eMagin Posts Record Net Income of $2.8 Million in the Third Quarter on Revenue Increase of 35 Perrcent

eMagin Corporation, a leader in OLED technology for the design and manufacture of OLED microdisplays for high resolution imaging products, issued financial results for its third quarter ending Sept. 30, 2010.

Andrew Sculley, eMagin’s president and CEO, commented, “I am pleased to report that eMagin posted strong gains in sales and profitability in the third quarter 2010, as demand from military market customers for both our high resolution OLED microdisplays, as well as our proprietary research and design expertise, continued unabated. The shipment of a record number of the company’s microdisplays and substantially higher contract revenue drove a 35% increase in revenues to $8.3 million as compared to 3Q’09, and year-to-date revenues of $22.5 million represented a 32% increase as compared to the same period last year.

“These results give us confidence that we will succeed in passing the midpoint of our annual revenue guidance for 2010 of $28 to $32 million,” Sculley added. “The defense industry’s increasing recognition of the advantages of our high contrast, low power consumption and broad temperature range microdisplays has allowed the Company to win additional contracts and increase market share in the military market, where equipping soldiers with reliable, high-performance technology is paramount.

“eMagin continues to improve its overall performance on the strength of R&D initiatives, such as our design of a display under the U.S. Army’s TATRC program, which are developing a pipeline of innovative products that are attracting new customers,” Sculley notd. “Our enhanced financial condition and a stronger organization, as well as investment in technology to improve our manufacturing efficiency, is also contributing to new contract wins. For instance, eMagin’s supply of components of advanced night-vision goggles to ITT Corp., a leading contender for the U.S. Army’s Spiral Enhanced Night Vision Goggles program, signals that the American military is prepared to qualify eMagin’s active matrix OLED technology for yet another application that contributes to soldier readiness.

“Another positive development for eMagin during the quarter was that the company began to see a more diverse mix of customers, including some marquee names that contributed significantly to the company’s total revenues. We believe that more and more customers are working with us as they recognize the strength of our financial position combined with our superior technology for microdisplays,” added Sculley.

eMagin Corporation generated revenue of $8.3 million for the third quarter of 2010, which represented a 35% increase over the prior year’s third quarter. Year to date, total revenues are up 32% over 2009 levels, due to significantly higher product sales and an 84% increase in contract revenues.

The company posted a strong gross margin of 66%, compared to a gross margin of 57% in the Q309. The higher gross margin for the period reflects sales of higher margin custom displays designed for customers’ exclusive use and the Company’s significant operating leverage, as it produced and shipped a record number of microdisplays during the quarter.

On Aug. 17, eMagin announced that it was awarded a subcontract by ITT Corporation for the supply of display beam combiner assemblies (DBCA), including eMagin’s OLED-XL microdisplays. The U.S. Army awarded a contract to ITT’s Night Vision & Imaging business units for the Spiral Enhanced Night Vision Goggle (SENVG). eMagin’s subcontract has a potential value of $15.2 million.

eMagin was awarded additional supply contracts from two major U.S. Military contractors whose products have received contracts from the U.S. Army under the Spiral Enhanced Night Vision Goggle (SENVG) program for the supply of OLED microdisplays. These subcontract awards have a potential value of $7.6 million and $5.5 million each, and bring the number of companies that are using eMagin’s microdisplay components in their SENVG offerings to three, including ITT Corporation.

eMagin completed the design of a 1920 x 1200 resolution display for the U.S. Army’s Telemedicine and Technology Research Center (TATRC). The microdisplay is the highest resolution microdisplay developed to date by eMagin, and has higher resolution than an HDTV but is of a size less than 1 inch in diagonal. The HD-resolution display will feature more than 7 million sub-pixels and a contrast ratio of 100,000 to 1, while consuming less than 350 milliwatts of power. eMagin will continue to receive contract revenue from this ongoing R&D project for a total of $6.4 million.

eMagin announced on August 10th that it signed an agreement to build its first production OLED deposition machine, one that will leverage the latest advances in the Company’s proprietary manufacturing processes. The new machine is expected to increase OLED deposition capacity by approximately tenfold, to increase yield significantly and to contribute to substantially more automated processes. Full integration of the OLED deposition machine to the production line is on track and expected by the end of 2011.

eMagin continued to ship microdisplays that serve a variety of military applications under several fielded programs. Customers included Sagem (FELIN, the French Army’s integrated soldier system), OASYS (U.S. Army’s Thermal Weapon Sight Remote Viewer Program), and L-3 Communications (optical/display subsystem for U.S. Army, Javelin Soldier-Mounted Anti-Tank Missile System).

In October, eMagin was recognized by Deloitte LLP as part of its Fast 500 ranking for the fourth year in a row. This year eMagin ranked 185th among the fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America, and 9th among companies located in Washington state.

Based on current market conditions, as well as expectations for the fourth quarter of the year due to scheduled deliveries under existing contracts, the company expects to reach at least $30 million in total revenue during 2010. This represents the midpoint of the previously stated guidance range of $28 million to $32 million in total annual revenue.