UNITED STATES SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

Form 10-K10-K/A Amendment No 1.

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to  

Commission file number 001-15751

eMAGIN CORPORATION 

(Exact name of registrant as specified in its charter) 

700 South Drive, Suite 201, Hopewell Junction, NY 12533

(Address of principal executive offices) 

(845) 838-7900 

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whetherif the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.   Yes ¨    No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes ¨    No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ    No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes þ    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.   

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.¨

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨

Indicate by checkmark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)   Yes  ¨    No þ

As of June 30, 2021,2022, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the issued and outstanding common stock held by non-affiliates of the registrant, based upon the closing price of the common stock as traded on the NYSE American of $3.48$0.65 was approximately $235.8$46.5 million. For purposes of the above statement only, all directors, executive officers, and 10% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.

The number of shares of common stock outstanding as of March 1, 2022April 27, 2023 was 72,979,47983,041,694.

DOCUMENTS INCORPORATED BY REFERENCE

EXPLANATORY NOTE

T

This Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”) of eMagin Corporation filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2023. In this Amendment No. 1, unless the context indicates otherwise, the designations “eMagin,” the “Company,” “we,” “us” or “our” refer to eMagin Corporation and its wholly owned subsidiaries.

This Amendment No. 1 is being filed solely to include the information required by Item 10 - “Directors, Executive Officers and Corporate Governance”, Item 11 - “Executive Compensation”, Item 12 - “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”, Item 13 - “Certain Relationships and Related Transactions, and Director Independence” and Item 14 - “Principal Accountant Fees and Services” of Part III of Form 10-K. The reference on the cover page of the 2022 Annual Report to the incorporation by reference of portions of our definitive proxy statement into Part III of the 2022 Annual Report is hereby deleted. Items 10, 11, 12, 13 and 14 of Part III of the 2022 Annual Report are amended and restated in their entirety as set forth in this Amendment No. 1. In addition, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are including with this Amendment No. 1 certain currently dated certifications. Because no financial statements have been included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted. We are not including the certifications under Section 906 of the Sarbanes-Oxley Act of 2002 as no financial statements are being filed with this Amendment No. 1.

Except as described above, no other amendments are being made to the 2022 Annual Report. This Amendment No. 1 does not reflect events occurring after the March 10, 2023 filing of the 2022 Annual Report or modify or update the disclosures contained in the 2022 Annual Report in any way other than as required to reflect the amendments discussed above and reflected below. Accordingly, this Amendment No. 1 should be read in conjunction with the 2022 Annual Report and our other filings with the SEC.

‎

eMAGIN CORPORATION

FORM 10-K/A

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022

Tabablele of Contents

‎

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or Report, contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” and elsewhere in this Report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

In particular, forward-looking statements in this Report include statements about:

our ability to generate sufficient cash flows and obtain the additional financing we need in order to continue as a going concern;

our ability to generate additional revenue or secure additional financing when required, in order to continue our current operations;

our ability to manufacture our products on a timely basis and at a competitive cost;

our ability to successfully remediate manufacturing issues that have resulted in production delays and successfully integrate new equipment on our manufacturing line;

our ability to achieve our yield improvement initiatives;

our ability to meet our obligations as they become due over the next twelve months;

our needs for additional financing, as well as our ability to obtain such additional financing on reasonable terms and the interest rate and expense we incur on any debt financing;

our ability to maintain our operations as a result of potential employee, customer and supplier disruptions caused by the COVID-19 pandemic or any resurgences and quarantine restrictions;

our anticipated cash needs and our estimates regarding our capital requirements;

our ability to repay our indebtedness pursuant to the asset based lending, or ABL facility;

our ability to maintain our relationships with customers and vendors;

our ability to protect our intellectual property;

our ability to successfully develop and market our products to customers;

our ability to generate customer demand for our products in our target markets;

the development of our target markets and market opportunities, including the consumer market;

technological developments in our target markets and the development of alternate, competing technologies in them;

the rate of acceptance of augmented reality/virtual reality, or AR/VR, systems and products in the consumer and commercial marketplace;

our potential exposure to product liability claims;

our ability to meet customers’ delivery schedules;

market pricing for our products and for competing products;

the impact of the majority holder of our Series B convertible stock, being able to prevent us from entering into significant corporate transactions, including certain capital raising transactions;

changes in demand by original equipment manufacturer or OEM, customers for advanced microdisplays, limited availability of suppliers and foundries, high costs of raw materials, pricing pressure brought by the marketplace or governmental customers and other factors that impact the commercial, military and consumer markets in which we operate;

increasing competition;

our ability to comply with the terms of government awards; and

provisions in certain of our organizational documents, commercial agreements, government awards, and our military contracts that may prevent or delay an acquisition of, partnership with, or investment in us and our ability to develop original equipment manufacturer and mass production partnerships.

The forward-looking statements in this Report represent our views as of the date of this Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the

future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this Report.

In this Report, references to “eMagin Corporation,” “eMagin,”, “we,” “us,” and “our company” refer to eMagin Corporation and our wholly owned subsidiary, Virtual Vision, Inc. References to “Consumer Night Vision Business” refers to our former consumer night vision products business, which we exited in 2018.

eMagin® is a registered trademark of eMagin Corporation. dPd^TM is an unregistered trademark of eMagin. All other trademarks used in this Annual Report are the property of their respective owners.

Summary of Risk Factors

We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and uncertainties include, but are not limited to, the following:

Risks related to our financial position, including risks relating to:

our ability to continue as a going concern;

our ability to generate revenue or obtain financing to mitigate the going concern risk;

our ability to meet obligations and continue our current level of operations; and

uncertainty regarding our ability to obtain additional capital funding.

Risks related to our business and industry, including risks relating to:

the impact of significant fluctuations in our operating results;

the impact of production challenges on our ability to deliver against orders or introduce new products;

dependence on critical machines and tools that can break down and impact production;

reliance on sole and limited source suppliers;

the impact of supply chain shortages and increased demand;

the impact of inflation on our production costs, revenue, and profit margins;

the impact of the COVID-19 pandemic on our business;

the impact of material requirements planning on demand and capacity;

the variability of production yields;

demand changes due to economic conditions, governmental regulations and alternative technologies;

the highly competitive nature of the display industry;

advantages our competitors have over us;

variations in cyclical demand;

product sales that are subject to lengthy OEM development periods;

the need to develop new products or enhancements to maintain or improve our profit margins;

the impact of a failure to develop and maintain relationships with companies that use our technology;

the variability of our military and commercial contract revenue and future licensing revenue;

the dependency of our AR/VR display development efforts on overall acceptance of AR/VR systems in the marketplace;

the speed of development of the market segments for consumer and commercial AR/VR systems; and

the impact of rescheduling and or/ cancellations of orders to our backlog.

Risks related to ownership of our common stock, including risks related to:

the volatility in the market price of our common stock;

share price risk related to provisions in agreements limit our ability to engage in mergers and acquisitions;

risks related to maintaining or losing our NYSE American listing;

the potential dilutive impact of future issuance of additional shares of common stock;

the expectation that we will not pay dividends in the foreseeable future;

the nature and content of public research reports about us;

the impact of anti-takeover provisions in our governing documents and under Delaware law;

the ability of Series B convertible preferred stockholders to hinder a change in control that might increase our market price;

the ability of Series B convertible preferred stockholders to block transactions that might benefit our share price;

the potential impact on our share price of sales of large blocks of our common stock held by the Series B convertible preferred stockholders; and

Part III

Ithe impactTEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

(a) Identification of any failure to maintain effective internal controls and governance standards.Directors

Risks related to our indebtedness, including risks relating to:

* Committee Chair

(1)asset based lending, or ABL facility covenants that impose operating and financial restrictions;Audit Committee

(2)risks related to repayment of ABL facility;Governance & Nominating Committee

(3)the potential impact of non-renewal of the ABL facility; and

the impact of variable rate provisions on our debt service obligations and interest expense.Compensation Committee

Risks related

Eric Braddom has served as a director since October 2018. Mr. Braddom is currently the Vice President of Product Management, Imaging, at SRI International. Prior to our intellectual property,that, he was the General Manager, Augmented and Virtual Reality Solutions, at Flex Ltd. Prior to joining Flex in 2015, he was the Vice President of Strategy within the Consumer Solutions division at TE Connectivity, formerly Tyco Electronics, where he worked with the executive team to manage and grow the $800 million consumer devices business. Previously, Mr. Braddom spent two years at Freescale Semiconductor as Director of Global Marketing for the eReaders consumer segment and 12 years at Texas Instruments in positions of increasing responsibility, focused primarily on the Digital Light Processing^TM display business, including risks related to:starting operations in Shanghai and Taiwan. Mr. Braddom received an M.B.A. from the University of Texas and a B.S. degree in electrical engineering from Washington University in St. Louis. Mr. Braddom’s business and management experience in technology and manufacturing led to the conclusion that he should serve on the Board of Directors, given the Company’s business and structure.

protectionPaul Cronson has served as a director since July of our patents2003. He is a founder and technology;Managing Director of Larkspur Capital, a broker dealer that is a member of FINRA and advises companies seeking private equity or debt. He received his B.A. from Columbia College in 1979 and his M.B.A. from Columbia University School of Business Administration in 1982. From 1979 to 1986, Mr. Cronson worked with several financial institutions including Laidlaw, Adams Peck in New York, as well as Samuel Montagu Co., Inc. and Chase Investment Bank Ltd in London. Upon returning to the United States Mr. Cronson joined Peter Sharp Co., where he managed a real estate portfolio, structured financings and assisted with capital market investments. In 1992, he formed Larkspur Capital Corporation. Mr. Cronson represents the Managing Member of Georgetown Investors 1 and Georgetown Investors 2, both investment partnerships with primary holdings in real estate in New York, Chicago, Los Angeles, Washington DC and Columbus. Mr. Cronson serves as a trustee on the boards of the California Institute of the Arts (CalArts) the Park Avenue Armory, the Solomon R Guggenheim Foundation (the Guggenheim Museum in New York) and the Evelyn Sharp Foundation and is a member of the advisory board for the Rand Center for Global Risk and Security. Mr. Cronson’s extensive experience in the financial services industry and board service make him qualified to serve on the Board of Directors.

intellectual property risksEllen Richstone has served as a director since July 2014. Ms. Richstone served as the Chief Financial Officer of several public and private companies between 1989 and 2012, including Rohr Aerospace, a Fortune 500 company. From 2002 to 2004, Ms. Richstone was the President and Chief Executive Officer of the Entrepreneurial Resources Group. From 2004 until its sale in 2007, Ms. Richstone served as the financial expert on the board of directors of American Power Conversion, an S&P 500 company. Ms. Richstone currently also serves on the board of directors of Superior Industries, Orion Energy Systems and Cognition Therapeutics, Inc. She also sits on the board of the National Association of Corporate Directors (“NACD”) in New England, as well as other non-profit organizations, and became a NACD Leadership Fellow in January 2018. In April 2013, Ms. Richstone was given the first annual Distinguished Director Award from conducting businessthe Corporate Directors Group. Ms. Richstone graduated from Scripps College in foreign jurisdictions;

changes to patent law;Claremont, California and

 holds graduate degrees from the potential impactFletcher School of defending third party claims against us.

Risks related to governmental, legal or regulatory matters, including risks related to:

Law and Diplomacy at Tufts University. Ms. Richstone also completed the impactAdvanced Professional Certificate in Finance at New York University’s Graduate School of changesBusiness Administration and attended the Executive Development program at Cornell University’s Business School. Ms. Richstone holds an Executive Master’s Certification in federal budget priorities on display revenue;

the impact of changes in federal budget priorities on research and development, or R&D, contract revenue;

the impact of governmental and customer’s bid process on our revenues and profits;

our ability to obtain government funding and perform under award conditions;

the impact of compliance with U.S. government procurement laws and regulations;

the impact of compliance with economic sanctions, export control laws, and related regulations; and

compliance with environmental regulations and possible liability.

Risks related to Information Technology, including risks related to:

the reliance of our business on our Information Technology systems; and

the impact of a potential security breach on our business.

General risks, including risks relating to:

our ability to attract and retain key personnel;

economic conditions may adversely impact our business;

risks related to international transactions;

risks related to product liability claims; and

the impact of changes in accounting principle on our reported financial results.

‎director governance from

the American College of Corporate Directors. Ms. Richstone’s broad industry experience in technology and corporate governance expertise led to the conclusion that she should serve on the Board of Directors, given the Company’s business and structure.

PARTAndrew G. Sculley became the Company’s Chief Executive Officer and President on June 1, 2008 and continues to serve as the Chief Executive Officer. He was appointed to the Board of Directors on November 2, 2009. Mr. Sculley served as the General Manager of Kodak’s OLED systems business unit and Vice President of Kodak’s Display Business from 2004 to 2008. From 2003 to 2006, he served on the board of directors of SK Display, a joint venture between Sanyo and Kodak. From 1996 to 2001, Mr. Sculley served as the Manager of Operations, CFO and member of the board of directors of Kodak Japan Ltd., where he managed distribution, information technologies, legal, purchasing and finance. Previously, he held positions in strategic planning and finance in Eastman Kodak Company. Mr. Sculley holds an M.B.A. from Carnegie-Mellon University and an M.S. in physics from Cornell University. He attended Harvard University’s International Senior Management Program while an executive at Kodak. Mr. Sculley’s experience as the Company’s Chief Executive Officer and technical and business management experience at Kodak’s Display Business, SK Display and Kodak Japan Ltd., led to the conclusion that Mr. Sculley should serve on the Board of Directors, given the Company’s business and structure.

Brigadier General Stephen M. Seay, U.S. Army (Ret.) began service as a director in January 2006. In March 2016, Brig. General Seay became Director, Leadership and Career Development Strategies, in the Department of Athletics, at the University of Central Florida (“UCF”). His responsibilities include resource development, mentor, coach and adviser to student athletes, and students, in career development opportunities in academia, government and industry, leading toward a successful career upon graduation. Additionally, in 2016, Brig. General Seay was selected to join the Proxy Board of Quantum 3D, Government Systems, Milpitas, CA. He founded Seay Business Solutions, LLC, a Florida veteran-owned small business, in 2006, specializing in providing assistance to entrepreneurs, as well as large and small businesses, focused on high technology solutions for defense and commercial markets. Brig. General Seay provides expertise in high technology operational and integrated modeling, simulation, training and education, including virtual and augmented reality systems, mission command, cyber operations, strategic planning, resource management/allocation/analysis, operations research and system life cycle planning, programming, execution, sustainment and life cycle system design. He held a wide variety of command and staff positions during his over 33 year Army career, culminating as the Commanding General, Joint Contracting Command-Iraq/Head of Contracting Authority, Operation Iraqi Freedom (2004-2005) and Program Executive Officer, Simulation, Training and Instrumentation (PEO STRI) from 2000-2005. He performs corporate and independent director responsibilities as a member of strategy, audit, compensation, finance, governance and executive committees. Brig. General Seay is the senior mentor/advisor for Talon Simulations, LLC, an entrepreneurial Florida small business, UCF graduate degree program and National Science Foundation grant awardee, TiTenn, LLC, also an entrepreneurial Florida small business spinout from UCF College of Engineering and Computer Science, and Walk On Nation, LLC, an entrepreneurial spinout from the UCF Department of Athletics, specializing in professional development training for high school and college student-athletes. Brig. General Seay received his B.S. from the University of New Hampshire, where he was a three-sport student-athlete, and an M.S. from North Carolina State University. He taught Chemistry and coached Division I lacrosse at the United States Naval Academy. Mr. Seay’s Army operational experience, coupled with his business and technical experience led to the conclusion that he should serve on the Board of Directors, given the Company’s business and structure.

