**U.S.
        Securities and Exchange Commission**
 **Washington,
        D.C. 20549**
   **FORM
        10-Q/A**
  
 (Mark
        One)
 
 [X]
        Quarterly report under section 13 or 15(d) of the Securities Exchange Act
        of
        1934 for the quarterly period ended March 31, 2005
 
 [  
        ] Transition report under section 13 or 15(d) of the Securities Exchange Act
        of
        1934 for the transition period from ____________ to
        ________________
  Commission
        file number: 000-24757
  **eMAGIN
        CORPORATION**
  (Exact
        name of small business issuer as specified in its charter)
 
  
 **DELAWARE**
                **56-1764501**(State
                    or other jurisdiction
                (IRS
                    Employer Identification
                    No.)of
                    incorporation or organization)
   
 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 [ ]
  Indicate
          by check mark whether the registrant is an accelerated filer (as defined
          in Rule
          12b-2 of the Exchange Act. Yes [ ] No [X]
 
 **APPLICABLE
          ONLY TO CORPORATE ISSUERS**
 
 Indicate
          the number of shares outstanding of each of the issuer’s classes of common
          equity, as of the latest practicable date: As of April 28, 2005 the Registrant
          had 82,172,176 shares of Common Stock outstanding.
  
  **EXPLANATORY
                NOTE** **:**
                This Amended Quarterly Report on Form 10-Q/A is being filed for the
                purpose of
                amending the form on which the Company previously filed its Amended
                Quarterly
                Report on Form 10-Q/A filed by the Company on July 13, 2005. This
                amended
                Quarterly Report is being filed for the sole purpose of modifying
                Exhibits 31.1
                and 31.2 *Certification
                Pursuant to Sarbanes-Oxley Section 302* to
                complete the statement under 5(a) by including the term: *material
                weaknesses* .
                In all
                other material respects this Amended Quarterly Report on Form 10-Q/A
                is
                unchanged from the Amended Quarterly Report on Form 10-Q/A filed
                by the Company
                on July 13, 2005.


**EMAGIN
        CORPORATION**
 
  **FORM
        10-Q/A FOR THE THREE MONTHS**
  
 **ENDED
        MARCH 31, 2005**
 
 
 **TABLE
        OF CONTENTS**
 
 **Page****PART
                  I - FINANCIAL INFORMATION****Description**Item
                  1.
              Condensed
                  Consolidated Financial Statements (unaudited)
              4Consolidated
                  Balance Sheets as of March 31, 2005 and December 31, 2004
              4Consolidated
                  Statements of Operations for the Three-Months ended March 31, 2005
                  and
                  March 31, 2004
              5Consolidated
                  Statements of Changes in Shareholders Equity for the Two-Years
                  ended
                  December 31, 2004 and for the Three-Months ended March 31, 2005
                  (unaudited)
              6Consolidated
                  Statements of Cash Flows for the Three-Months ended March 31, 2005
                  and
                  March 31, 2004
              7Selected
                  Notes to Unaudited Consolidated Financial
                  Statements
              8Item
                  2.
              Management’s
                  Discussion and Analysis of
                  Financial Condition and Results of Operations
              11Item
                  3.
              Quantitative
                  and Qualitative Disclosures About
                  Market Risk
              18Item
                  4.
              Controls
                  and Procedures
              18**PART
                  II - OTHER INFORMATION****Description**Item
                  1.
              Legal
                  Proceedings
              19Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              19Item
                  3.
              Defaults
                  Upon Senior Securities
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              19Item
                  5.
              Other
                  Information
              19Item
                  6.
              Exhibits
              19**SIGNATURES**
              20**CERTIFICATIONS**
              2131.1
              Certification
                  by Chief Executive Officer pursuant to
                  Sarbanes Oxley Section 30231.2
              Certification
                  by Chief Financial Officer pursuant to Sarbanes Oxley Section 30232.1
              Certification
                  by Chief Executive Officer pursuant to 18 U.S.C. Section 135032.2
              Certification
                  by Chief Financial Officer pursuant to 18 U.S. C. Section 1350
 
 
 
 2
  **PART
        I-FINANCIAL INFORMATION**
  **Item
        1. Financial Statements.**
 
 3
 **eMAGIN
        CORPORATION**
 
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 
 (In
        thousands)
 
