U.S. Securities and Exchange
                             Commission Washington,
                                   D.C. 20549

                                  FORM 10-QSB/A
                                   (Mark One)

 [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
            Act of 1934 for the quarterly period ended June 30, 2004

  [ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange
   Act of 1934 for the transition period from ____________ to ________________

                               eMAGIN CORPORATION

        (Exact name of small business issuer as specified in its charter)

                        Commission file number: 000-24757


            DELAWARE                                  56-1764501
    (State or other jurisdiction                    (IRS Employer
   of incorporation or organization)               Identification No.)


                             10500 N.E. 8th Street
                                   Suite 1400
                               Bellevue, WA 98004
                    (Address of principal executive offices)

                                 (425) 749-3600
                               (Issuer's telephone
                                     number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

APPLICABLE  ONLY TO  ISSUERS  INVOLVED  IN  BANKRUPTCY  PROCEEDINGS  DURING  THE
PRECEDING FIVE YEARS:

Not applicable

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 13, 2004 the Registrant
had 66,127,924 shares of Common Stock outstanding.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes [ ] No [X]

PRELIMINARY NOTE (restated):

This  Amended  Quarterly  Report  on Form  10-QSB/A  is being  filed to  provide
additional  information  to clarify the  corrections  reported in the previously
Amended  Quarterly  Report on Form  10-QSB/A  filed by the  Company on April 12,
2005. The Consolidated  Balance Sheets,  Consolidated  Statements of Operations,
Consolidated Statements of Cash Flows, and Statement of Changes in Shareholders'
Equity and Selected Notes to  Consolidated  Financial  Statements are labeled as
"restated"  where  applicable.  The  restatement  was  in  connection  with  the
preparation  of the  Company's  annual  report on Form 10-KSB for the year ended
December 31, 2004 where it was determined that the unamortized debt discount and
the deferred financing costs should have been recorded as interest expense.  The
restated statements reflect the changes made in the previous quarter ended March
31, 2004 filed on Form 10-QSB/A of the  reclassification  of approximately $1.67
million  of  unamortized  debt  discount  and  deferred   financing  costs  from
additional  paid-in-capital to interest expense in relation to the March 3, 2004
debt  conversion  of  approximately  $8.567  million in  principal  and  accrued
interest. The following table presents the impact of the corrections:

<PAGE>
<TABLE>
<CAPTION>

                 Unaudited Consolidated Statements of Operations
  -----------------------------------------------------------------------------------------------------
                                      Three Months Ended                   Six Months Ended
                                        June 30, 2004                       June 30, 2004
                              ---------------------------------   -------------------------------------
                                Originally                         Originally
                                  Filed           Restated            Filed            Restated
                              ---------------  ----------------  ----------------  -----------------
<S>                              <C>              <C>              <C>                <C>
  Other income (expense)         $     8,012      $     8,012      $(3,395,098)       $(5,068,069)

  Net loss                       $(1,398,722)     $(1,398,722)     $(6,331,694)       $(8,004,666)
  Basic and diluted loss per
  common share                   $     (0.02)     $     (0.02)     $     (0.11)       $     (0.14)
</TABLE>
In all other material respects this Amended Quarterly Report on Form 10-QSB/A is
unchanged from the Amended Quarterly Report on Form 10-QSB/A previously filed by
the Company on April 12, 2005.

In addition,  we are revising Item 3, Controls and Procedures,  to disclose that
the  Company's  management  believes that its controls and  procedures  were not
effective  as of  the  end of the  period  covered  by  this  report  due to the
restatements to the Company's financial statements as set forth above.

                                       2
<PAGE>



                          PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>


Index                                                                                                Page Number
<S>                                               <C>                                                       <C>
Item 1.       Consolidated Financial Statements
              Consolidated Balance Sheets at June 30, 2004 (Unaudited) and                                    4
              December 31, 2003 (restated)


              Unaudited Consolidated Statements of Operations for the Three and
              Six Months ended June 30, 2004 and June 30, 2003 (restated)                                     5

              Unaudited Consolidated Statements of Cash Flows for the Six Months
              ended June 30, 2004 and June 30, 2003 (restated)                                                6

              Unaudited Consolidated Statement of Changes in Shareholders' Equity from
              December 31, 2003 to June 30, 2004 (restated)                                                   7

              Selected Notes to Consolidated Financial Statements (restated)                                  8

Item 2.       Management's Discussion and Analysis of Financial Condition and
              Results of Operation (restated)                                                                15

Item 3.       Controls and Procedures                                                                        25

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings                                                                              26

Item 2.       Changes in Securities and Use of Proceeds                                                      26

Item 3.       Defaults Upon Senior Securities                                                                26

Item 4.       Submission of Matters to a Vote of Security Holders                                            26

Item 5.       Other Information                                                                              26

Item 6.       Exhibits and Reports on Form 8-K                                                               27

SIGNATURE                                                                                                    28


CERTIFICATION                                                                                           See Exhibits

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

</TABLE>


                                       3
<PAGE>
                               eMAGIN CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                  June 30, 2004             December 31,
                                                                                    (Unaudited)                2003
                                                                                    (Restated)
                                                                                  --------------         ------------------
<S>                                                                               <C>                    <C>
CURRENT ASSETS:

   Cash and cash equivalents                                                      $   4,400,282          $       1,053,895
   Trade receivables                                                                    798,155                    768,537
   Unbilled costs and estimated profits on contracts in progress                              -                     75,359
   Inventory                                                                            884,855                    275,417
   Prepaid expenses and other current assets                                            598,914                    287,958
                                                                                  --------------         ------------------
      Total current assets                                                            6,682,206                  2,461,166

EQUIPMENT AND LEASEHOLD IMPROVEMENTS:                                                 3,696,304                  3,350,930
Less:  Accumulated depreciation                                                      (2,451,360)                (2,149,991)
                                                                                  --------------         ------------------
Equipment and leasehold improvements, net                                             1,244,944                  1,200,939

INTANGIBLE ASSETS                                                                        45,897                          -
Less: Accumulated amortization                                                             (502)                         -
                                                                                  --------------         ------------------
Intangible assets, net                                                                   45,395                          -

OTHER LONG-TERM ASSETS                                                                   36,258                     86,907
                                                                                  --------------         ------------------
      Total assets                                                                $   8,008,803          $       3,749,011
                                                                                  ==============         ==================

                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                                               $     423,413          $         234,869
   Accrued payroll and benefits                                                         607,199                    952,850
   Other accrued expenses                                                               332,072                    988,569
   Advanced payments                                                                     93,611                    122,362
   Current portion of long term debt                                                     16,991                     38,184
   Other current liabilities                                                             34,762                     18,008
                                                                                  --------------         ------------------
      Total current liabilities                                                       1,508,048                  2,354,842

Capitalized lease obligations                                                            29,468                     36,257
Notes payable and short-term debt subsequently converted to equity                            -                  6,124,451
                                                                                  --------------         ------------------
      Total liabilities                                                               1,537,516                  8,515,550

                   SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY):
   Common Stock, par value $0.001 per share
      Shares authorized - 100,000,000
      Shares issued and outstanding - 63,971,483 and 42,695,412                          63,971                     42,694
   Additional paid-in capital                                                       150,732,560                131,598,910
   Deferred compensation                                                                      -                    (87,565)
   Accumulated deficit                                                             (144,325,244)              (136,320,578)
                                                                                  --------------         ------------------
      Total shareholders' equity (capital deficiency)                                 6,471,287                 (4,766,539)
                                                                                  --------------         ------------------
      Total liabilities and shareholders' equity                                  $   8,008,803          $       3,749,011
                                                                                  ==============         ==================
</TABLE>

                   See selected notes to financial statements

                                       4
<PAGE>
                               eMAGIN CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                        Three Months     Three Months      Six Months        Six Months
                                                           Ended             Ended            Ended             Ended
                                                       June 30, 2004     June 30, 2003*   June 30, 2004     June 30, 2003*
                                                                                           (Restated)
                                                      ----------------- ---------------  ---------------  -------------------
REVENUE:
<S>                                                   <C>               <C>                   <C>                    <C>
  Product revenue, net of returns                     $      1,446,136  $      306,991   $    1,986,224   $          772,370
                                                      ----------------- ---------------  ---------------  -------------------
    Total revenue                                            1,446,136         306,991        1,986,224              772,370
                                                      ----------------- ---------------  ---------------  -------------------

COST OF GOODS SOLD:
  Direct cost of goods sold                                    807,833         122,441        1,016,433            1,272,309
  Production expenses                                          729,612         895,366        1,883,735              895,366
                                                      ----------------- ---------------  ---------------  -------------------
    Total cost of goods sold                                 1,537,445       1,017,807        2,900,168            2,167,675
                                                      ----------------- ---------------  ---------------  -------------------

Gross loss                                                     (91,309)       (710,816)        (913,944)          (1,395,305)
                                                      ----------------- ---------------  ---------------  -------------------
COSTS AND EXPENSES:
  Research and development                                      75,906               -           83,896               21,848
  Selling, general and administrative                        1,239,519         633,702        1,938,757            2,081,876
                                                      ----------------- ---------------  ---------------  -------------------
    Total costs and expenses, net                            1,315,425         633,702        2,022,653            2,103,724
                                                      ----------------- ---------------  ---------------  -------------------

 Interest income (expenses), net                                 8,012         (25,006)      (5,068,069)            (275,986)
 Gain on payable forgiveness                                         -       1,885,423                -            1,885,423
                                                      ----------------- ---------------  ---------------  -------------------
Other income (expenses), net                                     8,012       1,860,417       (5,068,069)           1,609,437
                                                      ----------------- ---------------  ---------------  -------------------

    Net profit (loss)                                 $     (1,398,722) $      515,899   $   (8,004,666)  $       (1,889,592)
                                                      ================= ===============  ===============  ===================

Basic and diluted profit (loss) per common share      $          (0.02) $         0.02   $        (0.14)  $            (0.06)
                                                      ================= ===============  ===============  ===================


Weighted average common shares outstanding                  63,577,581      34,037,250       57,758,893           32,393,723
                                                      ================= ===============  ===============  ===================
* Reclassified for comparative purposes
</TABLE>

                   See selected notes to financial statements.