Introduction

We design, develop, manufactureDr. Wittels has served as a director and market organic light emitting diode, or OLED miniature displays, which we refer to as OLED-on-silicon microdisplays, virtual imaging products that utilize OLED microdisplays, and related products. We also perform research in the OLED field. We are oneChair of the leadingBoard of Directors since August 2011. She served on the Board of Directors previously from 2003 to 2006. Dr. Wittels is currently the principal in Sostenuto Strategic Advisors, in which capacity she consults on business strategy and serves as a strategy advisor. In October 2017 she helped found Route Dynamics Corp, which subsequently was renamed Nexteon Technologies, Inc. Initially she served as the President and COO, moving to CEO and COO in Feb of 2022. She has served as a Director since the company's inception. She served on the Board of Overseers of the Fermi National Accelerator Laboratory, a laboratory of the U.S. producersDepartment of OLED microdisplaysEnergy Office of High Energy Physics, from June 1995 through June 2011 and manufacture our productsfrom 2013 to 2014. From February 2001 until July 2011, Dr. Wittels was Corporate Vice President, Business and Technology Strategy of L-3 Communications. Her responsibilities at our facility located in the Hudson ValleyL-3 included strategies for growth, oversight of New York State. Our virtual imaging products integrate OLED technology with silicon chipsR&D, diligence support for M&A, and cross-company business development coordination. From 1979 to produce high-resolution microdisplays which, when viewed through a magnifying headset, create virtual images that appear comparable in size to that of a computer monitor or a large-screen television. Our products enable our original equipment manufacturer, or OEM, customers in the military, consumer and commercial markets to develop and market improved or new electronic products. We believe our Direct Patterning Technology, or dPd™, could significantly transform the way the world consumes information. Since 2001, our microdisplays have been used in AR/VR, aircraft helmets, heads-up display systems, thermal scopes, night vision goggles, weapon systems andshe held a variety of other applications.

We believe that our OLED microdisplays offerpositions with BAE Systems North America, including Division Vice President and General Manager, Acting President and Vice President of Engineering. She served on the board of Innovative Micro Technologies, Inc. from 2002 through July, 2011 and on the board of Millivision, Inc. from 2002 to 2006. Dr. Wittels holds a numberB.S. and a Ph.D. in physics, both from the Massachusetts Institute of significant advantages over comparable liquid crystal microdisplays, including higher contrast, greater power efficiency, less weight, more compact size, and negligible image smearing. Using our active matrix OLED technology, many computer and electronic system functions can be built directly into the OLED microdisplay silicon backplane, resulting in compact, high resolution and power efficient systems. Already proven in military and commercial systems, our product portfolio of OLED microdisplays deliver high-resolution, virtual images that perform effectively even in extreme temperatures and high-vibration conditions.

Our OEM customers incorporate our OLED displays in a variety of products including, military aviation helmets, military weapons sights and targeting systems, night vision and thermal imaging devices, training and simulation, visualization for ocular surgery, mobile ultrasound, and augmented reality applications.

We believe our technology, intellectual property portfolio and position in the marketplace give us a leadership position in OLED and OLED-on-silicon microdisplay technology. We have an intellectual property portfolio that includes 45 issued U.S. patents and 13 pending U.S. patent applications, and have over 20 years of manufacturing know-how and other proprietary technologies to create our high-performance OLED microdisplays. We also have 16 issued foreign patents and 10 pending foreign patent applications. We believe that we are one of only a few companies to market and produce significant quantities of high resolution, small molecule OLED-on-silicon microdisplays.

Consumer, commercial (in which we include the medical and industrial sectors), and military customers are increasingly turning to us because of our technological leadership in display brightness and resolution. This leadership in brightness is further demonstrated by our proprietary dPd capability. Unlike traditional OLED microdisplays that produce colors by using a white source with filters that eliminate about 80%Technology. Dr. Wittels’ business management experience, her scientific knowledge, her knowledge of the emitted light, with dPd we make full color displays by directly depositing each ofCompany, and her experience in developing strategy and strategic alliances led to the primary color materials on respective sub-pixels, without the use of filters. We have fabricated full color displays, including our 4kX4k and WUXGA displays using our dPd tool, which was newly upgraded and installed during 2021. In July 2021, using our dPd technology we created full color WUXGA displays with a brightness of over 10,000 cd/m2, which we demonstrated to industry analysts in October 2021. We expect to achieve a brightness level of over 28,000 cd/m2 ready for mass production of full color displays by 2023. We achieved the highest monochrome brightness levels in the market years ago and are continuing our leadership with color displays. Display brightness is critical for AR/VR devices because of optics inefficiency and the need to eliminate motion artifacts. This is especially important for heads up displays used in bright, daylight environments. Our high resolution and small pixel pitch are also important to eliminate the “screen door” effectconclusion that comes with expanding lower resolution displays over wide fields of view. We continue our development work for a tier-one consumer electronics company customer and are targeting similar levels of brightness on proof-of-concept displays using our full color dPd process.

We derive the majority of our revenue from sales of our OLED microdisplay products. We also earn revenue from commercial, consumer product and government development contracts that may complement and support our internal research and development programs. In addition, we generate sales from optics and microdisplays combined with optics. And finally, as the technology leader in this space, we may see future opportunities to license technologies like dPd to OEMs and other global manufacturers.

We were formed in March 2000, through the merger of Fashion Dynamics Corporation, and FED Corporation, a developer and manufacturer of optical systems and microdisplays for use in the electronics industry. Simultaneous with this merger, we changed our name to eMagin Corporation. We are incorporated in the state of Delaware. 

Our common stock is tradedshe should serve on the NYSE American underBoard of Directors, given the symbol EMAN.

Company’s business and structure.

Our Industry(b) Identification of Executive Officers

Andrew G. Sculley became the Company’s Chief Executive Officer and President on June 1, 2008 and continues to serve as the Chief Executive Officer. Effective October 4, 2018, Mr. Sculley resigned from his role as President. Mr. Sculley was appointed to the Board of Directors on November 2, 2009. Mr. Sculley served as the General Manager of Kodak’s OLED systems business unit and Vice President of Kodak’s Display Business from 2004 to 2008. From 2003 to 2006, he served on the board of directors of SK Display, a joint venture between Sanyo and Kodak. From 1996 to 2001, Mr. Sculley served as the Manager of Operations, Chief Financial Officer and member of the board of directors of Kodak Japan Ltd., where he managed distribution, information technologies, legal, purchasing and finance. Previously, he held positions in strategic planning and finance in Eastman Kodak Company. Mr. Sculley holds an M.B.A. from Carnegie-Mellon University and an M.S. in physics from Cornell University. He attended Harvard University’s International Senior Management Program while an executive at Kodak.

A microdisplay generallyMark Koch was appointed Chief Financial Officer effective, July 1, 2021, after previously serving as the Acting Chief Financial Officer since February 1, 2020, and as eMagin’s Vice President of Finance since October 2018, and Corporate Controller since March 2016. He has been a screen size that is less than two inches in diagonal. The miniature size enables microdisplays to be used infinancial executive and consultant for over 25 years. He joined eMagin from the Turtle Beach Corporation, an audio technology company providing gaming headsets, where he was the corporate controller. Previously, Mr. Koch was a wide varietyconsultant with Tatum, an executive talent and strategic consulting firm providing c-suite solutions. Mr. Koch was the principal accounting officer of applications that requireDel Global Technologies Corp, a screen that takes up small space, suchmedical imaging manufacturer with international operations. Mr. Koch has also served as head-mounted displays or HMDs, weapon sights,the corporate controller of SEMX Corporation a manufacturer of specialty materials and viewfinders of digital cameras. Microdisplays are used across various industries, including the military, commercial,thermal management solutions. He holds a B.S. from Manhattan College and consumer markets in which we operate. Microdisplays provide many advantages over other displays where small size is a requirement. Benefits include compact size, high brightness and resolution, low power consumption, and high contrast.Certified Public Accountant.

OurDr. Amalkumar Ghosh was appointed Chief Operating Officer effective February 1, 2020. Dr. Ghosh was our Chief Technology PlatformOfficer from September 30, 2018 until February 1, 2020. Dr. Ghosh was appointed Senior Vice President of Research and Development in April 2009 after serving as Vice President of OLED Research and Development at the Company since 2005. He is responsible for new microdisplay technology development, government programs, intellectual property and manufacturing process engineering. Dr. Ghosh has more than 30 years of leading industrial research and development experience. From 2002 to 2005, he was at Eastman Kodak Company where he played a key role towards OLED display technology development. From 1995 to 2002, he was employed by the Company. His work during this period laid the foundations for OLED microdisplay technology. From 1985 to 1995, he was with IBM Corporation where he was a leader in various aspects of semiconductor and LCD display technologies. He has many publications and patents to his credit and has received numerous awards and recognitions from the Society for Information Display, including being nominated a Fellow of the Society. Dr. Ghosh was the President of the Society for Information Displays from 2014 to 2016. Currently, he is a board director for the Society. Dr. Ghosh earned B.Sc. and M.Sc. degrees in physics from Poona University and a Ph.D. degree in physics from Massachusetts Institute of Technology.

Our microdisplays are based upon active matrix small moleculeOlivier Prache was appointed Senior Vice President, Product Development in September 2012. His current responsibilities encompass managing OLED technology, which we referproduct development and product engineering. In addition he is serving as interim VP of Operations, since March 2023. He served as Senior Vice President of Display Operations and Development from 2005 to as active matrix OLED or AMOLED. Our AMOLED technology permits us2012, after overseeing microdisplay product development at the Company since 1995 when he joined the Company’s predecessor, FED Corporation. Mr. Prache was employed by Philips-LCOS from 2002 until 2004 when he rejoined the Company. Prior to build millions of individual low-voltage light sources on low-cost, silicon computer chips to produce single color, white or full-color display arrays. Our technology allows many computerjoining the Company’s predecessor in 1995, he worked for Pixtech in France and video electronic system functions to be built directly into the silicon chip, under the OLED film, resultingOIS Optical Imaging Systems in a compact, integrated system with lower overall system costs relative to alternative technologies.Troy, Michigan. He earned an M.S. degree in electronics from E.N.S.E.R.G., in Grenoble, France in 1983.

OLEDs are thin films(c)   Identification of stable organic materials that emit light of various colors when a voltage is applied to them. OLEDs are emissive devices, which mean that they create their own light, as opposed to liquid crystal displays, which require a separate light source. As a result, our OLED microdisplays use less power and deliver much higher contrast and fuller color than liquid crystal microdisplays. Unlike liquid crystal displays which use crossed polarizers to generate black level, OLED displays exhibit an extremely high contrast ratio which results in very vivid images. Because the light they emit is lambertian, which means that it appears equally bright from most forward directions, a moderate movement in the eye does not change the image brightness or color as it does in some other technologies.Certain Significant Employees

Not applicable.

Our technology is based on integrating a proprietary OLED device with a specially designed silicon backplane to produce efficient(d) Family Relationships

There are no family relationships among our executive officers and high-performance AMOLED microdisplays. Our OLED displays incorporate a proprietary, top-emitting structure for our OLED devices that enables OLED displays to be built on opaque silicon integrated circuits rather than only on glass. Our OLED microdisplays emit full visible spectrum (white) light that is split with color filters to create color images. Our microdisplays’ performance meets or exceeds the requirements for a typical notebook computer or cell phone and is useful for a myriad of applications. New processes and device improvements, such as our OLED-XLS and OLED-XLE technologies, offer even better performance including brightness and efficiency.directors.

We have developed very bright OLED microdisplays using our patented dPd technology and have demonstrated color high resolution 4K x 4K displays and widescreen ultra-extended graphics array, or WUXGA, microdisplays with brightness in excess of 10,000 nits, which we believe is the world’s highest resolution and brightness OLED microdisplay. In addition to our AMOLED technology, we have developed compact optic and lens enhancements, which when coupled with the microdisplay, help our OEM customers provide a high-quality large screen appearance.(e) Business Experience

We believe thatThe business experience of each of our AMOLED technology provides significant advantages over other microdisplay technologiescurrent directors and executive officers is set forth in our targeted markets. These key advantages include:Part III, Item 10(a), "Identification of Directors" and Part III, Item 10(b), "Identification of Executive Officers," respectively, of this Amendment No.1.

high brightness;

sharp contrast;

vivid colors;

low power consumption for improved battery life and longer system life;

high-speed performance resulting in clear video images;

compact form factor and light weight;

wide operating temperature range;

good environmental stability (vibration and humidity); and

anticipated low manufacturing cost at higher volumes.

Our Market Opportunities

We target the military, commercial (in which we include the medical and industrial sectors), and consumer markets with many of our products catering to multiple markets. Within each of these market sectors we believe that our OLED microdisplays, when combined with compact optic lenses, can become a key component for a variety of mobile electronic products.

Military

We believe eMagin is the only U.S. manufacturer of OLED microdisplays. We believe that head-mounted systems incorporating our high brightness OLED microdisplays increase the user’s effectiveness by allowing hands-free operation and increased situational awareness with sufficient brightness for use in daylight, yet dimmable for nighttime light security. OLED microdisplays possess

performance characteristics important to demanding military

The directorships currently held, and commercial (e.g., industrial and medical) applications, including high contrast, wide dimming range, shock and vibration resistance, and insensitivity to high G-forces. The design features and performance characteristicsheld during the past five years, by each of our OLED microdisplays reduce the size, weight, and power required by current and future military systems, while also providingdirectors in any company with a wide operating temperature range. The image does not flicker or have color breakup in vibrating environments and the microdisplay’s wide viewing angle allows easeclass of viewing for long periods. Most important, our OLED’s low power consumption reduces battery weight and, for military applications, reduces constraints on mission length duesecurities registered pursuant to battery life. The OLED’s wide operating temperature range is of special interest for military applications because the display can turn on instantly at temperatures far below freezing and can operate at high temperatures such as in desert conditions. We believe that our microdisplay products provide power advantages over other microdisplay technologies, particularly liquid crystal displays which require backlights and heaters and cannot provide instant-on capabilities at low temperatures. Incorporating OLED microdisplays into aviation helmets has been made possible in part by the high brightness, high contrast and other performance featuresSection 12 of the OLED technology that we have developed.Exchange or subject to Section 15 of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, as amended, are set forth in Part III, Item 10(a), "Identification of Directors" of this Annual Report on Form 10- K/A.

