of common stock, and
         -        $2.8 million from exercise of employee options to purchase
                  275,209 shares of common stock.

Future operating expenditures and capital requirements will depend on numerous
factors, including the following:

         -        The progress of research and development programs,
         -        The progress in commercialization activities and arrangements,
         -        The cost of filing, prosecuting, defending and enforcing any
                  patent claims and other intellectual property rights,


                                       17
<PAGE>

         -        Competing technological and market developments, and
         -        The Company's ability to establish cooperative development,
                  joint venture and licensing arrangements.

In order to maintain exclusive rights under the license agreement with the
University of Washington, the Company is obligated to make royalty payments to
the University of Washington. If the Company is successful in establishing OEM
co-development and joint venture arrangements, the Company expects that its
partners will fund a portion of non-recurring engineering costs for product
development. Nevertheless, the Company expects cash requirements to increase
significantly each year as the Company expands its activities and operations to
commercialize its technologies.

The Company believes that its cash, cash equivalents and investment securities
balances at June 30, 2000 will satisfy its budgeted cash requirements for at
least the next 12 months based on the current operating plan. Actual expenses,
however, may be higher than estimated and the Company may require additional
capital earlier than anticipated to:

         -        Accelerate the development of retinal scanning display
                  technology,
         -        Respond to competitive pressures, or
         -        Meet unanticipated development difficulties.

The Company's operating plan calls for the addition of technical and business
staff and the purchase of additional computer and laboratory equipment, and
leasehold improvements. The operating plan also provides for the development of
strategic relationships with systems and equipment manufacturers. There can be
no assurance that additional financing will be available to us or that, if
available, it will be available on acceptable terms on a timely basis. If
adequate funds are not available to satisfy either short-term or long-term
capital requirements, the Company may be required to reduce operations
significantly. The Company's capital requirements will depend on many factors,
including, but not limited to, the rate at which the Company can, directly or
through arrangements with OEMs, introduce products incorporating the retinal
scanning display technology and the market acceptance and competitive position
of such products.

CONSIDERATIONS RELATING TO THE COMPANY'S BUSINESS

WE CANNOT BE CERTAIN THAT THE RETINAL SCANNING DISPLAY TECHNOLOGY OR PRODUCTS
INCORPORATING THIS TECHNOLOGY WILL ACHIEVE MARKET ACCEPTANCE. IF THE RETINAL
SCANNING DISPLAY TECHNOLOGY DOES NOT ACHIEVE MARKET ACCEPTANCE, OUR REVENUES MAY
NOT GROW.

Our success will depend in part on the commercial acceptance of the retinal
scanning display technology. The retinal scanning display technology may not be
accepted by manufacturers who use display technologies in their products or by
consumers of these products. To be accepted, the retinal scanning display
technology must meet the expectations of our potential customers in the defense,
medical, industrial, and consumer markets. If our technology fails to achieve
market acceptance, we may not be able to continue to develop the retinal
scanning display technology.


                                       18
<PAGE>

OUR LACK OF THE FINANCIAL AND TECHNICAL RESOURCES RELATIVE TO OUR COMPETITORS
MAY REDUCE OUR REVENUES, POTENTIAL PROFITS, AND OVERALL MARKET SHARE.

The retinal scanning display and products that may incorporate this
technology will compete with established manufacturers of miniaturized
cathode ray tube and flat panel display devices, many of which have
substantially greater financial, technical and other resources than us and
many of which are also developing miniature displays. Because of their
greater resources, our competitors may develop products or technologies that
are superior to our own. The introduction of superior competing products or
technologies could result in reduced revenues, lower margins or loss of
market share, any of which could reduce the value of our business.

WE MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE AND OUR FINANCIAL
RESULTS MAY SUFFER.

The electronic information display industry has been characterized by rapidly
changing technology, accelerated product obsolescence, and continuously evolving
industry standards. Our success will depend upon our ability to further develop
the retinal scanning display technology and to introduce new products and
features on a cost effective basis in a timely manner to meet evolving customer
requirements and compete effectively with competitors' product advances. We may
not succeed in these efforts because of:

         -        delays in product development,
         -        lack of market acceptance for our products, or
         -        lack of funds to invest in development.

The occurrence of any of the above factors could result in decreased revenues
and market share.

IF WE CAN NOT SUPPLY PRODUCTS IN COMMERCIAL QUANTITIES, WE WILL NOT ACHIEVE
COMMERCIAL SUCCESS.

We currently lack the capability to manufacture products in commercial
quantities. Our success depends in part on our ability to provide our components
and future products in commercial quantities at competitive prices. Accordingly,
we will be required to obtain access, through business partners or contract
manufacturers, to manufacturing capacity and processes for the commercial
production of our expected future products. We cannot be certain that we will
successfully obtain access to sufficient manufacturing resources. Future
manufacturing limitations of our suppliers could result in a limitation on the
number of products incorporating the retinal scanning display technology that
can be produced.

IF WE CANNOT MANUFACTURE PRODUCTS AT COMPETITIVE PRICES, OUR FINANCIAL RESULTS
WILL BE ADVERSELY AFFECTED.

To date, we have produced only prototype products for research, development, and
demonstration purposes. The cost per unit for these prototypes currently exceeds
the level at


                                       19
<PAGE>

which we could expect to profitably sell commercial versions of these
products to customers. If we cannot lower our cost of production, we may face:

         -        loss of profitability and loss of competitiveness for our
                  products, and
         -        increased demands on our financial resources, possibly
                  requiring additional equity and/or debt financings to sustain
                  our business operations.

OUR PRODUCTS MAY BE SUBJECT TO FUTURE HEALTH AND SAFETY REGULATION THAT COULD
INCREASE OUR DEVELOPMENT AND PRODUCTION COSTS.

Products incorporating retinal scanning display technology could become
subject to new health and safety regulations that would reduce our ability to
commercialize the retinal scanning display technology. Compliance with any
such new regulations would likely increase our cost to develop and produce
products using the retinal scanning display technology and adversely affect
our financial results.

IF WE EXPERIENCE DELAYS OR FAILURES IN DEVELOPING AND PRODUCING COMMERCIALLY
VIABLE PRODUCTS, WE MAY HAVE LOWER REVENUES.

Although we have developed prototype products incorporating the retinal scanning
display technology, we must undertake additional research, development and
testing before we are able to produce products for commercial sale. In addition,
product development delays or the inability to enter into relationships with
potential product development partners may delay or prevent us from
introducing commercial products.

IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR PATENTS AND OTHER PROPRIETARY
TECHNOLOGY, WE MAY BE UNABLE TO COMPETE WITH OTHER COMPANIES.

Our success will depend in part on our ability and the ability of the University
of Washington (the University) and our other licensors to maintain the
proprietary nature of the retinal scanning display and related technologies.
Although our licensors have patented various aspects of the retinal scanning
display technology and we continue to file our own patent applications covering
retinal scanning display features and related technologies, we cannot be certain
as to the degree of protection offered by these patents or as to the likelihood
that patents will be issued from the pending patent applications. Moreover,
these patents may have limited commercial value or may lack sufficient breadth
to protect adequately the aspects of our technology to which the patents relate.

We cannot be certain that our competitors, many of which have substantially
greater resources than us and have made substantial investments in competing
technologies, will not apply for and obtain patents that will prevent, limit or
interfere with our ability to make and sell our products. We also rely on
unpatented proprietary technology. Third parties could develop the same or
similar technology or otherwise obtain access to our proprietary technology. We
cannot be certain that we will be able to adequately protect our trade secrets,
know-how or other proprietary information or to prevent the unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information.


