eMagin Announces Third Quarter 2012 Results

  eMagin Announces Third Quarter 2012 Results

            Strengthens Operations with New Head of Manufacturing

           Maintains 2012 Revenue Guidance Range to $30-$34 Million

Business Wire

BELLEVUE, Wash. -- November 05, 2012

eMagin Corporation (NYSE MKT: EMAN), the leader in OLED technology for the
design and manufacture of OLED microdisplays for high resolution imaging
products, today announced results for the third quarter of 2012, ended
September 30, 2012.

“Important items completed during the third quarter include work on two
next-generation OLED microdisplays, hiring a new head of manufacturing and
achieving full automation of our new OLED deposition tool,” said. Andrew G.
Sculley, president and chief executive officer. “Samples of our new XGA
display have been shipped, paving the way for our entry into the large and
growing market for electronic camera viewfinders. In addition, our new digital
SVGA display, a next-generation version of our best-selling product, the SVGA,
is nearly complete. These new displays further broaden our industry leading
product line of OLED microdisplays, with resolutions from VGA to WUXGA, and
soon up to 2,000 by 2,000 pixels.”

Mr. Sculley continued, “We made great strides in optimizing our new OLED
deposition machine. We are now running SVGA displays and will qualify other
displays going forward. As we continue to enhance our manufacturing
operations, we recognized the need to have a highly experienced head of
manufacturing on board. To that end, I am pleased to announce that John R.
Coleman has joined eMagin as director of manufacturing. John brings more than
25 years of engineering, manufacturing and operations experience at leading
high tech companies including ON Semiconductor, UltraSource, Inc.,
STMicroelectronics and Atmel. John’s depth of knowledge and experience will be
invaluable as we continue to optimize our new OLED deposition machine, make
other enhancements to our processes and prepare for anticipated higher
production volumes.”

Third Quarter 2012 Results

Total revenues for the third quarter were $7.5 million versus $8.3 million for
the third quarter of 2011. The decrease in total revenues is attributable to
lower R&D contract revenue. Product revenue equaled the comparable year-ago
quarter. eMagin had additional display purchase orders that were not shipped
and will be pushed into the fourth quarter.

Gross margin for the third quarter was 49 percent on gross profit of $3.6
million, compared to a gross margin of 53 percent on gross profit of $4.4
million in the same quarter last year. The decrease in third quarter 2012
gross margin was due primarily to higher production costs and the lower
average selling price per unit.

Operating expenses are comprised of selling, general and administrative (SG&A)
expenses and research and development (R&D) expenses. SG&A expenses decreased
$74,000 and R&D expenses increased $408,000 due to increased company funded
R&D activity, including work on two new displays, the XGA display for the
electronic viewfinder market and the digital SVGA.

Income from operations was $558,000 in the third quarter of 2012 as compared
to $1.6 million in the third quarter of 2011. Net income for the third quarter
was $340,000 or $0.01 per diluted share. The company adjusts net income for
income tax since it records full tax rates but due to its net operating loss
carryforwards (NOL) pays only a small amount of income tax. Adjusted net
income, taking into account the impact of the net operating loss carryforwards
(NOL), was $550,000 or $.02 per diluted share. Third quarter adjusted EBITDA
was $1.2 million versus $2.1 million in the prior year. (See tables below.)

At September 30, 2012, the Company had approximately $16.6 million in cash,
cash equivalents and investments in certificates of deposit and corporate
bonds, compared to $14.3 million on December 31, 2011. During the quarter, the
Company did not repurchase any additional shares of its common stock. As of
September 30, 2012, there was approximately $2.0 million remaining under the
stock repurchase plan. The Company has no debt.

