UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

OR

[  ]  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.



|Delaware                                                       | 91-1600822                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

6222 185th Avenue NE
Redmond, Washington      98052

(425) 936-6847

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES    x NO     ̈



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer      ̈ | Accelerated filer    x | Non-accelerated filer     ̈ (Do not check if a smaller reporting company) | Smaller reporting company     ̈
|----------------------------- | ---------------------- | ------------------------------------------------------------------------ | ------------------------------

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Securities Exchange Act of 1934). YES     ̈ NO    x

As of October 31, 2008, 68,080,000 shares of the Company's common stock, $0.001 par value, were outstanding.






|                                                                                                                          | Page
|------------------------------------------------------------------------------------------------------------------------- | ----
|Part I: Financial Information                                                                                             |     
|Item 1.  Financial Statements:                                                                                            |     
|                                                                                                                          |     
|Consolidated Balance Sheets as of  September 30, 2008 and
December 31, 2007 (unaudited)                                   | 3   
|Consolidated Statements of Operations for the three and nine
months ended September 30, 2008 and 2007 (unaudited)         | 4   
|Consolidated Statements of Comprehensive Loss
for the three and nine months ended September 30, 2008 and 2007 (unaudited) | 5   
|Consolidated Statements of Cash Flows for the nine
months ended September 30, 2008 and 2007 (unaudited)                   | 6   
|Notes to Consolidated Financial Statements
(unaudited)                                                                    | 8   
|                                                                                                                          |     
|Item 2.  Management's Discussion and Analysis of Financial
Condition and Results of Operations                            | 14  
|Item 3.  Quantitative and Qualitative Disclosures About Market
Risk                                                       | 20  
|Item 4.  Controls and Procedures                                                                                          | 21  
|                                                                                                                          |     
|Part II: Other Information                                                                                                |     
|Item 1A. Risk Factors                                                                                                     | 21  
|Item 6.  Exhibits                                                                                                         | 28  
|Signatures                                                                                                                | 29  
|Exhibit Index                                                                                                             | 30  







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Microvision, Inc.

                    Consolidated Balance Sheet

                  (In thousands, except per share data)

                            (Unaudited)

`September 30,   December 31,
                                                                                       2008           2007
                                                                                   -------------  -------------
Assets                                                                                                         
Current assets
   Cash and cash equivalents                                                      $      30,991  $      13,399
   Investment securities, available-for-sale                                              6,222         22,411
   Accounts receivable, net of allowances of $73 and $123                                   169          1,885
   Costs and estimated earnings in excess of billings on uncompleted contracts                9            443
   Inventory                                                                              1,806            761
   Other current assets                                                                     996          1,180
                                                                                   -------------  -------------
   Total current assets                                                                  40,193         40,079

Property and equipment, net                                                               3,581          4,047
Restricted investments                                                                    1,475          1,125
Other assets                                                                                 48             47
                                                                                   -------------  -------------
   Total assets                                                                   $      45,297  $      45,298
                                                                                   =============  =============
                                                                                                               
Liabilities and Shareholders' Equity                                                                           
Current liabilities
   Accounts payable                                                               $       2,409  $       2,146
   Accrued liabilities                                                                    3,442          4,154
   Billings in excess of costs and estimated earnings on uncompleted contracts               71            970
   Liability associated with common stock warrants                                          524          2,657
   Current portion of capital lease obligations                                              41             44
   Current portion of long-term debt                                                         69             65
                                                                                   -------------  -------------
   Total current liabilities                                                              6,556         10,036
Capital lease obligations, net of current portion                                            54             88
Long-term debt, net of current portion                                                      340            393
Deferred rent, net of current portion                                                     1,487          1,720
                                                                                   -------------  -------------
   Total liabilities                                                                      8,437         12,237
                                                                                   -------------  -------------
Commitments and contingencies

Shareholders' equity
   Common stock, par value $.001; 125,000 shares authorized;
      68,044 and 56,730 shares issued and outstanding                                        68             57
   Additional paid-in capital                                                           318,983        292,374
   Accumulated other comprehensive income (loss)                                            (23)            51
   Accumulated deficit                                                                 (282,168)      (259,421)
                                                                                   -------------  -------------
   Total shareholders' equity                                                            36,860         33,061
                                                                                   -------------  -------------
   Total liabilities and shareholders' equity                                     $      45,297  $      45,298
                                                                                   =============  =============`

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

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Microvision, Inc.

                     Consolidated Statement of Operations

                  (In thousands, except per share data)

                            (Unaudited)

`Three Months Ended       Nine Months Ended
                                                                                   September 30,           September 30,
                                                                             ----------------------  ----------------------
                                                                                2008        2007        2008        2007
                                                                             ----------  ----------  ----------  ----------
Contract revenue                                                            $      480  $    2,301  $    3,767  $    6,422
Product revenue                                                                    414         298       1,319       1,074
                                                                             ----------  ----------  ----------  ----------
    Total revenue                                                                  894       2,599       5,086       7,496
                                                                             ----------  ----------  ----------  ----------
Cost of contract revenue                                                           253       1,349       1,389       3,576
Cost of product revenue                                                            356         404       1,224       1,134
                                                                             ----------  ----------  ----------  ----------
    Total cost of revenue                                                          609       1,753       2,613       4,710
                                                                             ----------  ----------  ----------  ----------
Gross margin                                                                       285         846       2,473       2,786
                                                                             ----------  ----------  ----------  ----------


Research and development expense                                                 5,804       3,694      16,111      10,247
Sales, marketing, general and administrative expense                             3,456       3,691      11,694      11,328
                                                                             ----------  ----------  ----------  ----------
    Total operating expenses                                                     9,260       7,385      27,805      21,575
                                                                             ----------  ----------  ----------  ----------
Loss from operations                                                            (8,975)     (6,539)    (25,332)    (18,789)
Interest income                                                                    271         526         962         860
Interest expense                                                                   (11)        (14)        (36)       (499)
Impairment of investment securities, available-for-sale                           (300)         --        (300)         --
Gain (loss) on derivative instruments, net                                         585         883       2,004      (1,709)
Other expense                                                                      (13)         (8)        (45)        (25)
                                                                             ----------  ----------  ----------  ----------
Net loss before Lumera transactions                                             (8,443)     (5,152)    (22,747)    (20,162)

Gain on sale of investment in Lumera                                                --         434          --       6,397
                                                                             ----------  ----------  ----------  ----------
Net loss                                                                    $   (8,443) $   (4,718) $  (22,747) $  (13,765)
                                                                             ==========  ==========  ==========  ==========

Net loss per share - basic and diluted                                      $    (0.13) $    (0.08) $    (0.38) $    (0.29)
                                                                             ==========  ==========  ==========  ==========

Weighted-average shares outstanding - basic and diluted                         64,879      56,236      59,483      47,683
                                                                             ==========  ==========  ==========  ==========`

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

---



Microvision, Inc.

                     Consolidated Statement of Comprehensive Income (Loss)

                             (In thousands)

                            (Unaudited)

`Three Months Ended       Nine Months Ended
                                                                                   September 30,           September 30,
                                                                             ----------------------  ----------------------
                                                                                2008        2007        2008        2007
                                                                             ----------  ----------  ----------  ----------
Net loss                                                                    $   (8,443) $   (4,718) $  (22,747) $  (13,765)
                                                                             ----------  ----------  ----------  ----------
Other comprehensive gain (loss)
Unrealized gain (loss) on investment securities, available-for-sale                (35)        (65)        (74)     (1,943)
Less: reclassification adjustment for gains realized in net income                  --        (434)         --      (6,397)
                                                                             ----------  ----------  ----------  ----------
Net unrealized loss                                                                (35)       (499)        (74)     (8,340)
                                                                             ----------  ----------  ----------  ----------
Comprehensive loss                                                          $   (8,478) $   (5,217) $  (22,821) $  (22,105)
                                                                             ==========  ==========  ==========  ==========`

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

---



Microvision, Inc.