                                       20
<PAGE>

WE COULD FACE LAWSUITS RELATED TO OUR USE OF THE RETINAL SCANNING DISPLAY
TECHNOLOGY. THESE SUITS COULD BE COSTLY, TIME CONSUMING AND REDUCE OUR REVENUES.

We are aware of several patents held by third parties that relate to certain
aspects of retinal scanning devices. These patents could be used as a basis to
challenge the validity of the University's patents, to limit the scope of the
University's patent rights, or to limit the University's ability to obtain
additional or broader patent rights. A successful challenge to the validity of
the University's patents could limit our ability to commercialize the retinal
scanning display technology and, consequently, materially reduce our revenues.
Moreover, we cannot be certain that patent holders or other third parties will
not claim infringement by us or by the University with respect to current and
future technology. Because U.S. patent applications are held and examined in
secrecy, it is also possible that presently pending U.S. applications will
eventually be issued with claims that will be infringed by our products or the
retinal scanning display technology. The defense and prosecution of a patent
suit would be costly and time-consuming, even if the outcome were ultimately
favorable to us. An adverse outcome in the defense of a patent suit could
subject us to significant cost, require others and us to cease selling products
that incorporate retinal scanning display technology, or to cease licensing the
retinal scanning display technology, or to require disputed rights to be
licensed from third parties. Such licenses would increase our cost or may not be
available at all. Moreover, if claims of infringement are asserted against our
future co-development partners or customers, those partners or customers may
seek indemnification from us for damages or expenses they incur.

IF WE LOSE THE EXCLUSIVE USE OF THE VIRTUAL RETINAL DISPLAY TECHNOLOGY, OUR
BUSINESS OPERATIONS AND PROSPECTS WOULD BE ADVERSELY AFFECTED.

We acquired the exclusive rights to the Virtual Retinal Display technology
under an exclusive license agreement with the University. If the University
were to violate the terms of the license agreement by providing the Virtual
Retinal Display technology to another company, our business, operations, and
prospects would be adversely affected. In addition, we could lose the
exclusivity under the license agreement if we fail to challenge within the
time limit claims that other companies are using the Virtual Retinal Display
technology in violation of our license agreement.

WE NEED TO COLLABORATE WITH THIRD PARTIES TO BE ABLE TO SUCCESSFULLY DEVELOP
PRODUCTS FOR SALE.

Our strategy for developing, testing, manufacturing and commercializing the
retinal scanning display technology and products incorporating the retinal
scanning display technology includes entering into cooperative development,
sales and marketing arrangements with corporate partners, original equipment
manufacturers, and other third parties. We cannot be certain that we will be
able to negotiate arrangements on acceptable terms, if at all, or that these
arrangements will be successful in yielding commercially viable products. If we
cannot establish these arrangements, we would require additional working capital
to undertake such activities on our own and would require extensive
manufacturing, sales and marketing expertise that we do not currently possess
and that may be difficult to obtain. In addition, we could encounter significant


                                       21
<PAGE>

delays in introducing the retinal scanning display technology or find that the
development, manufacture or sale of products incorporating the retinal scanning
display technology would not be feasible. To the extent that we enter into
cooperative development, sales and marketing or other joint venture
arrangements, our revenues will depend upon the efforts of third parties. We
cannot be certain that any such arrangements will be successful.

OUR REVENUES ARE HIGHLY SENSITIVE TO DEVELOPMENTS IN THE DEFENSE AND AEROSPACE
INDUSTRIES.

Our revenues to date have been derived principally from product development
research relating to defense applications of the retinal scanning display
technology. We believe that development programs and sales of potential products
in this market will represent a significant portion of our future revenues.
Developments that adversely affect the defense sector, including delays in
government funding and a general economic downturn, could cause our revenues to
decline substantially.

WE MAY REQUIRE ADDITIONAL CAPITAL TO CONTINUE IMPLEMENTING OUR BUSINESS PLAN.
THIS MAY LESSEN THE VALUE OF CURRENT STOCKHOLDERS' SHARES.

We may need additional funds in order to, among other requirements:

         -        further develop retinal scanning display technology,
         -        add manufacturing capacity,
         -        add to our sales and marketing staff,
         -        develop and protect our intellectual property rights, or
         -        fund long-term business development opportunities.

We cannot be certain that we will be able to obtain financing when needed or
that we will be able to obtain financing on satisfactory terms, if at all. If
additional funds are raised through the issuance of equity, convertible debt or
similar securities, current shareholders will experience dilution and the
securities issued to the new investors may have rights or preferences senior to
those of the shareholders of common stock. Moreover, if adequate funds were not
available to satisfy our short-term or long-term financial needs, we would be
required to limit our operations significantly.

LOSS OF ANY OF OUR KEY PERSONNEL COULD HAVE A NEGATIVE EFFECT ON THE OPERATION
OF OUR BUSINESS.

Our success depends on our officers and other key personnel and on the ability
to attract and retain qualified new personnel. Achievement of our business
objectives will require substantial additional expertise in the areas of sales
and marketing, engineering and product development, and manufacturing.
Competition for qualified personnel in these fields is intense, and the
inability to attract and retain additional highly skilled personnel, or the loss
of key personnel, could reduce our revenues and adversely affect our business.


                                       22
<PAGE>

WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT TO INCUR SIGNIFICANT LOSSES IN
THE FUTURE.

We have had substantial losses since our inception and our operating losses may
increase in the future. Accordingly, we cannot assure you that we will ever
become or remain profitable.

         -        As of June 30, 2000, we had an accumulated deficit of $51.5
                  million.
         -        We incurred net losses of $7.1 million from inception through
                  1995, $3.5 million in 1996, $4.9 million in 1997, $7.3 million
                  in 1998, $16.7 million in 1999, and $12.0 million in the six
                  month period ended June 30, 2000.

Our revenues to date have been generated from development contracts and sales
of engineering prototype units. We do not expect to generate significant
revenues from product sales in the near future. The likelihood of our success
must be considered in light of the expenses, difficulties, and delays
frequently encountered by companies formed to develop and market new
technologies. In particular, our operations to date have focused primarily on
research and development of the retinal scanning display technology and
development of prototypes. We are unable to accurately estimate future
revenues and operating expenses based upon historical performance.

We cannot be certain that we will succeed in obtaining additional development
contracts or that we will be able to obtain customer orders for products
incorporating the retinal scanning display technology. In light of these
factors, we expect to continue to incur substantial losses and negative cash
flow at least through 2001 and possibly thereafter. We cannot be certain that we
will become profitable or achieve positive cash flow at any time in the future.

A SUBSTANTIAL NUMBER OF OUR SHARES MAY BE SOLD INTO THE MARKET IN THE NEAR
FUTURE, WHICH COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DROP
SIGNIFICANTLY.

As of July 24, 2000, we had outstanding:

         -        11,827,443 shares of common stock,
         -        options under our option plans to purchase an aggregate of
                  2,884,481 shares of common stock,
         -        privately placed warrants to purchase 259,045 shares of common
                  stock.

