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, 2007

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, or a non-accelerated filer.
See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      ̈ Accelerated filer    x Non-accelerated filer     ̈

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, 2007, 56,725,000 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, 2007 and
December 31, 2006 (unaudited)                                   | 3   
|Consolidated Statements of Operations for the three and nine
months ended September 30, 2007 and 2006 (unaudited)         | 4   
|Consolidated Statements of Comprehensive Loss
for the three and nine months ended September 30, 2007 and 2006 (unaudited) | 5   
|Consolidated Statements of Cash Flows for the nine
months ended September 30, 2007 and 2006 (unaudited)                   | 6   
|Notes to Consolidated Financial Statements
(unaudited)                                                                    | 8   
|                                                                                                                          |     
|Item 2.  Management's Discussion and Analysis of Financial
Condition and Results of Operations                            | 13  
|Item 3.  Quantitative and Qualitative Disclosures About Market
Risk                                                       | 18  
|Item 4.  Controls and Procedures                                                                                          | 19  
|                                                                                                                          |     
|Part II: Other Information                                                                                                |     
|Item 1A. Risk Factors                                                                                                     | 20  
|Item 6.  Exhibits                                                                                                         | 27  
|Signatures                                                                                                                | 28  
|Exhibit Index                                                                                                             | 29  

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Microvision, Inc.

                    Consolidated Balance Sheet

                  (In thousands, except per share data)

                            (Unaudited)

`September 30,   December 31,
                                                                                       2007           2006
                                                                                   -------------  -------------
Assets                                                                                                         
Current assets
   Cash and cash equivalents                                                      $      18,484  $      14,552
   Investment securities, available-for-sale                                             21,940             --
   Accounts receivable, net of allowances of $182 and $216                                  842          1,166
   Costs and estimated earnings in excess of billings on uncompleted contracts            1,261            565
   Inventory                                                                              1,024          1,043
   Current restricted investments in Lumera                                                  --         10,693
   Other current assets                                                                   1,362          1,986
                                                                                   -------------  -------------
   Total current assets                                                                  44,913         30,005

Property and equipment, net                                                               4,124          4,011
Restricted investments                                                                    1,329          1,268
Other assets                                                                                 49             41
                                                                                   -------------  -------------
   Total assets                                                                   $      50,415  $      35,325
                                                                                   =============  =============
                                                                                                               
Liabilities and Shareholders' Equity                                                                           
Current liabilities
   Accounts payable                                                               $       1,914  $       1,785
   Accrued liabilities                                                                    3,063          3,698
   Billings in excess of costs and estimated earnings on uncompleted contracts              309            200
   Liability associated with common stock warrants                                        4,065          2,572
   Liability associated with embedded derivative feature                                     --             68
   Current portion of notes payable                                                          --          2,418
   Current portion of capital lease obligations                                              45             45
   Current portion of long-term debt                                                         63             59
                                                                                   -------------  -------------
   Total current liabilities                                                              9,459         10,845
Capital lease obligations, net of current portion                                            98            132
Long-term debt, net of current portion                                                      409            457
Deferred rent, net of current portion                                                     1,799          2,027
                                                                                   -------------  -------------
   Total liabilities                                                                     11,765         13,461
                                                                                   -------------  -------------
Commitments and contingencies

Shareholders' equity
   Common stock, par value $.001; 125,000 shares authorized;
      56,725 and 42,921 shares issued and outstanding                                        57             43
   Additional paid-in capital                                                           291,713        253,086
   Receivables from related parties, net                                                     --           (250)
   Accumulated other comprehensive income                                                   279          8,619
   Accumulated deficit                                                                 (253,399)      (239,634)
                                                                                   -------------  -------------
   Total shareholders' equity                                                            38,650         21,864
                                                                                   -------------  -------------
   Total liabilities and shareholders' equity                                     $      50,415  $      35,325
                                                                                   =============  =============`

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,
                                                                             ----------------------  ----------------------
                                                                                2007        2006        2007        2006
                                                                             ----------  ----------  ----------  ----------
Contract revenue                                                            $    2,301  $      541  $    6,422  $    3,657
Product revenue                                                                    298         282       1,074       1,544
                                                                             ----------  ----------  ----------  ----------
    Total revenue                                                                2,599         823       7,496       5,201
                                                                             ----------  ----------  ----------  ----------
Cost of contract revenue                                                         1,349         343       3,576       2,493
Cost of product revenue                                                            404         675       1,134       3,650
                                                                             ----------  ----------  ----------  ----------
    Total cost of revenue                                                        1,753       1,018       4,710       6,143
                                                                             ----------  ----------  ----------  ----------
Gross margin                                                                       846        (195)      2,786        (942)
                                                                             ----------  ----------  ----------  ----------