                    Consolidated Statement of Cash Flows

                           (In thousands)

                            (Unaudited)

`Nine Months Ended
                                                                                               September 30,
                                                                                        ----------------------
                                                                                           2008        2007
                                                                                        ----------  ----------
Cash flows from operating activities                                                                          
    Net loss                                                                           $  (22,747) $  (13,765)
    Adjustments to reconcile net loss to net cash used in operations:
        Depreciation                                                                          746         653
        Non-cash stock-based compensation expense                                           2,150       1,327
        Non-cash interest expense                                                              --         371
        Loss(gain) on derivative instruments                                               (2,004)      1,710
        Impairment of long-term investment securities                                         300          --
        Allowance for receivables from related parties                                       (240)         23
        Gain on sale of investment in Lumera                                                   --      (6,397)
        Net accretion of discount on short-term investments                                   (99)         --
        Non-cash deferred rent                                                               (206)       (207)
        Change in:
            Accounts receivable, net                                                        1,716         324
            Costs and estimated earnings in excess of billings on uncompleted contracts       434        (696)
            Inventory                                                                      (1,045)         19
            Other current assets                                                               55         391
            Other assets                                                                       (1)         (8)
            Accounts payable                                                                  298         243
            Accrued liabilities                                                              (754)       (683)
            Billings in excess of costs and estimated earnings on uncompleted contracts      (899)        109
                                                                                        ----------  ----------
            Net cash used in operating activities                                         (22,296)    (16,586)
                                                                                        ----------  ----------
Cash flows from investing activities                                                                          
    Sales of investment securities                                                         16,900          --
    Purchases of investment securities                                                       (986)    (21,590)
    Sales of restricted investment securities                                                  --       1,000
    Purchases of restricted investment securities                                            (350)     (1,061)
    Collections of receivables from related parties                                           240         227
    Sale of long-term investment - Lumera                                                      --       8,348
    Purchases of property and equipment                                                      (320)       (849)
                                                                                        ----------  ----------
            Net cash provided by (used in) investing activities                            15,484     (13,925)
                                                                                        ----------  ----------
Cash flows from financing activities                                                                          
    Principal payments under capital leases                                                   (32)        (34)
    Principal payments under long-term debt                                                   (49)        (44)
    Payments on notes payable                                                                  --      (1,400)
    Net proceeds from issuance of common stock and warrants                                24,485      35,921
                                                                                        ----------  ----------
            Net cash provided by financing activities                                      24,404      34,443
                                                                                        ----------  ----------
Net increase in cash and cash equivalents                                                  17,592       3,932
Cash and cash equivalents at beginning of period                                           13,399      14,552
                                                                                        ----------  ----------
Cash and cash equivalents at end of period                                             $   30,991  $   18,484
                                                                                        ==========  ==========
Supplemental disclosure of cash flow information                                                              
    Cash paid for interest                                                             $       36  $       77
                                                                                        ==========  ==========
Supplemental schedule of non-cash investing and financing activities                                          
    Other non-cash additions to property and equipment                                 $       11  $       32
                                                                                        ==========  ==========

    Issuance of common stock for payment of principal and interest
      on senior secured exchangeable convertible notes                                 $       --  $    1,388
                                                                                        ==========  ==========`

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

---



MICROVISION, INC.
                  Notes to Consolidated Financial Statements
                  September 30, 2008
                  (Unaudited)

1.  MANAGEMENT'S STATEMENT AND PRINCIPLES OF CONSOLIDATION

Management's Statement

The Consolidated Balance Sheet as of September 30, 2008, the Consolidated
Statements of Operations and Comprehensive Loss for the three and nine months
ended September 30, 2008 and 2007 and the Consolidated Statements of Cash Flows
for the nine months ended September 30, 2008 and 2007 have been prepared by
Microvision, Inc. (the "Company" or "Microvision") and have
not been audited.  In the opinion of management, all adjustments necessary to
state fairly the financial position at September 30, 2008 and the results of
operations, comprehensive loss and cash flows for all periods presented have
been made and consist of normal recurring adjustments.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules of the SEC.  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, 2007.  The results of operations for the nine months ended
September 30, 2008 are not necessarily indicative of the operating results that
may be attained for the entire fiscal year.

At September 30, 2008, Microvision had $37.2 million in cash, cash
equivalents, and investment securities, available-for-sale.  Based on its
current operating plan, the Company believes that it has sufficient cash to fund
operations until late 2009.  Microvision will require additional cash to fund
its operating plan past that time. There can be no assurance that additional
cash will be available or that, if available, it will be available on terms
acceptable to Microvision on a timely basis.  If adequate funds are not
available to satisfy either short-term or long-term capital requirements,
Microvision will be required to limit its operations substantially.  This
limitation of operations may include reductions in staff, operating costs and
capital expenditures.

2.  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 reporting periods.  Diluted net
loss per share is calculated on the basis of the weighted-average number of
common shares outstanding and taking into account the dilutive effect of all
potential common stock equivalents outstanding.  Potentially dilutive common
stock equivalents primarily consist of warrants and employee stock options.
Diluted net loss per share for the three and nine months ended September 30,
2008 and 2007 is equal to basic net loss per share because the effect of all
potential common stock outstanding during the periods, including convertible
debt, convertible preferred stock, options and warrants is anti-dilutive.  The
components of basic and diluted net loss per share were as follows (in
thousands, except loss per share data):

`Three Months Ended           Nine Months Ended
                                                                                  September 30,              September 30,
                                                                          --------------------------  --------------------------
                                                                              2008          2007          2008          2007
                                                                          ------------  ------------  ------------  ------------
Numerator:
Net loss available for common shareholders - basic and diluted           $     (8,443) $     (4,718) $    (22,747) $    (13,765)
                                                                          ============  ============  ============  ============

Denominator:
Weighted-average common shares outstanding - basic and diluted                 64,879        56,236        59,483        47,683
                                                                          ============  ============  ============  ============

Net loss per share - basic and diluted                                   $      (0.13) $      (0.08) $      (0.38) $      (0.29)
                                                                          ============  ============  ============  ============`

On September 30, 2008 and 2007, the Company excluded the following
convertible securities from diluted net loss per share as the effect of
including them would have been anti-dilutive: options and private warrants
convertible into a total of 16,464,000 and 9,442,000 shares of common stock and
125,000 and 0 shares of nonvested equity shares, respectively.

3.  INVESTMENT SECURITIES, AVAILABLE-FOR-SALE AND FAIR VALUE MEASUREMENTS

The Company accounts for investment securities in accordance with the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities ("FAS 115") and
Statement of Financial Accounting Standards No. 157, Fair Value Measurements
("FAS 157").  FAS 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values and
for investments in debt securities.  FAS 157 establishes a valuation framework
which defines fair value, provides guidance regarding the methods used for
measuring fair value, and expands disclosures about fair value measurements.

The Company's investment securities are comprised of commercial paper, U.S.
government and Agency securities, corporate bonds and auction-rate securities
("ARS").  The Company has classified its entire investment portfolio
as available-for-sale.  Available-for-sale securities are classified as current
assets or non-current assets on the Consolidated Balance Sheet and are stated at
fair value with unrealized gains and losses included in the Consolidated
Statement of Comprehensive Loss.  Dividend and interest income are recognized
when earned; realized gains and losses and other-than-temporary impairments are
recognized in the period incurred and are included separately in the
Consolidated Statement of Operations.  The cost of securities sold is based on
the specific identification method.

In September 2006, the FASB issued FAS 157.  FAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods of those fiscal years.  The Company adopted FAS 157
effective January 1, 2008.  The adoption of FAS 157 for financial assets and
liabilities did not have a material impact on the Company's consolidated
financial position, consolidated results of operations or consolidated cash
flows.

FAS 157 defines fair value as the exchange price (an exit price) that would
be received for an asset or paid to transfer a liability in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date.  FAS 157 also establishes a
three level fair value inputs hierarchy and requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.  The entity must also utilize market data and assumptions
it believes market participants would use in measuring the fair value of the
asset or liability, including assumptions about risks, the risks inherent in the
inputs and the valuation techniques.  The hierarchy is shown below:

Level 1 - Observable inputs such as quoted prices in active markets for
identical assets or liabilities,

Level 2 - Observable inputs, other than Level 1 prices, such as quoted prices
for similar assets or liabilities, quoted prices in markets that are not
sufficiently active to qualify as level 1, other observable inputs, or inputs
that can be corroborated by observable market data for substantially the full
term of the assets or liabilities.

Level 3 - Unobservable inputs in which there is little or no market data,
which requires the company to develop its own assumptions which are significant
to the measurement of the fair values of the assets or liabilities.

The Company utilizes valuations reported by outside valuation services for
its debt securities when available.  The valuations are reviewed for
reasonableness before being accepted for financial reporting.  The Company has
reviewed the inputs and methodologies used by the services as a basis for its
accounting and disclosures in accordance with FAS 157.

The principal markets for the debt securities are dealer markets which have a
high level of price transparency.  The market participants for debt securities
are typically large money center banks and regional banks, brokers, dealers,
pension funds, and companies with debt investment portfolios.

Prior to June 30, 2008, the Company used the market approach to measure fair
values of its investments in all debt and equity securities and the income
approach for derivatives.  Under the market approach, prices and other relevant
information generated by market transactions involving identical or comparable
assets or liabilities are used to estimate values.  Under the income approach,
valuation techniques to convert future amounts to a single present amount are
used.  Due to continuing low liquidity and high variability of valuations and
inputs in the market for student loan ARS ("SLARS") during the quarter
ended June 30, 2008, the Company determined the market did not have sufficient
market participant activity to continue supporting the market approach to value
its SLARS and changed from the market approach to using the income approach.

At September 30, 2008, the Company's marketable securities portfolio included
$3.0 million par value AAA rated SLARS.  The SLARS are long-term variable rate
bonds tied to short-term interest rates issued to fund government guaranteed
student loans.  Purchases, sales and interest rate resets for the Company's
SLARS are completed via a Dutch Auction process conducted every twenty-eight
days.  If insufficient clearing bids are submitted during the auction, the
auction has failed and the interest rates are reset to the "maximum
rates" , instead of "auction rates", according to the specific
provisions of each of the SLARS.  In addition, the Company would continue
holding the SLARS until a subsequent successful auction or until sales are
completed on a secondary market.

