| (Mark One)                                                                                      |
|-------------------------------------------------------------------------------------------------|
| R QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934        |
|                                                                                            |
|  For the quarterly period ended March 31, 2011                                             |
|  or                                                                                        |
|                                                                                            |
| £ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|                                                                                            |
|  For the transition period from  to                                              |

| Delaware                        | 56-1764501          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| incorporation or organization)  | Identification No.) |

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|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|-----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Page   |
| PART I   FINANCIAL INFORMATION |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Item 1                                        | Condensed Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                          | Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 3      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                          | Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2011 and 2010 (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 4      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                          | Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months ended March 31, 2011 (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 5      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                          | Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2011 and 2010 (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 6      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|                                          | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 7      |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 2                                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 15     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 3                                        | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 20     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 4T                                       | Controls and Procedures                                                                                                                                                                                                                                                                           | 20     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| PART II   OTHER INFORMATION         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Item 1                                        | Legal Proceedings                                                                                                                                                              | 21     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 1A                                       | Risk Factors                                                                                                                                                                   | 21     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 2                                        | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                    | 21     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 3                                        | Defaults Upon Senior Securities                                                                                                                                                | 21     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 4                                        | Submission of Matters to a Vote of Security Holders                                                                                                                            | 21     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 5                                        | Other Information                                                                                                                                                              | 21     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| Item 6                                        | Exhibits                                                                                                                                                                       | 22     |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| SIGNATURES                                    | 23                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| CERTIFICATIONS                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|----------|---------|-------------------|--------|
|                                                                                                                                                                                                                                         |   | March 31, 2011(unaudited) |     |    | December 31, 2010 |   |
|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |
| ASSETS                                                                                                                                                                                                                                       |   |                      |     |    |              |   |
|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |
| Current assets:                                                                                                                                                                                                                              |   |                      |     |    |              |   |
| Cash and cash equivalents                                                                                                                                                                                                                    |   | $                         | 7,763    |    |              | $      | 7,796 |   |
| Short-term investments – held to maturity                                                                                                                                                                                              |   |                      | 3,500    |    |              |   | 3,100 |   |
| Accounts receivable, net                                                                                                                                                                                                                     |   |                      | 4,698    |    |              |   | 5,150 |   |
| Inventory                                                                                                                                                                                                                                    |   |                      | 2,149    |    |              |   | 1,905 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                    |   |                      | 704      |    |              |   | 777 |   |
| Total current assets                                                                                                                                                                                                                         |   |                      | 18,814   |    |              |   | 18,728 |   |
| Long-term investments – held to maturity                                                                                                                                                                                               |   |                      | 1,750    |    |              |   | 1,500 |   |
| Equipment, furniture and leasehold improvements, net                                                                                                                                                                                         |   |                      | 3,538    |    |              |   | 3,287 |   |
| Intangible assets, net                                                                                                                                                                                                                       |   |                      | 38       |    |              |   | 39 |   |
| Other assets                                                                                                                                                                                                                                 |   |                      | 92       |    |              |   | 92 |   |
| Deferred tax asset                                                                                                                                                                                                                           |   |                      | 9,206    |    |              |   | 9,056 |   |
| Total assets                                                                                                                                                                                                                                 |   | $                         | 33,438   |    |              | $      | 32,702 |   |
|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                                   |   |                      |     |    |              |   |   |   |
|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |   |   |
| Current liabilities:                                                                                                                                                                                                                         |   |                      |     |    |              |   |   |   |
| Accounts payable                                                                                                                                                                                                                             |   | $                         | 1,324    |    |              | $      | 1,100 |   |
| Accrued compensation                                                                                                                                                                                                                         |   |                      | 1,811    |    |              |   | 1,975 |   |
| Other accrued expenses                                                                                                                                                                                                                       |   |                      | 1,638    |    |              |   | 1,781 |   |
| Advance payments                                                                                                                                                                                                                             |   |                      | 239      |    |              |   | 101 |   |
| Deferred revenue                                                                                                                                                                                                                             |   |                      | 24       |    |              |   | 26 |   |
| Other current liabilities                                                                                                                                                                                                                    |   |                      | 175      |    |              |   | 170 |   |
| Total current liabilities                                                                                                                                                                                                                    |   |                      | 5,211    |    |              |   | 5,153 |   |
|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |   |   |
| Commitments and contingencies  (Note 12)                                                                                                                                                                                           |   |                      |     |    |              |   |   |   |
|                                                                                                                                                                                                                                         |   |                      |     |    |              |   |   |   |
| Shareholders’ equity:                                                                                                                                                                                                                  |   |                      |     |    |              |   |   |   |
| Preferred stock, $.001 par value: authorized 10,000,000 shares:                                                                                                                                                                              |   |                      |     |    |              |   |   |   |
| Series B Convertible Preferred stock, (liquidation preference of $5,679,000) stated value $1,000 per share, $.001 par value:  10,000 shares designated and 5,679 issued and outstanding as of March 31, 2011 and December 31, 2010 |   |                      | —  |    |              |   | — |   |
| Common stock, $.001 par value: authorized 200,000,000 shares, issued and outstanding, 21,616,708 shares as of March 31, 2011 and 21,210,445 as of December 31, 2010                                                                          |   |                      | 22       |    |              |   | 21 |   |
| Additional paid-in capital                                                                                                                                                                                                                   |   |                      | 210,550  |    |              |   | 209,591 |   |
| Accumulated deficit                                                                                                                                                                                                                          |   |                      | (182,345 | )  |              |   | (182,063 | ) |
| Total shareholders’ equity                                                                                                                                                                                                             |   |                      | 28,227   |    |              |   | 27,549 |   |
| Total liabilities and shareholders’ equity                                                                                                                                                                                             |   | $                         | 33,438   |    |              | $      | 32,702 |   |