                                        5
<PAGE>
                               eMAGIN CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                           Six Months            Six Months
                                                                              ended                ended
                                                                          June 30, 2004        June 30, 2003*
                                                                           (Restated)
                                                                       -------------------- ---------------------

<S>                                                                    <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                               $        (8,004,666) $         (1,889,592)
Adjustments to reconcile net loss to net cash
 used in operating activities
  Depreciation and amortization                                                    301,369               245,661
  Amortization of  intangibles                                                         503               331,442
  Amortization of financing fees                                                     7,863                     -
  Bad debt expense                                                                  33,656                     -
  Non-cash charge for stock based compensation                                      87,565               199,396
  Non-cash interest related charges                                                129,428               409,305
  Non-cash charge for services received                                              8,400               153,121
  Non-cash financing expense                                                     4,955,186                77,857
  Non-cash debt restructure                                                              -            (1,885,423)
   Changes in operating assets and liabilities:
   Trade receivables                                                                12,086              (167,018)
   Unbilled costs and estimated profits on contracts in progress                         -                50,000
   Inventory                                                                      (409,716)             (271,300)
   Prepaid expenses and other current assets                                      (462,234)           (1,035,908)
   Other long-term assets                                                          (31,851)               50,710
   Advanced payment on contracts to be completed                                   (28,751)                9,385
   Deferred revenue                                                                      -               (29,900)
   Accounts payable, accrued expenses and accrued payroll                         (122,525)            1,059,729
   Other current liabilities                                                        16,754              (204,214)
                                                                       -------------------- ---------------------
    Net cash used in operating activities                                       (3,506,933)           (2,896,749)
                                                                       -------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of equipment                                                          (344,830)             (109,619)
                                                                       -------------------- ---------------------
    Net cash used in investing activities                                         (344,830)             (109,619)
                                                                       -------------------- ---------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sales of common stock, net of issuance costs                     3,916,536                     -
  Proceeds from exercise of stock options and warrants                           3,312,892               103,940
  Proceeds from long and short term debt                                                 -             3,350,000
  Payments for capital leases                                                      (31,278)                    -
                                                                       -------------------- ---------------------
    Net cash provided by financing activities                                    7,198,150             3,453,940
                                                                       -------------------- ---------------------
NET INCREASE  IN CASH AND CASH EQUIVALENTS                                       3,346,387               447,572
CASH AND CASH EQUIVALENTS, beginning of period                                   1,053,895                82,951
                                                                       -------------------- ---------------------
CASH AND CASH EQUIVALENTS, end of period                               $         4,400,282  $            530,523
                                                                       ==================== =====================
Supplemental Cash Flow Disclosure:

Conversion of debt to equity                                           $         8,567,424  $          4,845,537
Payments of A/P through issuance of stock                              $           152,874  $                  -
Stock issued for prepaid services                                      $            16,800  $            748,116
Cash payments of interest                                              $             4,618  $                  -
</TABLE>
* Reclassified for comparative purposes

                   See selected notes to financial statements.


                                        6
<PAGE>
                               eMAGIN CORPORATION
        STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY)
                                   (Unaudited)
                                   (Restated)
<TABLE>
<CAPTION>

                                                                                  Additional
                                         Common Stock              Deferred         paid-in        Accumulated
                                    Shares             $         Compensation       Capital          Deficit            Total
                                -------------  -------------    -------------    --------------   --------------    --------------
<S>                   <C>         <C>          <C>              <C>              <C>              <C>               <C>
Balance, December 31, 2003        42,695,412   $     42,694     $    (87,565)    $ 131,598,910    $(136,320,578)    $  (4,766,539)
Conversion of debt to equity      11,394,621         11,395                          8,556,029                          8,567,424
Stock options exercised            5,221,052          5,221                          1,379,263                          1,384,484
Sale of equity                     3,333,363          3,334                          3,913,204                          3,916,538
Issuance of warrants for debt
 conversion                                                                          3,180,000                          3,180,000
Stock warrants exercised           1,234,996          1,235                          1,927,172                          1,928,407
Issuance of common stock for
 services                             92,039             92                            177,982                            178,074
Amortization of deferred
 compensation                                                         87,565                                               87,565
Net loss for period                                                                                  (8,004,666)       (8,004,666)
                                -------------  -------------    -------------    --------------   --------------    --------------
Balance, June 30, 2004            63,971,483   $     63,971     $          -     $ 150,732,560    $(144,325,244)    $   6,471,287
                                =============  =============    =============    ==============   ==============    ==============
</TABLE>
                   See selected notes to financial statements.


                                       7
<PAGE>
                               eMAGIN CORPORATION
               Selected Notes to Consolidated Financial Statements

Note 1 - ACCOUNTING POLICIES

Basis of Presentation

In the opinion of  management,  the  accompanying  unaudited  interim  financial
information  reflects all adjustments,  consisting of normal recurring accruals,
necessary for a fair presentation.  Certain  information and footnote disclosure
normally  included in  financial  statements  prepared in  accordance  with U.S.
generally accepted accounting principles have been condensed or omitted pursuant
to instructions, rules and regulations prescribed by the Securities and Exchange
Commission.  The  company  believes  that the  disclosures  provided  herein are
adequate to make the  information  presented not misleading when these unaudited
interim condensed consolidated financial statements are read in conjunction with
the audited consolidated  financial statements contained in the company's Annual
Report on Form  10-KSB for the year ended  December  31,  2003.  The  results of
operations for the period ended June 30, 2004 are not necessarily  indicative of
the results to be expected for the full year.

This Amended Quarterly Report is being filed to reflect the  reclassification of
approximately  $1.67 million of unamortized debt discount and deferred financing
costs from additional  paid-in-capital  to non-cash interest expense in relation
to the  March 3,  2004  debt  conversion  of  approximately  $8.567  million  in
principal  and accrued  interest.  In  connection  with the  preparation  of the
Company's  annual report on Form 10-KSB for the year ended December 31, 2004, on
March 28,  2005 the Company was  advised by its  independent  registered  public
accounting  firm that the unamortized  debt discount and the deferred  financing
costs should be recorded as interest  expense.  These  changes are  reflected in
year-to-date  amounts and charts.  In all other  material  respects this Amended
Quarterly Report on Form 10-QSB/A is unchanged from the Amended Quarterly Report
on Form 10-QSB/A previously filed by the Company on August 16, 2004.

Stock-Based Compensation Expense (Restated)

The Company has elected to follow  Accounting  Principles  Board  Opinion No. 25
("APB  No.  25"),  "Accounting  for  Stock  Issued to  Employees,"  and  related
interpretations in accounting for its employee stock options.  Under APB No. 25,
when the exercise price of employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recorded.  The
Company  discloses  information  relating  to  the  fair  value  of  stock-based
compensation  awards in  accordance  with  Statements  of  Financial  Accounting
Standards  No.123,   "Accounting  for  Stock-Based  Compensation"  And  No.  148
"Accounting  for  Stock-Based  Compensation  - Transition and  Disclosure".  The
following table  illustrates the effect on net loss and loss per share as if the
Company had applied the fair value to all awards.  The fair value of each option
grant is estimated on the date of grant using the  Black-Scholes  option-pricing
model with the following  assumptions  used for grants in the second  quarter of
2004 and 2003,  respectively:  (1) average expected  volatility of 99% and 162%,
(2)  average  risk-free  interest  rates of 4.24%  and  3.33%,  and (3)  average
expected lives of seven years.

The pro forma amounts that are  disclosed  reflect the portion of the fair value
of awards that were earned for the three and six months  ended June 30, 2004 and
2003.