As of December 31, 2007, the Company held $8.8 million aggregate par value of
ARS, $5.8 million in municipal ARS and $3.0 million in SLARS.  The $5.8 million
in municipal ARS was sold at par value during the period from February through
May 2008.

Since February, 2008, the auctions of the Company's SLARS have failed,
resulting in the SLARS being illiquid through the normal auction process during
this period. At the time of the Company's initial investment and through the
filing date of this report, the SLARS held by the Company have maintained the
following credit factors:

- AAA rated,
- guaranteed by the Federal Family Education Loan Program ("FFELP")
and other federal and state student loan guarantee programs,
- collateralized by the student loans funded with the SLARS proceeds and
collections thereon,
- no declines in the credit ratings of the issuers; and,
- no material changes in loan collection rates.

Half of the Company's SLARS are insured by AMBAC, which has been AAA rated
from the time the SLARS were purchased, through the filing date of this report.

Based on the length of the historical duration of failed SLARS auctions and
significant uncertainty of the prospective duration of lack of liquidity in the
SLARS market, the Company determined that the estimated fair value of the SLARS
no longer approximated par value and the impairments were other-than-temporary.
The Company used a discounted cash flow model, with rates adjusted for
liquidity, to determine the estimated fair values of the SLARS as of September
30, 2008.  The Company recorded an "impairment of investment securities,
available-for-sale" of $300,000 for the period ended September 30, 2008 on
the Consolidated Statement of Operations.  Based on utilizing a discounted cash
flow model with sufficiently significant unobservable input estimates, the
Company reclassified the SLARS from Level 2 to Level 3 of the FAS 157 fair value
hierarchy during the period ended September 30, 2008. The following table
summarizes the activity for those financial assets where fair value measurements
are estimated utilizing Level 3 inputs:

`SLARS
                                                                                      ------------                                          
          Balance, December 31, 2007 and June 30, 2008                               $         --
          Transfer from Level 2 to Level 3, period ended September 30, 2008             3,000,000
          Realized loss included in earnings, period ended September 30, 2008            (300,000)
                                                                                      ------------
          Balance, September 30, 2008                                                   2,700,000
                                                                                      ============`

Assets and liabilities measured at fair value on a recurring basis in
accordance with FAS 157 are summarized below:

`Level 1       Level 2       Level 3        Total
                                               ------------  ------------  ------------  ------------
Assets
    Equity securities                         $     16,000  $         --  $         --  $     16,000
    U.S. government and agency securities        3,506,000            --            --     3,506,000
    Auction-rate securities                             --            --     2,700,000     2,700,000
                                               ------------  ------------  ------------  ------------
                                              $  3,522,000  $         --  $  2,700,000  $  6,222,000
                                               ============  ============  ============  ============
Liabilities
    Liability associated with
        common stock warrants                               $    524,000                $    524,000
                                                             ============                ============`

The Company's investments in U.S. government and agency securities and equity
securities are classified within Level 1 of the fair value hierarchy because
they are valued using quoted market prices in active markets with sufficient
observability by market participants.  The liability associated with common
stock warrants is classified within Level 2 of the fair value hierarchy because
it is valued using the Black-Scholes option valuation method with inputs with
sufficient levels of observability to market participants.  Financial assets and
liabilities are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement.  The Company's investments in
SLARS are classified within Level 3 of the fair value hierarchy because a
discounted cash flow model with sufficiently significant unobservable input
estimates is used to estimate fair values.

The Company's investments, warrants and liability associated with common
stock warrants are summarized below as of September 30, 2008 and December 31,
2007:

`Cost/       Gross       Gross
                                            Amortized   Unrealized  Unrealized   Estimated
                                              Cost        Gains       Losses    Fair Value
                                           -----------  ----------  ----------  ----------- 
As of September 30, 2008:
  Assets
    Equity securities                          43,000          --     (27,000)      16,000
    U.S. government and agency securities   3,502,000       4,000          --    3,506,000
    Auction-rate securities                 2,700,000          --          --    2,700,000
    Warrants                                       --          --          --           --
                                           -----------  ----------  ----------  -----------
                                          $ 6,245,000  $    4,000  $  (27,000) $ 6,222,000
                                           ===========  ==========  ==========  ===========
  Liabilities
    Liability associated with
       common stock warrants                                                   $   524,000
                                                                                ===========


                                              Cost/       Gross       Gross
                                            Amortized   Unrealized  Unrealized   Estimated
                                              Cost        Gains       Losses    Fair Value
                                           -----------  ----------  ----------  ----------- 
As of December 31, 2007:
  Assets
    Corporate bonds and equity securities   9,074,000      54,000      (5,000)   9,123,000
    U.S. government and agency securities   4,486,000       3,000      (1,000)   4,488,000
    Auction-rate securities                 8,800,000          --          --    8,800,000
    Warrants                                       --          --          --      130,000
                                           -----------  ----------  ----------  -----------
                                          $22,360,000  $   57,000  $   (6,000) $22,541,000
                                           ===========  ==========  ==========  ===========
  Liabilities
    Liability associated with
        common stock warrants                                                  $ 2,657,000
                                                                                ===========`

Changes in the fair values of the warrants and the liability associated with
common stock warrants are realized in the period of remeasurement and recorded
in Gain (loss) on derivative instruments, net in the Consolidated Statement of
Operations.

As of September 30, 2008, the unrealized gains on the Company's investments
in U.S. government and agency securities were due primarily to decreases in
prevailing interest rates and credit market conditions.

The realized gains and losses associated with the liability associated with
common stock warrants were primarily due to changes in the Microvision stock
price and decreasing terms to expiration.

4.  INVENTORY

Inventory at September 30, 2008 and December 31, 2007 consisted of the
following:

`September 30,  December 31,
                                                                              2008          2007
                                                                          ------------  ------------                            
Raw materials                                                            $    483,000  $    122,000
Work-in-process                                                                    --        10,000
Finished goods                                                              1,323,000       629,000
                                                                          ------------  ------------
                                                                         $  1,806,000  $    761,000
                                                                          ============  ============`

The inventory at September 30, 2008 and December 31, 2007 consisted of raw
materials, work-in-process, and finished goods for ROV, the Company's hand-held
bar code scanner.  Inventory is stated at the lower of cost or market, with cost
determined on a weighted-average basis.  Management periodically assesses the
need to provide for obsolescence of inventory and adjusts the carrying value of
inventory to its net realizable value when required.  In addition, Microvision
reduces the value of its inventory to its estimated scrap value when management
determines that it is not probable that the inventory will be consumed through
normal production during the next twelve months.

5.  SHARE-BASED COMPENSATION

The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Statement of Financial Accounting Standards
No. 123, as revised December 2004 ("FAS 123(R)"). The Company accounts for
equity instruments issued to non-employees in accordance with the provisions of
Emerging Issues Task Force Issue No. 96-18 and FAS No. 123. The following table
shows the amount of stock-based employee compensation expense included in the
Consolidated Statement of Operations:

`Three Months Ended            Nine Months Ended
                                                                                 September 30,               September 30,
                                                                          --------------------------  --------------------------
                                                                              2008          2007          2008          2007
                                                                          ------------  ------------  ------------  ------------
Cost of contract revenue                                                 $      7,000  $     38,000  $     71,000  $    100,000
Cost of product revenue                                                         4,000        10,000        16,000        18,000
Research and development expense                                              167,000        96,000       614,000       244,000
Sales, marketing, general and administrative expense                          355,000       407,000     1,435,000       885,000
                                                                          ------------  ------------  ------------  ------------
Share-based employee compensation cost charged against income            $    533,000  $    551,000  $  2,136,000  $  1,247,000
                                                                          ============  ============  ============  ============`

Options Activity and Positions

The following table summarizes shares, weighted average exercise price,
weighted average remaining contractual term and aggregate intrinsic value of
options outstanding and options exercisable as of September 30, 2008:

`Weighted
                                                                  Average
                                                      Weighted   Remaining
                                                       Average  Contractual   Aggregate
                                                      Exercise      Term      Intrinsic
Options                                  Shares         Price     (years)       Value
---------------------------------------- -----------  --------- ------------  ----------
Outstanding as of September 30, 2008      6,954,000  $    4.01          7.6  $   72,000

Exercisable as of September 30, 2008      3,132,000  $    5.14          6.4  $   47,000`

As of September 30, 2008, the Company's unamortized share-based compensation
was $5,190,000.  The Company plans to amortize this share-based compensation
cost over the next 2.6 years.

As of September 30, 2008, the Company's unamortized nonvested equity share-
based compensation was $197,000.  The Company plans to amortize this nonvested
equity share-based compensation cost over the next 2.5 years.