 **ASSETS**
              
              
              **March
                  31, 2005**
              ****
              ****
              **December
                  31, 2004**CURRENT
                ASSETS:
              
              
              (Unaudited)Cash
                  and cash equivalents
              
              $
              10,769
              
              $
              13,457Accounts
                  receivables, net
              
              
              507
              
              
              536Inventory
              
              
              2,926
              
              
              2,018Prepaid
                  expenses and other current assets
              
              
              500
              
              
              880Total
                  current assets
              
              
              14,702
              
              
              16,891EQUIPMENT
                AND LEASEHOLD IMPROVEMENTS:
              
              
              4,304
              
              
              4,072Less:
                Accumulated depreciation
              
              
              (2,956)
              
              
              (2,767)Total
                equipment and leasehold improvements, net
              
              
              1,348
              
              
              1,305Intangible
                assets
              
              
              64
              
              
              56Less:
                Accumulated amortization
              
              
              (3)
              
              
              (2)Total
                intangible assets, net
              
              
              61
              
              
              54Other
                long-term assets
              
              
              151
              
              
              186Total
                  assets
              
              $
              16,262
              
              $
              18,436**LIABILITIES
                  AND SHAREHOLDERS' EQUITY**CURRENT
                LIABILITIES:Accounts
                  payable
              
              $
              824
              
              $
              822Accrued
                  payroll and benefits
              
              
              577
              
              
              674Other
                  accrued expenses
              
              
              529
              
              
              357Advanced
                  payments
              
              
              18
              
              
              64Current
                  portion of capitalized lease obligation
              
              
              15
              
              
              14Other
                  current liabilities
              
              
              45
              
              
              35Total
                  current liabilities
              
              
              2,008
              
              
              1,966Capitalized
                lease obligations - long term
              
              
              18
              
              
              22Total
                  liabilities
              
              
              2,026
              
              
              1,988SHAREHOLDERS'
                EQUITY:Common
                  stock, par value $0.001 per shareShares
                  authorized - 100,000,000Shares
                  issued and outstanding - 82,072,176 and 79,638,817
              
              
              82
              
              
              80Additional
                  paid-in capital
              
              
              166,654
              
              
              165,399Accumulated
                  deficit
              
              
              (152,500)
              
              
              (149,031)Total
                  shareholders' equity
              
              
              14,236
              
              
              16,448Total
                  liabilities and shareholders' equity
              
              $
              16,262
              
              $
              18,436See
                  notes to financial statements.
 
   4
  **eMAGIN
        CORPORATION**
  **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 
 (In
        thousands except per share amounts)
 
 (Unaudited)
  **Three
                  Months Ended**
              
              
              **Three
                  Months Ended****March
                  31, 2005**
              
              
              **March
                  31, 2004**REVENUE:Product
                  revenue, net of returns
              
              $
              690
              
              $
              540COST OF
                GOODS SOLD:Direct
                  cost of goods sold
              
              
              177
              
              
              209Production
                  expenses
              
              
              1,780
              
              
              1,154Total
                  cost of goods sold
              
              
              1,957
              
              
              1,363Gross
                Loss
              
              
              (1,267)
              
              
              (823)OPERATING
                EXPENSES:Research
                  and development
              
              
              866
              
              
              8Stock
                  based compensation
              
              
              -
              
              
              84Selling,
                  general and administrative
              
              
              1,335
              
              
              615Total
                  costs and expenses, net
              
              
              2,221
              
              
              707Interest
                  income (expense), net
              
              
              19
              
              
              (5,076)Net
                  loss
              
              $
              (3,469)
              
              $
              (6,606)Basic
                and diluted net loss per common share
              
              $
              (0.04)
              
              $
              (0.13)Weighted
                average common shares outstanding
              
              
              81,432
              
              
              51,940See
                  notes to financial statements.
 
