PRESS RELEASE
eMagin Summarizes Highlights of 2003 Year End and Fourth Quarter Earnings Call
Hopewell Junction, NY- March 24, 2004 - eMagin Corporation (AMEX: EMA), the
leading manufacturer of active matrix OLED microdisplays and virtual imaging
systems, provided a summary of information presented by Gary W. Jones, chief
executive officer, during the Company's fourth-quarter and year-end 2003
financial results conference call which was webcast live on March 23, 2004.
Highlights of the presentation include the following information, some of which
is forward-looking and unaudited. The script of the conference call will be
filed as a Form 8-K.
Preliminary Financial Review:
-- Liabilities were reduced from $14,415,000 in December 2002 to less
than $7 million by the end of 2003. All of the Company's major equipment leases
have been paid off, reducing monthly fixed costs due to leases from over
$300,000 per month in early 2003 to about $10,000 per month in the fourth
quarter of 2003.
-- The Company is nearly debt free due to the recent conversion of
approximately $8 million secured debt to equity as announced in March 2004.
-- From January 1 2003 through February 2, 2004, the Company completed
private placement financings of more than $10 million with institutional and
private investors, and received over $2.8 million from option and warrant
exercises during the same time period. The Company currently has a cash balance
of approximately $5 million.
-- As of December 31, 2002 shareholder equity was a negative $12,808.
The Company expects a negative $4.6 to $4.8 million for the end of 2003, but
expects to have achieved positive shareholder equity in March 2004.
-- Total revenue for 2003 is expected to be approximately $2.57
million, representing an increase of about 21% over the prior year results.
Revenue from product sales doubled in 2003, while revenue from government R&D
contracts was reduced. The majority of 2003 sales resulted from the sales of
microdisplays and newly developing product line of virtual imaging modules.
1
-- Gross margins were 33% for the fourth quarter of 2003, partly due to
the way supplies and materials are recorded as expenses until the product is
sold. As the Company increases supply inventory, margins are weighed down. Mr.
Jones stated that the Company anticipates changing to a perpetual inventory
system in the later part of 2004 that should cause the gross margin number to
improve, even though the Company anticipates being on an upward sales ramp
through the remainder of 2004.
-- Net operating expenses in 2003 were just under $4 million as compared to
about $15 million in 2002. Gains from payables, debt, and lease restructuring in
2003 accounted for $4,638 of the 2003 expense reduction, but the remainder came
from solid cost reductions due to lease reductions.
-- Estimated net loss for 2003 was $4.5 million, as compared to a net loss
of $14,913 million in 2002. Net loss for the fourth quarter in 2003 was
approximately $1.9 million. The loss per share in 2003 is expected to be 13
cents, as compared to the loss per share in 2002 of 48 cents per share.
Outstanding shares increased from approximately 31 million in December 2002 to
approximately 36 million in December 2003. After the January 2004 financing,
option and warrant conversions, and debt conversion, the current total shares
outstanding was approximately 63 million as of March 23, 2004.
The results reported should be considered as unaudited results. The company
expects to file its 10KSB report prior to SEC filing deadline of March 31, 2004.
The company stated that it does not anticipate any substantial changes to the
information reported, but any changes would be provided in the filing and
shareholders were urged to review the 10KSB once it is filed in order to get a
more complete overview of the company.
Operations Review:
-- In addition to the Company's SVGA+ series and stereovision-capable
SVGA-3D OLED microdisplay product lines, new products introduced during 2003
included a high brightness yellow version of the SVGA+ display which can be
operated using special bias conditions to provide up to 4,000 CD/m2 luminance,
and a PC interface kit which provides a simple RGB interface with image flipping
for SVGA+ and SVGA-3D displays, and automatic stereovision signal recognition
for SVGA-3D displays.
-- More than 100 OEM customers have now purchased OLED developer kits,
OLED microdisplays, headsets, or subsystems, and are at various stages of their
own typical 6 to 24+ month product development cycles. In 2003 and early 2004
the Company began publicly announcing the first customer commercializations, one
of which was Rockwell Collins/KEO's S035 rugged head mounted display system.
Product announcements during the past six months included:
2
o VR Magic's EYESI(tm), a sophisticated 3D virtual reality
surgical training system;
o Leadtek's X-eye(tm) lightweight consumer headset;
o The coupling of the Liteye 400(tm) headset with Antelope
Technologies' MCC integrated hands-free computing
technology;
o Sensics' Sky Visor(tm), developed for the Robonaut, a
humanoid robot being developed by NASA and DARPA to help
reduce the number of dangerous space walks required of
astronauts. This innovation will also emerge as a new
product for Sensics, featuring a 150 degree field of view,
which can be used for a variety of telepresence and
simulation applications;
o Night Vision Equipment Corporation's Helmet IR-50(tm)
thermal imager, which provides a fully maneuverable
monocular eyepiece designed to quickly attach or detach to
standard military helmet mounts, and is the first OLED
product available in the government's GSA catalog;
o Sage Technologies' HelmetVue(tm), and Total Fire Group's
Fire Warrior(tm), which are designed to attach to all
popular firefighter helmets and provide a vision system
based on infrared technology that allow firefighters to see
areas of heat, such as recently made footprints, even when
normal vision is completely blocked by smoke.