Our products’ military applications primarily fall into three broad areas: (1) helmet(f) Involvement in Certain Legal Proceedings

Pursuant to an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Exchange Act Making Findings, and Imposing a Cease-and-Desist Order and Civil Penalty dated September 10, 2014 (the “Order”), the entry to which Mr. Cronson consented, the SEC found that Mr. Cronson had violated Section 16(a) of the Exchange Act and Rule 16a-3 promulgated thereunder by virtue of having failed to timely file a Form 4 reporting transactions in our Company’s securities on numerous occasions during the calendar years 2010 through 2013. The SEC ordered Mr. Cronson to (i) cease and desist from committing or causing any future violations Section 16(a) of the Exchange Act and Rule 16a-3 promulgated thereunder, and (ii) pay a civil money penalty in the amount of $47,250. Other than the foregoing, there are currently no legal proceedings, and during the past 10 years there have been no legal proceedings, that are material to the evaluation of the ability or integrity of any of our directors or director nominees.

-mounted(g) Promoters and handheld displays for situational awareness and data; (2) night vision/thermal imaging goggles, weapons sights, and handheld viewers; and (3) training and simulation devices. These systems are also well suited for demanding operations including; homeland defense, fire and rescue and urban security.Control Persons

 Not applicable.

Situational Awareness. (h) and (i) Audit Committee and Audit Committee Financial Expert

Our OLED microdisplays have been incorporated intoThe Audit Committee is responsible for overseeing management’s implementation of effective internal accounting and financial controls, supervising matters relating to audit functions, reviewing and setting internal policies and procedures regarding audits, accounting and other financial controls, reviewing the results of our audit performed by the independent public accountants, and evaluating and selecting the independent public accountants. The Audit Committee has adopted an Audit Committee Charter, which is posted on our Corporate Governance landing page under the tab labeled “Investors” on our website at http://www.emagin.com. During 2022, members of the Audit Committee were Ellen Richstone (Chair), Stephen M. Seay, and Eric Braddom. The Board of Directors has determined that Ms. Richstone qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The Board of Directors made a broad rangequalitative assessment of U.S.Ms. Richstone’s level of knowledge and foreign military situational awareness programs. Situational awareness products include head-mounted displays that are used to display images,experience based on a number of factors, including digital map, sensor imageryher prior experience as the chief financial officer of public companies, her experience and pilot aviation information. In addition, handheld imagers provide improved situational awarenesseducation in finance and her business experience. Ms. Richstone simultaneously serves on the battlefield, as well as in trainingaudit committees of more than three public companies, and simulation. These products can also be combined with a weapon systemthe Board of Directors has determined that her simultaneous service on the audit committees of other public companies does not impair her ability to giveeffectively serve on the user the capability to select targets without direct exposure.Audit Committee. During 2022, we expect to sell displays under a program with a prime contractor to support the F-35 Lightning II helmet mounted display systems. These custom designed OLED displays are a key componentAudit Committee held eight meetings in providing enhanced contrast and projection of images and symbology display as compared to LCD technology.person or through conference calls.

Night Vision/Thermal Imaging. Night vision goggles allow(j) Procedures for Stockholder Nominations to the user to see in low light conditions. Most versions include two different technologies: infrared/thermal and image intensification. Third and fourth generation military devices generally use some combinationBoard of the two technologies. Thermal imagers detect infrared energy (heat) and convert it into an electronic signal. The resulting signal needs to be presented on a display. Heat sensed by an infrared camera can be very precisely quantified, or measured, allowing the user to not only monitor thermal performance, but also identify and evaluate the relative severity of heat-related problems. Thermal imaging systems can be stand-alone handheld systems or integrated as part of the aiming mechanism for a larger system. Advances in sensor technology, both in sensitivity and resolution as well as economic efficiency, have been the driving factors in the adoption of thermal technologies for military applications. We believe the power efficiency and environmental ruggedness of our products are strong competitive advantages, particularly for smaller handheld non-cooled systems. Fielded products incorporating our OLED microdisplays include Enhanced Night Vision Binocular (ENVG-B), Enhanced Night Vision Goggle II, the Enhanced Night Vision Goggle III, the Javelin CLU medium-range anti-tank missile system, Thermal weapons sights, Laser Targeting Locator Modules, handheld and clip on thermal imagers.Directors

Training and Simulation. Our OLED microdisplays are purchasedNo material changes to the procedures for nominating directors by OEMs for use with their simulation and training products. Our displays have been commercialized and prototyped for situational awareness and night vision/thermal imaging applications by military systems integrators.our stockholders were made during fiscal year 2022.

Commercial

Code of Ethics and Business Conduct

We believehave adopted a Code of Ethics and Business Conduct that a wide varietyapplies to all of commercial markets (in which we include the medicalour directors, officers and industrial sectors) offer significant opportunities foremployees, including our products due to increasing demand for instant data accessibility in mobile workplace environmentsChief Executive Officer and the benefitChief Financial Officer and principal accounting officer. The Code of mobile displays to enhance visual performance. This market includes nightEthics and thermal imaging systems for law enforcement and first responders. Examples of existing and potential microdisplay applications include enhanced visualization for ocular surgery, mobile ultrasound, mobile nondestructive testing, enhanced vision for those with visual impairments, immediate access to inventory records or maintenance and construction manuals, routine quality assurance inspection, and real-time viewing of images and data for a variety of applications. As an example, a user wearing an HMD while operating test equipment, such as an oscilloscope, can view technical data while simultaneously probing printed circuit boards. Current commercial products equipped withBusiness Conduct is posted on our OLED microdisplays in these sectors include those produced by Alcon, AMO Wavefront, IMV (formerly BCF), Liteye, Trijicon, FLIR Systems, and Nordic NeuroLab.website at http://www.emagin.com.

Consumer

We believe a major driver of the longer term near
‎-eye virtual imaging microdisplay market is the growing consumer demand for mobile access to larger volumes of information and entertainment in smaller and more affordable packages. This desire for mobility and immersive content has resulted in the development of mobile video personal viewer products in three general categories:

immersive VR headset-application platforms such as accessories for gaming computers, and wearable telepresence systems;

ITEAR glasses and personal viewers for cell phones; andM 11. EXECUTIVE COMPENSATION

low cost thermal and low light imaging incorporated in scopes for hunting and other outdoor activities.

When we are able to manufacture our OLED displays in higher volumes at reduced costs and capitalize on our dPd technology, we believe that our products will be increasingly well positioned to compete with other microdisplays and cell phone size displays in the rapidly growing consumer market, particularly as demand expands for sophisticated mobile personal viewers offering higher resolution and better image quality for VR and AR applications. Users of VR HMDs are demanding a fully immersive experience. We believe our dPd technology addresses the critical performance parameters for next generation VR HMDs, including higher brightness, sharper resolution, lower power consumption, elimination of motion artifacts, and longer life. Our strategy for addressing the consumer mass market includes developing partnerships with both tier-one consumer companies and high-volume production manufacturing companies.

Potential applications for these personal viewers include handheld personal computers and mobile devices, such as smartphones, whose small, direct view screens limit the amount of information that can be displayed but which are now capable of running more complex software applications. Examples encompass applications where hands-free viewing is desired such as entertainment and gaming video headset systems; nighttime or thermal imaging devices for hunting, camping, and other outdoor activities; and maintenance applications. In addition, in late 2015, we entered into a HMD technology licensing agreement with a tier-one consumer electronics company which includes the use of our 2K × 2K displays in its consumer headsets. In first quarter 2017, we entered into an agreement with an additional tier-one company interested in incorporating our proprietary dPd technology into potential headset products. Also during first quarter 2017, we performed tests for a tier-one consumer electronics company demonstrating our dPd technology as a path for AR and VR. We also entered into agreements with tier-one companies to develop a new display design for Virtual Reality, and scale our dPd technology. During 2018, we designed a silicon backplane for this 4K design which is anticipated to have a 100-degree field of view. In late 2018 we received the first silicon wafers based on our 4K design from a foundry, and began testing and applying OLED materials to the wafers in furtherance, of our development efforts. During 2019, we demonstrated a 4K display at a major industry conference. During 2020, we entered into an agreement with another tier-one consumer company to design a display. During 2021, we demonstrated a new prototype for a widescreen ultra-extended graphics array (WUXGA) (1920x1200 pixels) that uses our dPd technology to achieve 10,000 candela per square meter (cd/m2) of maximum luminance, which we believe is the world’s brightest high-resolution, full-color OLED microdisplays.

Our Products

Our first commercial microdisplay, the super video graphics array, or SVGA+, Active Matrix OLED, was introduced in 2001. In 2008, we introduced engineering samples of our super extended graphics array, or SXGA, 120 OLED microdisplays and began selling significant quantities of the product in 2010. In 2010, we introduced the VGA microdisplay. In late 2011, we began selling pre-production samples of our WUXGA OLED microdisplay which is now qualified and in production. In 2014, we released our Digital SVGA, and in 2015, we released our smaller pixel pitch SXGA096, as well as an upgrade to the SXGA120 and WUXGA displays. Our OLED display products are being designed in products to be manufactured by OEM customers for a wide variety of military, commercial, and consumer applications. We offer our products to OEMs and other buyers as both separate components, integrated bundles coupled with our own optics, or complete systems. We also offer engineering support to enable customers to integrate our products into their own product development programs and design customized displays with resolutions or features to meet specific customer requirements. In 2015, we announced the development of a prototype immersive headset that uses our prototype 2K × 2K display. During 2016, we demonstrated what we believe to be the world’s highest brightness (~4,500 cd/m2) and highest resolution (1920x1200 pixels) microdisplay using our proprietary dPd technology. During 2017, we developed prototype displays of our 2K x 2K display with an advanced backplane design and brightness exceeding 5,000 cd/m2. During 2018, we continued to make improvements in the features and brightness of our displays and achieved over 7,500 nits in our WUXGA displays. We have shipped sample high brightness displays fabricated using our dPd technology to numerous customers. During 2019, we shipped our dPd tool to the vendor for upgrading to enable better performance and yield. Following the upgrade, we received the tool back from the vendor and began fabricating dPd prototypes during the second half of 2020 and have sent samples to customers for evaluation. During 2021, we achieved full color brightness levels of over 10,000 cd/m2 on WUXGA displays which were demonstrated to industry analysts, and exhibited at a tradeshow in customer headsets. After receipt and qualification of an advanced dPd tool which we purchased with the help of government grants, we expect to achieve a brightness level of over 28,000 cd/m2 ready for mass production of full color displays by 2023. During 2021 we completed the manufacturing qualification process for our high-luminance and power-efficient XLE displays and began to ramp production to meet customer demand. Our current XLE displays are qualified at over 1,500 cd/m2. These displays use eMagin’s existing backplane and are compatible with designs used by many customers, thereby providing an upgrade in luminance levels. Several of the display types listed below are currently available in XLE luminance levels.

SVGA+ OLED Microdisplay Series (Super Video Graphics Array of 852x600)

Executive Compensation Objectives

The SVGA+ OLED Microdisplay Seriesobjectives of our compensation program are as follows:

Compensation Setting Process

Role of Compensation Committee. The role of the Compensation Committee is a 0.62 inch diagonal microdisplay that has a resolutionto oversee the Company’s executive compensation strategy, oversee the administration of 852x600 triad pixels (1.53 million picture elements)its executive compensation and its equity-based compensation plans, review and approve the compensation of the Company’s Chief Executive Officer, and other executive officers and managers, and oversee the compensation of the Company’s Board of Directors. The Compensation Committee is comprised exclusively of independent outside directors and includes members with executive-level experience in other companies. In addition, the Compensation Committee compares executive compensation practices of similar companies at similar stages of development.

Role of Compensation Consultant.  The display alsoCompensation Committee has the authority to engage its own advisors to assist in carrying out its responsibilities. The Company engaged the Aon plc in March 2022 to provide guidance on equity compensation for Board members and to perform an internal monochrome video decoderassessment of an equity based-strategic incentive program for low power night vision systems.senior management.

Role of Management. In setting compensation for 2022, our Chief Executive Officer worked closely with the Compensation Committee and attended the meetings of the Compensation Committee. Our Chief Executive Officer made recommendations to the Compensation Committee regarding compensation of our executive officers other than himself. No executive officer participated directly in the final deliberations regarding his own compensation package.

Use of Comparative Market Data. The SVGA+ Rev3 OLEDCompensation Committee approved the 2022 peer group consisting of the following 17 companies. These companies were selected as peers based on their being in a similar industry, primarily manufacturers of electronic components or electronic equipment and instruments, and of a generally similar size, based mainly on revenue.

Elements of Executive Compensation

The compensation level of our executives generally reflects their level of experience and is designed to provide an incentive to positively affect our future operating performance and stockholder value.

Base Salary-XL microdisplay. Base salary is a power efficient OLED display solution for near-eye personal viewer applications which uses less than 115 mW powerthe primary fixed element in monochrome for thermal imaging applications,the Company’s compensation program and lower than 175 mW for full color video.is intended to provide an element of certainty and security to the Company’s executive officers on an ongoing basis. Base salaries are determined based on the executive’s level of experience, specialty and responsibility. Executive base salaries are reviewed on an annual basis by the Compensation Committee. Any increases in base salary are based on an evaluation of the individual’s performance, level of responsibility and, when such information is available, the level of pay compared to the salaries paid to persons in similar positions in the Company’s peer group or as shown in survey data.

Mr. Sculley’s base salary was decreased in 2019 from $418,000 to $352,000 due to the Work Status Reduction (defined below) and has since remained at the same level. Mr. Koch’s base salary was increased from $235,000 to $250,000 upon his appointment as Chief Financial Officer effective July 1, 2021 and has since remained at the same level. Dr. Ghosh’s annual base salary was reduced in 2019 from $355,000 to $284,000 due to the Work Status Reduction. In January 2020, Dr. Ghosh’s annual base salary was increased to $300,000 upon his appointment as Chief Operating Officer and has since remained at the same level. Amounts

reported in the 2022 Summary Compensation Table below reflect actual cash compensation paid and may differ slightly from these rates due to the timing of payroll dates in each period, and the timing of payroll increases.

Digital SVGA OLEDWork Status Reduction-. Effective October 14, 2019, pursuant to a work status reduction adopted by the Company (the “Work Status Reduction”), the work status of both Mr. Sculley and Mr. Ghosh was reduced by twenty percent (20%). The work status of certain vice presidents of the Company has also been reduced pursuant to the Work Status Reduction by either twenty percent (20%) or ten percent (10%). The Company has implemented the Work Status Reduction as a cost savings measure. The Work Status Reduction has no effect on the hourly rate of salary applicable to the named executive officers (or the vice presidents subject to the Work Status Reduction) or the benefits provided for under such executive officers’ (or such vice presidents’) Change in Control Agreements. See “Change in Control Agreements” below for a summary of the material terms of the Change in Control agreements with our named executive officers.