  5
  **eMAGIN
        CORPORATION**
  **STATEMENT
        OF CHANGES IN SHAREHOLDERS' EQUITY**
 
 (In
        thousands)
 
 (Unaudited)
 
  **Common
                  Stock**
              
              
              **Additional
                  paid-in**
              
              
              **Accumulated**
 **Shares**
              ****
              **$**
              ****
              **Capital**
              ****
              **Deficit**
              ****
              **Total**Balance,
                  December 31, 2004
              
              
              79,639
              
              $
              80
              
              
              165,399
              
              $
              (149,031
              )
              $
              16,448Stock
                  options exercised
              
              
              8
              
              
              
              
              
              6
              
              
              
              
              
              6Stock
                  warrants exercised
              
              
              2,413
              
              
              2
              
              
              1,237
              
              
              
              
              
              1,239Issuance
                  of common stock for services
              
              
              12
              
              
              
              
              
              12
              
              
              
              
              
              12Net
                  loss for period
              
              
              
              
              
              
              
              
              
              
              
              (3,469
              )
              
              (3,469
              )Balance,
                  March 31, 2005
              
              
              82,072
              
              $
              82
              
              
              166,654
              
              $
              152,500
              
              $
              14,236
  See
                  notes to financial
                  statements.
 
  
 
  6
  **eMAGIN
        CORPORATION**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 
 (In
        thousands)
 
 (Unaudited)
 
  **Three
                    Months Ended**
                ****
                ****
                **Three
                    Months Ended**
                ********
                ****
                ****
                **March
                    31, 2005**
                ****
                ****
                **March
                    31, 2004**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
                
                $
                (3,469)
                
                $
                (6,606)Adjustments
                  to reconcile net loss to net cashused
                    in operating activities-Depreciation
                    and
                    amortization
                
                
                188
                
                
                159Bad
                    debt
                    expense
                
                
                19
                
                
                34Amortization
                    of financing
                    fees
                
                
                -
                
                
                8Non-cash
                    charge for stock based
                    compensation
                
                
                -
                
                
                84Non-cash
                    interest related
                    charges
                
                
                -
                
                
                126Non-cash
                    charge for services
                    received
                
                
                12
                
                
                8Non-cash
                    financing
                    expense
                
                
                -
                
                
                4,955Changes
                    in operating assets and liabilities:Trade
                    receivables
                
                
                10
                
                
                151Inventory
                
                
                (908)
                
                
                (38)Prepaid
                    expenses and other current
                    assets
                
                
                271
                
                
                (658)Other
                    long-term
                    assets
                
                
                35
                
                
                -Advanced
                    payment on contracts to be
                    completed
                
                
                (47)
                
                
                2Accounts
                    payable, accrued expenses and accrued
                    payroll
                
                
                180
                
                
                (425)Other
                    current
                    liabilities
                
                
                10
                
                
                (4)Net
                    cash used in operating
                    activities
                
                
                (3,699)
                
                
                (2,204)CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases/Sales
                    of equipment,
                    net
                
                
                (232)
                
                
                (109)Net
                    cash used in investing
                    activities
                
                
                (232)
                
                
                (109)CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                    from sales of common stock, net of issuance
                    costs
                
                
                -
                
                
                3,916Proceeds
                    from exercise of stock options and
                    warrants
                
                
                1,246
                
                
                2,073Payments
                    of long term debt and capital leases
                
                
                (3)
                
                
                (15)Net
                    cash provided by financing
                    activities
                
                
                1,243
                
                
                5,974NET
                  INCREASE  (DECREASE) IN CASH AND CASH
                  EQUIVALENTS
                
                
                (2,688)
                
                
                3,661CASH
                  AND CASH EQUIVALENTS, beginning of
                  period
                
                
                13,457
                
                
                1,054CASH
                  AND CASH EQUIVALENTS, end of
                  period
                
                $
                10,769
                
                $
                4,715Supplemental
                  Cash Flow Disclosure:Conversion
                  of debt to equity
                
                $
                -
                
                $
                8,567Payments
                  of A/P through issuance of stock
                
                $
                -
                
                $
                35Stock
                  issued for prepaid services
                
                $
                -
                
                $
                17Cash
                  payments of interest
                
                $
                1
                
                $
                3See
                    notes to financial statements.
  
  7
  **eMAGIN
        CORPORATION**
 
 Selected
        Notes to Condensed 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 generally accepted accounting principles in
        the
        United States 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/A for the year
        ended December 31, 2004.  The results of operations for
        the period ended March 31, 2005 are not necessarily indicative of
        the
        results to be expected for the full year.
 
