eMagin Reports Fourth Quarter and Fiscal Year 2005 Results

eMagin Corporation (AMEX:EMA), the leader in OLED
virtual imaging technology, announced today financial results for the
quarter and year ended December 31, 2005.
   Fourth quarter and fiscal year selected highlights include the
following:

   Financial Summary:

   --  Revenue for the three months ended December 31, 2005 of $1.3
        million increased 146% from $518,000 at December 31, 2004.
        Full year revenue of $3.7 million increased 4% from $3.6
        million in 2004. Backlog remains consistent at approximately
        $28 million.

   --  Net loss and loss per share applicable to common stock for the
        three and twelve months ended December 31, 2005 was $4.8
        million, or $0.05 per share and $16.5 million, or $0.19 per
        share as compared to a net loss of $3.0 million or $0.04 per
        share and $12.7 million, or $0.20 per share during the three
        and twelve month periods ended December 31, 2004.

   --  Balance sheet showed $6.8 million in cash at December 31, 2005
        and inventory of $3.8 million.

   2005 Highlights:

   "In 2005 we made major advances in design wins, channel
development, and customer awareness. We also strengthened our
management, engineering, and marketing teams. Our primary challenge in
2005 was manufacturing and we attacked it aggressively," said Gary
Jones, chief executive officer of eMagin.
   "After much hard work, we believe that we've now addressed the
most critical yield and throughput issues. We believe that we have
identified our major manufacturing issues, put the right fixes in
place and have a good plan for further improvement. We believe that
the Fishkill NY fab should later this year be able to ramp to 10-20
times the display production rate achieved in 2005, assuming the
remaining contemplated improvements are made. We very recently began
running at a much higher rate than ever before, setting a new internal
OLED throughput record just last week. We are placing the highest
emphasis on quality - in fact we have recently passed three very
extensive quality audits for major military OEM programs this quarter
alone."
   "Military wins are finally starting to shift to larger contracts
after long qualifications and procurement cycles. We have recently
been notified of or are in final negotiations on major new design wins
with the United States and international OEMs. This enhances our
potential revenue stream, if all options are exercised, to over $65M
million over the next 5-6 years, and we see this opportunity growing
in size as thermal imaging, situational awareness, simulation and
training and many other applications benefiting from the OLED's low
system level power consumption, high speed, and rugged temperature
characteristics expand these markets."
   "The military systems growth is paralleled to a lesser extent by
growth in the medical and industrial markets, pushing the demand for
higher end display products. The consumer OEM backlog of $28 million
has remained in place in spite of both our display manufacturing
issues and customer design launch push outs. Deliveries to each of the
three major backlog customers have recently resumed so they can
finalize their products."
   "In 2005, we entered the emerging consumer market category in
personal display systems with the Z800 3DVisor personal display
system. This first of class product provides professional quality
simulation capability at the price of a low end notebook, with high
portability. The Z800 3DVisor not only won a 2006 CES Innovations
award for Gaming Peripherals but also the prestigious 2006 CES Best of
Innovations award for the entire display category, competing against
wide screen plasma projectors and LCD screens. The Z800 3DVisor was
also recognized with the Digital Life's Innovators Class of 2005
designation. As production increases, we are working to expand
awareness about the value-add proposition of the Z800 VR headset and
increase the number of select distribution arrangements and
co-promotions. We recently announced some of the first distributors,
and the product is now available via Amazon and PCMall, with others
being added."
   "One of the most important milestones we've made for the gaming
market is last week's introduction of an all new professional level
Software Developers Kit (SDK) that allows game developers to build in
intrinsic support for the Z800 3DVisor so that almost any computer or
video card will be able to achieve startlingly realistic full-3D
virtual reality results, further expanding the market. We will soon be
announcing partnering with one of the world's largest game
publishers."
   "Our SVGA-3D-shrink chip development continues to move forward and
is still expected to begin sampling next quarter. The SVGA-3DS is a
major pixel cell and interface concept revision, with many embedded
features. Our SXGA will employ the same cell structure and we expect
to move to push the SXGA design to completion after the SVGA-3DS
launch."
   "As we mentioned last quarter, we anticipate our large military
pipeline, the success of our systems products and our new displays
should support significant revenue growth in 2006. For the first
quarter ended March 31, 2006 we expect that revenue will increase
between 218% - 165% over the first quarter of 2005 to $1.8 million -
$1.5 million. These results are in line with our target for full year
revenue of approximately $20 million."
   Full results are available by referencing the Company's 10K for
the year ended December 31, 2005 to be filed with the SEC.

   About eMagin Corporation

   A leader in OLED microdisplay and virtual imaging technologies,
eMagin integrates high-resolution OLED microdisplays, magnifying
optics, and systems technologies to create a virtual image that
appears comparable to that of a computer monitor or a large-screen
television. eMagin's OLED displays have broad market reach and are
incorporated into a variety of near-to-eye imaging products by
military, industrial, medical and consumer OEMs who choose eMagin's
award-winning technology as a core component for their solutions.
eMagin has recently introduced its first direct-to-consumer system,
the Z800 3DVisor, which provides superb 3D stereovision and
headtracking for PC gaming, training and simulation, and business
applications. eMagin's microdisplay manufacturing and R&D operations
are co-located with IBM on its campus in East Fishkill, New York.
System design facilities and sales and marketing are located in
Bellevue, Washington. A sales office is located in Tokyo, Japan. For
additional information, please visit www.emagin.com and
www.3dvisor.com.

   Note: eMagin is a trademark of eMagin Corporation.

   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 and its subsidiaries' expectations, intentions,
strategies and beliefs pertaining to future events or future financial
performance. All statements contained herein are based upon
information available to eMagin's management as of the date hereof,
and actual results may vary based upon future events, both within and
without eMagin management's control. In some cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms, or
other comparable terminology. These statements are only predictions.
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.
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                          eMAGIN CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                               Unaudited
                   (In thousands, except share data)

                                Three Months Ended     Year Ended
                                   December 31,       December 31,
                                                   -------------------
                                   2005     2004     2005      2004
                                 -------- -------- --------- ---------
Revenue:
Product revenue, net of returns  $ 1,272  $   518  $  3,745  $  3,593
Cost of goods sold                 3,188    1,458    10,219     5,966
                                 -------- -------- --------- ---------
  Gross loss                      (1,916)    (940)   (6,474)   (2,373)
                                 -------- -------- --------- ---------
Operating expenses:
Research and development             981      454     4,020       898
Selling, general and
 administrative                    1,997    1,587     6,316     4,340
Stock based compensations              4     ----      ----        88
                                 -------- -------- --------- ---------
  Total operating expenses         2,982    2,041    10,336     5,326
                                 -------- -------- --------- ---------
Loss from operations              (4,898)  (2,981)  (16,810)   (7,699)
Other income (expense)               100       30       282    (5,012)
                                 -------- -------- --------- ---------
Net loss                         $(4,798) $(2,951) $(16,528) $(12,711)
                                 ======== ======== ========= =========
Loss per share, basic and 
 diluted                         $ (0.05) $ (0.04) $  (0.19) $  (0.20)
Weighted average number of
 common shares outstanding:
   Basic and diluted              94,756   76,193    85,407    64,278
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