Recent Corporate Highlights

  *John R. Coleman has joined eMagin as director of manufacturing. He will be
    located in the Company’s manufacturing facility in Hopewell Junction, New
    York. John brings more than 25 years of engineering, manufacturing and
    operations experience at leading high tech companies,
  *eMagin achieved fully automated operation of its new OLED deposition
    machine and is continuing to optimize throughput as additional operators
    are trained and product-specific tooling is created to allow the new
    machine to run all of its products,
  *First prototypes of the XGA display were completed and samples were
    shipped to a strategic customer. The Company is implementing further
    improvements prior to general release in the fourth quarter. The display
    takes advantage of the improvements embodied in our SXGA and WUXGA OLED
    microdisplays,
  *The U.S. SOCOM program regarding the WUXGA is progressing well and remains
    on schedule for completion in the fourth quarter,
  *The Display Beam Combiner Assembly for the Enhanced Night Vision Goggle
    program with ITT Exelis is in full production mode with ongoing deliveries
    to Exelis,
  *Phase I of the Navair program is nearly completed and will be finalized
    before the end of 2012. Meanwhile, Phase II of the program has begun,
  *eMagin will soon be releasing its Digital SVGA OLED microdisplay.The
    display is a direct replacement of our SVGA+ but with a digital interface
    with greatly improved contrast and pixel-to-pixel uniformity. The display
    takes advantage of the improvements embodied in our SXGA and WUXGA OLED
    microdisplays.

Outlook

eMagin is maintaining its 2012 revenue guidance range of $30-$34 million. The
Company expects further increases in display sales during the balance of the
year due to greater activity from existing and new customers as well as from
the ongoing enhancements to its production processes.

Conference Call Information

Full results will be published in the Company's 10-Q report for the third
quarter ended September 30, 2012, to be filed on Thursday November 8th and
will also be available via the Company’s website, www.emagin.com. A conference
call and live webcast will begin today at 5:00 p.m. ET. An archive of the
webcast will be available one hour after the live call through December 5,
2012. To access the live Webcast or archive, please visit the Company's
website at ir.emagin.com or www.earnings.com.

About eMagin Corporation

A leader in OLED microdisplay technology, OLED microdisplay manufacturing
know-how and mobile display systems, eMagin manufactures high-resolution OLED
microdisplays and integrates them with magnifying optics to deliver virtual
images comparable to large-screen computer and television displays in
portable, low-power, lightweight personal displays. eMagin microdisplays
provide near-eye imagery in a variety of products from military, industrial,
medical and consumer OEMs. More information about eMagin is available at
www.emagin.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including those regarding eMagin Corporation's
expectations, intentions, strategies and beliefs pertaining to future events
or future financial performance. Actual events or results may differ
materially from those in the forward-looking statements as a result of various
important factors, including those described in the Company's most recent
filings with the SEC. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, such statements should not be
regarded as a representation by the Company, or any other person, that such
forward-looking statements will be achieved. The business and operations of
the Company are subject to substantial risks which increase the uncertainty
inherent in forward-looking statements. We undertake no duty to update any of
the forward-looking statements, whether as a result of new information, future
events or otherwise. In light of the foregoing, readers are cautioned not to
place undue reliance on such forward-looking statements.

Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements presented on a
GAAP basis, the Company has provided non-GAAP financial information, namely
earnings before interest, taxes, depreciation and amortization (EBITDA). The
Company's management believes that this non-GAAP measure provides investors
with a better understanding of how the results relate to the Company's
historical performance. The additional adjusted information is not meant to be
considered in isolation or as a substitute for GAAP financials. Management
believes that these adjusted measures reflect the essential operating
activities of the Company. A reconciliation of non-GAAP financial information
appears below:

eMAGIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)
                                                             
                                              September 30,
                                              2012              December 31,
                                                                2011
                                              (unaudited)
                                                                             
ASSETS
                                                                             
Current assets:
Cash and cash equivalents                     $   7,567         $  7,571
Investments                                       8,267            5,745
Accounts receivable, net                          4,977            5,576
Inventories, net                                  2,814            2,760
Prepaid expenses and other current assets        931             1,008
Total current assets                              24,556           22,660
Long-term investments                             761              1,000
Equipment, furniture and leasehold                6,904            5,980
improvements, net
Other assets                                      125              127
Deferred tax asset                               8,165           8,165
Total assets                                  $   40,511        $  37,932
                                                                             
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                             
Current liabilities:
Accounts payable                              $   888           $  961
Accrued expenses                                  2,462            2,246
Other current liabilities                        739             614
Total current liabilities                         4,089            3,821
                                                                             