 Stock-Based
        Compensation
 
 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 Statement of Financial Accounting Standards
        No.123 ("SFAS No. 123"),  "Accounting for Stock-Based Compensation.
        "The
        following table illustrates the effect on net loss and loss per share
        as if
        the Company had applied the fair value recognition provision of SFAS No.
        123.
        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 first
        quarter of
        2005 and 2004, respectively: (1) average expected volatility of 64%
        and
        63%, (2) average risk-free interest rates of 4.33% and
        3.31%, and
        (3) expected lives of seven years.
 
 The
        pro
        forma amounts that are disclosed in accordance with SFAS No. 123 reflect
        the
        portion of the estimated fair value of awards that were earned for the three
        months ended March 31, 2005 and 2004.
 
  For
                  the three months ended March 31,
                
                
                **2005**
                ****
                ****
                **2004**Net
                  loss applicable to common stockholders', as reported
                
                $
                (3,469)
                
                $
                (6,606)Add:
                  Stock based employee compensation expense included in reported
                  net
                  loss
                
                
                -
                
                
                84Deduct: 
                  Stock-based employee compensation expense determined under fair
                  value
                  method
                
                
                (1,481)
                
                
                (1,288)Pro
                  forma net loss
                
                $
                (4,950)
                
                $
                (7,810)Net
                  loss per share applicable to common stockholders':Basic
                  and diluted, as reported
                
                $
                (0.04)
                
                $
                (0.13)Basic
                  and diluted, pro forma
                
                $
                (0.06)
                
                $
                (0.15)
 In
        March
        of 2005 the Company granted 1,100,000 stock options to certain officers and
        employees of the Company.  The exercise price of these options was
        equal to
        the market price of the stock on the date of grant.  The options vest
        over
        five years unless there is a change in control or a dismissal without cause
        in
        which case the options would vest immediately.
 
 Note
        2 -
        NATURE OF BUSINESS
 
 eMagin 
        Corporation  is a  developer  and manufacturer of 
        optical  systems  and microdisplays  for use in 
        the 
        electronics  industry.  eMagin also develops and markets
        microdisplay  systems and  optics technology for commercial, 
        industrial and military 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, 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
        be billed on a bi-monthly basis.
   8
 
 Note
        4 -
        RECEIVABLES
 
 The
        majority of our commercial accounts receivable are
        due
        from Original Equipment Manufacturers  ("OEM"s).  Credit
        is
        extended based on an 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 become uncollectable, and
        payments subsequently received on such receivables are
        reported as income in the year the payment is received.
 
 Receivables
        consisted of the following:
  **March
                  31, 2005**
              ****
              ****
              **December
                  31, 2004**Trade
                receivables
              
              $
              1,297
              
              $
              1,282Contract
                receivables
              
              
              -
              
              
              25Total
              
              
              1,297
              
              
              1,307Less
                allowance for doubtful accounts
              
              
              (790)
              
              
              (771)Net
                receivables
              
              $
              507
              
              $
              536
  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")
        were computed by dividing net loss by
        the weighted average  number of common shares 
        outstanding  and excluding any potential  dilution. 
        Net loss per
        common share assuming dilution  ("diluted EPS") was
        computed by
        reflecting potential dilution from the exercise of stock options
        and warrants.  Common equivalent shares totaling 6,010,882
        and
        36,594,874 have been excluded from the computation of diluted EPS
        for the three months ended March 31, 2005 and March
        31, 2004,
        respectively.
 
 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:
  **March
                    31, 2005**
                ****
                ****
                **December
                    31, 2004**Raw
                  materials
                
                $
                2,265
                
                $
                1,420Work
                  in process
                
                
                114
                
                
                169Finished
                  goods
                
                
                547
                
                
                429Total
                  Inventory
                
                $
                2,926
                
                $
                2,018
 Note
          8 -
          DEBTDebt consisted of capitalized leased obligation for equipment
          as
          follows:
  **March
                      31, 2005**
                  ****
                  ****
                  **December
                      31, 2004**Current
                    portion of capitalized lease obligations
                  
                  $
                  15
                  
                  $
                  14Long-term
                    capitalized lease obligations
                  
                  
                  18
                  
                  
                  22Total
                    debt
                  
                  $
                  33
                  
                  $
                  36
 
 9
 
 Note
        9 -
        SHAREHOLDERS' EQUITY
 
 The
        authorized common stock of the Company consists of 200,000,000 shares with
        a par
        value of $0.001 per share.
 