6.  LONG-TERM NOTES

Tenant Improvement Loan Agreement

In February 2006, the Company entered into a loan agreement with the lessor
of the Company's corporate headquarters to finance $536,000 in tenant
improvements.  The loan carries a fixed interest rate of 9% per annum, is
repayable over the initial term of the lease, which expires in 2013, and is
secured by a letter of credit.  The balance of the loan, including interest
added to principal, was $409,000 at September 30, 2008.

7.  COMMON STOCK

In July 2008, the Company raised approximately $26.0 million, before issuance
costs of approximately $1.9 million, from the sale of 11,172,000 shares of
common stock and warrants to purchase 6,703,000 shares of its common stock. The
warrants have an exercise price of $3.60 per share, a five year term, and are
not exercisable for one year from the date of issuance. The Company can call the
warrants after one year from the date of issuance if the average closing bid
price of its stock is over $7.20 (200% of exercise price) for any 20 consecutive
trading days.

8.  RECEIVABLES FROM RELATED PARTIES

In 2000, 2001 and 2002, the Board of Directors authorized the Company to
provide unsecured lines of credit to each of the Company's three officers.  The
lines of credit carry interest rates of 5.4% to 6.2% and were due within one
year of the officer's termination.

In January 2006, two officers with outstanding loans left the Company and
their loans became due in January 2007.  In May 2007, the Company foreclosed on
50,000 shares of Lumera common stock pledged as collateral for one of the
officer's loans and sold the shares for net proceeds of $227,000.  A third
officer with outstanding loans left the Company in August 2007 and his loans
became due in August 2008.

Under the terms of a settlement agreement with one of the former officers who
left in January 2006, the Company received payments of $240,000 in September
2008 and $1,000 subsequent to September 30, 2008.  The Company is pursuing
collection of the remaining outstanding balances from the other former officers.
As of September 30, 2008 and December 31, 2007, the total amount outstanding
under the lines of credit was $1,852,000 and $2,496,000, respectfully, and the
balances were fully reserved.

9.  COMMITMENTS AND CONTINGENCIES

Litigation

The Company has sued its former CEO and President Richard Rutkowski and
his spouse to collect $1,733,000 in outstanding loans from the Company that were
due in January 2007 and remain unpaid. Counterclaims were filed by Mr. Rutkowski
and his spouse, seeking to recover damages in an amount in excess of
$15,000,000. The Company believes these claims are without merit and intends to
defend them vigorously. However, an adverse outcome could have a material
adverse affect on its financial condition.

The Company is subject to other various claims and pending or threatened
lawsuits in the normal course of business. The Company is not currently party to
any such other legal proceedings that management believes would have a material
adverse effect on the Company's financial position, results of operations or
cash flows.

10.  NEW ACCOUNTING PRONOUNCEMENTS

In October 2008, the FASB released a FASB Staff Position, FSP FAS 157-3—Determining
the Fair Value of a Financial Asset When The Market for That Asset
Is Not Active, to clarify the application of the provisions of FAS 157 in an
inactive market and how an entity would determine fair value in an inactive
market.  FSP FAS 157-3 was effective upon issuance, including prior periods for
which financial statements had not been issued. The implementation of this
standard did not have a material impact on the Company's consolidated financial
position and results of operations.

In February 2008, the FASB released a FASB Staff Position, FSP FAS 157-2-
Effective Date of FASB Statement No. 157, which delays the effective date of FAS
157 for all nonfinancial assets and liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually) to fiscal years beginning after November 15, 2008.
The Company is currently assessing the financial impact of FSP FAS 157-2 on its
financial statements.

In June 2007, the Emerging Issues Task Force (EITF) reached a final consensus
on EITF Issue No. 07-1, Accounting for Collaborative Arrangements (EITF 07-1).
EITF 07-1 discusses how to determine whether an arrangement constitutes a
collaborative arrangement, how costs incurred and revenue generated on sales to
third parties should be reported by the participants, how an entity should
characterize payments made between participants and what participants should
disclose in the notes to the financial statements about a collaborative
arrangement. EITF 07-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008 and interim periods within those fiscal
years. The Company is currently assessing the financial impact of EITF 07-1 on
its financial statements.

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 27A of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 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
Microvision, as well as assumptions relating to the foregoing.  The words
"anticipate," "believe," "estimate,"
"expect," "goal," "may," "plan,"
"project," "will," and similar expressions identify forward-
looking statements, which speak only as of the date the statement was made.
Factors that could cause actual results to differ materially from those
projected in our forward-looking statements include the following: our ability
to obtain financing; market acceptance of our technologies and products; our
financial and technical resources relative to those of our competitors; our
ability to keep up with rapid technological change; government regulation of our
technologies; our ability to enforce our intellectual property rights and
protect our proprietary technologies; the ability to obtain additional contract
awards and to develop partnership opportunities; the timing of commercial
product launches; the ability to achieve key technical milestones in key
products; and other risk factors identified in this report under the caption
"Item 1A - Risk Factors."

Overview

We are developing compact, low power, high-resolution displays and imaging
systems based on silicon micro-mirror technology. Our technology has potential
applications for a broad range of consumer, automotive, medical, industrial, and
military products.  Our proprietary technology platform combines bi-axial Micro-
Electrical Mechanical system ("MEMS") light scanning technologies,
lasers, optics, electronics, with our system controls expertise to produce
compact display or imaging solutions that we anticipate will lead to
introduction of new applications and products in the consumer and automotive
markets.  Historically, we have entered into development agreements with
commercial and U.S. government customers to develop advanced prototype and
demonstration units based on our light scanning technologies.

Our strategy is to design, develop and supply a proprietary display
engine called PicoPTM, relying primarily on original equipment
manufacturers (OEMs) to commercialize products based on our PicoP engine.  The
PicoP display engine is an ultra-miniature video projector capable of producing
large, color rich, high resolution images, but it is also small and low power
enough to be embedded directly into mobile devices, such as cell phones.  We are
also marketing PicoP-based miniature projection engines to OEMs to be embedded
into a variety of consumer products.  The primary goal for consumer display
applications is to provide mobile device users with a large screen, high
resolution viewing experience from their mobile devices.

We are currently developing a small accessory projector that would be the
first commercial product based on our PicoP display engine. The accessory
projector is expected to display images from a variety of video sources
including cell phones, portable media players (PMPs), PDAs, gaming consoles,
laptop computers, digital cameras, and other consumer electronics products.  It
would allow users to watch movies, play videos, and display photos and other
data onto a variety of flat or curved surfaces.   We expect that the accessory
product will be commercially available during the first half of 2009.

The PicoP display engine, with some modification, could be embedded into
a vehicle to create a heads up display (HUD) that could project point-by-point
navigation, critical operational, safety and other information important to the
vehicle operator.  In working with Tier 1 suppliers, we have produced prototypes
that demonstrate the PicoP's ability to project onto the windscreen of an
automobile a high-resolution image readable during day or night.

We believe that the PicoP display engine could also be modified to be
embedded into a pair of glasses to provide a mobile user with a see-through or
occluded personal display to view movies, play games or access other content.
We are working with the US Air Force to further develop the optical design and
integration of the PicoP display engine for military applications such as helmet
mounted displays and full color see-through eyewear.

Results of Operations

Contract revenue.

`% of                  % of
                                                contract              contract
                                       2008      revenue     2007      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30                                                                     
Government revenue                  $     376       78.3  $   1,773       77.1  $  (1,397)    (78.8)
Commercial revenue                        104       21.7        528       22.9       (424)    (80.3)
                                     ---------             ---------             ---------
Total contract revenue              $     480             $   2,301             $  (1,821)    (79.1)
                                     =========             =========             =========

Nine months ended September 30
Government revenue                  $   1,945       51.6  $   4,752       74.0  $  (2,807)    (59.1)
Commercial revenue                      1,822       48.4      1,670       26.0        152       9.1
                                     ---------             ---------             ---------
Total contract revenue              $   3,767             $   6,422             $  (2,655)    (41.3)
                                     =========             =========             =========`

We earn contract revenue from performance on development contracts with the
United States government and commercial customers.

We recognize contract revenue as work progresses on long-term, cost plus
fixed fee and fixed price contracts using the percentage-of-completion method,
which relies on estimates of total expected contract revenue and costs.  Our
revenue contracts generally include a statement of the work we are to complete
and the total fee we will earn from the contract.  When we begin work on the
contract and at the end of each accounting period, we work with the members of
our technical team to estimate the labor and material and other cost required to
complete the statement of work compared to cost incurred to date.  We use
information provided by project mangers, vendors, outside consultants and others
as we deem necessary to develop our cost estimates.  Since our contracts
generally require some level of technology development to complete, the actual
cost required to complete a statement of work can vary from our estimated cost
to complete.   We have developed processes that allow us to make reasonable
estimates of the cost to complete a contract.  Historically, we have made only
immaterial revisions in the estimates to complete the contract at each reporting
period. Recognized revenues are subject to revisions as the contract progresses
to completion and actual revenue and cost become certain.  Revisions in revenue
estimates are reflected in the period in which the facts that give rise to the
revision become known.  In the future, revisions in these estimates could
significantly impact recognized revenue in any one reporting period.  If the
U.S. Government cancels a contract, we would receive payment for work performed
and costs committed to prior to the cancellation.