EquityXL (800x600).  Part of the compensation paid to our executives has historically been in the form of equity, which, through the end of calendar year 2020, was exclusively in the form of stock option grants. The stock option exercise price of all stock options granted by the Company is at least equal to the fair market value of our common stock on the date of grant. Therefore, a gain is only recognized if the value of the stock increases, which promotes a long-term alignment between the interests of the Company’s executives and its stockholders. In addition, the time-based vesting features of our stock options contribute to executive retention. During 2021 and 2022, the Board of Directors awarded both time-based and performance-based restricted stock units (“RSUs”) to certain members of management and senior employees. During 2022, the Board granted a retention award to Mr. Koch, which consist of time-based RSUs that cliff-vest on the later of (i) the date that the Company files its Annual Report on Form 10-K for the year ending December 31, 2025 and (ii) the date of the Company’s earnings call in the first quarter of calendar year 2026, subject to his continued service to the Company through such date, and granted a retention award to Mr. Ghosh, which consists of time-based RSUs that cliff vest on December 31, 2025 and performance-based RSUs that vest upon the achievement of certain milestones on or prior to December 31, 2025, subject to his continued service to the Company through the applicable vesting date.

Incentive Bonuses. Our named executive officers may be eligible to receive annual cash incentive awards that are tied to achieving performance metrics established by the Compensation Committee at the beginning of each year, with input from the Chief Executive Officer. Target bonuses for the named executive officers are set as a percentage of base salary. For 2022 the Compensation Committee did not establish an annual cash incentive program due to cash flow considerations and no bonuses were awarded to the named executive officers for 2022.

The Digital SVGAAnti-Hedging Policy

Under our insider trading policy, we prohibit directors and all employees (including executive officers) from trading in derivative or DSVGA OLED-XL isother instruments in order to hedge the economic risks of holding the Company’s stock received as long-term equity incentive awards under our compensation programs. Our policy does not allow any type of hedge strategy that involves creating downside protection, or that will generate an 800 × 600 display with 15 micron pixels andoffsetting gain, in the event of a 0.6 inch diagonal. It has alldecline in the benefitsvalue of our other digital displays,stock including, lower power (100 mW monochromebut not limited to, transactions involving purchasing put or selling call options, collars or forward sales contracts. However, strategies that only increase downside risk and 135 mW color), high (10,000upside gains are permitted. Employees may not hedge movements in Company stock held in our employee’s savings plan, issued stock, stock options, or RSUs they own even if they are fully vested. The purpose of our policy is to 1) contrast,align the interests, including the economic risk of ownership, of directors, employees and also featuresstockholders. In addition, we do not permit our executives to pledge shares of Company stock in which they have a digital composite signal interface, enabling a minimal physical interface for color applications.financial interest.

SXGA096 OLED-XL/XLS/XLE (Super eXtended Graphics Array, 1280 x 1024)

The SXGA096 display features a 9.6-micron color pixel and was designed with the same level of feature integration as the DSVGA microdisplay, as well as a low pin-count, high speed low voltage differential signaling, or LVDS, data interface. The compactness and high information content of the SXGA096 makes it ideal for small form factor applications such as commercial headsets and smart weapon sights. This microdisplay incorporates OLED XLS technology more than doubling the OLED XL brightness. This expands the range of optical solutions that can be used with this display to result in smaller and lighter display modules.

SXGA OLED-XL (Super eXtended Graphics Array, 1280 x 1024)Clawback Policy

Our SXGA OLED microdisplayClawback Policy provides that the Company will seek to recover, under the direction of the Compensation Committee, any cash or equity compensation paid to an executive officer of the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement, through such deductions or clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement. In light of the SEC’s adoption of final clawback rules in October 2022, we intend to update our clawback policy to comply with a 0.77 inch diagonal active area provides 3,932,160 subapplicable listing rules when effective.

-

pixels in an active area. The display’s pixel array comprises triads of vertical sub-pixels stacked side by side to make up each 12 × 12mm color pixel. The SXGA OLED-XL microdisplay offers digital signal processing, requiring less than 200mW under typical operation. The supported video formats are SXGA, 720p, DVGA (through 1280 × 960 pixel doubling), and both frame sequential and field sequential stereovision.Narrative Compensation Disclosure

SXGA-120 (Super eXtended Graphics Array, 1292 x 1200)This section explains how our executive compensation programs are designed and operate with respect to our named executive officers. Our named executive officers in 2022 are:

Our SXGA-120active array microdisplay is comprised of 1292 x 1036 square pixels with a 12-micron pitch and a 69% fill factor. An extra 12 columns and 12 rows (beyond the 1280 x 1024 main array) are provided to enable the active SXGA-120 display to be shifted by steps of 1 or 2 pixels in the X and Y directions for optical alignment purposes. The SXGA-120 is well suited to use in Weapon and Night Vision Systems using an FPGA and a SXGA or 720P camera source. It shares compatibility with the VGA display allowing for a common drive platform. It is also suitable for use in HMD’s requiring a balance between display size and FOV having a large pixel size making wider FOV easier to accomplish.

VGA OLED-XL (Video Graphics Array, 640 x 480)

The VGA OLED-XL microdisplay is our smallest (0.5 inches) and lowest powered (<60 mW monochrome/<100 mW color). The VGA OLED-XL utilizes the same voltage pixel drive architecture and “deep black” technology as the SXGA and WUXGA designs and includes motion artifact reduction technology like the WUXGA. The VGA interface is 30-bit digital RGB.

WUXGA OLED-XL (Widescreen Ultra eXtended Graphics Array, 1920 x 1200)

Our WUXGA OLED-XL microdisplay provides higher resolution than most high definition, or HD, flat screen televisions. Each full pixel is laid out as three 3.2 x 9.6 micron identical sub-pixels, which together form the 9.6-micron square RGB color group. The WUXGA OLED-XL is built upon the voltage pixel drive approach first developed for the SXGA OLED-XL, which provides improved uniformity, ultra-high contrast (measured at greater than 100,000:1) and lower power. The advanced WUXGA design features our proprietary “deep black” architecture that ensures that off-pixels are truly black, automatically optimizes contrast under all conditions, and delivers better pixel to pixel uniformity. The WUXGA OLED-XL includes a low-power LVDS, serial interface and the overall display power requirement is typically less than 350 mW running standard video. Also included is our proprietary motion enhancement technology which smooths video display and virtually eliminates unwanted artifacts. On-board circuitry ensures consistent color and brightness over a wide range of operating temperatures.

2K x 2K Display (2048 x 2048)

The 2Kx2K Reconfigurable Color OLED-XL (2K_CFXL) active array is comprised of 2072 x 2072 square color pixels with a 9.3-micron pitch and a 75% fill factor. An extra 24 columns and 24 rows (beyond the 2048 x 2048 main array) are provided to enable the 2K_CFXL display to be shifted by steps of 1 pixel in the X and Y directions for optical alignment purposes. Each full pixel is laid out as three 3.1 x 9.3 micron identical sub-pixels, which together form the 9.3-micron square RGB color group. Three primary color filter stripes are applied in alignment with the sub-pixels on a white-emissive OLED layer to form the color display. The 2K is intended for near-to-eye applications that demand high brightness, high resolution, high image quality, compact size, and low power such as virtual reality and avionics systems.

Design Reference KitsSummary Compensation Table

The following table sets forth information regarding compensation paid to our named executive officers for the years indicated.

(1)No bonuses were paid to the named executive officers during the fiscal years 2022 or 2021.

(2)The dollar amounts reported represent the grant date fair value of RSUs as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (referred to herein as “FASB ASC Topic 718”), excluding the effect of estimated forfeitures related to service-based vesting. These amounts do not necessarily correspond to the actual value that may be realized by the named executive officers upon settlement. The assumptions made in valuing the RSUs reported in this column are discussed in Note 14 to our financial statements included in our 2022 Annual Report. The value of the performance-based RSUs is based upon the probable achievement of the performance conditions, which is assumed to be the maximum level of achievement.

We provide design reference kits, which include a microdisplay and associated electronics,Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information with respect to help OEMs evaluatethe outstanding equity awards held by our microdisplay products and to assist their efforts to build and test new products incorporating our microdisplays. Additionally, we provide license-free source code for these kits (Firmware and FPGA Verilog) to enable our customer to accelerate their time to market.named executive officers as of December 31, 2022.

Integrated Modules(1)Represents the fair market value of unvested RSUs as of December 31, 2022 based upon the closing market price of our common stock on December 30, 2022, the last trading date of 2022, of $0.85 per share.

(2)Represents time-based RSUs that vest in equal installments over a three-year period following the date of grant.

We provide near(3)-eye virtual imaging modulesRepresents performance-based RSUs that incorporate our OLED-on-silicon microdisplays with our lenses and electronic interfaces for integration into OEM products. We have shipped customized modulesvest over a three-year period following the date of grant subject to several customers, somethe achievement of which have incorporated our products into their own commercial products.certain performance conditions related to achieving annual EBITDA targets.

(4)Represents time-based RSUs that cliff-vest on the later of (i) the date that the Company files its Annual Report on Form 10-K for the year ending December 31, 2025 and (ii) the date of the Company’s earnings call in the first quarter of calendar year 2026. This award is subject to pro-rated accelerated vesting in the event of a termination of employment without “Cause” (as defined in the applicable award agreement).

Prism Optics(5)Represents time-based RSUs that cliff vest on December 31, 2025. This award is subject to pro-rated accelerated vesting in the event of a termination of employment without “Cause,” for “Good Reason” or due to death or “Disability” (each as defined in the applicable award agreement).

(6)Represents performance-based RSUs that vest upon the achievement of certain milestones, on or prior to December 31, 2025. This award is subject to pro-rated accelerated vesting in the event of a termination of employment without “Cause,” for “Good Reason” or due to death or “Disability” (each as defined in the applicable award agreement).

We sell a high quality, large viewing angle prism optics with a wide range for eye positioning which is essential for incorporating our displays in immersive near-eye systems. This is an advanced molded plastic prism lens that permits our AMOLED microdisplays to provide realistic images that can be viewed for extended periods with reduced eye-fatigue.

Drive Boards

Through an agreement with Bild Innovative Technology we offer its line of OLED microdisplay compact driver boards to eMagin customers. Under this arrangement, customers now have the option of purchasing eMagin OLED microdisplays together with compact drive boards, thereby streamlining their prototyping efforts. The initial boards available from eMagin will be for SXGA096, SXGA120, and DSVGA resolutions, with more to be added in the future.

Government Contract Revenues and Government Awards

We derive a portion of our revenue from funding that we receive pursuant to research contracts or subcontracts funded by various agencies of the U.S. government. In addition, we have applied for and received U.S. government awards for the purchase of capital equipment.

In June 2020, we announced a $5.5 million award received under the U.S. Department of Defense Industrial Base Analysis, or IBAS, Program for OLED Supply Chain Assurance. In July 2020, we announced a $33.6 million award the U.S. Department of Defense to sustain and enhance U.S. domestic capability for high resolution, high brightness OLED microdisplays that will include equipment to manufacture our dPd displays. These funds will be used to purchase capital equipment over a 33 month period that will increase capacity, improve yields, and sustain operations at our Hopewell Junction, New York headquarters.

During 2021, we made progress towards our goals of securing new U.S. military programs, broadening our presence in foreign military applications, we continue to participate in discussions with the U.S. government on microdisplay development for future defense aviation/mounted/dismounted programs and to position our displays as a key component of the future Soldier System 2030 technology suite for enhanced soldier performance and accelerated decision-making.

We earn revenue from contracts with the U.S. government, either directly or funded through contractors that require us to conduct the research effort described in the statement of work section of the contract. These contracts may be modified or terminated at the discretion of the government and are subject to authorization, appropriation and allocation of the required funding on an annual basis.

Commercial Contract Funding

We also derive a portion of our revenue from funding we receive from customers in both the military and commercial sectors. During 2021, our efforts towards consumer AR/VR applications continued. We were also awarded several contracts to fund our efforts to improve production yields and OLED device performance in 2020.

Our Strategy

Our strategy is to strengthen our technology leadership position and our expertise in active matrix OLED technology and silicon wafer design, including our dPd technology. We believe we are the only U.S. OLED microdisplay manufacturer and can capitalize on our experience by supplying microdisplays and virtual imaging technology solutions for applications in military, commercial, and consumer markets, globally.   

We plan to continue our participation in U.S. government funded, and commercial contract research and development programs, which allow us to continue to advance our technology. We aim to provide microdisplays and complementary accessories to enable OEM

customers serving a variety of markets, including military, commercial and consumer, to develop and manufacture new and enhanced electronic products. The key elements of our strategy to achieve these objectives include:

Employment Agreements

Continue to be a valued supplier and partner to our military customers. Our OLED expertise has allowed us to provide displays that meet the demanding requirements of our military customers for integration into night vision and thermal systems, aviation helmets, situational awareness and training systems in service of both U.S. Armed Forces and those of our NATO and other foreign military allies. As a U.S. manufacturer of OLED microdisplays, we afford advantages to U.S. prime contractors who are restricted by military procurement regulations from buying from, or manufacturing sensitive components in China and other restricted countries. Capitalizing on this strategy, in 2020, we received U.S. Department of Defense awards to procure capital equipment to enhance our manufacturing capabilities to produce OLED microdisplays used in several key military programs.Employment Agreement with Andrew G. Sculley

On July 1, 2016, the Company and Andrew G. Sculley, Jr. entered into an Amended and Restated Employment Agreement (the “2016 Sculley Employment Agreement”), which provides for an annual base salary of $440,000.

Strengthen our technology leadership. Our advanced backplane designs, intellectual property portfolio coupled with our OLED fabrication techniques and know-how, and dPd technology allow usPursuant to produce displays that offer a competitive edge for our customers who integrate our displays into their end products. As the first to utilize AMOLED microdisplays we have a depth of knowledge and expertise, and have specialized manufacturing equipment in our in-house foundry that we believe will enable us to continue to develop performance improvements. We believe that our participation in U.S. government funded contract research and development programs, combined with our continuous investment in OLED research and development, will enable us to continue our technology leadership position.

Optimize microdisplay manufacturing efficiencies while protecting proprietary processes and partner with large volume manufacturers to bring our technology into high volume production. With the help of equipment to be provided under our U.S. government awards, we intend to reduce our production costs primarily by improving manufacturing yields, eliminate single point of failure equipment, lower fixed costs through reduced cycle time and increased automation. The U.S. government awards will also enable us to procure a dPd tool capable of producing production quantities of these high-brightness, high-resolution displays. We outsource certain portions of microdisplay production, such as chip fabrication, to minimize our costs and time to market. We intend to retain the OLED-related processes in-house, where we have a core competency and manufacturing expertise. We also believe that by keeping these processes under tight control we can better protect our proprietary technology and process know-how. We believe that this strategy will also enhance our ability to continue to optimize and customize processes and devices to meet customer needs. In order to address emerging high volume consumer electronics OLED microdisplay requirements, we are actively seeking manufacturing partners who can help us realize that objective.

Continue to build and maintain strong design capabilities. We employ in-house design capabilities supplemented by outsourced design services. Building and maintaining this capability allows us to reduce engineering costs, accelerate the design process and enhance design accuracy to respond to our customers’ needs as new markets develop. Contracting third party design support to meet demand and for specialized design skills may also remain a part of our overall long-term strategy. Given these capabilities, we continue to look for opportunities to add value to our displays to increase revenue.