 In
        the
        first quarter of 2005, the Company received  $1,246,046 for the exercise
        of
        2,421,359 warrants and options.
 
 The
        Company also issued 12,000 shares of common stock for the payment of $12,000
        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 in the
        accompanying unaudited consolidated statement of operations
        for
        the three months ended March 31, 2005.
 
 Note
        10 -
        STOCK COMPENSATION
 
 As
        of
        March 31, 2005, the Company has outstanding options to purchase 15,252,688
        shares. The Company issued all outstanding options at or above fair market
        value, or has previously expensed those options repriced below fair market
        value.
 
 Note
        11 -
        COMMITMENTS AND CONTINGENCIES
 
 [a]
        Royalty payments:
 
 The Company, in accordance with
        a royalty agreement, is obligated to make minimum annual royalty
        payments of $125,000 to a corporation which commented on January 1,
        2001.
        Under this agreement, the Company must pay to the corporation 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 will
        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.
 
 In
        April
        2005, the Company paid $125,000 for the minimum amount due for 2005. The
        amount
        was recorded in prepaid expenses and will be mortized as the
        Company records the royalty expense as defined in the agreement. Royalty
        expense was $22,556 and $22,855, respectively, for the three months ended
        March
        31, 2005 and 2004.
 
 [b]
        Contractual obligations:
 
 The Company leases
        certain office facilities and office, lab and
        factory
        equipment under operating leases expiring through 2009.  Certain leases
        provide for payments of monthly operating expenses. The approximate future
        minimum lease payments for 2005 are as follows:
   Operating
                leases
              
              $
              705Capital
                leases
              
              
              14Total
                  contractual obligations
              
              $
              719
  We
        currently lease space from IBM for approximately 
        $74,000
        per month that houses our own equipment for OLED microdisplay fabrication
        and for research and development plus additional space for assembly
        and administrative offices.  In 2004 we entered into
        an amended
        lease agreement which extends the term of this lease to May 31, 2009.
 
 
 10
 
 **Item
        2. Management’s Discussion and Analysis of Financial Condition and Results of
        Operations.**
 
 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 displays, which we refer
        to
        as OLED-on-silicon microdisplays, and microdisplay modules
        for virtual
        imaging, primarily for incorporation into the products of other
        manufacturers. Microdisplays are typically smaller than many postage
        stamps, 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 the device.
        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 the majority of our revenues
        from fees
        paid to us under research and development contracts,
        primarily
        with the U.S. federal 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 March
        31,
        2005, we have recognized an aggregate of approximately $8.0 million
        from
        sales of our products, and have a backlog of more than
        $28
        million in products ordered for delivery through 2007.  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. 
        In
        addition to marketing OLED-on-silicon microdisplays as components, we also
        offer
        microdisplays as an integrated package, which we call Microviewer that 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 operations in Washington State we are also developing
        head-wearable displays that incorporate our Microviewer.
 
 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 market 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.  Most of our operating
        expenses are fixed in the near term.  If we are unable
        to
        generate significant revenues, our net losses
        in any
        given period could be greater than expected.
 
 **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**
 
 11
 
 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.
 
 **Use
        of estimates**
 
 The
        preparation of financial statements in conformity with U.S. generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and the disclosure
        of
        contingent assets and liabilities at the date of the financial statements
        as
        well as the reported amounts of revenues and expenses during the reporting
        period. Actual results could differ from those estimates. These estimates
        and
        assumptions relate to recording net revenue, collectibility of accounts
        receivable, useful lives and impairment of tangible and intangible assets,
        accruals, income taxes, inventory realization and other factors. Management
        has
        exercised reasonable judgment in deriving these estimates. Consequently,
        a
        change in conditions could affect these estimates.
 
 **Fair
        value of financial instruments**
 
 The
        Company's cash, cash equivalents, accounts receivable and accounts payable
        are
        earned at cost which appropriates fair value due to the short-term nature
        of
        these instruments.
 
 **Results
        of Operations**
 
 **THREE
        MONTHS ENDED MARCH 31, 2005 COMPARED TO THREE MONTHS ENDED MARCH 31, 2004**
 
 **Revenues**
 
 Revenues
        for the three months ended March 31, 2005 were
        $0.7
        million, a 28% increase as compared to $0.5 million for the three
        months
        ended March 31, 2004.  The increase was attributable to increased
        unit
        shipments of our microdisplays.  Average selling price per unit decreased
        to $332 from $434 as compared to the first quarter of 2004. This was due
        to
        quantity discounts.
 
