eMagin Reports Second Quarter 2006 Results; Revenue Growth of 157%

eMagin Corporation (AMEX:EMA), the leader in OLED
virtual imaging technology, announced today financial results for the
quarter ended June 30, 2006.

   Second quarter selected highlights include the following:

   Financial Summary:

   --  Revenue for the three and six months ended June 30, 2006 of
        $1.7 million and $3.3 million increased 157% and 147%
        respectively from $0.7 million and $1.3 million at June 30,
        2005. The growth in revenue was directly attributable to
        increases in microdisplay output from our New York production
        facility.

   --  Approximately 9,800 microdisplays were produced during the
        second quarter, up 151% from 3,900 for the quarter ended June
        30, 2005. Over 16,000 displays have been produced over the
        past five months with output consistently in line with target
        rates based on expected demand.

   --  Net loss for the three and six months ended June 30, 2006 was
        $4.8 million and $10.0 million and included $0.8 million and
        $1.6 million of non-cash expense associated with the expensing
        of stock options. This compares to a net loss of $4.5 million
        and $8.0 million during the three and six months ended June
        30, 2005. Stock options were not expensed prior to 2006. Loss
        per share was the same for the three and six months ended June
        30, 2006 and June 30, 2005 at $(0.05) and $(0.10) per share

   --  On July 21, 2006 eMagin entered into agreements to sell senior
        secured convertible notes and warrants for $6.5 million
        dollars. The transaction is now closed.

   Second Quarter Highlights:

   --  eMagin received a substantial initial order and signed a
        multi-market distribution agreement with Vision 3
        International (V3i), Ltd., Korean-based leader in stereo
        imaging technologies. eMagin expects to fulfill the initial
        $1.1 million order over the next three months. eMagin also
        plans to bundle V3i's stereo cameras with its Z800 3DVisors in
        other markets.

   --  eMagin's OLED microdisplays were selected to provide
        power-efficient information display for Liteye Systems' new
        LE-700 and LE-750 head-mounted displays (HMDs).

   --  Icuiti entered into an agreement to purchase several thousand
        eMagin microdisplays for production of its Tac-Eye(tm) display
        system. Designed for the U.S. Military with partial funding
        from the Air Force Research Lab Human Effectiveness
        Directorate (AFRL-HE) and the US Special Operations Command
        (USSOCOM), the Tac-Eye display system is designed for maximum
        efficiency in today's demanding battlefield environments. The
        system can be mounted on a helmet or goggles.

   --  eMagin and the University of Michigan's Solid-State
        Electronics Laboratory (SSEL) won a Phase 1 Extension of their
        Small Business Technology Transfer (STTR) contract from The
        Office of Naval Research to lay additional groundwork in
        encapsulation technologies for small, lightweight displays,
        and, potentially, for flexible displays.

   --  eMagin announced the first four product offerings of its
        breakthrough OLED-XL microdisplay portfolio. The proprietary
        OLED-XL displays provide a new level of high performance
        imaging, with up to 410,000 hours luminance life, the widest
        temperature range, and the lowest power requirement of any
        commercially available SVGA resolution microdisplay system.

   During the quarter, the Company continued to make major strides in
its program to increase production, yield and uptime at its OLED
microdisplay fabrication facility in Hopewell Junction, New York.
Commenting on the results, Gary Jones, eMagin's chief executive
officer and president, said, "Using improved OLED materials and
processes in a device type we call OLED-XL, the production output and
product performance results have been significant. During the second
quarter approximately 10,000 displays were produced. During the same
period last year we produced 3900 units. Uptime and output has
continued at our target rate, determined by expected demand,
throughout the third quarter with more than 16,000 displays having
been produced over the past 5 months. Essentially we have tripled
uptime and output and continue to achieve positive results."
   Jones continued, "Many of the displays produced last quarter will
go toward building Z800 3DVisor systems for V3i's initial $1 million
order. The remaining displays as well as ongoing production will
support the building demand we see in the military and commercial OEM
market segments. Recent OEM design wins in the first half of 2006 have
led to greater visibility as these design wins convert to contracts.
Clearly the advantages our OLEDs bring to applications have been
proven in the field and now we're starting to see financial results
through the initiation of large production orders."
   John Atherly, eMagin's chief financial officer, added, "During the
first quarter we received notification on two key design wins where
OEMs selected our display or subsystem design for inclusion in their
programs which are worth in our estimation approximately $50 million
over the programs' six year lives. Today, the first of these moved to
contract with the signing of a $10 million six year supply agreement.
The initial schedule calls for approximately $100,000 of product to be
shipped over the next few months, $1.2 million in 2007 and $2.7
million in 2008 as the program hits full production. The second large
program is scheduled to move to contract next month and is also
expected to be a six year supply agreement. Depending on when signing
occurs approximately $1 million could ship this year, $4.5 million in
2007 and over $7 million in 2008 when full production is reached.
While we are not yet ready to provide annual guidance our recent
success in the fab and business wins are very favorable and suggest
that our second half results will be the Company's best ever and that
2007 is shaping up very well."
   eMagin Corporation also announced that it is changing the
Chairmanship to a non-Executive position with the appointment of Rear
Admiral Thomas Paulsen, USN (ret.) as its Chairman, enabling CEO and
President Gary Jones to focus on nurturing the company's growth.
Admiral Paulsen brings proven leadership to the board, assures
investors and shareholders of the board's independent oversight, and
complements the Company's management. Admiral Paulsen served for over
34 years in the US Navy with extensive experience in Command Control,
Communications and Intelligence (C3I), Telecommunications, Network
Systems Operations, Computers and Computer Systems Operations. He
holds a B.S. in Maritime and Electrical Engineering from the US Naval
Academy and an M.S. in Computer Science from the US Navy Post Graduate
School, Monterey, Calif. He also sits on several other Boards as both
a Director and an Advisor.
   According to Paulsen, "eMagin has decided to follow the growing
trend of progressive companies which are implementing non-executive
Board leadership, which we believe is important for fulfillment of
Sarbanes-Oxley and requirements for Board independence. Where others
have spent billions of dollars and failed, Gary Jones' leadership and
OLED technical knowledge has in less then nine years brought eMagin
OLED manufacturing from R & D to online production this past year to
enable the company to meet a growing level of demand from both defense
and commercial customer requirements. We also want to make sure that
we provide adequate levels of support for our CEO and President to
allow him the critical time necessary to concentrate on the growth of
the business."
   Full results are available by referencing the Company's 10Q report
for the quarter ended June 30, 2006 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 second 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.