Develop OEM and mass production partnerships2016 Sculley Employment Agreement, if Mr. Sculley’s (i) employment is terminated without Cause (as defined in the consumer and commercial HMD market. As the consumer and enterprise AR/VR, market matures, we believe our technology2016 Sculley Employment Agreement), (ii) employment is positioned well to address the requirements of this segment. Developing customer partnersterminated or his position is key to establishing eMagin as the market leader for next generation displays for the consumer HMD market. Our potential channels to this market include partnering for the mass production of microdisplays and licensing our dPd technology. We believe that our dPd technology will enable next generation AR/VR hardware for the consumer and enterprise segments because the high brightness and high pixel per inch,significantly changed or PPI, density afforded by the technology. Should we be successful in executing on mass production partnerships we believe it would allow us to be well positioned to meet the demands of a market predicted to experience significant growth through the 2020s.

Leverage strategic relationships. We have longstanding relationships with the U.S. military and have received technology achievement awards from the U.S. Army Communications – Electronics Research, Development and Engineering Center. We also have relationships with many U.S. and international prime military contractors. These and otherexternal relationships serve an important role in our research and development efforts. Suppliers, equipment vendors, government organizations, contract research groups, external design companies, customer and corporate partners, consortia, and university relationships all enhance the overall research and development effort and help us develop new ideas and solutions. In addition, we participate in industry associations such as the Society for Information Display; SPIE, the International Society for Optics and Photonics; the Army Aviation Association of America; the Association of the United States Army, or AUSA, and the National Defense Industrial Association, among others. We believe that strategic relationships allow us to determine better the demands of the marketplace and,salary decreased as a result allow usof a Change of Control (as defined in the 2016 Sculley Employment Agreement) or (iii) if he terminates his employment for Good Reason (as defined in the 2016 Sculley Employment Agreement), then Mr. Sculley shall, at the Company’s sole discretion, be entitled to focus our researchthe lesser of (i) the total amount of his base salary that remains unpaid under the 2016 Sculley Employment Agreement, which shall be paid monthly, or (ii) monthly salary payments for 12 months, based on Mr. Sculley’s monthly rate of base salary at the date of such termination, provided, however, in lieu of the aforementioned monthly payments, the Company may in its sole discretion pay such payments in a lump-sum. Pursuant to the 2016 Sculley Employment Agreement, payment by the Company of the foregoing severance amounts is contingent upon Mr. Sculley’s executing a release agreement substantially in the form attached as an exhibit to the 2016 Sculley Employment Agreement, and development activities on satisfying our customers’ evolving requirements.such release becoming effective, and only so long as Mr. Sculley does not revoke or breach the provisions of such release or the restrictive covenants set forth in Sections 4 and 5 of the 2016 Sculley Employment Agreement.

Pursuant to the 2016 Sculley Employment Agreement, Mr. Sculley shall, upon a termination described in the preceding paragraph, also be entitled to: (i) payment for accrued and unused vacation; (ii) the immediate vesting of any non-vested equity-related instruments granted pursuant to Section 2.6 of the 2016 Sculley Employment Agreement; and (iii) any bonuses which have accrued but remain unpaid prior to the date of Mr. Sculley’s termination.

The Company also agreed to amend any equity-related instruments granted to Mr. Sculley to permit the full exercise thereof following the termination of his employment without Cause, because of Disability (as defined in the 2016 Sculley Employment Agreement) or death and to amend any equity-related instruments granted to him to permit the immediate full vesting and exercise thereof at any time after termination of Mr. Sculley’s employment without Cause or because of Disability or death, to the same extent as though Mr. Sculley’s employment had not terminated. Mr. Sculley or his personal representative may accept either or both of such offers at any time before such equity-related instruments otherwise expire by giving written notice to the Company.

Expand intoThe term of the 2016 Sculley Employment Agreement expired on December 31, 2018. Mr. Sculley and the Company have agreed that the Company will continue to pay Mr. Sculley pursuant to the terms of the 2016 Sculley Employment Agreement until a new display markets. agreement is executed. In the future, technologies like dPd combinedinterim, the Company and Mr. Sculley have entered into a Change in Control Agreement. See “—Change in Control Agreements” below. Mr. Sculley’s new employment agreement, when entered into, is expected to be substantially the same as the 2016 Sculley Employment Agreement.

Change in Control Agreements

We have entered into change in control agreements (such agreements, as so amended and restated, the “Change in Control Agreements”) with each of Andrew G. Sculley, Amalkumar Ghosh and Mark Koch (each an “Executive”).

The Change in Control Agreements for Mr. Sculley and Mr. Ghosh provide that if, within the 12-month period following a Change in Control of the Company (as defined in the Change in Control Agreements), the Executive suffers a Terminating Event (as defined below), he will be entitled to receive a lump-sum cash payment in an amount equal to the Executive’s annual base salary in effect immediately prior to the Terminating Event (or the Executive’s annual base salary in effect immediately prior to the Change in Control, if higher), payable in a lump sum within 60 days of the termination date, provided that the Executive executes and does not revoke a separation agreement and release in favor of us. In addition, if the Executive was participating in our advanced backplane design capability may opengroup health plan immediately prior to termination and elects COBRA health continuation, then we will pay the doorExecutive a monthly cash payment for 12 months or the Executive’s COBRA health continuation period, whichever ends earlier, in an amount equal to enabling improvements over both traditional displays outside the microdisplay market, including cellmonthly employer contribution that we would have made to provide health insurance to the Executive if he had remained employed by us.

The Change in Control Agreement for Mr. Koch is on identical terms to the agreements for Mr. Sculley and Mr. Ghosh, except the payments for salary continuation are equal to one half of Mr. Koch’s annual salary and the payments for COBRA will be for up to six months.

A “Terminating Event” shall be deemed to have occurred under the Change in Control Agreements if the Executive (i) is terminated by us other than for Cause (as defined in the Change in Control Agreements), death or Disability (as defined in the Change in Control Agreements) or (ii) terminates his employment with the Company for Good Reason (as defined in the Change in Control Agreements).

The Change in Control Agreements for Mr. Sculley and Mr. Ghosh provide that (i) the Work Status Reduction applicable to the Executives as of October 14, 2019 does not qualify as Good Reason (as defined in the Change in Control Agreements); and (ii) the

phonesWork Status Reduction would not reduce the benefits provided for under the Change in Control Agreements. See “—Elements of Executive Compensation — Work Status Reductions” above for a description of the Work Status Reduction.

Each of the agreements terminates upon the earliest of (a) the termination of the Executive’s employment for any reason prior to a Change in Control, (b) the termination of the Executive’s employment with the Company after a Change in Control for any reason other than the occurrence of a Terminating Event or (c) the date which is 12 months after a Change in Control if the Executive is still employed by the Company.

The foregoing description is a summary of the Change in Control Agreements and other larger scale displays,should be read in conjunction with the full text of the form of Change in Control Agreement, which was filed as well as improvingExhibit 10.1 to the feasibility of emerging display technologies like microLED.Company’s Current Report on Form 8-K filed on October 18, 2019, and is incorporated herein by reference.

Sales and Marketing

We primarily provide our OLED display and optics components to OEMs to incorporate into their branded products and sell through their own well-established distribution channels. We have traditionally marketed and sold our products to customers through targeted selling, promotions, and select advertising. We identify companies with end products and applications for which we believe our products will provide a key differentiator. Marketing efforts focus on identifying prospects and communicating the product performance attributes foremost in the minds of purchasing decision-makers. We believe that this approach positions us to achieve the highest possible return on investment for our marketing expense.

We market our products in North America, Asia, and Europe directly from our sales office located at our Hopewell Junction, New York facilities. We also utilize distributors in Asia and Korea.

An OEM design cycle typically requires between 6 and 36 months, depending on the uniqueness of the market, the complexity of the end product or, in the case of military OEM customers, government procurement schedules. Because our microdisplays are the main functional component that defines many of our customers’ end products, we work closely with customers to provide technical assistance throughout the product evaluation and integration process.

Another element of our marketing strategy is discussions with customers and presentations to existing and potential customers at military, industrial and consumer tradeshows. Trade shows we have exhibited at, or plan to exhibit at include; Shot Show, the largest event for the recreational hunting and shooting market, Defense and Commercial Sensing Exposition sponsored by the International Society for Optics and Photonics, Army Aviation Association of America, Special Operations Force Industry Conference, Defense and Security Equipment International, Association of the United States Army, Eurosatory-France, Land, Naval & Internal Homeland Security Systems Exhibition, the Society for Information Display, Solid State Devices and Materials conference, and the International Meeting on Information Display and OLED World Summit. A key element of our marketing is the expansion of our presence in new, high potential markets. We are experiencing heightened interest and requests for quotation from a variety of international companies that are familiar with the performance of our microdisplays.

Customers

We sell our products directly to military contractors and OEM’s who use our displays in a diverse range of applications encompassing the military, and commercial (in which we include the medical and industrial market sectors). We classify revenues as either military, commercial, consumer or multiple based on our knowledge of the customer’s products and markets served by our displays. Revenues classified as multiple are for sales to customers that incorporate our displays in products that could be used for either military or commercial applications. We also perform funded R&D activities for both prime contractors, U.S. government defense related agencies, and non-military customers, which are classified as Contract revenues. Product and Contract revenues are disclosed on the Consolidated Statements of Operations. We maintain relationships with OEMs in a diverse range of industries encompassing the military, commercial, and consumer market sectors.

Director Compensation

The following table estimates revenuessets forth compensation information for our non-employee directors for the year ended December 31, 2022.

(1)Amounts in this column represent the grant date fair value of stock options granted to the non-employee directors during 2022, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures related to service-based vesting. These amounts do not necessarily correspond to the actual value that may be realized by market sectors:the non-employee directors upon exercise. The assumptions made in valuing the options reported in this column are discussed in Note 14 to our financial statements included in our 2022 Annual Report.

The table below sets forth the aggregate number of shares of our common stock underlying unexercised stock options held as of December 31, 2022 by each of the persons who served as a non-employee director during 2022:

Director Fees

Board Retainer. Each non-employee director, except the Chair, received an annual cash retainer of $40,000 for his or her service as a member of the Board of Directors in 2022. The Audit Committee Chair received an additional annual retainer of $10,000 for her service in such role in 2022. Mr. Cronson determined to forgo his cash retainer for the 2022 calendar year.

Meeting Fees. Members of the Board of Directors do not receive any additional fees for meeting attendance.

The following table representsOption Awards. Each non-employee director, except the domesticChair, received an option to purchase 45,000 shares of common stock in 2022. These options vest as to 50% of the shares underlying the option immediately on the date of grant and international revenues as a percentageto the remaining 50% of total net revenues:the shares underlying the option on the one-year anniversary of the date of grant.

Chair of the Board.

The Chair of the Board of Directors received an annual cash retainer of $70,000 and an option to purchase 90,000 shares in 2022. The option granted to the Chair vests as to 50% of the shares underlying the option immediately on the date of grant and as to the remaining 50% of the shares underlying the option on the one-year anniversary of the date of grant.

BacklogBoard Meetings During Fiscal Year 2022

During 2022, the Board of Directors held five meetings. During 2022, each member of our Board of Directors attended at least 75% of the aggregate of all meetings of our Board of Directors and of all meetings of committees of our Board of Directors on which such member served that were held during the period in which such director served. The Board of Directors also approved certain actions by unanimous written consent.

As of December 31, 2021, we had a backlog of approximately $13.8 million, an increase of approximately $2.9 million over the backlog of $10.9 million at December 31, 2020. Backlog is comprised of scheduled delivery dates through 2022 of non-binding customer purchase orders and purchase agreements, but does not include expected revenue from research and development contracts or expected non-recurring engineering programs under development. Backlog also does not include purchase orders for which deliveries are not or have not yet been scheduled. Our backlog may vary depending upon the timing of when orders are received and shipment dates scheduled, although we are generally seeing continuing growth in our year-over-year backlog. Variations in the magnitude and duration of purchase orders and customer delivery requirements may result in substantial fluctuations in backlog from period to period. Many of our purchase orders allow for rescheduling or cancellation by the customer with no or limited penalties.

Manufacturing Facilities

Our manufacturing facilities are located in Hopewell Junction, New York. We currently lease approximately 63,000 square feet of space, which houses our equipment for OLED microdisplay fabrication and research and development, includes a 16,300 square foot class 10 clean room space, additional lower level clean room testing space, assembly space, and administrative offices. At the end of the lease term we have two five-year options to extend the lease.

Facilities services provided by the lessor at our expense include our clean room, pure gases, high purity de-ionized water, compressed air, chilled water systems, and waste disposal support. This infrastructure provided by our lease provides us with many of the resources of a larger corporation without the added overhead costs. It further allows us to focus our resources more efficiently on our product development and manufacturing goals.

We employ a variety of specialized equipment in our manufacturing processes, including anode organic deposition tools, various sealing equipment, dicers, wire bonding equipment, heat testing ovens, and others.

We believe manufacturing efficiency is an important factor for success, across all of our markets. As previously announced, we have been designing, specifying, and ordering advanced OLED manufacturing equipment under our $34.0 million in Defense Production Act Title III funding and $5.0 million IBAS funding grants. We have placed orders for all major pieces of equipment funded by these programs, including an order for an advanced, production-capable dPd organic deposition tool that is expected to improve yield and throughput of this innovative technology by the end of 2023. Overall, the Company remains on track and within requirements of the U.S. Defense Production Act Title III and IBAS funding grants and anticipate improvements in manufacturing yield and reliability over the next 24 months as this equipment is qualified and added to the production line. The new equipment will help us increase capacity and yield for all display types, address critical productions points, and replace certain older equipment, which we expect will aid us in meeting expected demand for our microdisplays.

Competition

Non-employee Director Meetings

The industrynon-employee directors meet in which we operateregularly scheduled executive sessions without management to promote open and honest discussion. The Chair of our Board, currently Dr. Wittels, is highly competitive. We face competition from legacy technologies such as transmissive liquid crystal displays from Kopin Corporation, and liquid crystal on silicon displays as well as from alternative display technologies such as virtual scanning retinal displays. There are many large and small companies that manufacture or have in development products based onthe presiding director at these technologies.meetings.

Committees Established by the Board

We believe we areThe Board of Directors has standing Audit, Compensation, and Governance and Nominating Committees. Information concerning the only company with U.S.-based manufacturing capability for OLED microdisplays. There are other non-U.S. based manufacturersfunction of high-resolution OLED microdisplays that produce microdisplays that compete with our microdisplay products. They are Yunnan OLiGHTEK Opto-Electronic Technology Co., Ltd. in China and MicroOLED in France. Both are shipping OLED microdisplays into the market. Sony Mobile Display Corp., in Japan, produces OLED microdisplays for integration into Sony’s own higher-level systems such as digital cameras and HMDs and is now selling microdisplays to some commercial customers.each Board committee follows.

Audit Committee

In addition, there are several manufacturing facilitiesDuring 2022, the Audit Committee held eight meetings in China to build OLED microdisplays for the consumer AR/VR marketplace that came online. If other new OLED-based companies enter our markets, we will face additional competition.person or through conference calls.