<TABLE>
<CAPTION>
  For the three and six months ended June          Three Months   Three Months    Six Months      Six Months
  30,                                                 2004            2003           2004            2003
                                                                                  (Restated)
  ----------------------------------------------- -------------- -------------- -------------- --------------
<S>                                 <C>              <C>            <C>           <C>              <C>
  Net loss applicable to common stockholders',
  as reported                                     $  (1,398,722) $     515,899  $  (8,004,666) $  (1,889,592)
  ----------------------------------------------- -------------- -------------- -------------- --------------
  Add: Stock based employee compensation
  expense included in reported net loss                       -              -              -              -
  ----------------------------------------------- -------------- -------------- -------------- --------------
  Deduct:  Stock-based employee compensation
  expense determined under fair value method         (6,043,119)       (44,264)    (7,281,755)    (1,485,709)
  ----------------------------------------------- -------------- -------------- -------------- --------------
  Pro forma net loss.                             $  (7,441,841) $     471,635  $ (15,286,421) $  (3,375,301)
  ----------------------------------------------- -------------- -------------- -------------- --------------
  Net loss per share applicable to common
  shareholders':
  ----------------------------------------------- -------------- -------------- -------------- --------------
  Basic and diluted, as reported                  $       (0.02) $        0.02  $       (0.14) $       (0.06)
  ----------------------------------------------- -------------- -------------- -------------- --------------
  Basic and diluted, pro forma                    $       (0.12) $        0.01  $       (0.26) $       (0.10)
  ----------------------------------------------- -------------- -------------- -------------- --------------
</TABLE>

                                       8
<PAGE>
Note 2 - NATURE OF BUSINESS

We design, manufacture,  and market miniature display modules, which we refer to
as  OLED-on-silicon-microdisplays.  Microdisplays  are typically  smaller than a
postage  stamp,  but when viewed through a magnifier they create a virtual image
similar  to the real  image  of a  computer  monitor  or large  screen  TV.  Our
microdisplays  use organic light  emitting  diodes,  or OLEDs,  which emit light
themselves  when a current is passed  through them. Our  proprietary  technology
permits  OLEDs to be  coated  onto  silicon  chips to  produce  high  resolution
OLED-on-silicon  microdisplays.  We offer  microdisplay  products and subsystems
that original equipment  manufacturers,  or OEMs, can integrate into near-to-eye
applications,  such as head-mounted monocular or binocular headsets and viewers,
for military, medical, industrial, commercial, and consumer applications.

Note 3 - REVENUE AND COST RECOGNITION

Revenue is recognized when products are shipped to customers,  net of allowances
for anticipated  returns.  The Company's  revenue-earning  activities  generally
involve  delivering  products and revenues are  considered to be earned when the
Company has  completed  the  process by which it is  entitled to such  revenues.
Revenue  is  recognized  when  persuasive  evidence  of an  arrangement  exists,
delivery has occurred, the selling price is fixed or determinable and collection
is reasonably assured.

The Company also earns  revenues from certain of eMagin's R&D  activities  under
both  firm  fixed-price  contracts  and  cost-type  contracts,   including  some
cost-plus-fee  contracts.  Revenues  relating to firm fixed-price  contracts are
generally  recognized  on the  percentage-of-completion  method of accounting as
costs are incurred  (cost-to-cost  basis).  Revenues on cost-plus-fee  contracts
include costs  incurred plus a portion of estimated fees or profits based on the
relationship of costs incurred to total estimated costs.  Contract costs include
all direct  material and labor costs and an  allocation  of  allowable  indirect
costs as defined by each contract,  as periodically  adjusted to reflect revised
agreed upon rates. These rates are subject to audit by the other party.  Amounts
can typically be billed on a bi-monthly basis.

Note 4 - RECEIVABLES

The  majority  of our  commercial  accounts  receivable  are due  from  Original
Equipment  Manufacturers  ("OEM"s).  Credit is extended based on evaluation of a
customers'  financial  condition  and,  generally,  collateral  is not required.
Accounts  receivable are payable in U.S. dollars,  are due within 30-90 days and
are  stated at amounts  due from  customers  net of an  allowance  for  doubtful
accounts.  Any account  outstanding longer than the contractual payment terms is
considered  past due. The Company  determines  the  allowance by  considering  a
number of factors,  including the length of time trade  accounts  receivable are
past due, eMagin's previous loss history,  the customer's current ability to pay
its  obligation,  and the condition of the general economy and the industry as a
whole.  The  Company  writes  off  accounts  receivable  when  they  are  deemed
uncollectible.

Receivables consist of the following:

                                            June 30, 2004     December 31, 2003
                                            ------------       -------------
     Trade receivables                      $ 1,165,754        $    899,174
     Contract receivables                       145,809             173,809
     Unbilled receivables                             -              75,359
                                            ------------       -------------
       Total                                  1,311,563           1,148,342

     Less allowance for doubtful accounts      (513,408)           (304,446)
                                            ------------       -------------
     Net receivables                        $   798,155         $   843,896
                                            ============       =============

                                       9
<PAGE>
Note 5 - RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred.

Note 6 - NET LOSS PER COMMON SHARE

In accordance with SFAS No. 128, net loss per common share amounts ("basic EPS")
and  ("diluted  EPS") were  computed  by dividing  the net loss by the  weighted
average number of common shares  outstanding,  excluding any potential dilution.
Common equivalent  shares totaling  34,799,366 and 13,247,270 have been excluded
from the  computation of diluted EPS for the three and six months ended June 30,
2004 and June 30, 2003, respectively as their inclusion would be antidilutive.

Note 7 - INVENTORIES

Inventory is stated at the lower of cost or market. Cost is determined using the
first-in  first-out  method.  The Company reviews the value of its inventory and
reduces the inventory  value to its net realized value based upon current market
prices and contracts for future sales.

The components of inventories are as follows:

                                         June 30, 2004        December 31, 2003
                                         -------------          -------------
         Raw materials                   $    491,528           $     20,416
         Work in process                       92,955                 43,750
         Finished goods                       300,372                211,251
                                         -------------          -------------
           Total Inventory               $    884,855           $    275,417
                                         =============          =============

Note 8 - DEBT (Restated)

Debt consisted of the following:

<TABLE>
<CAPTION>
                                                          June 30, 2004       December 31, 2003
                                                          -------------         -------------
<S>                                                       <C>                   <C>
         a     Current portion of long term debt          $      16,991         $      38,184
         b     Restructuring Agreement  and
                  Original Secured Notes                              -             6,124,451
         c     Long-term capitalized lease obligations           29,468                36,257
                                                          -------------         -------------
               Total debt                                 $      46,459         $   6,198,892
                                                          =============         =============
</TABLE>
                                        10
<PAGE>
a) This amount  includes  (i) $13,113 due to Citicorp  Leasing  over the next 12
months in lease payments for equipment; and (ii) $3,878 due to IBM over the next
12 months for leasehold improvements.

b) In February  2004,  we entered into an  agreement  whereby the holders of our
Secured Convertible Notes (the "Notes"), which were due in November 2005, agreed
to an early  conversion  of all of the $7.825  million  principal  amount of the
Notes,  together  with the  $742,424  of accrued  interest  on the  Notes,  into
11,394,621  shares of common stock of eMagin.  On the date of the conversion the
Company  recorded,  $1,598,335  in  non-cash  interest  expense  related  to the
unamortized  debt  discount  and  beneficial  conversion  feature and $74,637 in
non-cash interest expense related to the writeoff of deferred financing costs.

In  consideration  of the  Noteholders  agreeing to the early  conversion of the
Notes,  eMagin issued the  Noteholders  warrants to purchase an aggregate of 2.5
million shares of common stock (the "Warrants"),  which Warrants are exercisable
at a price of $2.76 per share. 1.5 million of the Warrants are exercisable until
December 31, 2005.  The  remaining  1.0 million of the Warrants are  exercisable
until June 10, 2008. $3.18 million was recorded in non-cash interest expense for
the fair value estimate of these warrants.


c) This amount is due to Citicorp  Leasing as long-term  debt for lease payments
for equipment with this balance to be paid in 2005.

Note 9 - SHAREHOLDERS' EQUITY (Restated)

The authorized common stock of the Company consists of 200,000,000 shares with a
par value of $0.001 per share.

On January 9, 2004, we entered into a Securities Purchase Agreement with several
accredited  institutional and private investors whereby such investors purchased
an aggregate of 3,333,363 shares of common stock for an aggregate purchase price
of  $4,200,039.  The Company also entered into a registration  rights  agreement
with the  aforementioned  investors  with respect to the common stock issued and
common stock  issuable  upon the exercise of the  warrants.  The Company filed a
registration statement for the sale of these shares in February 2004.

The shares of common stock were priced at a 20% discount to the average  closing
price of the stock from December 30, 2003 to January 6, 2004,  which ranged from
$1.38 to $1.94 per share  during the period  for an average  discounted  closing
price of $1.26 per share. In addition, the investors received warrants (Class A)
to  purchase  an  aggregate  of  2,000,019  shares of common  stock  (subject to
anti-dilution  adjustments)  exercisable  at a price of $1.74  per  share  for a
period of five (5)  years.  The  warrants  were  priced at a 10%  premium to the
average closing price of the stock for the pricing period.

In connection with the private placement, eMagin also issued additional warrants
to the  investors to acquire an aggregate of 2,312,193  shares of common  stock.
1,206,914 of such warrants (Class B) are  exercisable,  within 6 months from the
effective date of the registration  statement  covering these  securities,  at a
price of $1.74 per share (a 10%  premium  to the  average  closing  price of the
stock for the pricing  period),  and  1,105,279 of such  warrants  (Class C) are
exercisable  within  12  months  from  the  effective  date of the  registration
statement  covering  these  securities,  at a price  of $1.90  per  share (a 20%
premium to the average closing price of the stock for the pricing period).

In February 2004, the Company and all of the holders of the Secured  Convertible
Notes (the "Notes"),  which were due in November 2005, entered into an agreement
whereby  the  holders  agreed to an early  conversion  of 100% of the  principal
amount of the Notes aggregating $7.825 million, together with all of the accrued
interest

                                       11
<PAGE>
of approximately  $742,000 on the Notes,  into 11,394,621 shares of common stock
of eMagin.  The listing of the shares  issuable  pursuant to such  agreement was
approved by the  American  Stock  Exchange.  On the date of the  conversion  the
Company  recorded,  $1,598,335  in  non-cash  interest  expense  related  to the
unamortized  debt  discount  and  beneficial  conversion  feature and $74,637 in
non-cash interest expense related to the writeoff of deferred financing costs.