Our contract revenue in a particular period is dependent upon when we enter
into a contract, the value of the contracts we have entered into, and the
availability of technical resources to perform work on the contracts.  Contract
revenue was lower during the three and nine months ended September 30, 2008 than
the same periods in 2007, due to the lower beginning contract backlog.

As long as most of our revenue is earned from performance on development
contracts, we believe there may be a high degree of variability in revenue from
quarter to quarter.

Our backlog of development contracts at September 30, 2008 was $336,000
compared to $5.3 million at September 30, 2007, all of which is scheduled for
completion during the next twelve months.  The decrease in backlog from 2007 is
primarily attributed to completion of government and commercial development
contracts in 2007 and early 2008.  We expect that we will have fewer
opportunities to enter into new development contracts as we move closer to the
commercialization of products based on our PicoP display engine.

Product revenue.

`% of                  % of
                                                 product               product
                                       2008      revenue     2007      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30                                                                     
Bar code revenue                    $     414      100.0  $     272       91.3  $     142      52.2
Nomad revenue                              --         --         26        8.7        (26)   (100.0)
                                     ---------             ---------             ---------
Total product revenue               $     414             $     298             $     116      38.9
                                     =========             =========             =========

Nine months ended September 30
Bar code revenue                    $   1,319      100.0  $     998       92.9  $     321      32.2
Nomad revenue                              --         --         76        7.1        (76)   (100.0)
                                     ---------             ---------             ---------
Total product revenue               $   1,319             $   1,074             $     245      22.8
                                     =========             =========             =========`

Our quarterly product revenue may vary substantially due to the timing of
product orders from customers, production constraints and raw material
availability.  The increase in bar code revenue for the three and nine months
ended September 30, 2008 compared to the same periods in 2007 was due to the
increased sales activity surrounding the ROV product line.

The backlog of product orders at September 30, 2008 was approximately
$311,000, compared to $391,000 at June 30, 2007, all of which is scheduled for
delivery during the next twelve months.

Cost of contract revenue.

`% of                  % of
                                                contract              contract
                                       2008      revenue     2007      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30     $     253       52.7  $   1,349       58.6  $  (1,096)    (81.2)
Nine months ended September 30          1,389       36.9      3,576       55.7     (2,187)    (61.2)`

Cost of contract revenue includes both the direct and allocated indirect
costs of performing on development contracts.  Direct costs include labor,
materials and other costs incurred directly in performing on a contract.
Indirect costs include labor and other costs associated with operating our
research and development department and building our technical capabilities and
capacity.  Cost of contract revenue is determined both by the level of direct
costs incurred on development contracts and by the level of indirect costs
incurred in operating and building our technical capabilities and capacity.
Both the direct and indirect costs can fluctuate substantially from period to
period.

The cost of contract revenue as a percentage of revenue was lower during the
three and nine months ended September 30, 2008 than September 30, 2007 as a
result of negotiating better terms on contracts entered into in late 2007.  We
target a gross margin for each contract of at least 40%; however, the gross
margin can vary based on the technical challenges encountered in completing the
contract.

The cost of revenue as a percentage of revenue can fluctuate significantly
from period to period, depending on the contract cost mix and the levels of
direct and indirect costs incurred.  However, over longer periods of time we
expect modest fluctuations in the cost of contract revenue, as a percentage of
contract revenue.

Cost of product revenue.

`% of                  % of
                                                 product               product
                                       2008      revenue     2007      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30     $     356       86.0  $     404      135.6  $     (48)    (11.9)
Nine months ended September 30          1,224       92.8      1,134      105.6         90       7.9`

Cost of product revenue includes both the direct and allocated indirect costs
of manufacturing products sold to customers.  Direct costs include labor,
materials and other costs incurred directly in the manufacture of these
products.  Indirect costs include labor and other costs associated with
operating our manufacturing capabilities and capacity.

Our overhead, which includes the costs of procuring, inspecting and storing
material, facility and depreciation costs, is allocated to inventory, cost of
product revenue, cost of contract revenue, and research and development expense
based on the proportion of direct material purchased for the respective
activity.  During the three months ending September 30, 2008 and 2007, we
expensed approximately $40,000 and $71,000, respectively, of manufacturing
overhead associated with production capacity in excess of production
requirements.

We expect that cost of product revenue on an absolute dollar basis will
increase in the future.  This increase will likely result from expected sales of
commercial products.  The cost of product revenue as a percentage of product
revenue can fluctuate significantly from period to period, depending on the
product mix, the level of overhead expense and the volume of direct materials
purchased.

Research and development expense.

`2008       2007     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $   5,804  $   3,694  $   2,110       57.1
Nine months ended September 30         16,111     10,247      5,864       57.2`

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, and
- Other operating expenses.

We have increased spending in research and development as part of our
strategy to accelerate the time to market for products based on the PicoP.   The
increase in cost is primarily attributable to increases in payroll costs and
contracted services.

In addition, we allocate our research and development resources based on the
business opportunity of the available projects, the skill mix of the resources
available and the contractual commitments we have made to customers.  In order
to accelerate our time to market and because contract revenue was lower for the
three and nine months ended September 30, 2008 compared to the same periods in
2007, we directed more of our research and development work to internally funded
projects compared to the same period last year.

We believe that a substantial level of continuing research and development
expense will be required to develop additional commercial products using the
scanned beam display technology.  Accordingly, we anticipate our level of
research and development spending will continue to be substantial.

Sales, marketing, general and administrative expense.

`2008       2007     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $   3,456  $   3,691  $    (235)      (6.4)
Nine months ended September 30         11,694     11,328        366        3.2`

Sales, marketing, general and administrative expense includes compensation
and support costs for marketing, sales, management and administrative staff, and
for other general and administrative costs, including legal and accounting
services, consultants and other operating expenses.

The increase in sales, marketing, general and administrative expense for the
nine months ended September 30, 2008 compared to the same period in 2007 was the
result of increased payroll costs and marketing costs associated with our
commercial products.

Interest income.

`2008       2007     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $     271  $     526  $    (255)     (48.5)
Nine months ended September 30            962        860        102       11.9`

The decrease in interest income for the three months ended September 30, 2008
resulted primarily from lower interest rates on our investment securities
compared to the same period in 2007.  The increase in interest income for the
nine months ended September 30, 2008 compared to the same period in 2007
resulted primarily from higher average cash and investment securities
balances.

Interest expense.

`2008       2007     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $      11  $      14  $      (3)     (21.4)
Nine months ended September 30             36        499       (463)     (92.8)`

In March and December 2005, we issued convertible notes (the "2005
Notes") with an aggregate principal amount of $20 million.  The last
payment on the 2005 Notes was made in March 2007, resulting in a decrease in
interest expense for the nine months ended September 30, 2008 compared to the
same period in 2007.

Impairment of investment, available-for-sale.

`2008       2007     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $    (300) $      --  $    (300)        n/a
Nine months ended September 30           (300)        --       (300)        n/a`

At September 30, 2008, our marketable securities portfolio included $3.0
million par value AAA rated student loan auction-rate securities
("SLARS").  Based on the length of the historical duration of failed
SLARS auctions and significant uncertainty of the prospective duration of
inactivity and lack of liquidity in the SLARS market, we determined that the
estimated fair values of the SLARS were less than par value and the impairments
were other-than-temporary.  We used a discounted cash flow model, with rates
adjusted for liquidity, to determine the estimated fair values of the SLARS as
of September 30, 2008.  We recorded an "impairment of investment
securities, available-for-sale" of $300,000 for the period ended September
30, 2008.

Gain (loss) on derivative instruments, net.

`2008       2007     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $     585  $     883  $    (298)     (33.7)
Nine months ended September 30          2,004     (1,709)     3,713     (217.3)`

We issued warrants to purchase 2,302,000 shares of common stock in
connection with the issuance of the 2005 Notes.  The warrants met the definition
of derivative instruments that must be accounted for as liabilities under the
provisions of Emerging Issues Task Force Issue No. 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock,because we cannot engage in certain corporate
transactions affecting the common stock unless we make a cash payment to the
holders of the warrants.  In July, 2008, warrants to purchase 750,000 shares of
common stock expired unexercised.  We record changes in the fair values of the
warrants in the statement of operations each period.  We valued the remaining warrants to purchase 1,552,000 shares
of common stock at September 30, 2008 using the Black-Scholes option-pricing
model with the following assumptions:  expected volatility of 69%; expected
dividend yields of 0%; risk free interest rates ranging from 1.9% to 2.1%; and
contractual lives ranging from 1.5 years to 2.2 years.  The changes in value of
the warrants of $599,000 for the three months and $2,134,000 for the nine months
ended September 30, 2008 were recorded as non-operating gains and are included
in "Gain (loss) on derivative instruments, net" in the consolidated statement of
operations.We valued the warrants at September 30, 2007 using the
Black-Scholes option-pricing model with the following assumptions:  expected
volatilities of 68%; expected dividend yields of 0%; risk free interest rates
ranging 3.9% to 4.1%; and contractual lives ranging from 0.8 years to 3.2 years.
The change in value of the warrants of $927,000 for the three months ended
September 30, 2007 was recorded as a non-operating gain and is included in "Gain
(loss) on derivative instruments, net" in the consolidated statement of
operations.  The change in value of the warrants of $1,493,000 for the nine
months ended September 30, 2007 was recorded as a non-operating loss and is
included in "Gain (loss) on derivative instruments, net" in the consolidated
statement of operations.