Research and development expense                                                 3,694       2,855      10,247       7,316
Sales, marketing, general and administrative expense                             3,691       3,652      11,328      13,066
Gain on disposal of fixed assets                                                    --          --          --        (198)
                                                                             ----------  ----------  ----------  ----------
    Total operating expenses                                                     7,385       6,507      21,575      20,184
                                                                             ----------  ----------  ----------  ----------
Loss from operations                                                            (6,539)     (6,702)    (18,789)    (21,126)
Interest income                                                                    526         236         860         484
Interest expense                                                                   (14)     (1,346)       (499)     (4,804)
Gain (loss) on derivative instruments, net                                         883         125      (1,709)      3,179
Other expense                                                                       (8)         (5)        (25)        (16)
                                                                             ----------  ----------  ----------  ----------
Net loss before Lumera transactions                                             (5,152)     (7,692)    (20,162)    (22,283)

Equity in losses of Lumera                                                          --          --          --        (290)
Gain on sale of investment in Lumera                                               434          --       6,397       7,270
                                                                             ----------  ----------  ----------  ----------
Net loss                                                                        (4,718)     (7,692)    (13,765)    (15,303)

Stated dividend on mandatorily redeemable convertible preferred stock               --          --          --         (59)
Accretion to par value of preferred stock                                           --          --          --        (138)
Inducement for conversion of preferred stock                                        --          --          --      (3,076)
                                                                             ----------  ----------  ----------  ----------
Net loss available for common shareholders                                  $   (4,718) $   (7,692) $  (13,765) $  (18,576)
                                                                             ==========  ==========  ==========  ==========

Net loss per share - basic and diluted                                      $    (0.08) $    (0.20) $    (0.29) $    (0.60)
                                                                             ==========  ==========  ==========  ==========

Weighted-average shares outstanding - basic and diluted                         56,236      38,437      47,683      30,997
                                                                             ==========  ==========  ==========  ==========`

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

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Microvision, Inc.

                     Consolidated Statement of Comprehensive Income (Loss)

                             (In thousands)

                            (Unaudited)

`Three Months Ended       Nine Months Ended
                                                                                   September 30,           September 30,
                                                                             ----------------------  ----------------------
                                                                                2007        2006        2007        2006
                                                                             ----------  ----------  ----------  ----------
Net loss                                                                    $   (4,718) $   (7,692) $  (13,765) $  (15,303)
                                                                             ----------  ----------  ----------  ----------
Other comprehensive gain (loss)
Unrealized gain (loss) on investment securities, available-for-sale                (65)     (2,362)     (1,943)      8,420
Less: reclassification adjustment for gains realized in net income                (434)         --      (6,397)     (7,270)
                                                                             ----------  ----------  ----------  ----------
Net unrealized gain (loss)                                                        (499)     (2,362)     (8,340)      1,150
                                                                             ----------  ----------  ----------  ----------
Comprehensive loss                                                          $   (5,217) $  (10,054) $  (22,105) $  (14,153)
                                                                             ==========  ==========  ==========  ==========`

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

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Microvision, Inc.

                    Consolidated Statement of Cash Flows

                           (In thousands)

                            (Unaudited)

`Nine Months Ended
                                                                                             September 30,
                                                                                        ----------------------
                                                                                           2007        2006
                                                                                        ----------  ----------
Cash flows from operating activities                                                                          
    Net loss                                                                           $  (13,765) $  (15,303)
    Adjustments to reconcile net loss to net cash used in operations:
        Depreciation                                                                          653         993
        Gain on disposal of fixed assets                                                       --        (198)
        Non-cash stock-based compensation expense                                           1,327       1,467
        Non-cash interest expense                                                             371       4,011
        Loss(gain) on derivative instruments                                                1,710      (3,179)
        Allowance for receivables from related parties                                         23          --
        Equity in losses of Lumera                                                             --         290
        Gain on sale of investment in Lumera                                               (6,397)     (7,270)
        Non-cash deferred rent                                                               (207)       (162)
            Change in:
            Accounts receivable, net                                                          324         603
            Costs and estimated earnings in excess of billings on uncompleted contracts      (696)        485
            Inventory                                                                          19        (271)
            Other current assets                                                              391          57
            Other assets                                                                       (8)         81
            Accounts payable                                                                  243      (1,623)
            Accrued liabilities                                                              (683)     (1,395)
            Billings in excess of costs and estimated earnings on uncompleted contracts       109         117
                                                                                        ----------  ----------
            Net cash used in operating activities                                         (16,586)    (21,297)
                                                                                        ----------  ----------
Cash flows from investing activities                                                                          
    Purchases of investment securities                                                    (21,590)         --
    Sales of restricted investment securities                                               1,000       1,100
    Purchases of restricted investment securities                                          (1,061)       (268)
    Decrease in restricted cash                                                                --         755
    Collections of receivables from related parties                                           227          --
    Sale of long-term investment - Lumera                                                   8,348      10,292
    Proceeds on sale of property and equipment                                                 --         200
    Purchases of property and equipment                                                      (849)     (1,995)
                                                                                        ----------  ----------
            Net cash provided by (used in) investing activities                           (13,925)     10,084
                                                                                        ----------  ----------
Cash flows from financing activities                                                                          
    Principal payments under capital leases                                                   (34)        (28)
    Principal payments under long-term debt                                                   (44)        (39)
    Increase in long-term debt                                                                 --         536
    Payments on notes payable                                                              (1,400)     (6,533)
    Increase in deferred rent                                                                  --         577
    Payment of embedded derivative feature of preferred stock conversion                       --      (1,074)
    Payment of preferred dividend                                                              --         (43)
    Net proceeds from issuance of common stock and warrants                                35,921      24,983
                                                                                        ----------  ----------
            Net cash provided by financing activities                                      34,443      18,379
                                                                                        ----------  ----------
Net increase in cash and cash equivalents                                                   3,932       7,166
Cash and cash equivalents at beginning of period                                           14,552       6,860
                                                                                        ----------  ----------
Cash and cash equivalents at end of period                                             $   18,484  $   14,026
                                                                                        ==========  ==========
Supplemental disclosure of cash flow information                                                              
    Cash paid for interest                                                             $       77  $      649
                                                                                        ==========  ==========
Supplemental schedule of non-cash investing and financing activities                                          
    Property and equipment acquired under capital leases                               $       --  $       80
                                                                                        ==========  ==========