In  consideration  of the  Noteholders  agreeing to the early  conversion of the
Notes, eMagin agreed to issue the Noteholders  warrants to purchase an aggregate
of 2.5 million  shares of common  stock (the  "warrants"),  which  warrants  are
exercisable  at a price of $2.76 per  share.  1.5  million of the  Warrants  are
exercisable until the later of (i) twelve (12) months from the date upon which a
registration  statement  covering  the  shares  issuable  upon  exercise  of the
Warrants is declared  effective by the  Securities and Exchange  Commission,  or
(ii)  December  31,  2005.  The  remaining  1.0  million  of  the  warrants  are
exercisable  until  June 10,  2008.  Using the Black  Scholes  method of valuing
warrants,  an expense totaling $3.18 million was recorded in interest expense in
the first quarter of 2004 to record the estimated fair value of these  warrants.
The  fair  value  of  the  warrants  was  estimated   using  the   Black-Scholes
option-pricing  model  with  the  following  assumptions  for  the  two  sets of
warrants:  (1)  average  expected  volatility  of 100%,  (2)  average  risk-free
interest  rates of 3.52%,  (3) Fair Market Value of $2.30,  (4) dividends of 0%,
and (5) Average  Term (in days) of 670 for the 12 month  warrants  and 1,460 for
the 4 year warrants.

In connection with the above conversion, eMagin also entered into a Registration
Rights  Agreement  with the  holders of the Notes  providing  the  holders  with
certain  registration rights under the Securities Act of 1933, as amended,  with
respect to the common stock issuable upon exercise of the warrants.

The Company received  $1,239,492 for the exercise of 131,918 options and 736,167
warrants in the three months ended June 30, 2004 for a total of  $3,312,892  for
the exercise of 5,221,052 options and 1,234,996 warrants in the six months ended
June 30, 2004.

The Company  issued  59,717 and 92,039 shares of common stock for the payment of
$118,275  and  $178,074  for the  three  and six  months  ended  June 30,  2004,
respectively,  for services  rendered and to be rendered in the future. As such,
the Company recorded the fair value of the services rendered in selling, general
and administrative expenses,  prepaid expenses and reduction of accounts payable
in the accompanying unaudited consolidated statements of operations.

Note 10 - STOCK COMPENSATION

As of June 30, 2004, the Company has outstanding  options to purchase 11,946,906
shares.

The Company granted an aggregate of 4,285,900 common stock options in the second
quarter of 2004.  These options were granted at market price on the day of grant
to new hires,  compensation  of directors  issued  annually and  approximately 3
million, 3- year incentive options granted to all employees.

In 2000 the Company issued options below fair market value. The Company recorded
$3,460 and $87,565 in expense for the three and six months  ended June 30, 2004,
respectively,  for the amortization of those options. The amount was recorded in
Selling, General & Administrative expenses.

Note 11 - COMMITMENTS AND CONTINGENCIES

[a] Royalty payments:

The  Company,  in  accordance  with a royalty  agreement,  is  obligated to make
minimum annual royalty  payments.  Under this agreement,  the Company must pay a
certain  percentage  of net sales of certain  products,  which  percentages  are
defined in the agreement.  The  percentages  are on a sliding scale depending on
the  amount of sales  generated.  Any  minimum  royalties  paid may be  credited
against the amounts due based on the percentage of sales. The royalty  agreement
terminates upon the expiration of the last-to-expire issued patent.

                                       12
<PAGE>
In the three and six  months  ended  June 30,  2004,  $72,004  and  $94,859  was
recorded in royalty  expense.  In April 2004,  the Company paid $125,000 for the
minimum  amount due for 2004.  The amount was  recorded in prepaid  expenses and
will be amortized as the Company  records the royalty  expense as defined in the
agreement.

[b] Contractual obligations:

The  Company  leases  certain  office  facilities  and  office,  lab and factory
equipment under operating leases expiring  through 2008.  Certain leases provide
for payments of monthly operating expenses. The approximate future minimum lease
payments for 2004 are as follows:

Operating leases                    $   20,712
Capital leases                           9,166
                                    -----------
Total contractual obligations       $   29,878
                                    ===========

We  currently  lease  space  from IBM for  $73,914  per month  that  houses  our
principal executive offices, our equipment for OLED microdisplay fabrication and
research and  development,  as well as our assembly  operations and storage.  We
currently  occupy such space on a  month-to-month  basis.  We are  currently  in
negotiations  with IBM for a new lease.  No assurance  can be given that we will
execute a new lease,  or that such new lease will be on terms that are favorable
to us. In the event that we are forced to locate new space,  we may experience a
disruption in our operations,  which could have a material adverse affect on our
results of operations.

NOTE 12 - RECLASSIFICATIONS

Certain amounts in the June 30, 2003 financial statements have been reclassified
to conform to the June 30, 2004 classification.

NOTE 13 - SUBSEQUENT EVENTS (Restated)

On August 5, 2004, the Company and the certain holders of its outstanding  Class
A, B and C common stock purchase warrants entered into an agreement  pursuant to
which the Company and the holders of the warrants  agreed to the  re-pricing and
exercise of an aggregate of 500,952,  862,085 and 736,857 currently  outstanding
Class A, B and C common stock purchase warrants, respectively. As a condition to
the  transaction,  the  holders  of the  warrants  agreed  to limit the right of
participation  that they were granted pursuant to Section 4.11 of the Securities
Purchase Agreement, dated January 9, 2004, under which they originally purchased
such securities.

Specifically,  the Company  agreed to lower the exercise  price of such warrants
from  $1.74,   $1.74  and/or  $1.90,   respectively,   to  $.90  per  share,  in
consideration of the holders agreeing to: (i) limit their right of participation
with  respect to any proposed  financing  transaction  to the maximum  number of
shares  that AMEX  will  allow  the  Investors  to  purchase  in any  subsequent
financing  without  the Company  being  required  to seek  shareholder  approval
(provided,  however, that in no event will the participation of all investors of
the January 2004 financing in any such subsequent  financing  exceed 35% of such
financing);  and (ii)  immediately  exercise the  re-priced  Class A, B and/or C
common stock purchase warrants.

As a result of the  transaction,  certain  holders  agreed to the re-pricing and
immediately  exercise all or a portion of their Class A, B and/or C common stock
purchase warrants, yielding proceds of approximately $1,889,900.

                                       13
<PAGE>
Following the completion of the  transaction,  all Class B common stock purchase
warrants  have been  exercised.  The Company  continues to have  outstanding  an
aggregate of 1,213,352 and 184,212 Class A and C common stock purchase warrants,
respectively.  The remaining outstanding  unexercised Class A and C common stock
purchase warrants continue to be exercisable as per their original terms.

Note 14 - RELATED PARTY TRANSACTIONS

A family member of an outside director of eMagin  participated in the re-pricing
of the Securities  Purchase  Agreement in August. The family member received the
same considerations as all other investors.

                                       14
<PAGE>
Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operation

Statement of Forward-Looking Information

This report 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.  These  statements  relate to future  events  or our  future  financial
performance.  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. Although we
believe that the expectations  reflected in the  forward-looking  statements are
reasonable,  such 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 the forward-looking statements contained in
this release.

We undertake no duty to update any of the forward-looking statements, whether as
a result of new information,  future events or otherwise.  Readers are cautioned
not to place undue reliance on the forward-looking  statements contained in this
report.

Overview

We  design  and  manufacture  miniature  display  modules,  which we refer to as
OLED-on-silicon-microdisplays,  primarily for incorporation into the products of
other  manufacturers.  Microdisplays are typically smaller than a postage stamp,
but when  viewed  through a magnifier  they can  contain all of the  information
appearing on a high-resolution  personal computer screen.  Our microdisplays use
organic light emitting  diodes,  or OLEDs,  which emit light  themselves  when a
current is passed through them.  Our technology  permits OLEDs to be coated onto
silicon chips to produce high resolution OLED-on-silicon microdisplays.

We believe that our  OLED-on-silicon  microdisplays offer a number of advantages
in near to the eye applications  over other current  microdisplay  technologies,
including  lower power  requirements,  less  weight,  fast video  speed  without
flicker,  and  wider  viewing  angles.  In  addition,  many  computer  and video
electronic  system  functions  can be built  directly  into the  OLED-on-silicon
microdisplay,  resulting in compact  systems with lower expected  overall system
costs relative to alternate microdisplay technologies.

Since our inception in 1996, we derived  substantially  all of our revenues from
fees paid to us under  research and  development  contracts,  primarily with the
U.S.  government.  We have devoted significant  resources to the development and
commercial  launch of our products.  We commenced  limited  initial sales of our
SVGA+  microdisplay  in May 2001 and commenced  shipping  samples of our SVGA-3D
microdisplay  in  February  2002.  As of  June  30,  2004,  we  have  recognized
approximately  $6.3  million from sales of our  products,  and have a backlog of
approximately  $30 million in products  ordered for delivery through 2005. These
products are being applied or considered  for near-eye and headset  applications
in products such as  entertainment  and gaming headsets,  handheld  Internet and
telecommunication   appliances,   viewfinders,  and  wearable  computers  to  be
manufactured by original equipment  manufacturer  (OEM) customers.  We have also
shipped a limited  number of prototypes of our eGlass II  Head-wearable  Display
systems. In addition to marketing  OLED-on-silicon  microdisplays as components,
we also offer microdisplays in an integrated package, which we call Microviewer,
which  includes a compact  lens for  viewing  the  microdisplay  and  electronic
interfaces  to convert the signal from our  customer's  product  into a viewable
image on the microdisplay.  Through our wholly owned subsidiary, Virtual Vision,
Inc.,  we are  also  developing  head-wearable  displays  that  incorporate  our
Microviewer.