 **Cost
        of Goods Sold**
 
 Cost
        of
        goods sold includes direct and indirect costs associated with
        production.  Cost of goods sold for the three months ended March 31,
        2005
        was $2.0 million, as compared to $1.4 million for the
        three months ended March 31, 2004.  Gross loss for the
        three
        months ended March 31, 2005 was ($1.3) million, as compared
        to
        ($0.8) million for the three months ended March 31, 2004. This
        translates to a Gross Margin of (183%) and (152%) for the three months ended
        March 31, 2005 and 2004, respectively.
 
 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.
 
 The
        increased costs of goods sold is directly attributable to our preparation
        for
        increased production volumes.  Expenses for the three months ended
        March
        31, 2005 reflect two full shifts of production and a partial third
        shift.  Expenses for the three months ended March
        31, 2004 represented staff required to run a single shift at relatively
        low
        throughput.  During the first quarter of 2005 we redesigned our processes
        to support what we believe will be increased throughput of between 10-30
        times
        year ago levels.  While these changes were being implemented, the
        majority
        of overhead and staff cost was directly expensed to cost of goods sold.
 
 **Operating
        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
        for the
        three months ended March 31, 2005 was $0.9 million, as compared to
        $8
        thousand for the three months ended March 31, 2004. 
        During
        the second half of 2004 we initiated two new design projects that are projected
        to yield future microdisplay products.  To accommodate these efforts
        our
        costs for the three months ended March 31, 2005 reflect expanded staff size
        and
        outsourced design services as compared to the three months ended March 31,
        2004.
 
 Non-cash
        Stock Based Compensation.  Non-cash expenses related
        to
        stock-based compensation amortization for the
        three months ended   March 31, 2005 was $0 as
        compared to
        $84 thousand for the three months ending March 31, 2004. Non-cash
        stock-based compensation costs are the result of amortization of
        the intrinsic value ascribed for the issuance of stock options
        at
        below fair market values. The amortization is done over the vesting period
        of
        such options and was fully expensed during 2004.
  12
 
 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, as well
        as other
        marketing and administrative expenses.  Selling, general and
        administrative expenses, for the three months ended March 31,
        2005
        were $1.3 million, as compared to $0.6 million for the three months
        ended
        March 31, 2004.  The $0.7 million increase was
        primarily due
        to an increase in staff and personnel costs.  Company headcount increased
        from 37 on March 31, 2004 to 79 on March 31, 2005.
 
 Interest Income
        (expense). Interest income (expense) for the three months ending March 31,
        2005
        was $18 thousand as compared to ($5.1) million for the three
        months ended March 31, 2004. The ($5.1) million
        decrease in interest expense for the three months
        ended
        March 31, 2005 was attributable to three factors recorded in 2004; (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.
 
 **Liquidity
        and Capital Resources**
 
 **Current
        Financial Position**
 
 We
        have
        total liabilities and contractual obligations of $6,650,746 as of
        March
        31, 2005.  These contractual obligations, along
        with the
        dates on which such payments are due, are described below:
  One
                      Year
                  
                  
                  More
                      ThanContractual
                    Obligations
                  
                  
                  Total
                  
                  
                  or
                      Less
                  
                  
                  One
                      YearOperating
                    leases
                  
                  $
                  3,747
                  
                  $
                  927
                  
                  $
                  2,820Royalties
                  
                  
                  625
                  
                  
                  125
                  
                  
                  500Capital
                    leases
                  
                  
                  38
                  
                  
                  18
                  
                  
                  20Total
                    contractual obligations
                  
                  $
                  4,410
                  
                  $
                  1,070
                  
                  $
                  3,340
 
 We
        currently anticipate that we will experience a significant increase in sales
        if
        we are successful in fulfilling product shipments to clients reflected in
        our
        backlog and if our new products meet with commercial success.  As
        a result
        we anticipate that working capital to facilitate higher accounts receivable
        and
        inventories will be our most significant use of cash in 2005. 
        We anticipate that we will continue to experience moderate
        growth in
        our operating expenses for the foreseeable future as
        well and
        that our operating expenses will be one of the principal uses
        of our
        cash. In particular, we expect that salaries for employees
        engaged in
        production operations, purchase of inventory and expenses of
        increased sales and marketing efforts should also be
        a 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, additional financing, exercising of outstanding
        options and warrants, and revenues generated by operations.
 