Almost all of our outstanding shares of common stock may be sold without
substantial restrictions. Sales in the public market of substantial amounts of
common stock, including sales of common stock issuable upon exercises of stock
options or warrants, could depress prevailing market prices for our common
stock. Even the perception that such sales could occur may adversely impact the
market price for our stock. A decrease in market price would decrease the value
of an investment in our common stock.


                                       23
<PAGE>

OUR QUARTERLY PERFORMANCE MAY VARY SUBSTANTIALLY AND THIS VARIANCE MAY DECREASE
OUR STOCK PRICE.

Our revenues to date have been generated from a limited number of development
contracts with U.S. government entities and commercial partners. Our quarterly
operating results may vary significantly based on:

         -        reductions or delays in funding of development programs
                  involving new information display technologies by the U.S.
                  government or our current or prospective commercial partners;
                  or
         -        the status of particular development programs and the timing
                  of performance under specific development agreements.

In one or more future quarters, our results of operations may fall below the
expectations of securities analysts and investors and the trading price of our
common stock may decline as a consequence.

OUR STOCK PRICE MAY BE VOLATILE AND THIS VOLATILITY COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.

The stock market is subject to price and volume fluctuations that particularly
affect the market prices of stock of small capitalization, high technology
companies. The trading price of our common stock could be subject to significant
fluctuations in response to, among other factors:

         -        variations in quarterly operating results,
         -        changes in analysts' estimates,
         -        announcements of technological innovations by our competitors,
         -        general conditions in the information display and electronics
                  industries, and
         -        general economic conditions.

Frequent changes in the market price of our common stock will affect the
day-to-day value of an investment in our common stock.

WE MAY INVEST OUR CAPITAL IN WAYS THAT DO NOT RESULT IN A FAVORABLE RETURN. THIS
COULD LOWER OUR STOCK PRICE.

Our management has broad discretion to invest our capital in ways in which our
stockholders may not agree. The failure of our management to invest our capital
effectively could result in lower returns than expected. This could lower the
value of our stock.

IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE THE COMPANY AND THIS COULD
DEPRESS OUR STOCK PRICE.

Certain provisions of Washington law and our amended and restated articles of
incorporation and bylaws contain provisions that create burdens and delays when
someone attempts to purchase our


                                       24
<PAGE>

Company. As a result, these provisions could limit the price that investors are
willing to pay for our stock. These provisions:

         -        authorize our board of directors, without further shareholder
                  approval, to issue preferred stock that has rights superior to
                  those of the common stock. Potential purchasers may pay less
                  for our Company because the preferred stockholders may use
                  their rights to take value from the Company; and
         -        provide that written demand of at least 30% of the outstanding
                  capital shares is required to call a special meeting of the
                  shareholders, which may be needed to approve the sale of the
                  Company. The delay that this creates could deter a potential
                  purchaser.


                                       25
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Most of the Company's cash equivalents and investment securities are at fixed
interest rates and, as such, the fair value of these instruments is affected by
changes in market interest rates. As of June 30, 2000, approximately $40.4
million, or 72%, of the Company's total investment portfolio matures within one
year. The Company's portfolio consists of only high-grade government agency
securities and commercial paper. Accordingly, the Company believes that its
interest rate risk is immaterial. In addition, substantially all of the
Company's development contract payments are made in U.S. dollars and,
consequently, the Company believes its foreign currency exchange rate risk is
immaterial. The Company does not have any derivative instruments and does not
engage in hedging transactions.


                                       26
<PAGE>

                                     Part II

                                OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On March 15, 2000, the Company issued 100,000 shares of common stock to Margaret
Elardi, a director of the Company, in exchange for and upon redemption of 1,600
shares of Series B-2 preferred stock held by Ms. Elardi. This transaction did
not involve a public offering and was exempt from registration under the
Securities Act pursuant to Section 4(2) therof.

On April 11, 2000, the Company issued 418,848 shares of common stock to Capital
Ventures International on exercise of a warrant. The Company received cash
consideration of $7.5 million in connection with the transaction. This
transaction did not involve a public offering and was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof.

On April 12, 2000 the Company sold 500,000 shares of common stock to Cree, Inc.
and General Electric Pension Trust. The Company received cash consideration of
$25.0 million in connection with the transaction. This transaction was exempt
from registration under the Securities Act pursuant to Section 4(2) thereof and
regulation D thereunder.

On April 13, 2000 the Company issued warrants to purchase 50,000 shares of
common stock to Burt Davis. The warrant was issued as consideration for
placement agent services rendered to the Company in connection with the sale of
common stock to Cree, Inc. and General Electric Pension Trust. The warrant
grants the holder the right to purchase up to 50,000 shares of common stock at a
price of $53.00 per share for a period of five years. This transaction was
exempt from registration under the Securities Act pursuant to Sections 4(2)
thereof.

On June 21, 2000 the Company issued 100,000 shares of common stock to
Margaret Elardi on exercise of an option to purchase 100,000 shares of common
stock at a price of $19.20 per share. The Company received cash consideration
of $1.9 million in connection with the transaction. This transaction did not
involve a public offering and was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.

On June 21, 2000 the Company issued a common stock purchase warrant to purchase
6,250 shares of common stock to Stan Berk. The warrant was issued as partial
consideration for placement agent services rendered to the Company in connection
with the exercise of the option to purchase Common Stock by Margaret Elardi. The
warrant provides the holder the right to purchase up to 6,250 shares of Common
Stock at a price of $19.20 per share for a period of five


                                       27
<PAGE>

years. This transaction did not involve a public offering and was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Shareholders was held on June 22, 2000. The
following proposals were introduced and vote upon:

PROPOSAL  NO 1 - Election of Directors

<TABLE>
<CAPTION>

                                    Votes                                 Votes
Name                                For                                Withheld

- ----------------           ------------------        ---------------------

<S>                                 <C>                                 <C>
Richard F. Rutkowski                10,586,249                          134,825
Stephen R. Willey                   10,633,390                           87,684
Richard A. Raisig                   10,481,023                          240,051
Jacob Brouwer                       10,399,588                          321,486
Richard A. Cowell                   10,634,405                           86,669
Margaret Elardi                     10,634,465                           86,609
Walter J. Lack                      10,633,249                           87,825
William A. Owens                    10,588,470                          132,604
Robert A. Ratliffe                  10,634,470                           86,604
Dennis Reimer                       10,634,400                           86,674

</TABLE>

PROPOSAL NO. 2 - Proposal to amend the Company's 1996 Stock Option Plan to
increase the number of shares of Common Stock authorized for issuance upon
exercise of options.

<TABLE>

<S>                                                  <C>
                  FOR                                4,052,728
                  AGAINST                            1,576,410
                  ABSTAINED                             65,636
                  BROKER NON-VOTES                   5,026,300

</TABLE>


                                       28
<PAGE>

PROPOSAL NO. 3 - Proposal to approve the Independent Director Stock Option Plan
and the initial grant of options thereunder to non-employee directors.

<TABLE>

<S>                                                  <C>
                  FOR                                4,667,685
                  AGAINST                              953,167
                  ABSTAINED                             73,922
                  BROKER NON-VOTES                   5,026,300

</TABLE>

PROPOSAL NO. 4 - Proposal to ratify the appointment of PricewaterhouseCoopers
LLP as independent auditors of the Company for the fiscal year ending December
31, 2000.