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|                                                           |   | Three Months EndedMarch 31, |       |
|----------------------------------------------------------------|--------|-----------------------------|------------|
|                                                           |   | 2011                        |       |   | 2010 |   |
|                                                           |   |                        |       |   |   |   |
| Revenue:                                                       |   |                        |       |   |   |   |
| Product                                                        |   | $                           | 4,310      |   |   | $ | 4,486 |   |
| Contract                                                       |   |                        | 1,131      |   |   |   | 1,441 |   |
| Total revenue, net                                             |   |                        | 5,441      |   |   |   | 5,927 |   |
|                                                           |   |                        |       |   |   |   |   |   |
| Cost of goods sold:                                            |   |                        |       |   |   |   |   |   |
| Product                                                        |   |                        | 2,609      |   |   |   | 1,845 |   |
| Contract                                                       |   |                        | 586        |   |   |   | 764 |   |
|     Total cost of goods sold               |   |                        | 3,195      |   |   |   | 2,609 |   |
| Gross profit                                                   |   |                        | 2,246      |   |   |   | 3,318 |   |
|                                                           |   |                        |       |   |   |   |   |   |
| Operating expenses:                                            |   |                        |       |   |   |   |   |   |
| Research and development                                       |   |                        | 532        |   |   |   | 734 |   |
| Selling, general and administrative                            |   |                        | 2,141      |   |   |   | 1,682 |   |
| Total operating expenses                                       |   |                        | 2,673      |   |   |   | 2,416 |   |
| (Loss) income from operations                                  |   |                        | (427)      |   |   |   | 902 |   |
|                                                           |   |                        |       |   |   |   |   |   |
| Other income (expense):                                        |   |                        |       |   |   |   |   |   |
| Interest expense, net                                          |   |                        | (29        | ) |   |   | (28 | ) |
| Other income, net                                              |   |                        | 16         |   |   |   | 7 |   |
| Total other expense, net                                       |   |                        | (13        | ) |   |   | (21 | ) |
| (Loss) income before (benefit from) provision for income taxes |   |                        | (440       | )  |   |   | 881 |   |
| (Benefit from) provision for income taxes                      |   |                        | (158       | ) |   |   | 1 |   |
| Net (loss) income                                              |   | $                           | (282       | )  |   | $ | 880 |   |
|                                                           |   |                        |       |   |   |   |   |   |
| (Loss) income per common share, basic                          |   | $                           | (0.01      | )  |   | $ | 0.05 |   |
| (Loss) income per common share, diluted                        |   | $                           | (0.01      | )  |   | $ | 0.03 |   |
|                                                           |   |                        |       |   |   |   |   |   |
| Weighted average number of common shares outstanding:          |   |                        |       |   |   |   |   |   |
| Basic                                                          |   |                        | 21,522,716 |   |   |   | 17,109,706 |   |
| Diluted                                                        |   |                        | 21,522,716 |   |   |   | 29,553,301 |   |