 We
        have
        received purchase agreements for approximately $28
        million
        for our products to be delivered now through early 2007. 
        Scheduled deliveries against our purchase
        agreements and other customer requirements are subject
        to
        change depending on a number of factors including, our
        production capacity, 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 are undergoing a ramp up in
        our
        supplies and staffing in order to be prepared to meet the currently
        anticipated shipping schedules, which we anticipate will require significant
        added effort.
 
 Our
        longer term cash requirements depend on numerous factors, including
        completion of our product development activities, ability to
        continue
        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 these
        efforts.
 
 EFFECT
        OF
        RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
 In
        November 2004, the FASB issued FAS No. 151, "An amendment of ARB No. 43,
        Chapter
        4" This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
        Pricing", to clarify the accounting for abnormal amounts of idle facility
        expense, freight, handling costs, and wasted material (spoilage). This Statement
        requires that those items be recognized as current-period charges regardless
        of
        whether they meet the criterion of "so abnormal". In addition, this statement
        requires that allocation of fixed production overheads to the costs of
        conversion be based on the normal capacity of the production facilities.
        The
        statement is effective for fiscal years beginning after June 15, 2005 with
        early
        adoption permitted. eMagin is currently evaluating the requirements and impact
        of FAS No. 151, but at this point does not believe the adoption will have
        a
        material impact on its financial position, cash flows or results of operations.
 
 FASB
        Statement 123R (Revision 2004), "Share-Based Payment", was issued in December
        2004 and is effective for reporting periods beginning after December 31,
        2005.
        The new statement requires all share-based payments to employees to be
        recognized in the financial statements based on their fair values. The Company
        currently accounts for its share-based payments to employees under the intrinsic
        value method of accounting set forth in Accounting Principles Board Opinion
        No.
        25, "Accounting for Stock Issues to Employees". Additionally, the Company
        complies with the stock-based employer compensation disclosure requirements
        of
        SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
        Disclosure, an amendment of FASB Statement No. 123". The Company will adopt
        the
        new statement in its financial statements for the quarter ending March 31,
        2006.
 
 13
 **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**
 
 **WE
        HAVE A HISTORY OF LOSSES SINCE OUR INCEPTION AND MAY INCUR LOSSES FOR THE
        FORESEEABLE FUTURE.**
 
 Accumulated
        losses excluding non-cash transactions as of March 31, 2005, were $51 million
        and acquisition related non-cash transactions were $102 million, which resulted
        in an accumulated deficit of $153 million, the majority of which was
        related to the March 2000 merger and the subsequent write-down of our 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 operating 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
        MAY NOT BE ABLE TO EXECUTE OUR BUSINESS PLAN AND MAY NOT GENERATE CASH FROM
        OPERATIONS**
 
 In
        the
        event that cash flow from operations is less than anticipated and we are
        unable
        to secure additional funding to cover our expenses, in order to preserve
        cash,
        we would be required to reduce expenditures and effect reductions in our
        corporate infrastructure, either of which could have a material adverse effect
        on our ability to continue 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
        were not able to generate sufficient capital, either from operations or through
        additional debt or equity financing, to fund our current operations, we would
        be
        forced to significantly reduce or delay our plans for continued research
        and
        development and expansion. This could significantly reduce the value of our
        securities.
 
 **RISKS
        RELATED TO MANUFACTURING**
 
 **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 meet
        our customers time requirements and would have difficulties in attracting
        new
        customers. In addition, we cannot assure you that once we commence volume
        production we will attain yields at high 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.**
 
 We
        initially expect to manufacture our products on a single manufacturing line.
        If
        we experience any significant disruption in the operation of 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 to 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 extensive.
        No assurance can be given that we will not lose potential sales or be unable
        to
        meet production orders 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
        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 expect to provide the design layouts to semiconductor
        contract manufacturers who will manufacture the integrated circuits on silicon
        wafers. We also expect to 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 could
        result
        in manufacturing delays, increased costs and ultimately in reduced or delayed
        sales or lost orders which could materially and adversely affect our operating
        results.
  14
 