Compensation Committee

In addition, we competeDuring 2022, the members of the Compensation Committee were Paul Cronson (Chair), Eric Braddom and Stephen M. Seay. The responsibilities and duties of the Compensation Committee consist of, but are not limited to: (1) periodically reviewing and approving salaries and incentive compensation of executive officers; (2) reviewing compensation plans, policies and benefit programs for employees, generally; and (3) reviewing the employee equity compensation and benefit plans. While performing its duties, the Compensation Committee receives substantial input from the Chief Executive Officer regarding the appropriate level and type of compensation for our executives, excluding the compensation paid to the Chief Executive Officer. The Compensation Committee has determined that no risks exist arising from the Company’s compensation policies and practices for its employees that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee retained Aon plc to provide certain compensation consulting services in 2022. The Compensation Committee reviewed the independence of the Aon plc in accordance with liquid crystalSEC and NYSE American rules and has determined that their work has not raised any conflicts of interest. The Compensation Committee has adopted a Compensation Committee Charter, which is posted on silicon displays (LCOS)our Corporate Governance landing page under the tab labeled “Investors” on our website at http://www.emagin.com. During 2022, the Compensation Committee held four meetings in person or through conference calls.

Governance and Nominating Committee

During 2022, the following directors served on the Governance and Nominating Committee: Stephen M. Seay (Chair), small transmissive liquid crystal displays (LCD),Paul Cronson and OLED microdisplays manufactured by competitors. While we believe our OLED technologyEllen Richstone and there were four meetings held in person or through conference calls. The Governance and Nominating Committee is technically superior by providing higher quality images, greater environmental ruggedness, reduced electronics costresponsible for considering potential Board members, nominating directors for election to the Board, implementing the Company’s corporate governance policies, and complexity, and improved power efficiency microdisplays, there is no assurance that we will continue to compete effectively. Competition can also come from inorganic micro LEDs, a technology stillfor all other purposes outlined in the development stage butGovernance and Nominating Committee Charter, which could become a major competitor if allis posted on our Corporate Governance landing page under the technological hurdles are overcome.tab labeled “Investors” on our website at http://www.emagin.com.

Our ability to compete successfully will depend on a number of factors, both within and outside our control. These factors to include:


‎our ability to design, manufacture and deliver new products, including those implementing dPd, on a timely basis;

our ability to address the needs of our customers;

Ithe 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 OEM customers incorporate our product solutions into their own products;

the market acceptance of our customers’ products; and

product or technology introductions by our competitors.

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.

Intellectual Property

We have developed an intellectual property portfolio of patents, trade secrets and manufacturing know-how. Our intellectual property includes 45 issued U.S. patents and 13 pending U.S. patent applications. We also have 16 issued foreign patents and 10 pending foreign patent applications. It is important to protect our investment in technology by obtaining and enforcing intellectual property rights, including rights under patent, trademark, trade secret, and copyright laws. We seek to protect inventions we consider significant by applying for patents in the United States and other countries when appropriate. The U.S. government holds data rights to some of our technology as a result of its funding a portion of our research and development.

Our intellectual property covers a wide range of materials, device structures, processes, and fabrication techniques, primarily concentrated in the following areas:

OLED devices, architecture, structures, and processes;

display color processing and sealing;

active matrix circuit methodologies and designs;

lenses and tracking (eye and head);

ergonomics and industrial design;

wearable computer interface methodology;

legacy field emission and general display technologies; and

head-mounted display technology.

We believe that, in addition to patent protection, our success is dependent upon trade secrets, technical expertise, and know-how. To protect this information and know-how from unauthorized use or disclosure, we use nondisclosure agreements and other measures to protect our proprietary rights, and we require all employees and, where appropriate, contractors, consultants, advisors, and collaborators, to enter into confidentiality and non-competition agreements. In addition, we work to continually improve our IT security posture through, among other things; network monitoring, enhancements to firewalls, antivirus and malware prevention software, email spam blockers, and end user security training. We believe that our intellectual property portfolio, coupled with our strategic relationships and accumulated manufacturing know-how in OLED, gives us a significant advantage over potential competitors.

U.S. Government Regulation

We are subject to certain export control laws, including the Export Administration Regulations, or EAR, and the International Traffic in Arms Regulations, or ITAR. Certain of our products may be deemed to be controlled for export by the U.S. Commerce Department’s Bureau of Industry and Security, or BIS, under the EAR or by the U.S. State Department’s Directorate of Defense Trade Controls, or DDTC, under the ITAR. Our ITAR products are custom displays developed for a specific military program or purpose. Failure to comply with these export control laws can lead to severe penalties, both civil and criminal, and can include debarment from contracting with the U.S. government.

Environmental Law Compliance

Our operations are subject to various governmental regulations related to toxic, volatile, experimental, and other hazardous chemicals used in our design and manufacturing process. While we continue to incur costs to comply with environmental regulations, we do not believe that such costs will have a material effect on our capital expenditures, earnings, or competitive position. Although we believe that we are currently in material compliance with all applicable environmental regulations, we cannot be certain that we or our suppliers have not in the past violated applicable laws or regulations, which violations could result in required remediation or other liabilities. We also cannot be certain that past use or disposal of environmentally sensitive materials in conformity with then existing environmental laws and regulations will protect us from required remediation or other liabilities under current or future environmental laws or

regulations. Any failure to comply with environmental regulations could result in the imposition of fines or in the suspension or cessation of our operations.

Employees

As of December 31, 2021, we had a total of 103 employees, of which 101 were full time. None of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good.

Human Capital

Oversight and Management

Our Human Resources organization is tasked with leading our organization in managing employment-related matters, including recruiting and hiring, onboarding and training, compensation planning, talent management and development. We are committed to providing team members with the training and resources necessary to continually strengthen their skills. Our executive team is responsible for periodically reviewing team member programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices. Management periodically reports to the Board and its committee’s human capital measures and results that guide how we attract, retain and develop a workforce to enable our business strategies.

Diversity, Equity and Inclusion

We believe that a diverse workforce is critical to our success, and we continue to monitor and improve the application of our hiring, retention, compensation and advancement processes for women and underrepresented populations across our workforce, including our team members of color, veterans and LGBTQ to enhance our inclusive and diverse culture. We continue to invest in recruiting diverse talent.

We strive to have a diverse culture of employees representing different genders, ages, ethnicities, sexual orientation, gender identity and abilities.

Workplace Safety and Health

A vital part of our business is providing our workforce with a safe, healthy and sustainable working environment. Our Environmental, Health and Safety program focuses on implementing change through employee observation and feedback channels to recognize risk and continuously improve our processes, as well as conducting regular risk reviews and self-audits at our manufacturing facility to explore new opportunities to reduce potential employee exposure to occupational injuries.

Importantly during 2021, our experience and continuing focus on workplace safety have enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19 pandemic. At the onset of the pandemic we established a team to monitor new COVID-19 related developments and support our operations to respond to the ever-changing landscape.

TEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The team consistsfollowing table sets forth the number of our Executive Management team, Human Resources, Manufacturing, IT,shares known to be beneficially owned by all persons who own at least 5% of eMagin’s outstanding common stock, the Company’s directors, the Company’s named executive officers, and Safety,the directors and provides updatesexecutive officers as a group as of April 20, 2023, unless otherwise noted. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the Boardshares indicated. Unless otherwise indicated, the mailing address of Directors. The team’s goals are to:

support safe working environments in our operations;

regularly communicate to inform and update employees; and

provide oversight of training on COVID-19 safety practices.

We took immediate action at the onset of the COVID-19 pandemic to enact rigorous safety protocols in our facilities by improving sanitation measures, implementing mandatory social distancing, temperature screening, use of facing coverings, reducing on-site staff through staggered shifts and schedules, remote working where possible, and restricting visitor access to our locations. These actions, in addition to generally being deemed an essential business, have enabled us to continue operating our business with minimal disruptions during the pandemic.

Available Information

Our website addressstockholders is www.emagin.com. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Proxy Statements and all amendments to such reports filed under the Securities Exchange Act of 1934, as amended, after we electronically file such material with, or furnish such material to the Securities and Exchange Commission, or SEC. These reports may be accessed from our website by following the links under “Investors,” then “SEC Filings.” The information found on our website is not part of this or any other report we file with or furnish to the SEC. We

assume no obligation to update or revise any forward-looking statements in this Annual Report or in other reports filed with the SEC, whether as a result of new information, future events or otherwise, unless we are required to do so by law. A copy of this Annual Report and our other reports is available without charge upon written request to Investor Relations,c/o eMagin Corporation, 700 South Drive, Suite 201, Hopewell Junction, NY 12533.

*        Less than 1% of the outstanding common stock

We also post on our website, https://www.emagin.com/investors/corporate-governance,**      Beneficial ownership is determined in accordance with the chartersrules of our Audit, Compensation, Governance and Nominating committees, our Code of Business Conduct and Ethics and any amendments of or waiver to such code of ethics, and other corporate governance materials recommended by the SEC as they occur, as well as earnings press releases and other business-related press releases.

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ITEM 1A. RISK FACTORScommon stock subject to options, warrants, RSUs, or preferred shares exercisable, vesting, or convertible within 60 days of April 20, 2023 are deemed outstanding for computing the percentage of the person holding such option, warrant, RSU or preferred share.

You should carefully consider the following risk factors and the other information included herein as well as the information included in other reports and filings made with the SEC before investing in our common stock. The following factors, as well as other factors affecting our operating results and financial condition, could cause our actual future results and financial condition to differ materially from those projected. The trading price of our common stock could decline due to any of these risks, should they materialize, and you may lose part or all of your investment.

Risks Related To Our Financial Position

(1)There is substantial doubt about our ability to continue as a going concern. If we are unable to continue as a going concern, our securities will have little or no value.

Our independent registered public accounting firm has issued a report for our financial statements at December 31, 2021 that includes an explanatory paragraph referring to our negative cash flow and recurring losses from operations, which raises substantial doubt about our ability to continue as a going concern without additional capital becoming available. As a result of our historical losses and current financial condition, there is substantial doubt about our ability to continue as a going concern for the twelve months from the issuance date of those financial statements. Our ability to continue as a going concern is dependent upon our uncertain ability to generate sufficient cash flows from operations, obtain equity and/or debt financing and reduce expenditures. Specifically, we have incurred substantial net losses in the past and we may incur further losses in the future. Our net losses were $5.2 million and $11.4 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 we had an accumulated deficit of $257 million. We can give no assurances that our losses will not continue in the future or that we will be profitable in the future. Our prior losses and potential continuing or future losses have had, and will continue to have, an adverse effect on our financial condition. In order for us to achieve profitability, we must, among other things, generate sufficient cash flows and/or obtain the additional financing we need in order to continue as a going concern; generate additional revenue; manufacture our products on a timely basis and at a competitive cost; continue to remediate manufacturing issues that have resulted in production delays; integrate new equipment on our manufacturing line, including equipment provided under government awards, meet our yield improvement initiatives; and successfully reduce expenses. If we are unable to successfully take these and other necessary steps, we may never operate profitably, and, even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future. As of December 31, 2021, the Company had $5.7 million of cash, $2.0 million of outstanding indebtedness and borrowing availability of $2.3 million under its ABL Facility.

Our cash position as of December 31, 2021 reflects the receipt of approximately $0.2 million in net proceeds from sales of our common shares under an at-the-market, or ATM facility entered into in November 2021. Our ongoing operations may require us to raise additional funds, and there are no assurances that such financing will be available on terms acceptable to us, or at all. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we are unable to reduce our expenditures or generate additional funds in the future through sales of our products, financings, government grants, loans or from other sources or transactions, we will exhaust our resources and will be unable to maintain our currently planned operations. If we cannot continue as a going concern, our stockholders would likely lose most or all of their investment in us.

Our financial condition is limited. If we are unable to generate sufficient revenue or secure additional external financing when required we may have to curtail our operations or cease our development plans and operations.

Our ability to continue current operations and to execute on our plans is dependent on our ability to generate sufficient cash flows from operations, raise additional capital or refinance our indebtedness to meet our obligations. Since the maximum amount of the borrowing base under our ABL Facility is based, in part, on our eligible accounts receivables, our borrowing ability could also be negatively impacted by any decrease in our accounts receivables. As of the December 31, 2021 we had $2.0 million in borrowings outstanding, and unused borrowing availability of $2.3 million, under our ABL Facility.

We incurred net losses of $5.2 million and $11.4 million for the years ended December 31, 2021 and 2020, respectively. Net cash used in operating activities for the years ended December 31, 2021 and 2020 was $7.4 million and $4.9 million, respectively. As of December 31, 2021, we had cash and cash equivalents of $5.7 million, net working capital of $11.8 million, accounts payable of $1.3 million and an accumulated deficit of $257 million. If we are unable to generate sufficient revenue or secure additional external financing when required we may have to curtail our operations or cease our development plans and operations.

If we are unable to meet our obligations as they become due over the next twelve months, we may not be able to continue our current operations.

Our ability to continue current operations and to execute on our plans is dependent on our ability to generate sufficient cash flows from operations, maintain our relationships with vendors and customers, secure alternative financing or refinance our indebtedness to meet our obligations. If adequate funds are not available to us on a timely basis, or at all, we may have to reduce current operations and delay capital expenditures in order to conserve cash.

Based on our current operating plan, working capital levels, financial projections, and our ability to borrow under our ABL Facility, we anticipate being able to meet our financial obligations as they become due through the first quarter of 2023. However, there can be no assurance that our plans will be achieved.

If we do not achieve our current financial projections we will be unable to maintain our currently planned operations after the first quarter of 2023, and we may violate one or more of our financial covenants under our ABL Facility. In addition, there can be no assurance that we will be able to renew or extend our ABL Facility when it matures on December 31, 2022. Although relations with the lender are positive and the Company expects the facility to be renewed upon expiration, there is no assurance the lender will renew or extend this facility or continue to make funds available during 2022 and beyond at present availability levels, or at all. We have no additional committed external sources of funds and additional financing may not be available when we need it or on terms that are favorable to us, if at all. In addition, we may seek additional capital, or consider strategic alternatives.

We cannot provide assurance that any actions by us to raise additional funds would be successful or, if such efforts were successful, that we would generate sufficient funds to meet our financial obligations as they become due and allow us to continue current operations or that these actions would be permittedThis figure represents: (i) under the terms of our existing or future debt agreements or (ii) by the holders of a majority of the then outstanding Series B convertible preferred stock, whose approval is required in order for us to take certain actions. If we do not have enough cash to fund our operations to profitability and if we are unable to secure additional capital, we may be required to seek strategic alternatives, including but not limited to a potential business combination, a sale of our company or our business, or a reduction and/or cessation of our operations.

We may require significant additional capital funding and such capital may not be available to us.

In the event that our operating expenses or working capital levels are higher than anticipated, we may be required to implement contingency plans within our control to conserve and/or enhance our liquidity to meet operating needs. Such plans include implementing cost reductions and restricting our operations. Our cash requirements relate primarily to working capital needed to operate and grow our business, including funding operating expenses and increasing production and inventory levels. Our ability to meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and quantity of product orders and shipments, the timing and amount of our operating expenses; the ability to raise additional funding, the timing and costs of working capital needs; the extent to which our products gain market acceptance; the timing and costs of product development and introductions; the extent of our ongoing and any new research and development programs, and any potential changes in our strategy or our planned activities. If we are unable to fund our operations without additional financing and therefore cannot sustain future operations, we may be required to delay, reduce and/or cease our operations.