<TABLE>

<S>                                                  <C>
                  FOR                                10,392,456
                  AGAINST                               303,517
                  ABSTAINED                              25,101
                  BROKER NON-VOTES                            0

</TABLE>


                                       29
<PAGE>

ITEM 6.       Exhibits and Reports on Form 8-K

a.)      EXHIBITS

10.1     Form of first amendment to the Employment Agreement for Richard F.
         Rutkowski, dated April 18, 2000 between Microvision, Inc. and
         Richard F. Rutkowski

10.2     Form of first amendment to the Employment Agreement for Stephen R.
         Willey, dated April 18, 2000 between Microvision, Inc. and Stephen
         R. Willey

10.3     Form of first amendment to the Employment Agreement for Richard A.
         Raisig, dated April 18, 2000 between Microvision, Inc. and Richard
         A. Raisig

10.4     Independent Director Stock Option Plan (1)

10.5     Stock Option Plan, as amended

27.0     Financial Data Schedule

- ---------
(1)      Incorporated by reference to the Company's definitive proxy
         statement for annual meeting of shareholders filed April 28, 2000.

- --------------------------------------------------------------------------------

b.)      Reports on Form 8-K

         The Company filed no current reports on Form 8-K during the quarterly
         period ended June 30, 2000


                                       30
<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                         MICROVISION, INC.

Date:  August 9, 2000                    /s/ Richard F. Rutkowski
                                         ----------------------------------
                                         Richard F. Rutkowski
                                         President, Chief Executive Officer
                                         (Principal Executive Officer)

Date: August 9, 2000                     /s/ Jeff Wilson
                                         ----------------------------------
                                         Jeff Wilson
                                         Controller
                                         (Principal Accounting Officer)


                                       31
<PAGE>

                                  EXHIBIT INDEX

The following documents are filed herewith or have been included as exhibits to
previous filings with the Securities and Exchange Commission and are
incorporated by reference as indicated below.

EXHIBIT
NUMBER        DESCRIPTION

10.1     Form of first amendment to the Employment Agreement for Richard F.
         Rutkowski, dated April 18, 2000 between Microvision, Inc. and
         Richard F. Rutkowski

10.2     Form of first amendment to the Employment Agreement for Stephen R.
         Willey, dated April 18, 2000 between Microvision, Inc. and Stephen
         R. Willey

10.3     Form of first amendment to the Employment Agreement for Richard A.
         Raisig, dated April 18, 2000 between Microvision, Inc. and Richard
         A. Raisig

10.4     Independent Director Stock Option Plan (1)

10.5     Stock Option Plan, as amended

27.0     Financial Data Schedule

- ---------
(1)      Incorporated by reference to the Company's definitive proxy
         statement for annual meeting of shareholders filed April 28, 2000.

- --------------------------------------------------------------------------------










                                       32
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>ex-10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>

                        FORM OF FIRST AMENDMENT TO THE
                  EMPLOYMENT AGREEMENT FOR RICHARD F. RUTKOWSKI

         This First Amendment to the Employment Agreement for Richard F.
Rutkowski, effective as of April 18, 2000, is by and between Microvision, Inc.,
a Washington corporation (the "Company"), and Richard F. Rutkowski (the
"Executive").

         WHEREAS, Executive serves as the President and Chief Executive Officer
of the Company;

         WHEREAS, the Company and Executive entered into an Employment
Agreement, dated as of October 1, 1997, (the "Employment Agreement"); and

         WHEREAS, in consideration for Executive's continued services to the
Company, the Company desires to amend the Employment Agreement to extend the
term thereof;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the parties agree as follows:

1.       The date set forth in Section 1.3 of the Employment Agreement shall be
changed to December 31, 2004.

2.       The annual salary amount set forth in Section 2.1 of the Employment
Agreement shall be changed to $225,000.

3.       The respective address for notice for each of the Company and Executive
set forth in Section 19 of the Employment Agreement shall be changed to 19910
North Creek Parkway, Bothell, Washington 98011-3008.

4.       All other terms and conditions of the Employment Agreement shall remain
in full force and effect.

         In witness whereof, the parties have executed this First Amendment to
the Employment Agreement as of the 18th of April, 2000.

MICROVISION, INC.                           EXECUTIVE

_____________________________               ______________________________

By: _________________________               By: __________________________

Its:_________________________

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex-10_2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>

<PAGE>

                        FORM OF FIRST AMENDMENT TO THE
                   EMPLOYMENT AGREEMENT FOR STEPHEN R. WILLEY

         This First Amendment to the Employment Agreement for Stephen R. Willey,
effective as of April 18, 2000, is by and between Microvision, Inc., a
Washington corporation (the "Company"), and Stephen R. Willey (the "Executive").

         WHEREAS, Executive serves as the Executive Vice President of the
Company;

         WHEREAS, the Company and Executive entered into an Employment
Agreement, dated as of October 1, 1998, (the "Employment Agreement"); and

         WHEREAS, in consideration for Executive's continued services to the
Company, the Company desires to amend the Employment Agreement to extend the
term thereof;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the parties agree as follows:

1.       The date set forth in Section 1.3 of the Employment Agreement shall be
changed to December 31, 2003.

2.       The annual salary amount set forth in Section 2.1 of the Employment
Agreement shall be changed to $185,000.

3.       The respective address for notice for each of the Company and Executive
set forth in Section 19 of the Employment Agreement shall be changed to 19910
North Creek Parkway, Bothell, Washington 98011-3008.

4.       All other terms and conditions of the Employment Agreement shall remain
in full force and effect.

         In witness whereof, the parties have executed this First Amendment to
the Employment Agreement as of the 18th of April, 2000.

MICROVISION, INC.                           EXECUTIVE

_____________________________               _____________________________

By: _________________________               By: _________________________

Its:_________________________

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>ex-10_3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

<PAGE>

                       FORM OF FIRST AMENDMENT TO THE
                   EMPLOYMENT AGREEMENT FOR RICHARD A. RAISIG

         This First Amendment to the Employment Agreement for Richard A. Raisig,
effective as of April 18, 2000, is by and between Microvision, Inc., a
Washington corporation (the "Company"), and Richard A. Raisig (the "Executive").

         WHEREAS, Executive serves as the Chief Financial Officer and Vice
President, Operations of the Company;

         WHEREAS, the Company and Executive entered into an Employment
Agreement, dated as of October 1, 1997, (the "Employment Agreement"); and

         WHEREAS, in consideration for Executive's continued services to the
Company, the Company desires to amend the Employment Agreement to extend the
term thereof;

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the parties agree as follows:

1.       The date set forth in Section 1.3 of the Employment Agreement shall be
changed to December 31, 2003.

2.       The annual salary amount set forth in Section 2.1 of the Employment
Agreement shall be changed to $170,000.

3.       The respective address for notice for each of the Company and Executive
set forth in Section 19 of the Employment Agreement shall be changed to 19910
North Creek Parkway, Bothell, Washington 98011-3008.

4.       All other terms and conditions of the Employment Agreement shall remain
in full force and effect.

         In witness whereof, the parties have executed this First Amendment to
the Employment Agreement as of the 18th of April, 2000.

MICROVISION, INC.                           EXECUTIVE

_____________________________               _____________________________

By: _________________________               By: _________________________

Its:_________________________

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>5
<FILENAME>ex-10_5.txt
<DESCRIPTION>EXHIBIT 10.5
<TEXT>

<PAGE>
                               MICROVISION, INC.