    Other non-cash additions to property and equipment                                 $       32  $       --
                                                                                        ==========  ==========

    Issuance of common stock for payment of principal and interest
      on senior secured exchangeable convertible notes                                 $    1,388  $    1,755
                                                                                        ==========  ==========

    Conversion of preferred stock and convertible debt into common stock               $       --       4,761
                                                                                        ==========  ==========

    Inducement for conversion of preferred stock                                       $       --  $    3,076
                                                                                        ==========  ==========`

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

---

MICROVISION, INC.
                    Notes to Consolidated Financial Statements
                    September 30, 2007
                    (Unaudited)


1.  MANAGEMENT'S STATEMENT AND PRINCIPLES OF CONSOLIDATION
Management's Statement

The Consolidated Balance Sheet as of September 30, 2007, the Consolidated
Statements of Operations and Comprehensive Loss for the three and nine months
ended September 30, 2007 and 2006 and the Consolidated Statements of Cash Flows
for the nine months ended September 30, 2007 and 2006 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, 2007 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, 2006.  The results of operations for the nine months ended
September 30, 2007 are not necessarily indicative of the operating results that
may be attained for the entire fiscal year.

At September 30, 2007, Microvision had $40,424,000 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
through at least 2008.  Microvision may 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.

Principles of Consolidation

Until July 2004, the consolidated financial statements included the accounts
of Microvision, a Delaware corporation, and its majority-owned subsidiary Lumera
Corporation ("Lumera"), a Delaware corporation.  In July 2004,
Microvision's ownership interest in Lumera was reduced to 33% as a result of
Lumera completing an initial public offering of its common stock.  As a result
of the reduction in ownership, Microvision changed to the equity method of
accounting for its investment in Lumera until January 2006.  In January 2006,
Microvision sold 2,550,000 shares of its Lumera common stock.  As a result of
the reduction in ownership, Microvision changed to the cost basis of accounting
for available-for-sale securities for its investment in Lumera in accordance
with Financial Accounting Standards Board No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("FAS 115").


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 convertible debt, convertible preferred
stock, warrants and employee stock options.  Diluted net loss per share for the
three and nine months ended September 30, 2007 and 2006 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,
                                                                          --------------------------  --------------------------
                                                                              2007          2006          2007          2006
                                                                          ------------  ------------  ------------  ------------
Numerator:
Net loss available for common shareholders - basic and diluted           $     (4,718) $     (7,692) $    (13,765) $    (18,576)
                                                                          ============  ============  ============  ============

Denominator:
Weighted-average common shares outstanding - basic and diluted                 56,236        38,437        47,683        30,997
                                                                          ============  ============  ============  ============

Net loss per share - basic and diluted                                   $      (0.08) $      (0.20) $      (0.29) $      (0.60)
                                                                          ============  ============  ============  ============



As of September 30, 2007 and 2006, the Company excluded the following
convertible securities from diluted net loss per share as the effect of
including them would have been anti-dilutive:


September 30,
                                        2007         2006
                                    ------------ ------------
Publicly traded warrants                     --   12,363,000
Options and private warrants          9,442,000   10,907,000
Notes payable                                --    1,272,000
                                    ------------ ------------
                                      9,442,000   24,542,000
                                    ============ ============

3.  INVESTMENT SECURITIES, AVAILABLE-FOR-SALE

The Company accounts for investment securities, available-for-sale in
accordance with the provisions of Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities ("FAS
115"). FAS 115 addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities.  The Company's investment securities, available-for sale are
comprised of commercial paper, government and commercial debt securities and
auction rate securities. The Company has classified its entire investment
portfolio as available-for-sale. Available-for-sale securities are stated at
fair value with unrealized gains and losses included in other comprehensive
income (loss). Dividend and interest income are recognized when earned. Realized
gains and losses are presented separately on the income statement. The cost of
securities sold is based on the specific identification method.
4.  INVENTORY

Inventory at September 30, 2007 and December 31, 2006 consisted of the
following:

September 30,  December 31,
                                                                              2007          2006
                                                                          ------------  ------------
Raw materials                                                            $    398,000  $    146,000
Work-in-process                                                                17,000            --
Finished goods                                                                609,000       897,000
                                                                          ------------  ------------
                                                                         $  1,024,000  $  1,043,000
                                                                          ============  ============