In January 2006, we acquired warrants to purchase 170,500 shares of Lumera
common stock.  The warrants were valued using the Black-Scholes option-pricing
model with the following assumptions:  expected volatility of 83%; expected
dividend yield of 0%; risk free interest rate of 4.55%; and contractual life of
5.1 years.  Changes in the fair value of the warrants are recorded in the
statement of operations each period.  As of September 30, 2008, the warrants
were valued using the Black-Scholes option-pricing model with the following
assumptions:  expected volatilities of 127%; expected dividend yields of 0%;
risk free interest rates of 2.13%; and contractual lives of 2.5 years.  As of
September 30, 2008, the fair value of the warrants decreased to $0 from $130,000
at December 31, 2007 and the changes in value of $14,000 and $130,000 for the
three and nine months ended September 30, 2008, respectively, were recorded as
non-operating losses and are included in "Gain (loss) on derivative
instruments, net" in the consolidated statement of operations.  As of
September 30, 2007, the warrants were valued using the Black-Scholes option-
pricing model with the following assumptions:  expected volatility of 83%;
expected dividend yields of 0%; risk free interest rates of 4.1%; and
contractual lives of 3.5 years.  The changes in value of $44,000 and $284,000
for the three and nine months ended September 30, 2007, respectively, were
recorded as non-operating losses and are included in "Gain (loss) on
derivative instruments, net" in the consolidated statement of
operations.

Liquidity and Capital Resources

We have funded our operations to date primarily through the sale of equity
and debt securities and, to a lesser extent, from development contract revenues
and product sales.  At September 30, 2008, we had $37.2 million in cash, cash
equivalents and investment securities, available-for-sale.  In July 2008, we
raised approximately $26.0 million, before issuance costs of approximately $1.9
million, from the sale of 11.2 million shares of common stock and warrants to
purchase 6.7 million shares of our common stock.  The warrants have an exercise
price of $3.60 per share, a five year term, and are not exercisable for one year
from the date of issuance. We can call the warrants after one year from the date
of issuance if the average closing bid price of our stock is over $7.20 (200% of
exercise price) for any 20 consecutive trading days.  Based on our

Cash used in operating activities totaled $22.3 million during the nine
months ended September 30, 2008, compared to $16.6 million during the same
period in 2007.  In both periods, cash used in operating activities for both
periods resulted primarily from the loss from operations.

We had the following material gains and charges, and changes in assets during
the nine months ended September 30, 2008:

- "Impairment of investment securities, available-for-sale"
- "Non-cash stock-based compensation expense"
- "Loss (gain) on derivative instruments"
- "Inventory"
- "Accounts receivable"
- "Accruals"

Cash provided by investing activities totaled $15.5 million during the nine
months ended September 30, 2008, compared to cash used in investing activities
of $13.9 million during the same period of 2007.  During the nine months ended
September 30, 2008, we had net sales of investment securities totaling $15.9
million compared to net purchases of investment securities of $21.6 million
during the nine months ended September 30, 2007.  During the nine months ended
September 30, 2007, we sold 1.6 million shares of Lumera common stock for $8.4
million.  In addition, we used cash of $320,000 for capital expenditures during
the nine months ended September 30, 2008, compared to $849,000 during the same
period in 2007.

Cash provided by financing activities totaled $24.4 million during the nine
months ended September 30, 2008, compared to $34.4 million during the same
period in 2007.  The last scheduled payment on our 2005 Notes of $1.4 million
was made in March of 2007.

ITEM 3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Of our total cash equivalents and investment securities available-for-sale
balance, 90% have variable interest rates and, as such, the fair values of the
principal of these instruments are not affected by changes in market interest
rates.  The remaining 10% of our cash equivalents and investment securities
available-for-sale balance are at fixed interest rates and, as such, the fair
values of these instruments are affected by changes in market interest rates.
Due to the generally short-term maturities of these investment securities, we
believe that the market risk arising from our holdings of these financial
instruments is not material.

Our investment policy restricts investments to ensure principal preservation
and liquidity.  The investment securities portfolio is comprised of short-term
highly rated commercial paper, U.S. government agency notes and auction-rate
securities.

At September 30, 2008, our marketable securities portfolio included $3.0
million par value AAA rated student loan auction-rate debt securities
("SLARS").  SLARS are long-term variable rate bonds tied to short-term
interest rates issued to fund government guaranteed student loans.  Purchases,
sales and interest rate resets for our SLARS are completed via a Dutch Auction
process conducted every twenty-eight days.   If insufficient clearing bids are
submitted during the auction, the auction has failed and the interest rates are
reset to the "maximum rates", instead of "auction rates",
according to the specific provisions of each of the SLARS.  In addition, we
would continue holding the SLARS until a subsequent successful auction or until
sales are completed on a secondary market.

At the time of our initial investment and through the filing date of this
report, the SLARS that we hold remain AAA rated, collateralized by the Federal
Family Education Loan Program ("FFELP") and other federal and state
student loan guarantee programs, and there have been no declines in the credit
ratings of the issuers or material changes in loan collection rates.  Our $3.0
million of auction-rate securities have been subject to failed auctions in 2008
as a result of the current negative liquidity conditions in the global credit
markets.  The failed auctions have rendered these securities temporarily
illiquid through the normal auction process.    AMBAC is the insurer on 50% of
the auction-rate securities that we hold.   As of September 30, 2008, AMBAC
continued to be rated AAA.  In addition, all of the auction-rate securities that
we have sold through September 30, 2008, totaling $5.8 million, have been sold
at par value.

Based on the length of the historical duration of failed SLARS auctions and
significant uncertainty of the prospective duration of inactivity and lack of
liquidity in the SLARS market, we determined that the estimated fair values of
the SLARS were less than par value and the impairments were other-than-temporary.
We used a discounted cash flow model, with rates adjusted for
liquidity, to determine the estimated fair values of the SLARS as of September
30, 2008.  We recorded an "impairment of investment securities, available-for-sale"
of $300,000 for the period ended September 30, 2008 on the
Consolidated Statement of Operations.

Any continuation or worsening of the current global ecomomic and financial
conditions could materially adversely affect our ability to raise, or the cost of,
needed capital and could materially adversely affect our ability to
commercialize products.

The values of cash equivalents and investment securities, available-for-sale,
by maturity date as of September 30, 2008, are as follows (in thousands):

`Amount      Percent
                                     ---------  ---------
Cash and cash equivalents           $  31,011      83.33%
Less than one year                         --         --
One to two years                        3,502       9.41%
Greater than five years                 2,700       7.26%
                                     ---------  ---------
                                    $  37,213     100.00%
                                     =========  =========`

All of the Company's development contract payments are made in U.S. dollars.
However, in the future the Company may enter into additional development
contracts in foreign currencies that may subject the Company to foreign exchange
rate risk.  The Company intends to enter into foreign currency hedges to offset
the exposure to currency fluctuations when it can determine the timing and
amounts of the foreign currency exposure.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by
this report and, based on this evaluation, our principal executive officer and
principal financial officer have concluded that these disclosure controls and
procedures are effective.  There were no changes in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) that occurred
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

PART II

OTHER INFORMATION

ITEM 1A - RISK FACTORS

Risk Factors Relating to the Microvision Business

We have a history of operating losses and expect to incur significant
losses in the future.

We have had substantial losses since our inception.  We cannot assure you
that we will ever become or remain profitable.

- As of September 30, 2008, we had an accumulated deficit of $282.2 million.
- We incurred consolidated net losses of $215.7 million from inception through
2005, $24.0 million in 2006, $19.8 million in 2007, and consolidated net loss of
$22.7 million in the nine months ended September 30, 2008.

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 scanned beam technology and
development of demonstration units.  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 substantial customer orders for our
products.  In light of these factors, we expect to continue to incur substantial
losses and negative cash flow at least through 2009 and likely thereafter.  We
cannot be certain that we will achieve positive cash flow at any time in the
future.

We will require additional capital to fund our operations and to implement
our business plan.  If we do not obtain additional capital, we may be required
to curtail our operations substantially.  Raising additional capital may dilute
the value of current shareholders' shares.