                                       15
<PAGE>
We license our core OLED technology from Eastman Kodak and we have developed our
own  technology to create high  performance  OLED-on-silicon  microdisplays  and
related  optical  systems.  We believe our technology  licensing  agreement with
Eastman Kodak, coupled with our own intellectual property portfolio,  gives us a
leadership position in OLED and OLED-on-silicon  microdisplay technology. We are
the only  company to  demonstrate  publicly  and offer  commercially  full-color
OLED-on-silicon microdisplays.

Company History

Our history has been as a developmental stage company. As of January 1, 2003, we
are no longer a development stage Company. We have transitioned to manufacturing
our product and intend to  significantly  increase  our  marketing,  sales,  and
research and development efforts, and expand our operating infrastructure. If we
are unable to generate significant revenues,  our net losses in any given period
could increase and we may be forced to reduce our expenses or operations.

CRITICAL ACCOUNTING POLICIES

The Securities and Exchange  Commission  ("SEC")  defines  "critical  accounting
policies" as those that require  application  of  management's  most  difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the  effect of matters  that are  inherently  uncertain  and may change in
subsequent periods.

Not  all of the  accounting  policies  require  management  to  make  difficult,
subjective or complex judgments or estimates.  However,  the following  policies
could be deemed to be critical within the SEC definition.

Revenue Recognition

Revenue  on  product  sales  is  recognized  when  persuasive   evidence  of  an
arrangement  exists,  such as when a purchase order or contract is received from
the customer,  the price is fixed, title to the goods has changed and there is a
reasonable  assurance of collection  of the sales  proceeds.  We obtain  written
purchase  authorizations from our customers for a specified amount of product at
a  specified  price  and  consider  delivery  to have  occurred  at the  time of
shipment.  Revenue  is  recognized  at  shipment  and we  record a  reserve  for
estimated  sales  returns,  which is  reflected as a reduction of revenue at the
time of revenue recognition.

Revenues from research and development  activities  relating to firm fixed-price
contracts are generally  recognized  on the  percentage-of-completion  method of
accounting as costs are incurred  (cost-to-cost  basis).  Revenues from research
and development  activities  relating to cost-plus-fee  contracts  include costs
incurred plus a portion of estimated  fees or profits based on the  relationship
of costs incurred to total  estimated  costs.  Contract costs include all direct
material  and labor  costs and an  allocation  of  allowable  indirect  costs as
defined by each contract,  as  periodically  adjusted to reflect  revised agreed
upon rates. These rates are subject to audit by the other party.  Amounts can be
billed on a bi-monthly  basis.  Billing is based on subjective  cost  investment
factors.

Results of Operations (Restated)

THREE AND SIX MONTHS ENDED JUNE 30, 2004  COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 2003

Revenues

Revenues  for the three and six months ended June 30, 2004 were $1.4 million and
$2.0 million, respectively, as compared to $0.3 million and $0.8 million for the
three  and six  months  ended  June 30,  2003,  an  increase  of 371% and  157%,
respectively. The increase in revenue resulted from increased unit volume to the
Company's  current customer base. Unit pricing was relatively  unchanged in 2004
as compared to 2003. We currently have firm orders or letters of intent to

                                       16
<PAGE>
purchase  our  products  at  significantly  higher  volume  levels  than we have
experienced historically. In order to realize revenue from these orders, we will
be  required  to  increase  unit  production  levels  and the  amount of capital
committed to pre-payments of raw materials and finished goods.  The critical raw
materials in the  manufacture  of our products are silicon wafers used to create
our OLED  microdisplays  and lenses used in assembly of our subsystems.  Both of
these items require  significant cash pre-payments and can take up to six months
for delivery once ordered.  While we anticipate  that our revenues will increase
in the  future,  we can  not  reliably  estimate  when  and  by how  much  until
predictable  raw material  delivery is established or increased  levels of these
materials are held in inventory.

Cost of Goods  Sold.  Cost of goods  sold  includes  direct and  indirect  costs
associated  with production and inventory loss. Cost of goods sold for the three
and six  months  ended  June 30,  2004  were  $1.5  million  and  $2.9  million,
respectively, as compared to $1.0 million and $2.2 million for the three and six
months  ended  June 30,  2003.  The $0.5  million  and  $0.7  million  increase,
respectively,  in costs was  directly  related to higher unit volumes in 2004 as
compared to 2003. However, our gross loss percentage during the 2004 periods has
been reduced  significantly due to volume and operating  efficiencies created as
we increased production.

We currently record all expenses  associated with manufacturing in cost of goods
sold. The full facility overhead as well as the expense of  non-capitalized  raw
materials is matched against our units sold. While our production volume is low,
the gross  margin  reflects  the  costs  that  will be  shared  when  quantities
increase.

Costs and Expenses

Research and Development.  Research and development  expenses included salaries,
development materials and other costs specifically  allocated to the development
of new products.  Gross research and development  expenses were $76 thousand and
$84  thousand  for the  three  months  and  six  months  ended  June  30,  2004,
respectively,  as compared to $0 and $22  thousand  for the three and six months
ended June 30,  2003.  We currently  anticipate  that  research and  development
expenses will increase over the coming quarters if higher revenues are realized.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses  consist  principally of salaries and fees for  professional  services,
legal fees  incurred  in  connection  with patent  filings and related  matters,
amortization,  as well as other marketing and administrative expenses.  Selling,
general and  administrative  expenses were $1.2 million and $1.9 million for the
three and six months  ended June 30,  2004,  respectively,  as  compared to $0.6
million and $2.1 million for the three and six months  ended June 30, 2003.  The
increase of $0.6  million in the three months ended June 30, 2004 as compared to
the three months ended June 30, 2003 is due to an increase of Marketing,  legal,
travel and bad debt expenses  related to higher revenue and  receivable  levels.
The  decrease of $0.2  million in the six months ended June 30, 2004 as compared
to the six  months  ended  June 30,  2003 is  mostly  due to lower  professional
services fees. We currently anticipate that selling,  general and administrative
expenses will increase over the coming quarters if higher revenues are realized.

Other  Income  (Expense).  Other income  (expense)  for the three and six months
ended June 30,  2004 were $8  thousand  and  ($5.1)  million,  respectively,  as
compared  to $1.9  million and $1.6  million for the three and six months  ended
June 30, 2003.  The $1.9  million  decrease in other income for the three months
ended June 30, 2004 as compared to the three  months ended June 30, 2003 was due
to a one time gain resulting from an agreement with debt holders to forgive debt
of approximately  $1.9 million in 2003. The increase in interest expense for the
six months  ended June 30, 2004 was  attributable  to three  factors;  (1) $3.18
million  of  non-cash  charges  related to the value of the  warrants  issued to
induce  the  holders  of the  $7.825  million  in  Notes  to  agree  to an early
conversion of the Notes into common stock,  (2)  $1,598,325 in non-cash  charges
related to the remaining  unamortized  debt discount and  beneficial  conversion
feature  associated with the  aforementioned  Notes, and (3) $74,637 in non-cash
charges related to the write-off of the remaining unamortized deferred financing
costs.

                                       17
<PAGE>
Liquidity and Capital Resources

Current Financial Position

We have total  liabilities and contractual  obligations of $2,180,528 as of June
30,  2004.  These  contractual  obligations,  along with the dates on which such
payments are due, are described below:
<TABLE>
<CAPTION>
Contractual Obligations                    Total            One Year or Less      More than One Year
-----------------------              ----------------       ----------------      ------------------
<S>                                  <C>                   <C>                    <C>
 Royalties                           $       562,500        $       125,000       $         437,500
 Operating leases                             28,458                 28,458                       -
 Capital leases                               52,054                 18,372                  33,682
                                     ----------------       ----------------      ------------------
 Total contractual obligations       $       643,012        $       171,830       $         471,182
                                     ================       ================      ==================
</TABLE>

Assuming  we are  able to  increase  our  revenue,  we  anticipate  that we will
continue to  experience  growth in our  operating  expenses for the  foreseeable
future and that our operating expenses will be the principal use of our cash. In
particular,  we  expect  that  salaries  for  employees  engaged  in  production
operations,  purchase  of  inventory,  funding of  receivables  and  expenses of
increased  sales and marketing  efforts would be the principle  uses of cash. We
expect  that our cash  requirements  over  the next 12  months  will be met by a
combination  of cash on  hand,  which as of June  30,  2004  was  $4.4  million,
additional  financing,  exercising  of  outstanding  options and  warrants,  and
revenues generated by operations.

We have  received  purchase  agreements  for  approximately  $30  million of our
products  to be  delivered  now  through  2005.  Management  believes  that  the
prospects for growth of product revenue remain high.