Alternatives we would consider for additional funding include additional equity or debt financings, or licensing of our technology. In addition to raising capital, we may also consider strategic partnerships and government programs that may be available to us. If we are unable to obtain additional capital, we may not be able to sustain our future operations and may be required to delay, reduce and/or cease our operations. We cannot assure you that any necessary additional financing will be available on terms favorable to us, or at all. Additionally, even if we raise sufficient capital through additional equity or debt financings, strategic alternatives or otherwise, there can be no assurance that the revenue or capital infusion will be sufficient to enable us to develop our business to a level where it will be profitable or generate positive cash flow. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. In addition, there can be no assurances that the majority holder of our Series B convertible preferred stock, will not withhold its consent for any future capital raise we propose. See “The holders of shares of our Series B convertible preferred stock have exercised, and may continue to exercise, significant influence over us.” If we incur additional debt, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. The terms of any debt securities issued could also impose significant restrictions on our operations. Broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds.

Risks Related To Our Business and Industry

Our operating results have significant fluctuations.

In addition to the variability resulting from the short-term nature of commitments from our customers, other factors contribute to significant periodic quarterly fluctuations in results of operations. These factors include, but are not limited to, the following:

demand for our products;

the receipt and timing of orders and the timing of delivery of orders;

the amount of R&D contract or nonrecurring engineering work we may have in a given year;

the inability to adjust expense levels or delays in adjusting expense levels, in either case in response to lower than expected revenues or gross margins;

the volume of orders relative to our manufacturing capacity;

manufacturing delays due to equipment failures;

changes due to quarterly fair value adjustments of our warrant liability;

product introductions and market acceptance of new products or new generations of products;

changes in cost and availability of labor and components;

product mix;

variation in operating expenses; regulatory requirements and changes in duties and tariffs;

pricing and availability of competitive products and services; and

changes, whether or not anticipated, in economic conditions.

The manufacture of active matrix OLED microdisplays encompasses several complex processes resulting in irregular production schedules, including production delays and interruptions, which could adversely affect our operating results.

Our product technology and manufacturing processes are evolving which can result in production challenges and difficulties. We cannot assure you that we will be able to produce our products in sufficient quantity and quality to maintain existing customers and attract new customers. In addition, we cannot assure you that we will not experience manufacturing problems which could result in delays in delivery of orders or product introductions.

Several steps of our production processes are dependent upon certain critical machines and tools which have in the past, and could in the future, result in delivery interruptions and reduced revenues.

We currently have equipment that is critical to our manufacturing operations for which there is no redundancy. 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 in a timely manner. Interruptions in our manufacturing could be caused by equipment problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing, repair, and maintenance of manufacturing equipment can be extensive. We have experienced production interruptions and/or delays in the past, including in 2020 and 2021, and also had delays in getting vendor support personnel due to COVID-19 travel restrictions during 2021. While we are continually making improvements in production processes; no assurance can be given that we will not lose potential sales or be unable to meet production orders due to future production delays or interruptions in our manufacturing line.

We rely on key sole source and limited source suppliers.

We depend on a number of sole source or limited source suppliers for certain raw materials, components, and services. These include silicon wafers, circuit boards, graphic integrated circuits, passive components, materials and chemicals, and equipment support. We maintain several single-source supplier relationships either because alternative sources are not available or because the relationship is advantageous to us due to performance, quality, support, delivery, capacity, or price considerations or a combination thereof. Even where alternative sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could materially and adversely affect our operating results. 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. Our industry relies on a limited number of foundries to produce the silicon wafers and backplanes required by our manufacturing process. Should foundries be unable to provide the required amount of silicon wafers for production, because of either capacity constraints or natural disasters, our ability to manufacture microdisplays would be affected. Our inability to obtain sufficient quantities of components and other 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. Generally, we do not have long-term contracts or written agreements with our source suppliers but instead operate on the basis of short-term purchase orders.

Semiconductor industry supply chain shortages and increased demand may reduce the availability of raw materials we need for production and have led to longer lead times and increased material costs. If we are unable to purchase sufficient quantities of raw materials at acceptable prices, we may be unable to meet demand for our products in a timely manner or within budget.

Currently, the semiconductor industry is experiencing supply chain shortages, which have impacted our semiconductor industry suppliers’ ability to provide us with the raw materials in the amounts we require for production. Shortages in the semiconductor industry, whether due to capacity constraints, ongoing supply chain disruptions, or natural disasters, adversely affect our ability to manufacture microdisplays. Our inability to obtain components and other 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 business, financial condition, and results of operations.

Prolonged inflation and supply chain disruptions could result in lost revenue, higher costs and decreased profit margins.

Recent inflationary pressures have resulted in the increased cost of raw materials we use in the production of our products. Rising prices for not only raw materials, but also semiconductor chips, freight, packaging, labor and energy, increases the costs to manufacture and distribute our products. In addition, we have experienced shortages in certain raw materials and component inputs of our products, some suppliers have been unable to meet delivery schedules due to excess demand and labor shortages, and lead times have lengthened throughout our supply chain. Our efforts to mitigate supply chain weaknesses may not be successful or may have unfavorable effects. For example, efforts to purchase raw materials in advance for product manufacturing may result in increased storage costs or excess supply. If our costs continue to rise due to continuing significant inflationary pressures or supply chain disruptions, we may not be able to fully offset such higher costs through price increases. In addition, delays in obtaining materials from our suppliers could result in lost opportunities to sell our products due to their availability. Increased costs and decreased product availability due to supply chain issues could adversely impact our revenue and/or gross margin, and could thereby harm our business, financial condition, and results of operation.

The COVID-19 pandemic has affected our business and could materially adversely affect our financial condition and results of operations and ability to continue as a going concern.

The COVID-19 pandemic has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners.

The COVID-19 pandemic has impacted our business. We have experienced occasional production disruptions related to the unwillingness or inability of certain of our equipment repair vendors to travel to our facility, the temporary loss of services of employees quarantined due to COVID-19 and delays in the supply of raw materials caused by disruptions due to COVID-19. Any period of interrupted access to our manufacturing facilities or our workforce, or similar limitations for our vendors and suppliers, can impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations, particularly if prolonged. In addition, if we are unable to continue regularly scheduled maintenance of our manufacturing equipment, our manufacturing capabilities may be negatively impacted and we may experience further unscheduled closures and/or production disruptions, which could have a material adverse effect on our financial condition and results of operations.

Due to the measures implemented to contain the COVID-19 outbreak, our suppliers, located both inside and outside of the United States, may have limited supplies of, or may be unable to produce, the components we use to manufacture our products. Any significant disruption in the supply of such components could impair our ability to satisfy customer orders, which could have a material adverse effect on our financial condition and results of operations.

Certain of our customers have experienced, and may continue to experience, disruptions in their operations and supply chains, which can result in delayed, reduced, or canceled orders, or collection risks, and which may adversely affect our results of operations. Any existing or future delays, reductions or cancellation of orders from our customers military, commercial or consumer market customers may adversely affect our results of operations.

COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our activities, which could have an adverse effect on our operations. Due to the increase in employees working from home and accessing our network and systems remotely, we face increased risk of security breaches and other disruptions which could compromise our information technology systems, and expose to liability, theft of sensitive data or damage to our reputation. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and future employee virus or workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions. In addition, our ability to attract, recruit and retain highly skilled and qualified technical and consulting personnel or other employees may be impacted by COVID-19 travel restrictions, and other COVID-19 health concerns related to relocation on the part of potential employees and their families.

The pandemic has significantly increased economic and demand uncertainty. It is possible that the current outbreak and continued spread of COVID-19, and any resurgence related to the Omicron variant, or other vaccine resistant strains, will cause the economic slowdown to continue, and it is possible that it could cause a global recession. Although vaccines are becoming more widely available, there is a significant degree of uncertainty and lack of visibility as to the extent and duration of the COVID-19 pandemic and related slowdowns or economic trends. Although demand for the Company’s products has remained steady, the Company’s inability to obtain components and other materials or services on a timely basis has resulted in manufacturing delays, increased costs, and in reduced or delayed sales. If these trends worsen or result in lost orders it could materially and adversely affect our business, financial condition, and results of operations. Although many jurisdictions are now open with social distancing measures implemented to curtail the spread of COVID-19,

we cannot predict the length of time that it will take for our supply chain to be restored and any meaningful economic recovery to take place. We also cannot predict whether the Omicron variant or other vaccine resistant strains will lead to additional surges in new cases of COVID-19, or the severity of such surges if/when they occur, such that governmental authorities decide to reimpose quarantines, lockdowns or travel restrictions, which could further materially and adversely affect our results and financial condition. It is also not possible to predict with certainty the impact of executive orders providing for mandatory COVID-19 vaccinations will have on our workforce. Our implementation of these requirements may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition, and results of operations.

We have experienced occasional delays in product shipments, which may be exacerbated if there are additional surges of quarantines, lockdowns or travel restrictions are re-imposed or heightened. There is no assurance that our operations will not be further disrupted in the future by additional impacts of the COVID-19 virus or any resurgences, on either our internal operations or those of our suppliers or customers, including the possible impact of travel restrictions on key support personnel for our critical production equipment. A continued economic slowdown could adversely affect our business in 2022. Given the significant economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of the impact on demand for our products. These expectations are subject to change without warning and investors are cautioned not to place undue reliance on them. Unanticipated consequences of the pandemic and resulting economic uncertainty could adversely affect our liquidity and capital resources in the future as well as our ability to continue as a going concern.

Our results of operations, financial condition and business would be harmed if we were unable to balance customer demand and capacity.

As customer demand for our products changes, and as we enter new markets which may require higher volume mass production, we must be able to ramp up or adjust our production capacity to meet demand or enter into relationships with high volume manufacturers. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to expand our manufacturing capacity or enter into relationships with high volume manufacturers, our prospects may be limited, and our business and results of operations could be adversely impacted. If we experience delays or unforeseen costs associated with adjusting our capacity levels, we may not be able to achieve our financial targets. For some of our products, vendor lead times exceed our customers’ required delivery time, causing us to order to forecast rather than order based on actual demand. Ordering raw material, building finished goods, and scheduling contract manufacturer production for our consumer products based on forecasts exposes us to numerous risks, including potential inability to service customer demand within an acceptable timeframe, holding excess inventory or having unabsorbed manufacturing overhead.

Variations in our production yields impact our ability to reduce our costs and could cause our margins to decline and our operating results to suffer.

All of our products are manufactured using technologies and processes that are highly complex. The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following:

variability in our manufacturing process and repeatability;

changes in manufacturing personnel due to turnover or employee absences;

production challenges associated with the introduction of new display types;

contamination of the manufacturing environment or equipment;

equipment failure, power outages, or modification to our manufacturing processes;

lack of consistency and adequate quality and quantity of component parts and other raw materials;

defects in packaging either within or without our control;

any transitions or changes in our production process, planned or unplanned;

certain customer requirements outside of our normal specifications; and

changes in the mix of display types produced from period to period.

Variations in our production yields impact our costs and cause our margins to decline and our operating results to suffer. For example, in the fiscal years 2019, 2020 and 2021 we experienced low production yields and output and an adverse impact on our gross margins and operating results due to equipment failures.

Demand for our products is dependent on economic conditions, changes in government regulation and could be impacted by alternative display technologies.

Historically, approximately 8% of our revenue comes from sales to customers using our displays for commercial applications, including within the industrial and medical sectors. Demand by commercial customers for OLED displays could decline due to overall economic conditions and the development of alternative technologies that might offer the enhanced performance of OLED displays at a lower price. Demand for products incorporating our displays could be also affected if our OEM customers are impacted by changes in governmental, regulation or medical regulation or insurance reimbursements that influence demand for medical devices that use our

products.

Our competitors have many advantages over us.

The industry in which we operate is highly competitive. We face competition from legacy technologies such as transmissive liquid crystal displays from Kopin Corporation and liquid crystal on silicon displays as well as from alternative display technologies such as virtual scanning retinal displays. There are many large and small companies that manufacture or have in development products based on these technologies. In addition, we compete with liquid crystal on silicon displays, small transmissive liquid crystal displays, and OLED microdisplays manufactured by competitors. Competition can also come from inorganic micro LEDs, a technology still in the development stage but which could become a major competitor if the technological hurdles are overcome. Certain of our competitors have operations based in China, where lower manufacturing and production costs may provide them with a competitive advantage. For example, OLiGHTEK and BOE recently funded a joint venture to build a manufacturing facility that came online in 2019, BOE has plans to build additional OLED manufacturing facilities in China and Kopin Corporation has entered into a supply agreement with both BOE and other Chinese manufacturers. We cannot assure you that we will be able to compete successfully against current and any future competition, and the failure to do so would have a materially adverse effect upon our business, operating results and financial condition.

We are subject to cyclical demand.

Our business strategy is dependent on OEM manufacturers’ building and selling products that incorporate our OLED displays as components into those products. Fluctuations in demand could cause significant harm to our business. Our inventory levels may increase if we build products to meet an anticipated demand that does not develop. Alternatively, we may experience production shortages if demand increases sharply and we are unable to meet requirements to produce an increased number of displays.

Our products are subject to lengthy OEM development periods.

We sell most of our microdisplays to OEMs who will incorporate them into 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, often with a duration of between one and three years. 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 also could adversely affect our business and our operating results.

In order to increase or maintain our profit margins we may have to continuously develop new products, product enhancements and new technologies.

In some markets, prices of established products tend to decline over time. In order to increase or maintain our profit margins over the long-term, we believe that we will need to continuously develop new products, 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, that we will have the resources to fund the expenditures necessary to implement certain cost-saving measures, or that our costs can be reduced as quickly as any reduction in unit prices. We may also attempt to offset the anticipated decrease in our average selling price by introducing new products with higher selling prices that may or may not offset price declines in more mature products. If we fail to do so successfully, our results of operations could be materially and adversely affected.

Our business strategy for the consumer market will fail if we cannot continue to form strategic relationships with consumer and other companies that manufacture and use products that could incorporate our active matrix OLED technology.

Our prospects could be significantly affected by our ability to maintain and develop strategic alliances with tier-one consumer companies and high-volume manufacturers and with OEMs for incorporation of our active matrix OLED microdisplay 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 and adverse effect on our business.

Our military and commercial contract revenue is variable and dependent on a small number of customers. The continuation of our consumer contract revenue and our goal of developing a licensing revenue stream using our dPd and other display technology is subject to many risks and uncertainties.