 **RISKS
        RELATED TO OUR INTELLECTUAL PROPERTY**
 
 We
        rely
        on our license agreement with Eastman Kodak for the development of our products,
        and the termination of this license, 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 them, relating to OLED display technology. Eastman Kodak's
        patents expire at various times in the future. 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 available on terms acceptable to us,
        if at
        all. Protection of intellectual property has historically been a large yearly
        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:
 
 ·
              our
                  success in designing, manufacturing and delivering expected new
                  products,
                  including those implementing new technologies on a timely basis;
 
 ·
              our
                  ability to address the needs of our customers and the quality of
                  our
                  customer services;
 
 ·
              the
                  quality, performance, reliability, features, ease of use and pricing
                  of
                  our products;
 
 ·
              successful
                  expansion of our manufacturing capabilities;
 
 ·
              our
                  efficiency of production, and ability to manufacture and ship products
                  on
                  time;
 
 ·
              the
                  rate at which original equipment manufacturing customers incorporate
                  our
                  product solutions into their own products;
  15
 ·
              the
                  market acceptance of our customers' products; and
 
 ·
              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.
 
 **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.
 
 **OU
        R 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 anticipate 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 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 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 materially adverse affect on our business
        and our operating results. In addition, difficulties in hiring and retaining
        technical personnel could delay the implementation of our business plan.
 
 16
 
 **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. 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.
        Our
        current purchase agreements 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
        suffer and the value of your investment in the Company may decline.
 
 **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 in to 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 have
        longer receivable periods or warranty periods. 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 additional 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 potential 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 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 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.
 
 17
 **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 sell
        equity or equity-related securities in the future at a time and price
        that
        we deem appropriate.  As of April 30, 2005, we have outstanding
        (i)
        options to purchase 15,252,688 shares; and (ii) warrants to
        purchase 18,273,439 shares of common stock.
 
 **WE
        HAVE A STAGGERED BOARD OF DIRECTORS AND OTHER ANTI-TAKEOVER PROVISIONS, WHICH
        COULD INHIBIT POTENTIAL INVESTORS OR DELAY OR PREVENT A CHANGE OF CONTROL
        THAT
        MAY FAVOR YOU.**
 
 Our
        Board
        of Directors is divided into three classes and our Board members are elected
        for
        terms that are staggered. This could discourage the efforts by others to
        obtain
        control of the company. Some of the provisions of our certificate of
        incorporation, our bylaws and Delaware law could, together or separately,
        discourage potential acquisition proposals or delay or prevent a change in
        control. In particular, our board of directors is authorized to issue up
        to
        10,000,000 shares of preferred stock (less any outstanding shares of preferred
        stock) with rights and privileges that might be senior to our common stock,
        without the consent of the holders of the common stock.
 
 **Item
        3. Quantitative and Qualitative Disclosures About Market Risk.**
 
 We
        did
        not have material exposure to market risk from derivatives or other financial
        instruments as of March 31, 2005, and we do not expect any significant effect
        on
        our results of operations from interest rate and foreign currency fluctuations.
 
 **Item
        4. 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.
 
 (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.
 
 18
 **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. Unregistered Sales of Equity Securities and Use of Proceeds.**
 
 None.
 
 **Item
        3. Defaults Upon Senior Securities.**
 
 None
 
 **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 None.
 
 **Item
        5. Other Information.**
 
 None.
 
 **Item
        6. Exhibits**
 
 EXHIBIT
                  NUMBER
              DESCRIPTION31.1
              Certification
                  by Chief Executive Officer pursuant to Sarbanes Oxley Section 30231.2
              Certification
                  by Chief Financial Officer pursuant to Sarbanes Oxley Section 30232.1
              Certification
                  by Chief Executive Officer pursuant to 18 U.S. C. Section 135032.2
              Certification
                  by Chief Financial Officer pursuant to 18 U.S. C. Section 1350
 
 
 
  19
 **SIGNATURES**   In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
  **EMAGIN
                  CORPORATION**Date: November
                  2, 2005
              By:
              /s/ Gary
                  Jones
                Gary
                  JonesCHIEF
                  EXECUTIVE OFFICER,
                PRESIDENT
 
 
 Date: November
                  2, 2005
              By:
              /s/ John
                  Atherly
                John
                  AtherlyCHIEF
                    FINANCIAL OFFICER
 
 
 
  20