Scheduled   deliveries  against  our  purchase  agreements  and  other  customer
requirements are subject to change  depending on a number of factors  including,
our production  capacity which is heavily dependant on predictable silicon wafer
and lens  delivery  from our  suppliers,  our  customers'  production  timing of
related  systems  into which they are  integrating  our products and their other
supplier  schedules,  changes in the expected  procurement  periods for military
programs and the requirements of the individual agreements and contracts that we
have with our customers.  We currently  anticipate the need to ramp our supplies
and  staffing  quickly and  efficiently  to be  prepared  to meet the  currently
anticipated shipping schedules,  which will require significant added effort and
capital.

We are in the early phases of  production,  although our past  progress had been
impeded by our prior cash position. Anticipated increased shipments in the first
half of 2004 were  delayed,  primarily  due to a lack of raw  materials  that we
order and pre-pay approximately six months before anticipated receipt.  Based on
improvements  made  by our  silicon  wafer  supplier  to  delivery  and  quality
throughout the first half of the year we believe that they have resolved many of
the  manufacturing  issues. A limiting factor that remains is the requirement by
our supplier to pre-pay for these  wafers and our ability to allocate  increased
amounts of our  capital  to these  pre-payments.  During  the second  quarter we
negotiated an  improvement to our terms whereby we now only pay 60% of the order
up front rather than 100%.  We believe that steady  improvements  to these terms

                                       18
<PAGE>
will allow us to obtain  increased  quantities of critical raw  materials  which
will allow us to increase our  production and revenue levels within our existing
capital constraints.

Our  cash  requirements  depend  on  numerous  factors,  including  new  product
development  activities,  ability to commercialize  our products,  timely market
acceptance of our products and our customers'  products,  and other factors.  We
expect to  carefully  devote  capital  resources  to  continue  our  development
programs directed at  commercializing  our products in our target markets,  hire
and train additional staff, expand our research and development activities,  and
develop and expand our manufacturing capacity.

Any delays could change the cash  requirements of the company.  While we believe
that we are in position to handle the anticipated production increase, there can
be no assurance that we will not experience some issues relating to raw material
availability,  yield and throughput  risk that could result in product  shipment
delays to customers.

Factors Which May Affect Future Results

In  evaluating  our business,  prospective  investors  and  shareholders  should
carefully consider the risks factors, any of which could have a material adverse
impact on our business,  operating results and financial condition and result in
a complete loss of your investment.

Risks Related To Our Financial Results

If we do not obtain additional cash to operate our business,  we may not be able
to execute our business plan and may not achieve profitability.

     In the event that cash flow from operations is less than anticipated and we
are unable to secure additional funding to cover these added losses, in order to
preserve  cash, we would be required to further reduce  expenditures  and effect
further reductions in our corporate infrastructure, either of which could have a
material adverse effect on our ability to continue or increase our current level
of  operations.  To the  extent  that  operating  expenses  increase  or we need
additional  funds to make  acquisitions,  develop  new  technologies  or acquire
strategic assets,  the need for additional  funding may be accelerated and there
can be no assurances that any such  additional  funding can be obtained on terms
acceptable to us, if at all. If we are not able to generate  sufficient capital,
either from  operations  or through  additional  financing,  to fund our current
operations,  we may not be able to continue as a going concern. If we are unable
to  continue as a going  concern,  we may be forced to  significantly  reduce or
cease our current operations.  This could significantly  reduce the value of our
securities,  which  could  result  in our  de-listing  from the  American  Stock
Exchange and cause investment losses for our shareholders.

We may not be able to satisfy the American Stock  Exchange's  continued  listing
requirements.

     The AMEX staff  notified us in June 2003 that we had fallen  below  Section
1003(a)(i)  of the AMEX Company  Guide for having  shareholders'  equity of less
than $2,000,000 and losses from continuing  operations  and/or net losses in two
out of the three most recent fiscal years.  We were afforded the  opportunity to
submit a plan of compliance to the AMEX and presented a plan to the AMEX in July
2003. On September 9, 2003,  we received  notice from the staff of the AMEX that
the AMEX had  accepted  our plan to  regain  compliance  with  AMEX's  continued
listing  standards and granted us an extension  until December 4, 2004 to regain
compliance with those  standards.  The failure to execute our plan and remain in
compliance with the AMEX equity  requirement  could result in a delisting of our
common stock.

     We will be  subject  to  periodic  review  by the  AMEX  staff  during  the
extension  period.  During this time, we must make progress  consistent with the
terms of the plan or maintain  compliance with the continued listing  standards.
While as a result of our  recently  completed  financing in January 2004 and the
conversion of our outstanding  promissory notes in March 2004, our balance sheet
as of June 30, 2004 reflects that we meet AMEX's $2 million  shareholder  equity
requirement,  there can be no  assurance  that AMEX will waive this  requirement
prior to December 2004 or that we will be in compliance

                                       19
<PAGE>
with this requirement at December 2004. Other unidentified issues may arise that
could  adversely  affect the  financial or the potential  listing  status of the
company.

We have a history of losses  since our  inception  and may incur  losses for the
foreseeable future.

     Accumulated losses excluding  acquisition  related  transactions as of June
30, 2004, were $42 million and acquisition  related non-cash  transactions  were
$102 million,  which  resulted in an accumulated  net loss of $144 million,  the
majority  of which was  related  to the March  2000  merger  and the  subsequent
write-down of goodwill.  The non-cash losses were dominated by the  amortization
and write-down of goodwill and purchased  intangibles and write-down of acquired
in-process research and development  related to the March 2000 acquisition,  and
also included some non-cash stock-based  compensation.  We have not yet achieved
profitability  and we can give no assurances that we will achieve  profitability
within the foreseeable future as we fund our operations and capital expenditures
in areas such as  establishment  and expansion of markets,  sales and marketing,
operating  equipment and research and  development.  We cannot assure  investors
that we will ever achieve or sustain  profitability or that our operating losses
will not increase in the future.

We were previously primarily dependent on U.S. government contracts.

     For many years, the majority of our revenues were derived from research and
development  contracts  with  the U.S.  government.  We no  longer  rely on such
contracts for revenue.  We plan to submit  proposals for additional  development
contract funding;  however, funding is subject to legislative  authorization and
even if funds are  appropriated  such funds may be withdrawn based on changes in
government priorities.  No assurances can be given that we will be successful in
obtaining  new  government  contracts.  Our  inability to obtain  revenues  from
government  contracts  could have a material  adverse  effect on our  results of
long-term  operations,  unless  substantial  product or non-government  contract
revenue offsets any lack of government contract revenue.

Risks related to our intellectual property

     We rely on our license  agreement with Eastman Kodak for the development of
our products.  Eastman  Kodak's  licensing of its OLED  technology to others for
microdisplay  applications,  or the  sublicensing  by Eastman  Kodak of our OLED
technology  to third  parties,  could  have a  material  adverse  impact  on our
business.

     Our principal  products under  development  utilize OLED technology that we
license from Eastman  Kodak.  We rely upon Eastman  Kodak to protect and enforce
key patents held by Eastman Kodak, relating to OLED display technology.  Eastman
Kodak's  patents  expire at various  times in the future  from near term in 2004
through long term  patents that are just being issued in 2004.  Our license with
Eastman  Kodak  could  terminate  if we fail to  perform  any  material  term or
covenant  under the license  agreement.  Since our license from Eastman Kodak is
non-exclusive,  Eastman Kodak could also elect to become a competitor  itself or
to license OLED technology for microdisplay  applications to others who have the
potential to compete with us. The occurrence of any of these events could have a
material adverse impact on our business.

We may not be successful in protecting our intellectual property and proprietary
rights.

     We rely on a combination  of patents,  trade secret  protection,  licensing
agreements  and other  arrangements  to  establish  and protect our  proprietary
technologies.  If we fail to  successfully  enforce  our  intellectual  property
rights,  our competitive  position could suffer,  which could harm our operating
results.  Patents may not be issued for our current patent  applications,  third
parties  may  challenge,  invalidate  or  circumvent  any  patent  issued to us,
unauthorized  parties  could  obtain  and  use  information  that we  regard  as
proprietary  despite  our  efforts to protect  our  proprietary  rights,  rights
granted under patents issued to us may not afford us any competitive  advantage,
others  may  independently  develop  similar  technology  or design  around  our
patents,  our  technology  may be available to licensees of Eastman  Kodak,  and
protection of our intellectual property rights may be limited in certain foreign
countries.  We may be required to expend  significant  resources  to monitor and
police our intellectual property rights. Any future infringement or other claims
or  prosecutions  related  to our  intellectual  property  could have a material
adverse effect on our business. Any such claims, with or without merit, could be
time  consuming  to defend,  result in costly  litigation,  divert  management's
attention  and  resources,  or  require us to enter  into  royalty or  licensing
agreements.  Such  royalty or  licensing  agreements,  if  required,  may not be

                                       20
<PAGE>
available  on terms  acceptable  to us, if at all.  Protection  of  intellectual
property has historically been a large expense for eMagin. We have not been in a
financial position to properly protect all of our intellectual property, and may
not be in a  position  to  properly  protect  our  position  or  stay  ahead  of
competition  in new research and the  protecting of the  resulting  intellectual
property.

Risks related to the microdisplay industry

The commercial  success of the  microdisplay  industry depends on the widespread
market acceptance of microdisplay systems products.