The inventory at September 30, 2007 and December 31, 2006 consisted of raw
materials, work-in-process, and finished goods for ROVTM and Flic ®, the Company's hand-held bar code scanners.
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,
                                                                          --------------------------  --------------------------
                                                                              2007          2006          2007          2006
                                                                          ------------  ------------  ------------  ------------
Cost of contract revenue                                                 $     38,000  $      9,000  $    100,000  $     58,000
Cost of product revenue                                                        10,000        15,000        18,000        65,000
Research and development expense                                               96,000        73,000       244,000       183,000
Sales, marketing, general and administrative expense                          407,000       374,000       885,000     1,147,000
                                                                          ------------  ------------  ------------  ------------
Share-based employee compensation cost charged against income            $    551,000  $    471,000  $  1,247,000  $  1,453,000
                                                                          ============  ============  ============  ============`

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, 2007:

`Weighted
                                                                  Average
                                                      Weighted   Remaining
                                                       Average  Contractual   Aggregate
                                                      Exercise      Term      Intrinsic
Options                                  Shares         Price     (years)       Value
---------------------------------------- -----------  --------- ------------  ----------
Outstanding as of September 30, 2007      5,378,000  $    4.50          7.0  $6,239,000

Exercisable as of September 30, 2007      2,253,000  $    5.77          5.2  $2,845,000`

As of September 30, 2007, the Company's unamortized share-based compensation
was $5,100,000.  The Company plans to amortize this share-based compensation
cost over the next 2.7 years.

6.  LONG-TERM NOTES

Convertible Notes

The following table summarizes the activity related to the Company's
convertible notes during the nine months ended September 30, 2007 (in
thousands):

`Embedded
                                                                                            derivative
                                                                        Notes    Warrants    feature
                                                                      ---------  ---------  ---------- 
Balances at December 31, 2006                                        $   2,418  $   2,572  $       68
Principal payments on notes                                             (2,767)        --          --
Discount accretion for the nine months ended September 30, 2007            349         --          --
Changes in market value for the nine months ended September 30, 2007        --      1,493         (68)
                                                                      ---------  ---------  ----------
Balance of notes at September 30, 2007                               $      --  $   4,065  $       --
                                                                      =========  =========  ==========`

In March 2007, the Company made the final scheduled payments in connection
with its convertible notes as follows:

- cash payments of $1,400,000 in principal and $28,000 in interest, and
- issued 459,000 shares of its common stock in payment of $1,367,000 in
principal and $21,000 in interest.

The Company issued warrants to purchase 2,302,000 shares of common stock in
connection with the issuance of the convertible 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 the Company cannot engage in certain corporate
transactions affecting the common stock unless the Company makes a cash payment
to the holders of the warrants.  The Company records changes in the fair values
of the warrants in the statement of operations each period.  The Company 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 from 3.9% to 4.1%; and
contractual lives ranging from 0.8 years to 3.2 years.  The changes in value of
the warrants of $927,000 and $1,493,000 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.

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 $473,000 at September 30, 2007.

7.  RECEIVABLES FROM RELATED PARTIES

In 2000, the Board of Directors authorized the Company to provide
unsecured lines of credit to each of the Company's then three senior officers.
The limit of the line of credit was three times the executives' base salary less
any amounts outstanding under the Executive Option Exercise Note Plan. In 2001
and 2002, the Board of Directors authorized additions totaling $700,000, to the
limit for one senior officer. The lines of credit carry interest rates of 5.4%
to 6.2%. The lines of credit must be repaid within one year of the senior
officer's termination or within thirty days of demand by the Company in the
event of a plan termination, provided that in the event of such a demand the
senior officer may elect to deliver a promissory note with a one-year term in
lieu of payment.

In 2002, the Company determined that certain of its senior officers may have
insufficient net worth and short-term earnings potential to repay loans
outstanding under the Company's lines of credit. In 2002 and 2003, the Company
recorded allowances for doubtful accounts for receivables from senior officers
totaling $900,000.

In January 2006, two of the senior officers with outstanding loans left the
Company. Because the lines of credit were not fully secured and collection was
uncertain, the Company recorded an additional allowance of $1,031,000 in
December 2005. In accordance with the terms, the loans were due in January 2007.
Neither of the officers has repaid their loans. One of the officers pledged
50,000 shares of Lumera common stock as collateral for the loans.  In May 2007,
the Company foreclosed on the collateral and sold the shares for net proceeds of
$227,000.  The Company is pursuing collection of the remaining outstanding
balances. As a result of a review of the financial position of the former
executives and the potential difficulty in collecting loans from former
employees, the Company recorded additional allowances for doubtful accounts for
the receivables from senior officers of $542,000 during the year ended December
31, 2006 and $23,000 during the nine months ended September 30, 2007.

As of September 30, 2007 and December 31, 2006, the total amount outstanding
under the lines of credit was $2,496,000 and $2,723,000, respectively.  As of
September 30, 2007 and December 31, 2006, the allowance for receivables from
related parties was $2,496,000 and $2,473,000, respectively.