Based on our current operating plan, we believe we have sufficient cash to
fund operations until late 2009.  We will require additional cash to fund our
operating plan past that time. We plan to obtain additional cash through the
issuance of equity or debt securities. We will require additional capital in the
future to fund our operations, including to:

- Further develop the technology platform and PicoP display engine,
- Develop and protect our intellectual property rights, and
- Fund long-term marketing and business development opportunities.

Our capital requirements will depend on many factors, including, but not
limited to, the rate at which we can, directly or through arrangements with
original equipment manufacturers, introduce products incorporating the PicoP
display engine and image capture technologies and the market acceptance and
competitive position of such products.  If revenues are less than we anticipate,
if the level and mix of revenues vary from anticipated amounts and allocations
or if expenses exceed the amounts budgeted, we may require additional capital
earlier than expected to further the development of our technologies, for
expenses associated with product development, and to respond to competitive
pressures or to meet unanticipated development difficulties.  In addition, our
operating plan provides for the development of strategic relationships with
systems and equipment manufacturers that may require additional investments by
us.

Additional capital may not be available to us, or if available, on terms
acceptable to us or on a timely basis.  Raising additional capital may involve
issuing securities with rights and preferences that are senior to our common
stock and may dilute the value of current shareholders' shares.  If adequate
funds are not available to satisfy long-term capital requirements, we may be
required to limit our operations substantially.  This limitation of operations
may include reductions in staff and operating costs as well as reductions in
capital expenditures and investment in research and development.

We cannot be certain that our technology platform or products
incorporating our PicoP display engine will achieve market acceptance.  If
products incorporating the PicoP display engine do not achieve market
acceptance, our revenues may not grow.

Our success will depend in part on customer acceptance of the PicoP display
engine.  The PicoP display engine may not be accepted by manufacturers who use
display technologies in their products, by systems integrators who incorporate
our products into their products or by end users of these products.  To be
accepted, the PicoP display engine must meet the expectations of our potential
customers in the defense, industrial, medical and consumer markets.  If our
technology fails to achieve market acceptance, we may not be able to continue to
develop our technology platform.

It may become more difficult to sell our stock in the public market.

Our common stock is listed for quotation on The NASDAQ Global Market.  To
keep our listing on this market, we must meet NASDAQ's listing maintenance
standards.  If we are unable to continue to meet NASDAQ's listing maintenance
standards, our common stock could be delisted from The NASDAQ Global Market.  If
our common stock were delisted, we likely would seek to list the common stock on
the NASDAQ Capital Market, the American Stock Exchange or on a regional stock
exchange.  Listing on such other market or exchange could reduce the liquidity
for our common stock.  If our common stock were not listed on the Capital Market
or an exchange, trading of our common stock would be conducted in the over-the-
counter market on an electronic bulletin board established for unlisted
securities or directly through market makers in our common stock.  If our common
stock were to trade in the over-the-counter market, an investor would find it
more difficult to dispose of, or to obtain accurate quotations for the price of,
the common stock.  A delisting from The NASDAQ Global Market and failure to
obtain listing on such other market or exchange would subject our securities to
so-called penny stock rules that impose additional sales practice and market-
making requirements on broker-dealers who sell or make a market in such
securities.  Consequently, removal from The NASDAQ Global Market and failure to
obtain listing on another market or exchange could affect the ability or
willingness of broker-dealers to sell or make a market in our common stock and
the ability of purchasers of our common stock to sell their securities in the
secondary market.  In addition, when the market price of our common stock is
less than $5.00 per share, we become subject to penny stock rules even if our
common stock is still listed on The NASDAQ Global Market.  While the penny stock
rules should not affect the quotation of our common stock on The NASDAQ Global
Market, these rules may further limit the market liquidity of our common stock
and the ability of investors to sell our common stock in the secondary market.
At some point during all four quarters of 2006 and 2007 and the first three
quarters of 2008, the market price of our stock traded below $5.00 per share.
On October 31, 2008, the closing price of our stock was $1.73.

Our lack of the financial and technical resources relative to our
competitors may limit our revenues, potential profits, overall market share or
value.

Our current products and potential future products will compete with
established manufacturers of existing products and companies developing new
technologies.  Many of our competitors have substantially greater financial,
technical and other resources than we have.  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 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 our
technology platform and to cost effectively introduce new products and features
in a timely manner to meet evolving customer requirements and compete 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 product development and marketing.

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

We could face lawsuits related to our use of the PicoP display engine or
other technologies.  Defending these suits would be costly and time consuming.
An adverse outcome in any such matter could limit our ability to commercialize
our technology and products, reduce our revenues and increase our operating
expenses.

We are aware of several patents held by third parties that relate to certain
aspects of light scanning displays and image capture products.  These patents
could be used as a basis to challenge the validity, limit the scope or limit our
ability to obtain additional or broader patent rights of our patents or patents
we have licensed.  A successful challenge to the validity of our patents or
patents we have licensed could limit our ability to commercialize our technology
and the PicoP display engine and, consequently, materially reduce our revenues.
Moreover, we cannot be certain that patent holders or other third parties will
not claim infringement by us 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 our 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, to require others and us to
cease selling products that incorporate the PicoP display engine, to cease
licensing our technology or to require disputed rights to be licensed from third
parties.  Such licenses, if available, would increase our operating expenses.
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.

Our planned future products are dependent on advances in technology by
other companies.

We rely on and will continue to rely on technologies, such as light sources,
MEMS and optical components that are developed and produced by other companies.
The commercial success of certain of our planned future products will depend in
part on advances in these and other technologies by other companies.  We may,
from time to time, contract with and support companies developing key
technologies in order to accelerate the development of them for our specific
uses.  There are no guarantees that such activities will result in useful
technologies or components for us.

Our products may be subject to future health and safety regulations that
could increase our development and production costs.

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

Our dependence on sales to distributors increases the risks of managing
our supply chain and may result in excess inventory or inventory shortages.

Currently, the majority of our distributor relationships for the ROV Scanner
and its accessories involve the distributor taking inventory positions and
reselling to multiple customers.  With these distributor relationships, we do
not recognize revenue until the distributors sell the product through to their
end user customers.  Our distributor relationships do reduce our ability to
forecast sales and increases risks to our business. Since our distributors act
as intermediaries between us and the end user customers, we must rely on our
distributors to accurately report inventory levels and production forecasts.
This requires us to manage a more complex supply chain and monitor the financial
condition and credit worthiness of our distributors and the end user customers.
Our failure to manage one or more of these risks could result in excess
inventory or shortages that could adversely impact our operating results and
financial condition.

We do not have long-term commitments from our ROV customers, and plan
purchases based upon our estimates of customer demand, which may require us to
contract for the manufacture of our products based on inaccurate estimates.

Our ROV sales are made on the basis of purchase orders rather than long-term
commitments.  Our customers may cancel or defer purchases at any time.  This
requires us to forecast demand based upon assumptions that may not be correct.
If our customers or we overestimate demand, we may create inventory that we may
not be able to sell or use, resulting in excess inventory, which could become
obsolete or negatively affect our operating results.  Conversely, if our
customers or we underestimate demand, or if sufficient manufacturing capacity is
not available, we may lose revenue opportunities, damage customer relationships,
and we may not achieve expected revenues.

Our future growth will suffer if we do not achieve sufficient market
acceptance of our products to compete effectively.

Our success depends, in part, on our ability to gain acceptance of our
current and future products by a large number of customers.  Achieving market
based acceptance for our products will require marketing efforts and the
expenditure of financial and other resources to create product awareness and
demand by potential customers.  We may be unable to offer products consistently
or at all that compete effectively with products of others on the basis of price
or performance.  Failure to achieve broad acceptance of our products by
potential customers and to effectively compete would have a material adverse
effect on our operating results.

Because we plan to continue using foreign contract manufacturers, our
operating results could be harmed by economic, political, regulatory and other
factors in foreign countries.

We currently use a contract manufacturer in Asia to manufacture our ROV
product, and we plan to use foreign manufacturers to manufacture future
products, where appropriate.  These international operations are subject to
inherent risks, which may adversely affect us, including:

- political and economic instability;
- high levels of inflation, historically the case in a number of countries in
Asia;
- burdens and costs of compliance with a variety of foreign laws;
- foreign taxes;
- changes in tariff rates or other trade and monetary policies; and
- changes or volatility in currency exchange rates.

If we have to qualify a new contract manufacturer or foundry for our
products, we may experience delays that result in lost revenues and damaged
customer relationships.

We rely on single suppliers to manufacture our ROV Scanner product and our
MEMS chips in wafer form.  The lead time required to establish a relationship
with a new contract manufacturer or foundry is long, and it takes time to adapt
a product's design to a particular manufacturer's processes.  Accordingly, there
is no readily available alternative source of supply for these products and
components in high volumes.  This could cause significant delays in shipping
products if we have to change our source of supply and manufacture quickly,
which may result in lost revenues and damaged customer relationships.

If we experience delays or failures in developing commercially viable
products, we may have lower revenues.