     The market for  microdisplays  is  emerging.  Our  success  will  depend on
consumer   acceptance   of   microdisplays   as  well  as  the  success  of  the
commercialization of the microdisplay market. As an OEM supplier, our customer's
products must also be well  accepted.  At present,  it is difficult to assess or
predict with any assurance the  potential  size,  timing and viability of market
opportunities  for our technology in this market.  The  viewfinder  microdisplay
market sector is well established with entrenched  competitors with whom we must
compete.

The microdisplay systems business is intensely competitive.

     We do business in intensely  competitive  markets that are characterized by
rapid technological change,  changes in market requirements and competition from
both other suppliers and our potential OEM customers. Such markets are typically
characterized by price erosion. This intense competition could result in pricing
pressures,  lower sales, reduced margins, and lower market share. Our ability to
compete successfully will depend on a number of factors, both within and outside
our control. We expect these factors to include the following:

     o    our success in designing,  manufacturing  and delivering  expected new
          products,  including those  implementing  new technologies on a timely
          basis;
     o    our ability to address the needs of our  customers  and the quality of
          our customer services;
     o    the  quality,  performance,  reliability,  features,  ease  of use and
          pricing of our products;
     o    successful expansion of our manufacturing capabilities;
     o    our  efficiency of  production,  and ability to  manufacture  and ship
          products on time;
     o    the  rate  at  which  original   equipment   manufacturing   customers
          incorporate our product solutions into their own products;
     o    the market acceptance of our customers' products; and
     o    product or technology introductions by our competitors.

     Our  competitive  position  could be damaged if one or more  potential  OEM
customers decide to manufacture their own microdisplays, using OLED or alternate
technologies.  In  addition,  our  customers  may  be  reluctant  to  rely  on a
relatively  small  company  such as eMagin for a critical  component.  We cannot
assure  you that we will be able to compete  successfully  against  current  and
future  competition,  and the failure to do so would have a  materially  adverse
effect upon our business, operating results and financial condition.

The display industry is cyclical.

     The display  industry  is  characterized  by  fabrication  facilities  that
require  large  capital  expenditures  and long lead times for  supplies and the
subsequent  processing time,  leading to frequent  mismatches between supply and
demand. The OLED microdisplay sector may experience overcapacity if and when all
of the  facilities  presently  in the  planning  stage come on line leading to a
difficult market in which to sell our products.

Competing products may get to market sooner than ours.

     Our competitors are investing  substantial resources in the development and
manufacture  of  microdisplay  systems using  alternative  technologies  such as
reflective   liquid   crystal   displays   (LCDs),    LCD-on-Silicon    ("LCOS")
microdisplays, active matrix electroluminescence and scanning image systems, and
transmissive  active matrix LCDs.  Some of these  products have been  introduced
years  ahead of our  products  and  some  are  established  in  segments  of the
microdisplay  and virtual imaging markets that we have yet to enter.  Displacing

                                       21
<PAGE>
entrenched  competitors  may be difficult,  especially in long-term  projects or
products, even if our product proves itself to be better.

Our competitors have many advantages over us.

     As the  microdisplay  market  develops,  we  expect to  experience  intense
competition   from   numerous   domestic   and   foreign   companies   including
well-established  corporations possessing worldwide manufacturing and production
facilities,  greater name  recognition,  larger  retail bases and  significantly
greater financial,  technical,  and marketing resources than us, as well as from
emerging companies  attempting to obtain a share of the various markets in which
our microdisplay products have the potential to compete.

Our products are subject to lengthy OEM development periods.

     We plan to sell most of our  microdisplays and related products to OEMs who
will  incorporate  them into or with products they sell.  OEMs determine  during
their product development phase whether they will incorporate our products.  The
time elapsed between initial sampling of our products by OEMs, the custom design
of our  products to meet  specific  OEM product  requirements,  and the ultimate
incorporation of our products into OEM consumer products is significant.  If our
products  fail to  meet  our  OEM  customers'  cost,  performance  or  technical
requirements or if unexpected  technical  challenges arise in the integration of
our  products  into  OEM  consumer  products,  our  operating  results  could be
significantly  and  adversely  affected.   Long  delays  in  achieving  customer
qualification  and  incorporation  of our products  could  adversely  affect our
business.

Our products will likely experience rapidly declining unit prices.

     In the  markets  in which we  expect  to  compete,  prices  of  established
products  tend to decline  significantly  over time.  In order to  maintain  our
profit margins over the long term, we believe that we will need to  continuously
develop product  enhancements and new  technologies  that will either slow price
declines of our  products or reduce the cost of  producing  and  delivering  our
products. While we anticipate many opportunities to reduce production costs over
time,  there  can be no  assurance  that  these  cost  reduction  plans  will be
successful.  We may also  attempt  to offset  the  anticipated  decrease  in our
average selling price by introducing new products,  increasing our sales volumes
or  adjusting  our product  mix. If we fail to do so, our results of  operations
would be materially and adversely affected.

Risks related to manufacturing

We expect  to  depend on  semiconductor  contract  manufacturers  to supply  our
silicon integrated circuits and other suppliers of key components, materials and
services.

     We  do  not  manufacture  the  silicon  integrated  circuits  on  which  we
incorporate  our OLED  technology.  Instead,  we provide  the design  layouts to
semiconductor  contract manufacturers who manufacture the integrated circuits on
silicon wafers. We also depend on suppliers of a variety of other components and
services,   including  circuit  boards,  graphic  integrated  circuits,  passive
components,  materials and chemicals,  and equipment  support.  Our inability to
obtain  sufficient  quantities of high quality  silicon  integrated  circuits or
other necessary components, materials or services on a timely basis has resulted
in delays and could result in future manufacturing  delays,  increased costs and
ultimately in reduced or delayed sales or lost orders which could materially and
adversely affect our operating results.

The manufacture of  OLED-on-silicon  is new and OLED microdisplays have not been
produced in significant quantities.

     If we are unable to produce our products in sufficient quantity, we will be
unable to attract  customers.  In  addition,  we cannot  assure you that once we
commence volume  production we will attain yields of throughput that will result
in  profitable  gross  margins  or  that we will  not  experience  manufacturing
problems  which  could  result  in  delays in  delivery  of  orders  or  product
introductions.

We are dependent on a single manufacturing line.

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<PAGE>
     We initially  expect to manufacture our products on a single  manufacturing
line.  If we  experience  any  significant  disruption  in the  operation at our
manufacturing facility or a serious failure of a critical piece of equipment, we
may be unable to supply  microdisplays to our customers.  For this reason,  some
OEMs  may  also be  reluctant  to  commit  a broad  line of  products  with  our
microdisplays  without a second production  facility in place.  Interruptions in
our  manufacturing  could be caused by  manufacturing  equipment  problems,  the
introduction  of new equipment into the  manufacturing  process or delays in the
delivery of new manufacturing equipment. Lead-time for delivery of manufacturing
equipment can be long. No assurance can be given that we will not lose potential
sales or be able to meet sales orders  delivery  requirements  due to production
interruptions  in our  manufacturing  line. In order to meet the requirements of
certain OEMs for multiple manufacturing sites, we will have to expend capital to
secure   additional  sites  and  may  not  be  able  to  manage  multiple  sites
successfully.

We currently lease space from IBM on a month-to-month basis.

     We  currently  lease  space from IBM that  houses our  principal  executive
offices,  our  equipment  for OLED  microdisplay  fabrication  and  research and
development, as well as our assembly operations and storage. We currently occupy
such space on a month-to-month  basis. We are currently in negotiations with IBM
for a new lease.  No assurance can be given that we will execute a new lease, or
that such new lease will be on terms that are favorable to us. In the event that
we are  forced to locate new  space,  we will  experience  a  disruption  in our
operations,  which  could  have a  material  adverse  affect on our  results  of
operations.

Risks related to our business

Our success  depends on attracting  and retaining  highly  skilled and qualified
technical and consulting personnel.

     We must  hire  highly  skilled  technical  personnel  as  employees  and as
independent  contractors in order to develop our products..  The competition for
skilled  technical  employees  is  intense  and we may not be able to  retain or
recruit such  personnel.  We must compete with  companies  that possess  greater
financial  and other  resources  than we do, and that may be more  attractive to
potential employees and contractors.  To be competitive, we may have to increase
the  compensation,  bonuses,  stock options and other fringe benefits offered to
employees in order to attract and retain such personnel.  The costs of retaining
or attracting  new personnel may have a material  adverse affect on our business
and  operating  results.  In  addition,  difficulties  in hiring  and  retaining
technical personnel could delay the implementation of our business plan.

Our success depends in a large part on the continuing service of key personnel.

     Changes in management could have an adverse effect on our business.  We are
dependent upon the active  participation  of several key  management  personnel,
including  Gary W. Jones,  our chief  executive  officer.  This is especially an
issue  while  the  company  staffing  is small.  We will  also  need to  recruit
additional  management in order to expand  according to our business  plan.  The
failure to attract and retain  additional  management or personnel  could have a
material adverse effect on our operating results and financial performance.

Our business depends on new products and technologies.

     The market for our products is  characterized  by rapid changes in product,
design and manufacturing  process  technologies.  Our success depends to a large
extent on our ability to develop and manufacture  new products and  technologies
to match the varying requirements of different customers in order to establish a
competitive  position  and  become  profitable.  Furthermore,  we must adopt our
products and processes to technological  changes and emerging industry standards
and practices on a  cost-effective  and timely basis.  Our failure to accomplish
any of the above could harm our business and operating results.