                            1996 STOCK OPTION PLAN,
                                  AS AMENDED


1.   PURPOSE. The purpose of the 1996 Stock Option Plan (the "Plan") is to
provide a means by which Microvision, Inc. (the "Company"), may attract,
reward, and retain the services or advice of current or future employees,
officers, directors, and agents of the Company and to provide added
incentives to them by encouraging stock ownership in the Company.

2.   ADMINISTRATION. This Plan shall be administered by the Board of
Directors of the Company (the "Board") or, if the Board shall authorize a
committee to administer this Plan, by such committee to the extent so
authorized; provided, however, that only the Board of Directors may suspend,
amend or terminate this Plan as provided in Section 13, and provided further
that a committee that includes officers of the Company shall not be permitted
to grant options to persons who are officers of the Company. The
administrator of this Plan is referred to as the "Plan Administrator."

     2.1 PROCEDURES. The Board of Directors shall designate one member of the
Plan Administrator as chairman. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum
exists, or acts approved in writing by all Plan Administrator members, shall
constitute valid acts of the Plan Administrator.

     2.2 POWERS Subject to the specific provisions of this Plan, the Plan
Administrator shall have the authority, in its discretion: (a) to grant the
stock options described in Section 5, including Incentive Stock Options and
Non-Qualified Stock Options, and to designate each option granted as an
Incentive Stock Option or a Non-Qualified Stock Option; (b) to determine, in
accordance with Section 5.1(f) of this Plan, the fair market value of the
shares of Common Stock subject to options; (c) to determine the exercise
price per share of options; (d) to determine the Optionees to whom, and the
time or times at which, options shall be granted and the number of shares of
Common Stock to be represented by each option; (e) to interpret this Plan;
(f) to prescribe, amend and rescind rules and regulations relating to this
Plan; (g) to determine the terms and provisions of each option granted (which
need not be identical) and, with the consent of the Optionee, modify or amend
each option; (h) to reduce the exercise price per share of outstanding and
unexercised options; (i) to defer, with the consent of the Optionee, or to
accelerate the exercise date of any option; (j) to waive or modify any term
or provision contained in any option applicable to the underlying shares of
Common Stock; (k) to authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an option previously
granted by the Plan Administrator; and (l) to make all other determinations
deemed necessary or advisable for the administration of this Plan. The
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan, any option issued hereunder or of any rule or
regulation promulgated in connection herewith and all

                                     -1-


<PAGE>

actions taken by the Plan Administrator shall be conclusive and binding on
all interested parties. The Plan Administrator may delegate administrative
functions to individuals who are officers or employees of the Company.

     2.3 LIMITED LIABILITY. No member of the Board of Directors or the Plan
Administrator or officer of the Company shall be liable for any action or
inaction of the entity or body, or another person or, except in circumstances
involving bad faith, of himself or herself. Subject only to compliance with
the explicit provisions hereof, the Board of Directors and Plan Administrator
may act in their absolute discretion in all matters related to the Plan.

     2.4 SECURITIES EXCHANGE ACT OF 1934. At any time that the Company has a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall be
administered in accordance with Rule 16b-3 adopted under the Exchange Act and
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations, proposed and final, thereunder, as all may be amended from time
to time, and each member of the Plan Administrator shall be a "disinterested
director" and an "outside director" with the meaning of such Rule 16b-3 and
Section 162(m), respectively.

3.   STOCK SUBJECT TO THIS PLAN. Subject to adjustment as provided below and
in Section 11 hereof, the stock subject to this Plan shall be the Company's
common stock (the "Common Stock"), and the total number of shares of Common
Stock to be delivered on the exercise of all options granted under this Plan
shall not exceed 5,500,000 shares, as such Common Stock was constituted on
the date on which this Plan was last amended by the Board as set forth on the
last page hereof. If any option granted under this Plan expires, is
surrendered, exchanged for another option, canceled or terminated for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for purposes of this Plan, including for
replacement options that may be granted in exchange for such surrendered,
canceled or terminated options. Shares issued on exercise of options granted
under this Plan may be subject to restrictions on transfer, repurchase rights
or other restrictions as determined by the Plan Administrator.

4.   ELIGIBILITY.

     4.1 OPTIONEES. The Plan Administrator may award options to any current
or future employee, officer or agent of the Company or its subsidiaries.
Non-employee directors of the Company shall not be eligible to participate in
the Plan. Any party to whom an option is granted under this Plan is referred
to as an "Optionee."

     4.2 SUBSIDIARIES. As used in this Plan, the term "subsidiary" of a
company shall include any corporation in which such company owns, directly or
indirectly, at the time of the grant of an option hereunder, stock having 50%
or more of the total combined voting power of all classes of stock thereof.

                                      -2-


<PAGE>

5.   AWARDS. The Plan Administrator, from time to time, may take the
following actions, separately or in combination, under this Plan: (a) grant
Incentive Stock Options, as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), to any employee of the Company or its
subsidiaries, as provided in Section 5.1 of this Plan; (b) grant options
other than Incentive Stock Options ("Non-Qualified Stock Options"), as
provided in Section 5.2 of this Plan; (c) grant options to officers,
employees and others in foreign jurisdictions, as provided in Section 7 of
this Plan; and (d) grant options in certain acquisition transactions, as
provided in Section 8 of this Plan. No employee may be granted options to
acquire more than 100,000 shares in any fiscal year of the Company.

     5.1 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be subject to
the following terms and conditions:

         (a) Incentive Stock Options may be granted under this Plan only to
employees of the Company or its subsidiaries, including employees who are
directors.

         (b) No employee may be granted Incentive Stock Options under this
Plan to the extent that the aggregate fair market value, on the date of
grant, of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by that employee during any calendar year,
under this Plan and under any other incentive stock option plan (within the
meaning of Section 422 of the Code) of the Company or any subsidiary, exceeds
$100,000. To the extent that any option designated as an Incentive Stock
Option exceeds the $100,000 limit, such option shall be treated as a
Non-Qualified Stock Option. In making this determination, options shall be
taken into account in the order in which they were granted, and the fair
market value of the shares of Common Stock shall be determined as of the time
that the option with respect to such shares was granted.

         (c) An Incentive Stock Option may be granted under this Plan to an
employee possessing more than 10% of the total combined voting power of all
classes of stock of the Company (as determined pursuant to the attribution
rules contained in Section 424(d) of the Code) only if the exercise price is
at least 110% of the fair market value of the Common Stock subject to the
option on the date the option is granted, as described in Section 5.1(f) of
this Plan, and only if the option by its terms is not exercisable after the
expiration of five years from the date it is granted.

         (d) Except as provided in Section 5.5 of this Plan, no Incentive
Stock Option granted under this Plan may be exercised unless at the time of
such exercise the Optionee is employed by the Company or any subsidiary of
the Company and the Optionee has been so employed continuously since the date
such option was granted.

         (e) Subject to Sections 5.1.(c) and 5.1.(d) of this Plan, Incentive
Stock Options granted under this Plan shall continue in effect for the period
fixed by the Plan Administrator, except that no Incentive Stock Option shall
be exercisable after ten years from the date it is granted.

                                      -3-


<PAGE>

         (f) The exercise price shall not be less than 100% of the fair
market value of the shares of Common Stock covered by the Incentive Stock
Option at the date the option is granted. The fair market value of shares
shall be the closing price per share of the Common Stock on the date of grant
as reported on a securities quotation system or stock exchange. If such
shares are not so reported or listed, the Plan Administrator shall determine
the fair market value of the shares of Common Stock in its discretion.