Additional products are being or have been commercialized which contain the
Company's products, and these will be announced on the OEM customers' schedules.
-- Major areas of targeted consumer OEM expansion include virtual
reality games, mobile consumer PCs, and viewfinders for camcorders, cameras, and
mobile video phones.
-- Manufacturing is still at a small fraction of the Company's
production equipment capacity for over 50,000 0.59-inch diagonal microdisplays.
Based on current pricing, the Company believes the current facility's equipment
could produce over $75 million in displays per year once fully ramped, and
anticipates that demand should grow to potentially fill its existing production
capacity within the next 2 years.
-- Production yields are improving and are on target.
-- The volume of first quarter shipments to date have been impacted by
equipment downtime during recent upgrades of production equipment for improved
equipment uptime, reliability, and quality, and by delays in wafer shipments
during early
3
2004 due to temporary capacity issues from the CMOS wafer supplier.
The production upgrades are expected to provide benefits through the remainder
of the year, CMOS wafers have been received, the wafer foundry has indicated
intent to provide the higher volume wafer allocations required for production
ramp, and the Company is accelerating production to reduce short term backlog.
-- QVGA wafers from Rohm (Japan) are expected to arrive in the second
or third quarter to begin initial OLED processing. The QVGA microdisplays will
target the camcorder and digital camera viewfinder markets.
-- Improved higher efficiency OLEDs are being developed and anticipated
to be used to create a new product series to address high luminance and
long-life static image applications.
-- Searches are underway for several key senior management positions,
including CFO and senior marketing staff.
Additional CEO Comments:
In his presentation, Mr. Jones included the following remarks.
"eMagin is in the best position it has ever been in. When we went
public over three years ago we had a powerful core technology that could
potentially open the world's door to practical virtual imaging. This goal would
enable people to have access to large area, high resolution imaging and even 3-D
360 degree surround imaging, something before only visible in expensive and
heavy-bulky simulators.
At that time, we still needed to develop our display products. This
meant we had to develop a host of divergent technologies, including the
semiconductor design of 15 million transistor integrated circuits which
incorporate built-in PC interfaces and several graphics functions as well as an
analog DRAM to be practical for most customers based on market input. We had to
develop new semiconductor-like processes, invent new device structures, invent
or adapt new materials, create or adapt automated production equipment, and then
work with our customers to open these new markets. These were all major tasks.
We found ourselves undercapitalized in one of the worst capital markets
of recent times. With much perseverance, a great core team, effective sales
efforts, and the belief of a few key - and very much appreciated - supporters,
we were able to reach our current position where the goal is finally close at
hand.
We are a different company today than we were last year, but with the
same vision. 2003 was a year of restructuring our finances and reorienting
ourselves from mostly R&D to producing products. Customers were completing their
product R&D efforts
4
and preparing to launch their products. Several large purchase agreements were
inked and many more plans were put in place to launch new virtual imaging
products in a great many applications areas.
We believe that we have the best products in our market, so our biggest
task is to help make this emerging market grow and to cost effectively produce
displays and virtual imaging subsystems."
Mr. Jones concluded, "These have been important achievements, but we
are just beginning to bring this new concept of virtual imaging to market. We
believe that the last year has been a critical period for eMagin, but it is
barely the beginning."
About eMagin Corporation
eMagin Corporation is a global leader in near-to-the-eye virtual imaging
technologies and products. eMagin integrates high resolution organic light
emitting diode (OLED) displays smaller than one-inch in size, magnifying optics,
and systems technologies to create a virtual image that appears comparable to
that of a computer monitor, a large-screen television, or even a theater-like
experience. eMagin's microdisplay systems are expected to enable new mass
markets for wearable personal computers, wireless Internet appliances, portable
DVD-viewers, digital cameras, and other emerging applications for consumer,
industrial, and military applications. eMagin's corporate headquarters and
microdisplay operations are co-located with IBM on its campus in East Fishkill,
N.Y. Optics and system design facilities are located at its wholly owned
subsidiary, Virtual Vision, Inc., in Redmond, WA. Website:
http://www.emagin.com.
Forward Looking Statements:
Statements in this press release which are not historical data are
forward-looking statements which involve known and unknown risks, uncertainties
or other factors not under the company's control, which may cause actual
results, performance or achievements of the company to be materially different
from the results, performance or other expectations implied by these
forward-looking statements. These factors include, but are not limited to, those
detailed in the company's periodic filings with the Securities and Exchange
Commission.
5