-0-
*T
                          eMAGIN CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In thousands, except share data)

                                                 June 30,     December
                                                   2006          31,
                                                (unaudited)     2005
                                                -----------  ---------
                     ASSETS

Current assets:
 Cash and cash equivalents                       $     255  $   6,727
 Investments - held to maturity                        124        120
 Accounts receivable, net                              954        762
 Inventory                                           3,614      3,839
 Prepaid expenses and other current assets             832      1,045
                                                  ---------  ---------
  Total current assets                               5,779     12,493
Equipment, furniture and leasehold improvements,
 net                                                   983      1,299
Intangible assets, net                                  56         57
Other assets                                           233        233
                                                  ---------  ---------
  Total assets                                   $   7,051  $  14,082
                                                  =========  =========

      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                $   2,686  $     562
 Accrued compensation                                1,018      1,010
 Other accrued expenses                                875      1,894
 Deferred revenue                                       98         96
 Current portion of capitalized lease obligations        9         16
 Other current liabilities                             148         47
                                                  ---------  ---------
  Total current liabilities                          4,834      3,625

Capitalized lease obligations                            4          6
Long-term debt                                          37         50
                                                  ---------  ---------
    Total liabilities                                4,875      3,681
                                                  ---------  ---------

Commitments and contingencies

Shareholders' equity:
Preferred stock, $.001 par value: authorized
 10,000,000 shares; no shares issued and
 outstanding                                            --         --
Common stock, $.001 par value: authorized
 200,000,000 shares, issued and outstanding,
 100,422,492 shares as of June 30, 2006 and
 99,972,458 shares as of December 31, 2005             100        100
Additional paid-in capital                         177,633    175,860
Accumulated deficit                               (175,557)  (165,559)
                                                  ---------  ---------
  Total shareholders' equity                         2,176     10,401
                                                  ---------  ---------
  Total liabilities and shareholders' equity     $   7,051  $  14,082
                                                  =========  =========


                          eMAGIN CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except share data)
                              (unaudited)

                     Three Months Ended          Six Months Ended
                          June 30,                   June 30,
                 -------------------------- --------------------------
                         2006         2005          2006         2005
                  ------------  -----------  ------------  -----------
Revenue:

Product revenue  $      1,674  $       616  $      3,245  $     1,307
Contract revenue          ---           36            70           36
                  ------------  -----------  ------------  -----------

 Total revenue,
  net                   1,674          652         3,315        1,343
                  ------------  -----------  ------------  -----------

Cost of goods
 sold                   2,965        2,389         5,994        4,346
                  ------------  -----------  ------------  -----------

Gross loss             (1,291)      (1,737)       (2,679)      (3,003)
                  ------------  -----------  ------------  -----------

Operating
 expenses:

Research and
 development            1,305        1,130         2,542        2,016
Selling, general
 and
 administrative         2,247        1,760         4,836        3,095
                 ------------- ------------ ------------- ------------
 Total operating
  expenses              3,552         2890         7,378        5,111
                  ------------  -----------  ------------  -----------

Loss from
 operations            (4,843)      (4,627)      (10,057)      (8,114)

Other income
 (expense):

 Interest
  expense                 ---           (1)          ---           (2)
 Other income,
  net                       5          130            59          149
                  ------------  -----------  ------------  -----------
   Total other
    income, net             5          129            59          147
                  ------------  -----------  ------------  -----------

Net loss         $     (4,838) $    (4,498) $     (9,998) $    (7,967)
                  ============  ===========  ============  ===========


Loss per share,
 basic and
 diluted         $      (0.05) $     (0.05) $      (0.10) $     (0.10)
                  ============  ===========  ============  ===========

Weighted average
 number of shares
 outstanding:

Basic and diluted 100,114,000   82,445,000   100,076,000   81,955,000
                  ============  ===========  ============  ===========
*T