Commitments and contingencies
                                                                             
Shareholders’ equity:
Preferred stock, $.001 par value:
authorized 10,000,000 shares:
Series B Convertible Preferred stock,
(liquidation preference of $5,659,000)
stated value $1,000 per share, $.001 par          —                —
value: 10,000 shares designated and 5,659
issued and outstanding as of September 30,
2012 and December 31, 2011
Common stock, $.001 par value: authorized
200,000,000 shares, issued and outstanding,       24               24
23,674,541 shares as of September 30, 2012
and 23,513,978 as of December 31, 2011
Additional paid-in capital                        223,052          220,838
Accumulated deficit                               (186,191  )      (186,656  )
Treasury stock, 150,000 shares as of
September 30, 2012 and 25,000 shares as of       (463      )     (95       )
December 31, 2011
Total shareholders’ equity                       36,422          34,111
Total liabilities and shareholders’ equity    $   40,511        $  37,932
                                                                             

eMAGIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(unaudited)
                                                               
                 Three Months Ended                Nine Months Ended

                 September 30,                     September 30,
                 2012             2011             2012             2011
Revenue:
                                                                                 
Product          $ 6,309          $ 6,306          $ 19,263         $ 16,564
Contract          1,201           1,957           2,971           4,589
Total revenue,    7,510           8,263           22,234          21,153
net
                                                                                 
Cost of goods
sold:
                                                                                 
Product            3,132            2,902            9,914            8,554
Contract          729             1,002           1,477           2,368
Total cost of     3,861           3,904           11,391          10,922
goods sold
                                                                                 
Gross profit      3,649           4,359           10,843          10,231
                                                                                 
Operating
expenses:
                                                                                 
Research and       1,173            765              3,571            2,071
development
Selling,
general and       1,918           1,992           6,525           6,361
administrative
Total
operating         3,091           2,757           10,096          8,432
expenses
                                                                                 
Income from        558              1,602            747              1,799
operations
                                                                                 
Other income
(expense):
Interest           (10        )     (26        )     (18        )     (85        )
expense, net
Other income,      13               3                32               32
net
Change in fair
value of          —               3,028           —               2,548
warrant
liability
Total other
income            3               3,005           14              2,495
(expense), net
Income before
provision for      561              4,607            761              4,294
income taxes
Provision for     221             488             295             542
income taxes
                                                                                 
Net income       $ 340            $ 4,119          $ 466            $ 3,752
Less net
income
allocated to      83              1,015           113             954
participating
securities
Net income
allocated to     $ 257            $ 3,104          $ 353            $ 2,798
common shares
                                                                                 
Income per       $ 0.01           $ 0.13           $ 0.02           $ 0.13
share, basic
Income per       $ 0.01           $ 0.03           $ 0.01           $ 0.02
share, diluted
                                                                                 
Weighted
average number
of shares
outstanding:
                                                                                 
Basic             23,444,361      23,084,229      23,473,770      22,153,525
Diluted           25,393,035      25,322,920      25,360,864      25,642,105
                                                                                 

eMAGIN CORPORATION

Non-GAAP Information

(in thousands except per share data)

                Three Months Ended               Nine Months Ended
                September 30,                     September 30,
Adjusted Net    2012            2011             2012            2011
Income:
                                                                   
Income before
provision for $ 561            $ 4,607          $ 761            $ 4,294
income taxes
Adjusted
provision for   11              92              15              86         
income taxes
Adjusted net    550              4,515            746              4,208
income
Less adjusted
net income
allocated to    134             1,112           181             1,070      
participating
securities
Adjusted net
income          416             3,403           565             3,138      
allocated to
common shares
                                                                   
Adjusted EPS:
Basic         $ 0.02          $ 0.15          $ 0.02          $ 0.14       
Diluted       $ 0.02          $ 0.05          $ 0.02          $ 0.04       
                                                                   
Weighted
average
number of
shares
outstanding:
Basic           23,444,361       23,084,229       23,473,770       22,153,525
Diluted         23,393,035       25,322,920       25,360,864       25,642,105
                                                                   
Adjusted
EBITDA:
                                                                   
Adjusted net  $ 550            $ 4,515          $ 746            $ 4,208
income
Change in
fair value of   -                (3,029     )     -                (2,548     )
warrant
liability
Severance       (6         )     -               (53        )     9          
Net income,     544              1,486            693              1,669
adjusted
Non-cash        559              416              1,959            1,777
compensation
Depreciation
and             57               48               168              118
amortization
expense
Interest        10               26               18               85
expense
Adjusted
provision for   11              92              15              86         
income taxes
Adjusted      $ 1,181         $ 2,068         $ 2,853         $ 3,735      
EBITDA

Contact:

Investors:
eMagin Corporation
Paul Campbell, 425-284-5220
Chief Financial Officer
pcampbell@emagin.com