8.  ACCOUNTING FOR LUMERA

Investment Securities, Available-for-sale

In January 2006, Microvision sold 2,550,000 shares of its Lumera common
stock for $10.3 million.  Microvision recorded a "Gain on sale of
investment in Lumera" of approximately $7.3 million.

As a result of the reduction in ownership, Microvision changed to the cost
basis of accounting for its investment in Lumera in accordance with FAS 115.

During the three and nine months ended September 30, 2007, the Company sold
133,000 and 1,646,000 shares, respectively, of Lumera common stock for gross
proceeds of $597,000 and $8.4 million, respectively.  Microvision recorded gains
of $434,000 and $6.4 million in "Realized gain on sale of investment in
Lumera" for the three and nine months ended September 30,
2007,respectively, as a result of these sales.

As of September 30, 2007, the Company owned 104,000 shares of Lumera common
stock that were valued at $442,000 and were classified as "Investment
securities, available-for-sale."  The cost, net unrealized gain and
estimated fair market value of the shares of Lumera common stock as of September
30, 2007, are shown below (in thousands):

`Net      Estimated
                                                Unrealized     Fair
                                       Cost        Gain       Value
                                     ---------  ----------  ----------             
Lumera common stock                 $     123  $      319  $      442
                                     =========  ==========  ==========`

Warrant

In connection with the change in accounting method in January 2006, the
Company recorded $476,000 in "Other current assets" for the fair value
of a warrant previously received to purchase 170,500 shares of Lumera common
stock.  On the transaction date, the warrant was 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 4.6%; and
contractual life of 5.1 years.

At September 30, 2007, the warrant was revalued 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 4.1%; and contractual
life of 3.5 years.  The fair value of the warrant decreased to $310,000 at
September 30, 2007 from $595,000 at December 31, 2006, and the changes in value
for the three and nine months ended September 30, 2007 of $44,000 and $284,000,
respectively, were recorded as non-operating losses and are included in
"Gain (loss) on derivative instruments, net" in the consolidated
statement of operations.

9.	INCOME TAXES

On January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
(FIN 48).  FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. The new FASB standard also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition.

Historically, the Company's tax provision for financial statement purposes
and the actual tax returns have been prepared using consistent methodologies.
There were no material unrecognized tax benefits as of December 31, 2006.  Due
to the Company's Net Operating Loss Carryforwards and research and development
credits, any future adjustments to the unrecognized tax benefit will have no
impact on the Company's effective tax rate due to the valuation allowance which
fully offsets all tax benefits.  For the quarter ended September 30, 2007, the
unrecognized tax benefit did not change significantly.  The Company does not
expect the unrecognized tax benefit to change significantly during the next
twelve months. Any interest and penalties incurred on the settlement of
outstanding tax positions would be recorded as a component of interest
expense.

The Company files its tax returns as prescribed by the tax laws of the
jurisdictions in which it operates.  The Company's Federal and state taxes for
the years 2000 through 2006 are subject to examination.  As of September 30,
2007, the Company believes assessments that may possibly arise will likely be
immaterial to 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 miniature display and imaging engines based upon our PicoP
architecture. The PicoP utilizes our expertise in two dimensional
Micro-Electrical Mechanical system ("MEMS") light scanning technologies, lasers,
optics and electronics to create a high quality video or still image from a
small form factor device with lower power needs than conventional display
technologies.

In 2006, we announced our strategy to develop and supply PicoP-based
miniature display engines to potential OEM customers who will embed them into a
variety of consumer and automotive products. The primary objective for consumer
applications is to provide users of mobile devices with a large screen viewing
experience produced by a small embedded projector. Mobile devices may include
cell phones, PDA's, gaming consoles and other consumer electronics products.
These potential products would allow users to watch movies, play videos, display
images, and other data onto a variety of surfaces. The same display engines with
some modification could be embedded into the dashboard of an automobile or an
airplane to create a heads up display (HUD) that could project point-by-point
navigation, critical operational, safety and other information important to the
driver or pilot. The PicoP-based engine could be further modified to be embedded
into a pair of glasses to provide the mobile user with a see-through or occluded
personal display to view movies, play games or access other content.

Results of Operations

Contract revenue.

`% of                  % of
                                                contract              contract
                                       2007      revenue     2006      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30                                                                     
Government revenue                  $   1,773       77.1  $     271       50.1  $   1,502     554.2
Commercial revenue                        528       22.9        270       49.9        258      95.6
                                     ---------             ---------             ---------
Total contract revenue              $   2,301             $     541             $   1,760     325.3
                                     =========             =========             =========

Nine months ended September 30
Government revenue                  $   4,752       74.0  $   2,281       62.4  $   2,471     108.3
Commercial revenue                      1,670       26.0      1,376       37.6        294      21.4
                                     ---------             ---------             ---------
Total contract revenue              $   6,422             $   3,657             $   2,765      75.6
                                     =========             =========             =========`

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

Our contract revenue in a particular period is dependent upon the timing of
entering 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 higher during the three and nine months ended September 30,
2007 than the same periods in 2006, due to higher contract backlog at the
beginning of the respective periods.