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|                                       |   | Preferred Stock |    |   | Common Stock |   |    |   |   |   |       |   |   |                       |          |
|--------------------------------------------|--------|-----------------|---------|--------|--------------|--------|---------|--------|--------|--------|------------|--------|--------|----------------------------|---------------|
|                                       |   | Shares          |    |   | Amount       |   |    | Shares |   |   | Amount     |   |   | Additional Paid-in Capital |          |   | Accumulated Deficit |   |   | Total Shareholders’ Equity |   |
| Balance,December 31, 2010                  |   |            | 5,679   |   |         | $      | — |   |   |   | 21,210,445 |   |   | $                          | 21            |   |   | $ | 209,591 |   |   | $ | (182,063 | ) |   | $ | 27,549 |   |
|                                       |   |            |    |   |         |   |    |   |   |   |       |   |   |                       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cashless exercise of common stock warrants |   |            | — |   |         |   | — |   |   |   | 310,897    |   |   |                       | —       |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Exercise of common stock warrants          |   |            | — |   |         |   | — |   |   |   | 72,116     |   |   |                       | 1             |   |   |   | 81 |   |   |   | — |   |   |   | 82 |   |
| Exercise of common stock options           |   |            | — |   |         |   | — |   |   |   | 23,250     |   |   |                       | —       |   |   |   | 22 |   |   |   | — |   |   |   | 22 |   |
| Stock-based compensation                   |   |            | — |   |         |   | — |   |   |   | —    |   |   |                       | —       |   |   |   | 856 |   |   |   | — |   |   |   | 856 |   |
| Net loss                                   |   |            | — |   |         |   | — |   |   |   | —    |   |   |                       | —  |   |   |   | —  |   |   |   | (282 | ) |   |   | (282 | ) |
| Balance,March 31, 2011                     |   |            | 5,679   |   |         | $      | — |   |   |   | 21,616,708 |   |   | $                          | 22            |   |   | $ | 210,550 |   |   | $ | (182,345 | ) |   | $ | 28,227 |   |
|                                       |   |            |    |   |         |   |    |   |   |   |       |   |   |                       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|                                                                                                                                                   | Three Months Ended |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------|
|                                                                                                                                                   | March 31,          |    |
|                                                                                                                                                   | 2011               |    |   | 2010 |   |
|                                                                                                                                                   | (unaudited)        |    |
| Cash flows from operating activities:                                                                                                                  |               |    |   |   |   |
| Net (loss) income                                                                                                                                      | $                  | (282    | ) |   | $ | 880 |   |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities:                                                               |               |    |   |   |   |   |   |
| Depreciation and amortization                                                                                                                          |               | 34      |   |   |   | 16 |   |
| Reduction of provision for sales returns and doubtful accounts                                                                                         |               | (204    | ) |   |   | (161 | ) |
| Deferred tax benefit                                                                                                                                   |               | (150    | ) |   |   | — |   |
| Stock-based compensation                                                                                                                               |               | 856     |   |   |   | 433 |   |
| Amortization of common stock issued for services                                                                                                       |               | — |   |   |   | 1 |   |
| Changes in operating assets and liabilities:                                                                                                           |               |    |   |   |   |   |   |
| Accounts receivable                                                                                                                                    |               | 656     |   |   |   | 303 |   |
| Inventory                                                                                                                                              |               | (244    | ) |   |   | (14 | ) |
| Prepaid expenses and other current assets                                                                                                              |               | 73      |   |   |   | (53 | ) |
| Deferred revenue                                                                                                                                       |               | (2      | ) |   |   | 128 |   |
| Accounts payable, accrued compensation, other accrued expenses, advance payments, and other current liabilities                                        |               | 60      |   |   |   | (67 | ) |
| Net cash provided by operating activities                                                                                                              |               | 797     |   |   |   | 1,466 |   |
| Cash flows from investing activities:                                                                                                                  |               |    |   |   |   |   |   |
| Purchase of equipment                                                                                                                                  |               | (284    | ) |   |   | (763 | ) |
| Purchase of investments – held to maturity                                                                                                       |               | (650    | ) |   |   | — |   |
|       Net cash used in investing activities                                                                              |               | (934    | ) |   |   | (763 | ) |
| Cash flows from financing activities:                                                                                                                  |               |    |   |   |   |   |   |
| Proceeds from exercise of stock options and warrants                                                                                                   |               | 104     |   |   |   | — |   |
| Net cash provided by financing activities                                                                                                              |               | 104     |   |   |   | — |   |
| Net (decrease) increase in cash and cash equivalents                                                                                                   |               | (33     | ) |   |   | 703 |   |
| Cash and cash equivalents, beginning of period                                                                                                         |               | 7,796   |   |   |   | 5,295 |   |
| Cash and cash equivalents, end of period                                                                                                               | $                  | 7,763   |   |   | $ | 5,998 |   |
|                                                                                                                                                   |               |    |   |   |   |   |   |
| Cash paid for interest                                                                                                                                 | $                  | 15      |   |   | $ | 15 |   |
| Cash paid for taxes                                                                                                                                    | $                  | — |   |   | $ | 115 |   |
|                                                                                                                                                   |               |    |   |   |   |   |   |
| Issuance of 310,897 and 334,608 shares of common stock for cashless exercise of  380,511 and 669,717 warrants in 2011 and 2010, respectively | $                  | — |   |   | $ | — |   |
|                                                                                                                                                   |               |