We have developed demonstration units incorporating the PicoP display engine.
However, we must undertake additional research, development and testing before
we are able to develop additional products for commercial sale.  Product
development delays by us or our potential product development partners, or the
inability to enter into relationships with these partners, may delay or prevent
us from introducing products for commercial sale.  We intend to rely on third
party developments or to contract with other companies to continue development
of green laser devices we will need for our products.

Our success will depend, in part, on our ability to secure significant
third party manufacturing resources.

We are developing our 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 our technology that we are able to
produce.

If our licensors and we are unable to obtain effective intellectual
property protection for our products and technology, we may be unable to compete
with other companies.

Intellectual property protection for our products is important and uncertain.
If we do not obtain effective intellectual property protection for our products,
processes and technology, we may be subject to increased competition.  Our
commercial success will depend in part on our ability and the ability of the
University of Washington and our other licensors to maintain the proprietary
nature of the PicoP display and other key technologies by securing valid and
enforceable patents and effectively maintaining unpatented technology as trade
secrets.  We try to protect our proprietary technology by seeking to obtain
United States and foreign patents in our name, or licenses to third-party
patents, related to proprietary technology, inventions, and improvements that
may be important to the development of our business.  However, our patent
position and the patent position of the University of Washington and other
licensors involve complex legal and factual questions.  The standards that the
United States Patent and Trademark Office and its foreign counterparts use to
grant patents are not always applied predictably or uniformly and can change.
Additionally, the scope of patents are subject to interpretation by courts and
their validity can be subject to challenges and defenses, including challenges
and defenses based on the existence of prior art.  Consequently, we cannot be
certain as to the extent to which we will be able to obtain patents for our new
products and technology or the extent to which the patents that we already own
or license from others protect our products and technology.  Reduction in scope
of protection or invalidation of our licensed or owned patents, or our inability
to obtain new patents, may enable other companies to develop products that
compete with ours on the basis of the same or similar technology.

We also rely on the law of trade secrets to protect unpatented know-how and
technology to maintain our competitive position.  We try to protect this know-
how and technology by limiting access to the trade secrets to those of our
employees, contractors and partners with a need to know such information and by
entering into confidentiality agreements with parties that have access to it,
such as our employees, consultants and business partners.  Any of these parties
could breach the agreements and disclose our trade secrets or confidential
information, or our competitors might learn of the information in some other
way.  If any trade secret not protected by a patent were to be disclosed to or
independently developed by a competitor, our competitive position could be
materially harmed.

We could be exposed to significant product liability claims that could be
time-consuming and costly, divert management attention and adversely affect our
ability to obtain and maintain insurance coverage.

We may be subject to product liability claims if any of our product
applications are alleged to be defective or cause harmful effects.  For example,
because some of our PicoP displays are designed to scan a low power beam of
colored light into the user's eye, the testing, manufacture, marketing and sale
of these products involve an inherent risk that product liability claims will be
asserted against us.  Product liability claims or other claims related to our
products, regardless of their outcome, could require us to spend significant
time and money in litigation, divert management time and attention, require us
to pay significant damages, harm our reputation or hinder acceptance of our
products.  Any successful product liability claim may prevent us from obtaining
adequate product liability insurance in the future on commercially desirable or
reasonable terms.  An inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product liability
claims could prevent or inhibit the commercialization of our products.

We rely heavily on a limited number of development contracts with the U.S.
government, which are subject to immediate termination by the government for
convenience at any time, and the termination of one or more of these contracts
could have a material adverse impact on our operations.

During the first nine months of 2008 and the full year of 2007, 38% and 61%,
respectively, of our revenue was derived from performance on a limited number of
development contracts with the U.S. government.  Therefore, any significant
disruption or deterioration of our relationship with the U.S. government would
significantly reduce our revenues.  Our government programs must compete with
programs managed by other contractors for limited amounts and uncertain levels
of funding.  The total amount and levels of funding are susceptible to
significant fluctuations on a year-to-year basis.  Our competitors continuously
engage in efforts to expand their business relationships with the government and
are likely to continue these efforts in the future.  Our contracts with the
government are subject to immediate termination by the government for
convenience at any time.  The government may choose to use contractors with
competing display technologies or it may decide to discontinue any of our
programs altogether.  In addition, those development contracts that we do obtain
require ongoing compliance with applicable government regulations.  Termination
of our development contracts, a shift in government spending to other programs
in which we are not involved, a reduction in government spending generally, or
our failure to meet applicable government regulations could have severe
consequences for our results of operations.

Our development agreements have long sales cycles, which make it difficult
to plan our expenses and forecast our revenues.

Our development agreements have lengthy sales cycles that involve numerous
steps including determination of a product application, exploring the technical
feasibility of a proposed product, evaluating the costs of manufacturing a
product and manufacturing or contracting out the manufacturing of the product.
Our long sales cycle, which can last several years, makes it difficult to
predict the quarter in which contract signing and revenue recognition will
occur.  Delays in entering into development agreements could cause significant
variability in our revenues and operating results for any particular quarterly
period.

Our development contracts may not lead to products that will be
profitable.

Our development contracts, including without limitation those discussed in
this document are exploratory in nature and are intended to develop new types of
products for new applications.  These efforts may prove unsuccessful and these
relationships may not result in the development of products that will be
profitable.

Our revenues are highly sensitive to developments in the defense
industry.

Our revenues to date have been derived principally from product development
research relating to defense applications of our 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.

If we lose our rights under our third party technology licenses, our
operations will be adversely affected.

Our business depends in part on technology rights licensed from third
parties.  We could lose our exclusivity or other rights to use the technology
under our licenses if we fail to comply with the terms and performance
requirements of the licenses.    In addition, certain licensors may terminate a
license upon our breach and have the right to consent to sublicense
arrangements.  If we were to lose our rights under any of these licenses, or if
we were unable to obtain required consents to future sublicenses, we would lose
a competitive advantage in the market, and may even lose the ability to
commercialize our products completely.  Either of these results could
substantially decrease our revenues.

We are dependent on third parties in order to develop, manufacture, sell
and market our products.

Our strategy for commercializing our technology and products incorporating
the PicoP display engine includes entering into cooperative development,
manufacturing, 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 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 delays in introducing the PicoP display engine or find that the
development, manufacture or sale of products incorporating the PicoP display
engine 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 performance of third parties.  We cannot be
certain that any such arrangements will be successful.

Loss of any of our key personnel could have a negative effect on the
operation of our business.

Our success depends on our executive 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, research 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.

We are dependent on a small number of customers for our revenue.  Our
quarterly performance may vary substantially and this variance, as well as
general market conditions, may cause our stock price to fluctuate greatly and
potentially expose us to litigation.

Our revenues to date have been generated primarily 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;
- changes in evaluations and recommendations by any securities analysts
following our stock or our industry generally;
- announcements by other companies in our industry;
- changes in business or regulatory conditions;
- announcements or implementation by our competitors of technological
innovations or new products;
- the status of particular development programs and the timing of performance
under specific development agreements;
- economic and stock market conditions; or
- other factors unrelated to our company or industry.

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.  In addition, following periods of
volatility in the market price of a company's securities, shareholders often
have instituted securities class action litigation against that company.  If we
become involved in a class action suit, it could divert the attention of
management, and, if adversely determined, could require us to pay substantial
damages.

If we fail to manage expansion effectively, our revenue and expenses could
be adversely affected.

Our ability to successfully offer products and implement our business plan in
a rapidly evolving market requires an effective planning and management process.
The growth in business and relationships with customers and other third parties
has placed, and will continue to place, a significant strain on our management
systems and resources.  We will need to continue to improve our financial and
managerial controls, reporting systems and procedures and will need to continue
to train and manage our work force.

ITEM 6.	Exhibits

|10.1 | Microvision 2006 Incentive Plan, as amended                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 | Chief Executive Officer Certification Pursuant to Rule 13a-14 of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002      
|31.2 | Chief Financial Officer Certification Pursuant to Rule 13a-14 of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 Of the
Sarbanes-Oxley Act of 2002      
|32.1 | Chief Executive Officer Certification pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
|32.2 | Chief Financial Officer Certification pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

| | MICROVISION, INC.
| | -----------------

|Date:  November 7, 2008 | BY: | /s/  Alexander Y. Tokman
                Alexander Y. Tokman
                Chief Executive Officer
                (Principal Executive Officer)
|----------------------- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------



|Date:  November 7, 2008 | BY: | /s/  Jeff Wilson
                Jeff Wilson     
                Chief Financial Officer
                (Principal Financial Officer)
|----------------------- | --- | ---------------------------------------------------------------------------------------------------------------------------------------

EXHIBIT INDEX

The following documents are filed.

|Exhibit Number | Description                                                                                                                                                                     
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1           | Microvision 2006 Incentive Plan, as amended                                                                                                                                     
|31.1           | Chief Executive Officer Certification Pursuant to Rule 13a-14 of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002      
|31.2           | Chief Financial Officer Certification Pursuant to Rule 13a-14 of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002      
|32.1           | Chief Executive Officer Certification pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
|32.2           | Chief Financial Officer Certification pursuant to Section 1350,
Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002