In March 2007, we announced a contract with a leading Tier 1 automotive
supplier to develop projection-based display solutions based on our
PicoP(TM).

In May 2007, we announced a $3.2 million one year contract with the U. S. Air
Force to provide a prototype lightweight see-through full-color eyewear display.

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, 2007 was $5.3 million
compared to $6.8 million at September 30, 2006, all of which is expected to be
completed during the next twelve months.

Product revenue.

`% of                  % of
                                                 product               product
                                       2007      revenue     2006      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30                                                                     
Flic revenue                        $     272       91.3  $     190       67.4  $      82      43.2
Nomad revenue                              26        8.7         92       32.6        (66)    (71.7)
                                     ---------             ---------             ---------
Total product revenue               $     298             $     282             $      16       5.7
                                     =========             =========             =========

Nine months ended September 30
Flic revenue                        $     998       92.9  $   1,374       89.0  $    (376)    (27.4)
Nomad revenue                              76        7.1        170       11.0        (94)    (55.3)
                                     ---------             ---------             ---------
Total product revenue               $   1,074             $   1,544             $    (470)    (30.4)
                                     =========             =========             =========`

Our quarterly revenue may vary substantially due to the timing of product
orders from customers, production constraints and availability of raw materials
and components.

In May 2007, we announced the launch of ROV, our new bar code scanner
product.  The ROV is based on our proprietary MEMS technology. We plan for ROV
to be manufactured by our contract manufacturing partner in Malaysia.

Flic revenue for nine months ended September 30, 2007 was lower than the same
period in 2006. We believe that many of our customers are waiting for the
availability of ROV before placing orders.  We had planned to begin commercial
shipments of ROV during the third quarter 2007.  During our Beta evaluation, we
determined that ROV did not meet our quality standards.  We have delayed the
launch of ROV production until we can correct the deficiencies.  We expect to
begin commercial shipments during the fourth quarter of 2007.



The backlog of product orders at September 30, 2007 was approximately
$391,000, compared to $98,000 at September 30, 2006, all of which is scheduled
for delivery during the next twelve months.

Cost of contract revenue.

`% of                  % of
                                                contract              contract
                                       2007      revenue     2006      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30     $   1,349       58.6  $     343       63.4  $   1,006     293.3
Nine months ended September 30          3,576       55.7      2,493       68.2      1,083      43.4`

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 for both
the three and nine month ended September 30, 2007 than the same periods in 2006.
This improvement is a result of negotiating better terms on contracts entered
into in late 2006 and early 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
                                       2007      revenue     2006      revenue   $ change  % change
(in thousands)                       ---------  ---------  ---------  ---------  --------- ---------
Three months ended September 30     $     404      135.6  $     675      239.4  $    (271)    (40.1)
Nine months ended September 30          1,134      105.6      3,650      236.4     (2,516)    (68.9)`

Cost of product revenue includes both the direct and allocated indirect costs
of manufacturing Flics sold to customers.  Direct costs include labor, materials
and other costs incurred directly in the manufacture of Flic.  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, 2007 and 2006, we
expensed approximately $71,000 and $276,000, respectively, of manufacturing
overhead associated with production capacity in excess of production
requirements.

The decline in cost of product revenue as a percentage of product revenue for
the three and nine months ended September 30, 2007 compared to the previous year
is attributable to the following factors:

- The decision in June 2006 to no longer support the Nomad product line.
During the six months ended June 30, 2006 we recorded expenses of $1.2 million
associated with the Nomad product line that were not repeated in 2007.
- Reduced direct cost and overhead on the Flic product line resulting in a
savings of approximately 205% and 64% for the three and nine months ended
September 30, 2007 compared to the same period in 2006.

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.

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $   3,694  $   2,855  $     839       29.4
Nine months ended September 30         10,247      7,316      2,931       40.1`

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.

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.

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $   3,691  $   3,652  $      39        1.1
Nine months ended September 30         11,328     13,066     (1,738)     (13.3)`

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.

In early 2006, we announced our plan to reduce spending in sales, marketing,
general and administrative expenses.  We continue to aggressively manage these
costs as part of our strategy of accelerating the development of products based
on the PicoP while controlling the cash burn.  The decrease in sales, marketing,
general and administrative expense for the nine months ended September 30, 2007
is the result of cost reduction efforts.

Interest income.

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $     526  $     236  $     290      122.9
Nine months ended September 30            860        484        376       77.7`

The increase in interest income for the three and nine months ended
September 30, 2007 compared to the same periods in 2006 resulted primarily from
higher average cash and investment securities balances.

Interest expense.

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $      14  $   1,346  $  (1,332)     (99.0)
Nine months ended September 30            499      4,804     (4,305)     (89.6)`

In March 2005, we raised $10 million before issuance costs of $423,000
from the issuance of convertible notes ("March Notes") and warrants to purchase
an aggregate of 462,000 shares of Microvision common stock. In December 2005, we
raised $10 million before issuance costs of $134,000 from the issuance of
convertible notes ("December Notes"), 838,000 shares of Microvision common stock
and warrants to purchase an aggregate of 1,089,000 shares of Microvision common
stock.  The decrease in interest expense from the prior year relates to the
lower outstanding balance of our March and December Notes in 2007 than in
2006.