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|                                 |   | March 31,2011 (unaudited) |   |   | December 31, 2010 |   |
|--------------------------------------|--------|--------------------------------|--------|--------|-------------------|--------|
| Accounts receivable                  |   | $                              | 4,868  |   |              | $      | 5,524 |   |
| Less allowance for doubtful accounts |   |                           | (170   | )      |              |   | (374 | ) |
| Net receivables                 |   | $                              | 4,698  |   |              | $      | 5,150 |   |

|                                                                      |   | Three Months EndedMarch 31, |       |
|---------------------------------------------------------------------------|--------|-----------------------------|------------|
|                                                                      |   | 2011                        |       |   | 2010 |   |
| Numerator:                                                                |   |                        |       |   |   |   |
|                                                                      |   |                        |       |   |   |   |
| Net (loss) income                                                         |   | $                           | (282       | )  |   | $ | 880 |   |
|                                                                      |   |                        |       |   |   |   |   |   |
| Denominator:                                                              |   |                        |       |   |   |   |   |   |
|                                                                      |   |                        |       |   |   |   |   |   |
| Weighted average shares outstanding for basic earnings per share          |   |                        | 21,522,716 |   |   |   | 17,109,706 |   |
| Effective of dilutive shares:                                             |   |                        |       |   |   |   |   |   |
|     Dilution from stock options and warrants          |   |                        | —    |   |   |   | 4,791,595 |   |
| Convertible preferred stock                                               |   |                        | —    |   |   |   | 7,652,000 |   |
| Dilutive potential common shares                                          |   |                        | —    |   |   |   | 12,443,595 |   |
| Weighted –average shares outstanding for diluted earnings per share |   |                        | 21,522,716 |   |   |   | 29,553,301 |   |