         (g) The provisions of clauses (b) and (c) of this Section shall not
apply if either the applicable sections of the Code or the regulations
thereunder are amended so as to change or eliminate such limitations or to
permit appropriate modifications of those requirements by the Plan
Administrator.

     5.2 NON-QUALIFIED STOCK OPTIONS.  Non-Qualified Stock Options shall be
subject to the following terms and conditions:

         (a) The exercise price may be more or less than or equal to the fair
market value of the shares of Common Stock covered by the Non-Qualified Stock
Option on the date the option is granted, and the exercise price may
fluctuate based on criteria determined by the Plan Administrator. The fair
market value of shares of Common Stock covered by a Non-Qualified Stock
Option shall be determined by the Plan Administrator, as described in Section
5.1(f).

         (b) Unless otherwise established by the Plan Administrator, any
Non-Qualified Stock Option shall terminate ten years after the date it is
granted.

     5.3 VESTING. To ensure that the Company will achieve the purposes of and
receive the benefits contemplated in this Plan, any option granted to any
Optionee hereunder shall be exercisable according to the vesting schedule, if
any, established by the Plan Administrator and set forth in the option grant
letter issued to each Optionee.

     5.4 NONTRANSFERABILITY. Options granted under this Plan and the rights
and privileges conferred hereby may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by the applicable laws of descent and distribution, shall not
be subject to execution, attachment or similar process, and shall be
exercisable during the Optionee's lifetime only by the Optionee. Any
purported transfer or assignment in violation of this provision shall be void.

     5.5 TERMINATION OF OPTIONS.

         (a) GENERALLY. Unless otherwise determined by the Plan Administrator
or specified in the Optionee's Option Agreement, if the Optionee's employment
or service with the Company terminates for any reason other than for cause,
resignation, retirement, disability or death, and unless

                                      -4-


<PAGE>

by its terms the option sooner terminates or expires, then the Optionee may
exercise, for a three-month period, that portion of the Optionee's option
that was exercisable at the time of such termination of employment or service
(provided the conditions of Section 6.4 and any other conditions specified in
the Option Agreement shall have been met by the date of exercise of such
option).

         (b) FOR CAUSE; RESIGNATION.

             (i)   If an Optionee is  terminated  for cause or resigns in
lieu of dismissal,  any option  granted hereunder shall be deemed to have
terminated as of the time of the first act that led or would have led to the
termination for cause or resignation in lieu of dismissal, and such Optionee
shall thereupon have no right to purchase any shares of Common Stock pursuant
to the exercise of such option, and any such exercise shall be null and void.
Termination for "cause" shall include (i) the violation by the Optionee of
any reasonable rule or policy of the Board of Directors or the Optionee's
superiors or the chief executive officer or the chief operating officer of
the Company that results in damage to the Company or which, after notice to
do so, the Optionee fails to correct within a reasonable time; (ii) any
willful misconduct or gross negligence by the Optionee in the
responsibilities assigned to him or her; (iii) any willful failure to perform
his or her job as required to meet the objectives of the Company; (iv) any
wrongful conduct of an Optionee that has an adverse impact on the Company or
that constitutes a misappropriation of the assets of the Company; (v)
unauthorized disclosure of confidential information; or (vi) the Optionee's
performing services for any other company or person that competes with the
Company while he or she is employed by or provides services to the Company,
without the written approval of the chief executive officer of the Company.
"Resignation in lieu of dismissal" shall mean a resignation by an Optionee of
employment with or service to the Company if (i) the Company has given prior
notice to such Optionee of its intent to dismiss the Optionee for
circumstances that constitute cause, or (ii) within two months of the
Optionee's resignation, the chief operating officer or the chief executive
officer of the Company or the Board of Directors determines, which
determination shall be final and binding, that such resignation was related
to an act that would have led to a termination for cause.

             (ii)  If an Optionee resigns from the Company, the right of the
Optionee to exercise his or her option shall be suspended for a period of two
months from the date of resignation, unless the chief executive officer of
the Company or the Board of Directors determines otherwise in writing.
Thereafter, unless there is a determination that the Optionee resigned in
lieu of dismissal, the option may be exercised at any time before the earlier
of (i) the expiration date of the option (which shall have been similarly
suspended) or (ii) the expiration of three months after the date of
resignation, for that portion of the Optionee's option that was exercisable
at the time of such resignation (provided the conditions of Section 6.4 and
any other conditions specified in the Option Agreement shall have been met at
the date of exercise of such option).

         (c) RETIREMENT. Unless otherwise determined by the Plan
Administrator, if an Optionee's employment or service with the Company is
terminated with the Company's approval for

                                      -5-


<PAGE>

reasons of age, the Option may be exercised at any time before the earlier of
(a) the expiration date of the option or (b) the expiration of three months
after the date of such termination of employment or service, for that portion
of the Optionee's option that was exercisable at the time of such termination
of employment or service (provided the conditions of Section 6.4 and any
other conditions specified in the Option Agreement shall have been met at the
date of exercise of such option).

         (d) DISABILITY. Unless otherwise determined by the Plan
Administrator, if an Optionee's employment or relationship with the Company
terminates because of a permanent and total disability (as defined in Section
22(e)(3) of the Code), the option may be exercised at any time before the
earlier of (a) the expiration date of the option or (b) the expiration of 12
months after the date of such termination, for up to the full number of
shares of Common Stock covered thereby, including any portion not yet vested
(provided the conditions of Section 6.4 and any other conditions specified in
the Option Agreement shall have been met by the date of exercise of such
option).

         (e) DEATH. Unless otherwise determined by the Plan Administrator, in
the event of the death of an Optionee while employed by or providing service
to the Company, the option may be exercised at any time before the earlier of
(a) the expiration date of the option or (b) the expiration of 12 months
after the date of death by the person or persons to whom such Optionee's
rights under the option shall pass by the Optionee's will or by the
applicable laws of descent and distribution, for up to the full number of
shares of Common Stock covered thereby, including any portion not yet vested
(provided the conditions of Section 6.4 and any other conditions specified in
the Option Agreement shall have been met by the date of exercise of such
option).

         (f) EXTENSION OF EXERCISE PERIOD APPLICABLE TO TERMINATION. The Plan
Administrator, at the time of grant or at any time thereafter, may extend the
one-month, three-month and 12-month exercise periods to any length of time
not longer than the original expiration date of the option, and may increase
the portion of an option that is exercisable, subject to such terms and
conditions as the Plan Administrator may determine; provided, that any
extension of the exercise period or other modification of an Incentive Stock
Option shall be subject to the written agreement and acknowledgment by the
Optionee that the extension or modification disqualifies the option as an
Incentive Stock Option.

         (g) FAILURE TO EXERCISE OPTION. To the extent that the option of any
deceased Optionee or of any Optionee whose employment or service terminates
is not exercised within the applicable period, all rights to purchase shares
of Common Stock pursuant to such options shall cease and terminate.

         (h) TRANSFERS; LEAVES. For purposes of this Section 5.5, a transfer
of employment or other relationship between or among the Company and/or any
subsidiaries shall not be deemed to constitute a termination of employment or
other cessation of relationship with the Company or any of its subsidiaries.
For purposes of this Section 5.5, with respect to Incentive Stock Options,

                                      -6-


<PAGE>

employment shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (as determined by the
Plan Administrator) in accordance with the policies of the Company.