Gain (loss) on derivative instruments, net.

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $     883  $     125  $     758      606.4
Nine months ended September 30         (1,709)     3,179     (4,888)    (153.8)`

In connection with the issuance of our Notes, we concluded that the note
holders' right to convert all or a portion of the Notes into our common stock is
an embedded derivative instrument as defined by FAS 133, Accounting for
Derivative Instruments and Hedging Activities.  We determine the value of
the derivative features at each balance sheet date using the Black-Scholes
option-pricing model.  Due to the retirement of our Notes in March 2007, the
value of the derivative feature decreased to zero.  The changes in value of $0
and $68,000 for the three and nine months ended September 30, 2007,
respectively, were recorded as non-operating gains and are included in "Gain
(loss) on derivative instruments, net" in the consolidated statement of
operations.

We issued warrants to purchase 2,302,000 shares of common stock in connection
with the issuance of the 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.
We record changes in the fair values of the warrants in the statement of
operations each period.  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 from 3.9% to 4.1%; and contractual lives ranging from 0.8 years to 3.2
years.  The changes in value of the warrants of $927,000 and $1,493,000 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.

In January 2006, we sold 2.6 million shares of our Lumera common stock for
$10.3 million.  As a result of the reduction in ownership, we changed to the
cost basis of accounting for our investment in Lumera in accordance with FAS
115.  In connection with the change in accounting method, we recorded $476,000
in "Other current assets" for the fair value of warrants previously received to
purchase 170,500 shares of Lumera common stock.  On the transaction date, 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, 2007, the warrants were valued
using the Black-Scholes option-pricing model with the following assumptions:
expected volatilities of 83%; expected dividend yields of 0%; risk free interest
rates of 4.1%; and contractual lives of 3.5 years.  As of September 30, 2007,
the fair value of the warrants decreased to $310,000 at September 30, 2007 from
$595,000 at December 31, 2006, and 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.



Equity in losses of Lumera and Gain on sale of investment in
Lumera.

Equity in losses of Lumera:

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $      --  $      --  $      --         n/a
Nine months ended September 30             --       (290)       290     (100.0)`

Gain on sale of investment in Lumera:

`2007       2006     $ change   % change
(in thousands)                       ---------  ---------  ---------  ---------                     
Three months ended September 30     $     434  $      --  $     434         n/a
Nine months ended September 30          6,397      7,270       (873)     (12.0)`

As discussed above, in January 2006, we sold 2.6 million shares of our Lumera
common stock for $10.3 million.  We recorded a "Gain on sale of investment
in Lumera" of approximately $7.3 million.  We recorded a charge of $290,000
for our proportion of Lumera net loss for the period preceding the sale and
change in accounting method.

During the three and nine months ended September 30, 2007, we sold 133,000
and 1,646,000 shares of Lumera common stock for gross proceeds of $597,000 and
$8.4 million, respectively.

Liquidity and Capital Resources

We have funded our operations to date primarily through the sale of common
stock, convertible preferred stock, convertible debt, warrants and, to a lesser
extent, from development contract revenues and product sales.  At September 30,
2007, we had $40.4 million in cash, cash equivalents and investment securities,
available-for-sale.  On June 21, 2007, we exercised our right to call our
publicly traded warrants.  Under the terms of the publicly traded warrants, the
warrant holders had until July 6, 2007 to exercise their warrants or the
warrants would expire.  We received $34,092,000 from the exercise of 12,855,000
publicly traded warrants after we exercised our right to call these warrants.
In addition, during the nine months ended September 30, 2007, we sold
approximately 1,646,000 shares of Lumera common stock for gross proceeds of
$8,426,000.  Based on our current operating plan, we believe we have sufficient
cash to fund operations through at least 2008.   We may require additional cash
to fund our 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 us on a timely basis.  If adequate funds are not available
to satisfy either short-term or long-term capital requirements, we will be
required to limit our operations substantially.  This limitation of operations
may include reductions in staff, operating costs and capital expenditures.

Cash used in operating activities totaled $16.6 million during the nine
months ended September 30, 2007, compared to $21.3 million during the same
period in 2006.  Cash used in operating activities for both periods resulted
primarily from the loss from operations.

Cash used in investing activities totaled $13.9 million during the nine
months ended September 30, 2007, compared to cash provided by investing
activities of $10.1 million during the same period of 2006.   Cash used in
investing activities for the nine months ended September 30, 2007 includes
purchases of $21.6 million of investment securities with a portion of the
proceeds from the call of our public warrants. In January 2006, we sold 2.6
million shares of our Lumera common stock for $10.3 million.  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 $849,000 for capital
expenditures during the nine months ended September 30, 2007, compared to $2.0
million during the same period in 2006.  Capital expenditures include leasehold
improvements to leased office space and computer hardware and software,
laboratory equipment and furniture and fixtures to support operations.  The
decrease is due to the absence of expenditures for leasehold improvements to our
new facility that we incurred in 2006.