|                 |   | March 31,2011 (unaudited) |   |   | December 31, 2010 |   |
|----------------------|--------|--------------------------------|--------|--------|-------------------|--------|
| Raw materials   |   | $                              | 1,177  |   |              | $      | 748 |   |
| Work in process      |   |                           | 599    |   |              |   | 681 |   |
| Finished goods  |   |                           | 373    |   |              |   | 476 |   |
| Total inventory      |   | $                              | 2,149  |   |              | $      | 1,905 |   |

----

|                                            |   | March 31,2011 (unaudited) |   |   | December 31, 2010 |   |
|-------------------------------------------------|--------|--------------------------------|--------|--------|-------------------|--------|
| Vendor prepayments                              |   | $                              | 45     |   |              | $      | 83 |   |
| Other prepaid expenses *                        |   |                           | 659    |   |              |   | 694 |   |
| Total prepaid expenses and other current assets |   | $                              | 704    |   |              | $      | 777 |   |

|                                |   | Three Months EndedMarch 31, |   |
|-------------------------------------|--------|-----------------------------|--------|
|                                |   | 2011                        |   |   | 2010 |   |
| Cost of  revenue          |   | $                           | 25     |   |   | $ | 97 |   |
| Research and development            |   |                        | 19     |   |   |   | 102 |   |
| Selling, general and administrative |   |                        | 812    |   |   |   | 234 |   |
| Total stock compensation expense    |   | $                           | 856    |   |   | $ | 433 |   |

----

|                           |   | Three Months EndedMarch 31, |         |
|--------------------------------|--------|-----------------------------|--------------|
|                           |   | 2011                        |         |   | 2010 |   |
| Dividend yield                 |   |                        | 0            |  % |   |   | 0 |  % |
| Risk free interest rates       |   |                        | 1.04 to 2.37 |  % |   |   | 1.34 to 2.07 |  % |
| Expected  volatility |   |                        | 67.1 to 85.7 |  % |   |   | 80.6 to 86.9 |  % |
| Expected term (in years)       |   |                        | 3.5 to 5.5   |   |   |   | 3.5 to 4.0 |   |

|                                             |   | Number of Shares |      |   | Weighted Average Exercise Price |   |   | Weighted Average Remaining Contractual Life (In Years) |   |   | Aggregate Intrinsic Value |   |
|--------------------------------------------------|--------|------------------|-----------|--------|---------------------------------|--------|--------|--------------------------------------------------------|--------|--------|---------------------------|--------|
| Outstanding at December 31, 2010                 |   |             | 3,152,114 |   |                            | $      | 1.71   |                                                   |   |   |                      |   |   |   |
| Options granted                                  |   |             | 1,294,177 |   |                            |   | 7.51   |                                                   |   |   |                      |   |   |   |
| Options exercised                                |   |             | (23,250   | )      |                            |   | 0.95   |                                                   |   |   |                      |   |   |   |
| Options forfeited                                |   |             | (130      | )      |                            |   | 2.60   |                                                   |   |   |                      |   |   |   |
| Options cancelled                                |   |             | (4,537    | )      |                            |   | 1.38   |                                                   |   |   |                      |   |   |   |
| Outstanding at March 31, 2011                    |   |             | 4,418,374 |   |                            | $      | 3.42   |                                                   |   |   | 5.96                      |   |   | $ | 17,182,953 |   |
| Vested or expected to vest at March 31, 2011 (1) |   |             | 4,332,600 |   |                            | $      | 4.22   |                                                   |   |   | 5.96                      |   |   | $ | 16,151,976 |   |
| Exercisable at March 31, 2011                    |   |             | 2,988,823 |   |                            | $      | 1.95   |                                                   |   |   | 6.38                      |   |   | $ | 15,694,652 |   |