We generally do not have long-term contracts with our customers.

     Our business is operated on the basis of short-term  purchase orders and we
cannot  guarantee  that we will be able to obtain  long-term  contracts for some
time.  Such  purchase  orders  can be  cancelled  or  revised  without  penalty,
depending on the  circumstances.  In the absence of a backlog of orders that can
only be canceled  with  penalty,  we plan  production on the basis of internally
generated  forecasts of demand,  which makes it difficult to accurately forecast
revenues.  If we fail to accurately forecast operating results, our business may

                                       23
<PAGE>
suffer and the value of your  investment  in the  Company  may  decline.  Large,
long-term  supply line  commitments  and large  inventories  of various types of
displays and other products will be required to support our business and provide
reasonable  order turn around for  customers.  Potentially  enabling rapid sales
growth targets can greatly  increase the cash  requirement  for these  accounts.
Such supplies and inventories are subject to potential obsolescence, long delays
before sale, and potential damage or loss.

Our  business  strategy  may  fail  if we  cannot  continue  to  form  strategic
relationships  with  companies  that  manufacture  and use  products  that could
incorporate our OLED-on-silicon technology.

     Our  prospects  will be  significantly  affected  by our ability to develop
strategic   alliances  with  OEMs  for  incorporation  of  our   OLED-on-silicon
technology  into  their  products.  While we intend  to  continue  to  establish
strategic  relationships  with  manufacturers of electronic  consumer  products,
personal  computers,   chipmakers,   lens  makers,  equipment  makers,  material
suppliers and/or systems assemblers,  there is no assurance that we will be able
to continue to establish and maintain  strategic  relationships  on commercially
acceptable  terms,  or that the  alliances we do enter into will  realize  their
objectives.  Failure  to do so  would  have a  material  adverse  effect  on our
business.

Our business depends to some extent on international transactions.

     We purchase  needed  materials  from  companies  located  abroad and may be
adversely  affected by political and currency  risk,  as well as the  additional
costs of doing business with a foreign entity. Some customers in other countries
pay slower than domestic customers.  In addition,  many of the OEMs that are the
most  likely  long-term  purchasers  of our  microdisplays  are  located  abroad
exposing us to additional  political and currency risk. We may find it necessary
to locate  manufacturing  facilities  abroad to be closer to our customers which
could  expose us to various  risks,  including  management  of a  multi-national
organization,  the  complexities  of  complying  with  foreign laws and customs,
political   instability   and  the   complexities   of   taxation   in  multiple
jurisdictions.

Our business may expose us to product liability claims.

     Our business may expose us to product  liability  claims.  Although no such
claims have been brought  against us to date, and to our knowledge no such claim
is  threatened  or likely,  we may face  liability to product  users for damages
resulting from the faulty design or  manufacture of our products.  While we plan
to maintain product liability insurance coverage, there can be no assurance that
product liability claims will not exceed coverage limits, fall outside the scope
of such  coverage,  or that such  insurance  will  continue to be  available  at
commercially reasonable rates, if at all.

Our business is subject to  environmental  regulations  and  possible  liability
arising from governmental claims related to the disposal of hazardous substances
and/or potential  employee claims of exposure to harmful  substances used in the
development and manufacture of our products.

     We are  subject  to  various  governmental  regulations  related  to toxic,
volatile, experimental and other hazardous chemicals used in, and disposed of in
connection  with, our design and  manufacturing  process.  Our failure to comply
with  these  regulations  could  result  in the  imposition  of  fines or in the
suspension or cessation of our  operations.  Compliance  with these  regulations
could  require us to acquire  costly  equipment  or to incur  other  significant
expenses.  We  develop,  evaluate  and  utilize new  chemical  compounds  in the
manufacture  of our products.  While we attempt to ensure that our employees are
protected  from  exposure  to  hazardous  materials,  we cannot  assure you that
potentially  harmful  exposure  will not  occur or that we will not be liable to
employees as a result.

Risks related to our stock

The  substantial  number of shares that are or will be  eligible  for sale could
cause our common stock price to decline even if the company is successful.

     Sales of significant  amounts of common stock in the public market,  or the
perception that such sales may occur,  could materially  affect the market price
of our common  stock.  These sales might also make it more  difficult  for us to

                                       24
<PAGE>
sell equity or equity-related  securities in the future at a time and price that
we deem  appropriate.  As of June 30, 2004,  we had  outstanding  (i) options to
purchase  11,981,906 shares; and (ii) warrants to purchase  17,957,159 shares of
common stock.

ITEM 3:  Controls and Procedures

(a)  Evaluation  of  Disclosure  Controls and  Procedures.  As of the end of the
period covered by this report, we conducted an evaluation, under the supervision
and with the  participation  of our chief executive  officer and chief financial
officer of our disclosure  controls and procedures (as defined in Rule 13a-15(e)
and Rule 15d-15(e) of the Exchange Act). Based upon this  evaluation,  our chief
executive  officer and chief  financial  officer  concluded  that our disclosure
controls and procedures are effective to ensure that information  required to be
disclosed  by us in the reports that we file or submit under the Exchange Act is
recorded, processed,  summarized and reported, within the time periods specified
in the Commission's rules and forms.

     Notwithstanding  the foregoing,  in connection with the audit of our annual
report on Form 10-KSB for the year ended December 31, 2004, on March 28, 2005 we
determined that the conversion of the debt to equity during the first quarter of
2004 should have been classified as a debt  transaction and therefore an expense
should have been recorded in  connection  with the  conversion.  As set forth in
this report and in our  quarterly  report on Form  10-QSB/A for the period ended
June 30, 2004 which was filed with the SEC on April 12, 2005,  the  Consolidated
Balance Sheets,  Consolidated Statements of Operations,  Consolidated Statements
of Cash Flows,  Statement of Changes in Shareholders'  Equity and Selected Notes
to Consolidated  Financial Statements have been restated,  where applicable,  to
classify  the  conversion  as a  debt  transaction  and  record  an  expense  in
connection with the conversion.  Accordingly, these restatements, which were due
to  interpretations  of the accounting  treatment of such transactions which was
subsequently  determined to be incorrect,  has lead management to determine that
our disclosure  controls and procedures  were not effective as of the end of the
period  covered  by this  report  to  ensure  that  information  required  to be
disclosed  by us in the reports that we file or submit under the Exchange Act is
recorded, processed,  summarized and reported, within the time periods specified
in the Commission's rules and forms.

(b)  Changes in internal controls.  There was no change in our internal controls
or in other  factors  that could affect  these  controls  during our last fiscal
quarter that has  materially  affected,  or is  reasonably  likely to materially
affect, our internal control over financial reporting.

     Notwithstanding the foregoing,  we engaged John Atherly in June 2004 as our
Chief  Financial  Officer,  and in May 2005, we appointed  Irwin Engelman to our
board of  directors  and  appointed  Mr.  Engelman as the  Chairman of our Audit
Committee  immediately  following our annual meeting of  shareholders  which was
held on September 30, 2005. In addition, we have hired a new Director of Finance
to assist  the Chief  Financial  Officer  with our  filing  and other  financial
reporting  obligations.  We believe  these  additions in  personnel  enhance our
ability  to meet  our  financial  and  other  reporting  obligations  as well as
strengthen  our  disclosure  controls and  procedures so that they are currently
effective  to ensure  that  information  required to be  disclosed  by us in the
reports that we file or submit  under the  Exchange Act is recorded,  processed,
summarized and reported,  within the time periods  specified in the Commission's
rules and forms.

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<PAGE>
PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The company is party to certain legal proceedings arising in the ordinary course
of business.  In the opinion of  management,  the outcome of such legal  matters
will not have a material  adverse effect on the company's  results of operations
or financial position.

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

1.   The Annual Meeting was held at the American Stock Exchange in New York City
     on June 15, 2004 at 11:00 AM.

2.   There were present in person or by proxy 52,979,411 shares of Common Stock,
     of a total of 63,349,980 shares of Common Stock entitled to vote.

3.   The  number  of  shares  voted in favor of the  election  of the  following
     nominees for director is set forth opposite each nominee's name:

                     Nominee                         No. of Shares
                  --------------                     -------------
                  Claude Charles                       52,888,562
                  Jack Goldman                         52,878,190
                  Dr. Jill Wittels                     52,891,120

4.   25,699,101 shares were voted in favor of the 2004 Non-Employee Compensation
     plan.

7.   52,756,155  shares were voted in favor of the  appointment of Eisner LLP as
     auditors for 2004.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a)        Exhibits List

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<PAGE>
EXHIBIT
NUMBER                         DESCRIPTION

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


(b)      Reports on Form 8-K

The Company filed one report on form 8-K during the quarter ended June 30, 2004.
Information regarding the items reported on is as follows:

DATE OF REPORT                      ITEM REPORTED ON



May 28, 2004        On May 17, 2004,  K.C.  Park,  President of Virtual  Vision,
                    Inc.,  a  wholly  owned  subsidiary  of  eMagin  Corporation
                    ("eMagin"),  entered into a written  Sales Plan (the "Plan")
                    relating  to  future  sales of a  portion  of his  shares of
                    eMagin's common stock.

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<PAGE>
                                   SIGNATURES

     In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                                 eMAGIN CORPORATION


Dated:  November 2, 2005                       By:/S/ Gary W. Jones
                                                 -----------------------
                                                 Gary W. Jones
                                                 Chief Executive Officer

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