6.   EXERCISE.

     6.1 PROCEDURE. Subject to the provisions of Section 5.3 above, each
option may be exercised in whole or in part; provided, however, that no fewer
than 100 shares (or the remaining shares then purchasable under the option,
if less than 100 shares) may be purchased on any exercise of any option
granted hereunder and that only whole shares will be issued pursuant to the
exercise of any option (the number of 100 shares shall not be changed by any
transaction or action described in Section 8 or Section 11 unless the Plan
Administrator determines that such a change is appropriate). Options shall be
exercised by delivery to the Secretary of the Company or his or her
designated agent of notice of the number of shares with respect to which the
option is exercised, together with payment in full of the exercise price and
any applicable withholding taxes.

     6.2 PAYMENT. Payment of the option exercise price shall be made in full
when the notice of exercise of the option is delivered to the Secretary of
the Company or his or her designated agent and shall be in cash or bank
certified or cashier's check or through irrevocable instructions to a stock
broker to deliver the amount of sales proceeds necessary to pay the
appropriate exercise price and withholding tax obligations, all in accordance
with applicable governmental regulations, for the shares of Common Stock
being purchased. The Plan Administrator may determine at the time the option
is granted for Incentive Stock Options, or at any time before exercise for
Non-Qualified Stock Options, that additional forms of payment will be
permitted.

     6.3 WITHHOLDING. Before the issuance of shares of Common Stock on the
exercise of an option, the Optionee shall pay to the Company the amount of
any applicable federal, state or local tax withholding obligations. The
Company may withhold any distribution in whole or in part until the Company
is so paid. The Company shall have the right to withhold such amount from any
other amounts due or to become due from the Company to the Optionee,
including salary (subject to applicable law) or to retain and withhold a
number of shares having a market value not less than the amount of such taxes
required to be withheld by the Company to reimburse it for any such taxes and
cancel (in whole or in part) any such shares so withheld.

     6.4 CONDITIONS PRECEDENT TO EXERCISE. The Plan Administrator may
establish conditions precedent to the exercise of any option, which shall be
described in the relevant Option Agreement.

7.   FOREIGN QUALIFIED GRANTS Options under this Plan may be granted to
officers and employees of the Company and other persons described in Section
4 who reside in foreign jurisdictions as the Plan Administrator may determine
from time to time. The Board of Directors may adopt supplements to the Plan
as needed to comply with the applicable laws of such foreign jurisdictions
and to give Optionees favorable treatment under such laws; provided, however,
that no award shall

                                      -7-


<PAGE>

be granted under any such supplement on terms more beneficial to such
Optionees than those permitted by this Plan.

8.   CORPORATE MERGERS, ACQUISITIONS, ETC. The Plan Administrator may also
grant options under this Plan having terms, conditions and provisions that
vary from those specified in this Plan provided that such options are granted
in substitution for, or in connection with the assumption of, existing
options granted, awarded or issued by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason
of a transaction involving a corporate merger, consolidation, acquisition of
property or stock, reorganization or liquidation to which the Company is a
party.

9.   HOLDING PERIOD. Unless otherwise determined by the Plan Administrator,
if a person subject to Section 16 of the Exchange Act exercises an option
within six months of the date of grant of the option, the shares of Common
Stock acquired on exercise of the option may not be sold until six months
after the date of grant of the option.

10.  OPTION AGREEMENTS. Options granted under this Plan shall be evidenced by
written stock option agreements (the "Option Agreements") that shall contain
such terms, conditions, limitations and restrictions as the Plan
Administrator shall deem advisable and that are consistent with this Plan.
All Option Agreements shall include or incorporate by reference the
applicable terms and conditions contained in this Plan.

11.  ADJUSTMENTS ON CHANGES IN CAPITALIZATION.

     11.1 STOCK SPLITS, CAPITAL STOCK ADJUSTMENTS. The aggregate number and
class of shares for which options may be granted under this Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share thereof (but not the total price), and each such option, shall all
be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock of the Company resulting from a stock split,
stock dividend or consolidation of shares or any like capital stock
adjustment.

     11.2 EFFECT OF MERGER, SALE OF ASSETS, LIQUIDATION OR DISSOLUTION.

          (a) MERGERS, SALE OF ASSETS, OTHER TRANSACTIONS. In the event of a
merger, consolidation or plan of exchange to which the Company is a party or
a sale of all or substantially all of the Company's assets (each, a
"Transaction"), the Board of Directors, in its sole discretion and to the
extent possible under the structure of the Transaction, shall select one of
the following alternatives for treating outstanding options under this Plan:

             (i)   Outstanding options shall remain in effect in accordance
with their terms;

                                      -8-


<PAGE>

             (ii)  Outstanding options shall be converted into options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities subject
thereto and exercise price of the converted options shall be determined by
the Board of Directors of the Company, taking into account the relative
values of the companies involved in the Transaction and the exchange rate, if
any, used in determining shares of the surviving corporation to be issued to
holders of shares of the Company. Unless otherwise determined by the Board of
Directors, the converted options shall be vested only to the extent that the
vesting requirements relating to options granted hereunder have been
satisfied;

             (iii) The Board of Directors provides a period before the
consummation of the Transaction during which outstanding options shall be
exercisable to the extent vested and, on the expiration of such period, all
unexercised options shall immediately terminate. The Board of Directors, in
its sole discretion, may accelerate the vesting of such options so that they
are exercisable in full during such period; or

             (iv)  The Board of Directors shall take such other action with
respect to outstanding options as the Board deems to be in the best interests
of the Company.

         (b)  LIQUIDATION; DISSOLUTION. If the Company is liquidated or
dissolved, options shall be treated in accordance with Section 11.2(a)(iii).

     11.3 FRACTIONAL SHARES. If the number of shares covered by any option is
adjusted, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.

     11.4 DETERMINATION OF BOARD TO BE FINAL All adjustments under this
Section 11 shall be made by the Board of Directors, and its determination as
to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. Unless an Optionee agrees otherwise, any change or
adjustment to an Incentive Stock Option shall be made, if possible, in such a
manner so as not to constitute a "modification," as defined in Section 424(h)
of the Code, and so as not to cause the Optionee's Incentive Stock Option to
fail to continue to qualify as an Incentive Stock Option.

12.  SECURITIES REGULATIONS.

     Shares of Common Stock shall not be issued with respect to an option
granted under this Plan unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, applicable laws of foreign
countries and other jurisdictions and the requirements of any quotation
service or stock exchange on which the shares may then be listed, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance, including the availability of an exemption from registration
for the issuance and sale of any shares hereunder. The inability of the
Company to obtain, from any regulatory body having jurisdiction,

                                      -9-


<PAGE>

the authority deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability with respect of the nonissuance or
sale of such shares as to which such requisite authority shall not have been
obtained.

     As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares of Common Stock are being purchased only for investment and without
any present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any relevant
provision of the aforementioned laws. The Company may place a stop-transfer
order against any shares of Common Stock on the official stock books and
records of the Company, and a legend may be stamped on stock certificates to
the effect that the shares of Common Stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided (concurred in
by counsel for the Company) stating that such transfer is not in violation of
any applicable law or regulation. The Plan Administrator may also require
such other action or agreement by the Optionees as may from time to time be
necessary to comply with the federal and state securities laws. THIS
PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE
OPTIONS OR STOCK THEREUNDER.