|   |          |                |      |                                                 |                |   |                            |   |   |               |   |   |                               |      |
|--------|---------------|---------------------|-----------|------------------------------------------------------|---------------------|--------|---------------------------------|--------|--------|--------------------|--------|--------|------------------------------------|-----------|
|   |          | Options Outstanding |      |                                                 | Options Exercisable |   |
|   |          | Number Outstanding  |      | Weighted AverageRemaining Contractual Life(In Years) |                |   | Weighted Average Exercise Price |   |   | Number Exercisable |   |   | Weighted Average Exercisable Price |      |
| $      | 0.34 - $0.98  |                | 979,058   |                                                 |                | 5.31   |                            |   | $      | 0.81               |   |   |                               | 968,098   |   |   | $ | 0.81 |   |
| $      | 1.00 - $1.51  |                | 1,085,798 |                                                 |                | 6.18   |                            |   |   | 1.21               |   |   |                               | 932,224   |   |   |   | 1.23 |   |
| $      | 1.80 - $1.94  |                | 376,099   |                                                 |                | 5.87   |                            |   |   | 1.94               |   |   |                               | 368,899   |   |   |   | 1.94 |   |
| $      | 2.60 - $3.92  |                | 581,242   |                                                 |                | 6.98   |                            |   |   | 3.13               |   |   |                               | 492,602   |   |   |   | 3.10 |   |
| $      | 5.62 - $22.50 |                | 1,396,177 |                                                 |                | 5.84   |                            |   |   | 7.48               |   |   |                               | 227,000   |   |   |   | 7.29 |   |
|   |          |                | 4,418,374 |                                                 |                | 5.96   |                            |   | $      | 3.42               |   |   |                               | 2,988,823 |   |   | $ | 1.95 |   |

----

----

----

|          |   | Three Months EndedMarch 31, |   |
|---------------|--------|-----------------------------|--------|
|          |   | 2011                        |   |   | 2010 |   |
| North America |   | $                           | 4,095  |   |   | $ | 3,716 |   |
| Europe        |   |                        | 532    |   |   |   | 1,490 |   |
| Asia          |   |                        | 814    |   |   |   | 721 |   |
| Total         |   | $                           | 5,441  |   |   | $ | 5,927 |   |

----

----

----

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|                          |    | Three months endedMarch 31, |   |
|-------------------------------|--------------|---------------------------------------|--------|
|                          |    | 2011                                  |   |   | 2010 |   |
|                          |    | (unaudited)                           |   |
| Product revenue gross profit  |    | $                                     | 1,701  |    |   | $ | 2,641 |    |
| Product revenue gross margin  |    |                                  | 39     | % |   |   | 59 | % |
| Contract revenue gross profit |    | $                                     | 545    |   |   | $ | 677 |   |
| Contract revenue gross margin |    |                                  | 48     | % |   |   | 47 | % |
| Total gross profit            |    | $                                     | 2,246  |   |   | $ | 3,318 |   |
| Total gross margin            |    |                                  | 41     | % |   |   | 56 | % |
|                          |    |                                  |   |   |   |   |   |   |

----

----

----

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| 31.1                    | Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 (1)         |
|------------------------------|-------------------------------------------------------------------------------------------------------|
|                         |                                                                                                  |
| 31.2               | Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 (1)    |
|                         |                                                                                                  |
| 32.1     | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (1)                       |
|               |                                                                                                  |
| 32.2                         | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (1)                       |

----

|   | eMAGIN CORPORATION |                        |
|--------|--------------------|-----------------------------|
|   |               |                        |   |
|   | By:                | /s/ Andrew G. Sculley       |   |
|   |               | Andrew G. Sculley           |   |
|   |               | Chief Executive Officer     |   |
|   |               | Principal Executive Officer |   |

|   |   |                                       |   |
|--------|--------|--------------------------------------------|--------|
|   | By:    | /s/ Paul Campbell                          |   |
|   |   | Paul Campbell                              |   |
|   |   | Chief Financial Officer                    |   |
|   |   | Principal Accounting and Financial Officer |   |