Cash provided by financing activities totaled $34.4 million during the nine
months ended September 30, 2007, compared to cash provided by financing
activities of $18.4 million during the same period in 2006.  The change in cash
provided by financing activities was due to the timing of these activities in
the respective periods.

ITEM 3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Of our total cash equivalents and investment securities available-for-sale
balance, 60% 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 40% 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.  Auction rate securities are securities that generally have
maturities of twenty to thirty years.  After the initial issuance, however, the
interest rate is periodically reset, usually every seven, fourteen or
twenty-eight days, through a Dutch auction process. If an auction is unsuccessful, the
holder of the security must hold their position until the next auction date at
an interest rate specified in the issuer's statement.  To date, the auction rate
securities held by the Company have not had a failed auction.

The weighted average maturities of cash equivalents and investment securities
available-for-sale as of September 30, 2007, are as follows (dollar amounts in
thousands):

`Amount      Percent
                                     ---------  ---------
Cash and cash equivalents             $18,484      45.72%
Less than one year                     $8,720      21.57%
One to two years                       $3,520       8.71%
Greater than five years                 9,700      24.00%
                                     ---------  ---------
                                       40,424     100.00%
                                     =========  =========`



Presently, all of our development contract payments are denominated in U.S.
dollars and, consequently, we believe we have no material foreign currency
exchange rate risk.  However, in the future we may enter into development
contracts or product sales in foreign currencies that may subject us to foreign
exchange rate risk.

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, 2007, we had an accumulated deficit of $253.4 million.
- We incurred consolidated net losses of $187.4 million from inception through
2004, $28.2 million in 2005, $24.0 million in 2006, and consolidated net loss of
$13.8 million in the nine months ended September 30, 2007.

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 our PicoP 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 2007 and likely thereafter.  We
cannot be certain that we will achieve positive cash flow at any time in the
future.

We may 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 through at
least 2008.  We may require additional cash to fund our operating plan past that
time.  We may require additional capital in the future to fund our operations,
including to:

- Further develop the PicoP technology,
- 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 light
scanning 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 the PicoP technology or products incorporating
this technology will achieve market acceptance.  If the PicoP technology does
not achieve market acceptance, our revenues may not grow.

Our success will depend in part on customer acceptance of the PicoP
technology.  The PicoP technology 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 technology 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 the PicoP technology.

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.
During all four quarters of 2006, and the first three quarters of 2007, the
market price of our stock traded below $5.00 per share.  On October 31, 2007,
the closing price of our stock was $4.63.

Our lack of 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 the
PicoP technology 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 technology 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 PicoP 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 the PicoP technology and
other technologies 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 the PicoP 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 PicoP technology, to cease licensing
PicoP 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 PicoP display technology could become subject to new
health and safety regulations that would reduce our ability to commercialize the
PicoP display technology.  Compliance with any such new regulations would likely
increase our cost to develop and produce products using the PicoP display
technology and adversely affect our financial results.

If we cannot manufacture products at competitive prices, our financial
results will be adversely affected.

To date, we have produced limited quantities of our Flic products and
demonstration units for research, development and demonstration purposes.  The
cost per unit for these units currently exceeds the level at which we could
expect to profitably sell these products.  If we cannot lower our cost of
production, we may face increased demands on our financial resources, possibly
requiring additional equity and/or debt financing to sustain our business
operations.

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.  In addition, our efforts to improve the quality and utility of
our existing Flic products may not result in improved sales.  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 Flic
product and plan to use a contract manufacturer for our new ROV product, and we
plan to continue using foreign manufacturers to manufacture some of our other
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 experience delays or failures in developing commercially viable
products, we may have lower revenues.

We have developed demonstration units incorporating the light scanning
technology. 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 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 2007 and the full year of 2006, 63% and 51%,
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 developmental 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 the PicoP display technology.  We
believe that development programs and sales of potential products in this market
will represent a significant portion of our future revenues.  Developments that
adversely affect the defense sector, including delays in government funding and
a general economic downturn, could cause our revenues to decline
substantially.

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 the PicoP technology and products
incorporating the PicoP technology 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 technology or find
that the development, manufacture or sale of products incorporating the PicoP
technology would not be feasible.  To the extent that we enter into cooperative
development, sales and marketing or other joint venture arrangements, our
revenues will depend upon the 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

|Exhibit Number | Description                                                                                                                                                                     
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 2, 2007 | BY: | /s/  Alexander Y. Tokman                                
|----------------------- | --- | --------------------------------------------------------
|                        |     | Alexander Y. Tokman                                     
|                        |     | Chief Executive Officer
   (Principal Executive Officer)





|Date:  November 2, 2007 | BY: | /s/  Jeff T. Wilson                                  
|----------------------- | --- | -----------------------------------------------------
|                        |     | Jeff T. Wilson                                       
|                        |     | Chief Financial Officer
(Principal Financial Officer)

---



EXHIBIT INDEX

The following documents are filed.

|Exhibit Number | Description                                                                                                                                                                     
|-------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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