     If any of the Company's capital stock of the same class as the Common
Stock subject to options granted hereunder is listed on a national securities
exchange, all shares of Common Stock issued hereunder if not previously
listed on such exchange shall be authorized by that exchange for listing
thereon before the issuance thereof.

13.  AMENDMENT AND TERMINATION.

     13.1 PLAN. The Board of Directors may at any time suspend, amend or
terminate this Plan, provided that, except as set forth in Section 8, the
approval of the Company's shareholders is necessary within twelve months
before or after the adoption by the Board of Directors of any amendment that
will:

         (a) increase the number of shares of Common Stock to be reserved for
the issuance of options under this Plan;

         (b) permit the granting of stock options to a class of persons other
than those now permitted to receive stock options under this Plan; or

         (c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.

     13.2 OPTIONS. Subject to the requirements of Section 422 of the Code
with respect to Incentive Stock Options and to the terms and conditions and
within the limitations of this Plan, the

                                      -10-


<PAGE>

Plan Administrator may modify or amend outstanding options granted under this
Plan. The modification or amendment of an outstanding option shall not,
without the consent of the Optionee, impair or diminish any of his or her
rights or any of the obligations of the Company under such option. Except as
otherwise provided in this Plan, no outstanding option shall be terminated
without the consent of the Optionee. Unless the Optionee agrees otherwise,
any changes or adjustments made to outstanding Incentive Stock Options
granted under this Plan shall be made in such a manner so as not to
constitute a "modification," as defined in Section 425(h) of the Code, and so
as not to cause any Incentive Stock Option issued hereunder to fail to
continue to qualify as an Incentive Stock Option as defined in Section 422(b)
of the Code.

     13.3 AUTOMATIC TERMINATION. Unless sooner terminated by the Board of
Directors, this Plan shall terminate ten years from the date on which this
Plan is adopted by the Board. No option may be granted after such termination
or during any suspension of this Plan. The amendment or termination of this
Plan shall not, without the consent of the Optionee, alter or impair any
rights or obligations under any option theretofore granted under this Plan.

14.  MISCELLANEOUS.

     14.1 TIME OF GRANTING OPTIONS. The date of grant of an option shall, for
all purposes, be the date on which the Company completes the required
corporate action relating to the grant of an option; the execution of an
Option Agreement and the conditions to the exercise of an option shall not
defer the date of grant.

     14.2 NO STATUS AS SHAREHOLDER. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall
be, or have any of the rights or privileges of, a shareholder of the Company
with respect to any of the shares of Common Stock issuable on the exercise of
any option granted under this Plan unless and until such option has been
exercised and the issuance (as evidenced by the appropriate entry on the
books of the Company or duly authorized transfer agent of the Company) of the
stock certificate evidencing such shares.

     14.3 STATUS AS AN EMPLOYEE. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer on any Optionee any right to
continue in the employ of the Company, or to interfere in any way with the
right of the Company to terminate his or her employment or other relationship
with the Company at any time.

     14.4 RESERVATION OF SHARES. The Company, during the term of this Plan,
at all times will reserve and keep available such number of shares of Common
Stock as shall be sufficient to satisfy the requirements of this Plan.

15.  EFFECTIVENESS OF THIS PLAN. This Plan shall become effective on the date
on which it is adopted by the Board of Directors of the Company. No option
granted under this Plan to any officer

                                      -11-


<PAGE>

or director of the Company shall become exercisable until the Plan is
approved by the shareholders, and any option granted before such approval
shall be conditioned on and is subject to such approval.

                                      -12-


<PAGE>

Adopted by the Board of Directors on July 10, 1996, and approved by the
shareholders on August 9, 1996.

Amended by the Board of Directors on November 8, 1996.

Amended by the shareholders, pursuant to the recommendation of the Board of
Directors, on October 15, 1998.

Amended by the shareholders, pursuant to the recommendation of the Board of
Directors, on June 22, 2000.

                                     -13-


<PAGE>

                               MICROVISION, INC.

                            1996 STOCK OPTION PLAN,
                                  AS AMENDED


<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                            <C>
1.       Purpose..................................................................................................1

2.       Administration...........................................................................................1
2.1      Procedures
2.2      Powers
2.3      Limited Liability
2.4      Securities Exchange Act of 1934

3.       Stock Subject to This Plan...............................................................................2

4.       Eligibility..............................................................................................2
         4.1      Optionees
         4.2      Subsidiaries

5.       Awards...................................................................................................3
         5.1      Incentive Stock Options
         5.2      Non-Qualified Stock Options
         5.3      Vesting
         5.4      Nontransferability
         5.5      Termination of Options
                  (a)  Generally
                  (b)  For Cause; Resignation
                  (c)  Retirement
                  (d)  Disability
                  (e)  Death
                  (f)  Extension of Exercise Period Applicable to Termination
                  (g)  Failure to Exercise Option
                  (h)  Transfers; Leaves

6.       Exercise.................................................................................................7
         6.1      Procedure
         6.2      Payment
         6.3      Withholding
         6.4      Conditions Precedent to Exercise

7.       Foreign Qualified Grants.................................................................................8

                                      -i-


<PAGE>

<CAPTION>

8.       Corporate Mergers, Acquisitions, Etc.....................................................................8
9.       Holding Period...........................................................................................8

10.      Option Agreements

11.      Adjustments On Changes in Capitalization.................................................................8
         11.1     Stock Splits, Capital Stock Adjustments
         11.2     Effect of Merger, Sale of Assets, Liquidation or Dissolution
                  (a)  Mergers, Sale of Assets, Other Transactions
                  (b) Liquidation; Dissolution
         11.3     Fractional Shares
         11.4     Determination of Board to Be Final

12.      Securities Regulations...................................................................................9

13.      Amendment and Termination...............................................................................10
         13.1     Plan
         13.2     Option
         13.3     Automatic Termination

14.      Miscellaneous...........................................................................................11
         14.1     Time of Granting Options
         14.2     No Status as Shareholder
         14.3     Status as an Employee
         14.4     Reservation of Shares

15.      Effectiveness of This Plan..............................................................................12
</TABLE>

                                     -ii-



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>6
<FILENAME>ex-27_1.txt
<DESCRIPTION>EXHIBIT 27.1
<TEXT>

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF MICROVISION, INC. FOR THE SIX MONTH PERIOD
ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-END>                               JUN-30-2000
<CASH>                                      13,277,200
<SECURITIES>                                41,116,900
<RECEIVABLES>                                  964,800
<ALLOWANCES>                                  (78,000)
<INVENTORY>                                          0
<CURRENT-ASSETS>                            61,305,900
<PP&E>                                       5,630,500
<DEPRECIATION>                             (1,832,200)
<TOTAL-ASSETS>                              66,780,200
<CURRENT-LIABILITIES>                        3,659,700
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                   115,954,100
<OTHER-SE>                                (53,676,700)
<TOTAL-LIABILITY-AND-EQUITY>                66,780,200
<SALES>                                              0
<TOTAL-REVENUES>                             3,285,500
<CGS>                                                0
<TOTAL-COSTS>                                2,351,400
<OTHER-EXPENSES>                            14,109,300
<LOSS-PROVISION>                                18,000
<INTEREST-EXPENSE>                         (1,187,600)
<INCOME-PRETAX>                           (12,005,600)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                       (12,005,600)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                              (12,005,600)
<EPS-BASIC>                                     (1.09)
<EPS-DILUTED>                                   (1.09)


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