Our military and commercial contract revenue is historically comprised of a small number of customers and can vary significantly from year to year. Specifically, our military and commercial contract revenue has varied from $2.1 million in the year ended December 31,

2019, to $4.4 million in the year ended December 31, 2020, to $1.9 million in the year ended December 31, 2021. Our prospects for commercial contract revenue are dependent on the market and technology for AR/VR systems which is in its early stages. Industry players are evaluating numerous display alternatives including OLED microdisplays, LCOS displays, smartphone screens and other display technologies. Numerous AR/VR devices are presently available in the marketplace and beginning to gain acceptance. Our 2021 commercial contract revenue primarily relates to work with a tier-one consumer customer that is presently in the development and proof of concept stages. In the event that companies with which we are not engaged launch AR/VR devices that gain widespread market acceptance, continued business with us may not serve the strategic interests of our present or future consumer customers. This consumer customer may not be satisfied with the performance of our dPd displays and terminate their development process with us, or choose to use OLED microdisplays produced by a competing company, or alternative display technologies. In the event we were no longer engaged in OLED microdisplay development for consumer companies, if this customer were to terminate its development process with us or if we were to lose other commercial or military contract revenue, our business and operating results could be adversely affected.

The success of our AR/VR efforts is dependent upon widespread acceptance of AR/VR systems and products in the consumer and commercial marketplace.

The market for AR/VR systems and products is developing slower than originally forecast. The success of our efforts in the AR/VR market will depend on the widespread acceptance of AR/VR systems and products in the consumer, enterprise and commercial markets. At present, it is difficult to assess or predict with any assurance the potential size, timing and viability of the consumer and commercial AR/VR market, as well as our ability to partner with a foundry or other mass production partner to produce a sufficient number of displays to address this potential market.

The market segment for AR/VR systems and products may take longer to develop than we anticipate or may not develop, which may impact our ability to grow display and contract revenues.

Although we believe our displays are suitable for AR/VR systems and products that hold great potential for use in various consumer market applications, our success will depend on the acceptance of systems and products by consumers and in particular the widespread adoption of our displays and dPd technology for AR/VR hardware. We are unable to predict when or if customers will choose to incorporate our displays into their AR/VR hardware, or if consumers will accept their systems. In addition, even if consumers accept AR/VR products, manufacturers may choose to manufacture systems using our competitors’ displays, or their own in-house display designs. Our success in commercializing and licensing our dPd displays suitable for AR/VR products is important in our ability to achieve positive cash flow and profitability. If we are unable to commercialize our dPd displays for AR/VR products, we may be unable to increase revenues or achieve profitability or positive cash flow.

We seek to develop widespread market acceptance of our displays for AR/VR systems and products in the consumer market which is extremely competitive and is highly susceptible to fluctuations in demand.

We seek to partner with companies to develop widespread market acceptance of our displays and related AR/VR systems and products in the consumer market. This market is extremely competitive and is highly susceptible to fluctuations in demand. The consumer products market is intensely competitive and price sensitive. Sales of consumer products have historically been dependent upon discretionary spending by consumers. Consumers may defer or alter purchasing decisions based on economic conditions or other factors, and accordingly could cause a reduction in demand for products such as AR/VR systems and products using our displays. Any downturn in global economic conditions may cause a decrease in overall consumer demand and in demand for our products in the near term and possibly longer and prevent our systems and products using our displays from gaining widespread market acceptance.

Amounts included in our backlog may not result in actual revenue or translate into profits. Our backlog is subject to rescheduling and/or cancellation and is, therefore an uncertain indicator of future operating results.

As of December 31, 2021, we had a backlog of approximately $13.8 million, an increase of approximately $2.9 million over the backlog of $10.9 million at December 31, 2020. Backlog is comprised of scheduled delivery dates through 2022 of non-binding customer purchase orders and purchase agreements. Our backlog may vary depending upon the timing of when orders are received and shipment dates scheduled. Variations in the magnitude and duration of purchase orders and customer delivery requirements may result in substantial fluctuations in backlog from period to period. Many of our purchase orders allow for rescheduling or cancellation by the customer with no or limited penalties. We have experienced postponements, cancellations and reductions in expected purchase orders due to changes in our customers’ spending plans, market volatility, regulatory delays and/or other factors, including the impact of the COVID-19 pandemic and our inability to meet customer demand due to unexpected down time of our manufacturing equipment. There can be no assurance as to our customers’ requirements, our ability to meet customer demands, or that actual purchases will be consistent with our stated backlog. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings. If any significant portion of our backlog fails to materialize, our results of operations, cash flows and liquidity would be materially and adversely affected.

Risks Related To Our Common Stock

The market price of our common stock may be volatile.

The market price of our common stock has been subject to wide fluctuations. During our four most recently completed fiscal quarters, the closing price of our stock ranged from a low of $1.17 to a high of $4.84. The market price of our common stock in the future is likely to continue to be subject to wide fluctuations in response to various factors, including, but not limited to, the following:

variations in our operating results and financial conditions;

sales by our existing shareholders;

changes in financial estimates or investment recommendations by securities analysts following our business;

actual or anticipated announcements of technical innovations, commercial partnerships, new product developments, or design wins by us or our competitors;

general conditions in the semiconductor and display industries; and

worldwide economic and financial conditions.

In addition, the public stock markets have experienced extreme price and volume fluctuations that have particularly affected the market price for many technology companies and that have often been unrelated to the operating performance of these companies. The broad market fluctuations and other factors may continue to adversely affect the market price of our common stock.

Provisions in certain of our commercial agreements and our military business may prevent or delay an acquisition of partnership with, or investment in us, and our ability to develop OEM and mass production partnerships, which could decrease the market value of our common stock.

Provisions in certain of our commercial agreements may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable. In addition, as a contractor and subcontractor to the U.S. federal government, we are subject to and must comply with various government regulations that impact our operating costs, profit margins and the internal organization and operation of our business. As a result, these provisions and business may prevent or delay an acquisition of, partnership with, or investment in, our Company and our ability to develop OEM and mass production partnerships and could limit the price that strategic investors may be willing to pay in the future for shares of our common stock. They could also deter potential partners or acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Failure to meet the maintenance criteria of the NYSE American may result in the delisting of our common stock, which could result in lower trading volumes and liquidity, lower prices of our common shares and make it more difficult for us to raise capital.

Our common stock is listed on the NYSE American, and we are subject to its continued listing requirements, including maintaining certain share prices and a minimum amount of shareholder’s equity. If we are unable to comply with the NYSE American continued listing requirements, including its trading price requirements, our common stock may be suspended from trading on and/or delisted from the NYSE American. Although we have not been notified of any delisting proceedings, there is no assurance that we will not receive such notice in the future or that we will be able to then comply with NYSE American listing standards. The delisting of our common stock from the NYSE American may materially impair our stockholders' ability to buy and sell our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

Future issuances of our common stock could lower our stock price and dilute the interests of existing stockholders.

We may issue additional shares of our common stock in the future, including shares of our common stock in connection with acquisitions, strategic partnerships or joint ventures that we believe will allow us to complement our growth strategy, increase market share in our current markets and expand into adjacent markets, broaden our technology and intellectual property, and strengthen our relationships with distributors and OEMs. Any future issuances of shares of our common stock, including in connection with any future acquisition, partnership or joint venture, may result in the dilution of existing stockholders to the extent we are required to issue equity securities.

The issuance of a substantial amount of common stock could have the effect of substantially diluting the interests of our current stockholders. In addition, the sale of a substantial amount of common stock in the public market, either in the initial issuance or in a subsequent resale by investors who acquired such common stock in a private placement, could have a material adverse effect on the market price of our common stock.

In addition, we notified the holders of our Series B convertible preferred stock that the $0.75 conversion price was reduced to $0.3022 due to sales of our common stock in December 2019, as required by a dilution provision in the related Series B preferred stock agreements. As a result, the number of2,762,284 shares of common stock issuable upon the conversion of the Series B preferred stock was increased from 7.5 million to 18.3 million shares. If the holders of the Series B convertible preferred stock sell any or all of the common

stock issuable upon conversion of the Series B convertible preferred stock, this could have a material adverse effect on the market price of our common stock.

We do not intend to pay cash dividends. We last paid a dividend on our capital stock in 2012 and we do not anticipate paying any dividends in the foreseeable future. Consequently, any gains from an investment in our securities will likely depend on whether the price of our common stock increases.

We have not paid dividends on any of our capital stock since 2012. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, our ABL Facility prohibits us from paying cash dividends on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience a gain from your investment in our securities if the price of our common stock increases.

If industry or financial analysts do not publish research or reports about our business, or if they issue inaccurate or unfavorable research regarding our common stock, our share price and trading volume could decline.

Due to our continued losses and lack of consistent revenue growth, there may be little or no incentive for securities analysts of brokerage and other financial firms to provide investment coverage of us or to recommend the purchase of our common stock. Any reports that industry or financial analysts publish about us or our business may influence the trading market for our common stock. We do not control these analysts, whether they provide investment coverage of us, or the content and opinions included in any of their reports. If any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding our company, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our common stock or publish unfavorable research about us. If, after initiating coverage of us and our common stock, one or more analysts were to cease coverage of our company or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline.

A provision in our certificate of incorporation and by-laws may prevent or delay an acquisition of our company, which could decrease the market value of our common stock.

Provisions of Delaware law, our certificate of incorporation and our by-laws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable. These provisions may also prevent or delay attempts by stockholders to replace or remove our current management or members of our Board of Directors. These provisions include:

limitations on the removal of directors;

advance notice requirements for stockholder proposals and nominations;

the inability of stockholders to act by written consent or to call special meetings;

the ability of our Board of Directors to make, alter or repeal our by-laws; and

the authority of our Board of Directors to issue preferred stockplaced with such terms as our Board of Directors may determine.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which limits business combination transactions with stockholders of 15% or more of our outstanding voting stock that our Board of Directors has not approved. These provisions and other similar provisions make it more difficult for stockholders or potential acquirers to acquire us without negotiation. These provisions may apply even if some stockholders may consider the transaction beneficial to them. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions might also discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a premium over the then current market price for our common stock.

The holders of shares of our Series B convertible preferred stock have and may continue to exercise significant influence over us.

Under the terms of the certificate of designations governing our Series B convertible preferred stock, the Series B convertible preferred stock generally ranks, with respect to liquidation and dividends, senior to our other securities and, so long as any shares of Series B convertible preferred stock remain outstanding, the approval of the holders of a majority of the Series B convertible preferred stock outstanding at the time of approval is required in order for us to, among other things, (i) amend, alter or repeal our certificate of incorporation if such amendment, alteration or repeal adversely affects the powers, preferences or special rights of the Series B convertible preferred stock; (ii) create any series or class of stock ranking senior as to liquidation rights or dividends with the Series B convertible preferred stock (other than series A senior secured convertible preferred stock, or series A convertible preferred stock); (iii) redeem, or pay dividends on, any class or series of our capital stock (other than the series A convertible preferred stock); or (iv) so long as there are holders of at least 577 outstanding shares of Series B convertible preferred stock, issue any shares of Series B convertible preferred stock. The terms of the certificate of designations also provide that so long as any shares of Series B convertible preferred

stock are outstanding, we may not offer, sell or issue, or enter into any agreement, arrangement or understanding to offer, sell or issue, any common stock or common stock equivalent (other than offerings that are underwritten on a firm commitment basis and registered with the SEC under the Securities Act) without the approval of holders of a majority of the Series B convertible preferred stock outstanding. These and other rights granted to holders of the Series B convertible preferred stock enable the holders thereof to exert substantial control over our affairs and potentially exercise their control in a manner adverse to the interest of our other stockholders.

The majority holder of our Series B convertible stock, has prevented, and may in the future prevent, us from entering into significant corporate transactions that our management and Board have otherwise approved, including certain capital raising transactions.

The consent requirements set forth in the certificate of designations has impaired, and may in the future impair, our ability to enter into significant corporate transactions, including certain capital raising transactions. For example, the securities purchase agreement pursuant to which we sold the Series B convertible preferred stock provides that so long as there are holders of at least 577 outstanding shares of Series B convertible preferred stock and until such date that (i) all shares of our Series B convertible stock become eligible for resale under Rule 144 without volume restrictions or (ii) a registration statement registering the sale of such shares become effective, unless we obtain the prior written consent of the majority holders, we may not issue or sell any securities in a capital raising transaction, unless such securities are not and will not be registered under the Securities Act until on or after the effective date of a registration statement registering the sale of the Series B convertible stock. The majority holder of our Series B convertible preferred stock, has previously withheld consent to certain capital raises that were proposed by our management and approved by our Board, most recently in September 2021. As a result, we were unable to proceed with the proposed offerings and raise capital at the times, at the prices, and in the amounts, that our management and our Board deemed most beneficial to the Company. There can be no assurances that the majority holder of our Series B convertible preferred stock, will not withhold its consent for any future capital raise we propose. The consent requirements set forth in the certificate of designations may also delay or prevent any acquisition of our company on terms that our other stockholders may desire and may adversely affect the market price of our common stock.

Concentration of ownership of our stock may enable one stockholder or a small number of stockholders to significantly influence matters requiring stockholder approval.

As of March 1, 2022, Stillwater Holdings LLC (f/k/a Stillwater LLC) beneficially owned or controlled shares representing approximately 15% of our outstanding voting stock including ownership in Series B preferred shares that vote on an if converted basis. Flat Creek Fiduciary Management LLC as trustee for,of a trust for the benefit of minor beneficiaries of the sole member of Stillwater Holdings LLC, in which the sole member of Stillwater Holdings LLC has investment control,control; and 100 shares of common stock owned approximately 3% of our outstanding voting stock,by Flat Creek Fiduciary Management LLC, as trustee for a trust for the benefit of the sole member of Stillwater Holdings LLC and the descendants of such member of which owned approximately 3%the sole member of our outstanding voting stock. Together such stockholders owned approximately 21% of our outstanding voting stock. As a result, these stockholders, if they act together, may be able to exert a significant degree of influence over matters requiring stockholder approval, includingStillwater Holdings LLC is the election of directors and approval of significant corporate transactions. Further, if these stockholders act together with another stockholder, Ginola Limited, which has common directors with Mount Union Corp. and Chelsea Trust Company, as of March 1, 2022, they would collectively own or controlinvestment manager; (ii) 15,671,741 shares representing approximately 24% of our outstanding voting stock. This concentration of ownership may facilitate or hinder a change of control and might affect the market price of our common stock. Furthermore, the interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders. Since January 2022, the holders of the Series B preferred shares have not sold shares of our outstanding common stock. Future sales of common stock underlying Series B Convertible Preferred Stock. Mortimer D. A. Sackler exercises sole voting power with respect to the shares held in the name of Stillwater Holdings LLC as sole member, Mortimer D. A. Sackler exercises sole voting power with respect to the shares held in the name of Stillwater Trust LLC as sole member and president and Mortimer D.A. Sackler has investment control with respect to the shares held in the name of Flat Creek Fiduciary Management LLC, as trustee; therefore Stillwater Holdings LLC is deemed to beneficially own the shares held by the holdersFlat Creek Fiduciary Management LLC. The mailing address of Stillwater Holdings LLC is c/o Frank S. Vellucci, Esq, Norton Rose Fulbright US LLP, 1301 Avenue of the Series B preferred shares or any other large shareholder may negatively impact the price or our common stock.Americas, New York, NY 10019-6022.

We are subject(2)This figure represents 199,305 shares of common stock owned by Paul Cronson, 490,046 shares of common stock underlying options, and 397,088 shares of common stock underlying Series B Convertible Preferred Stock held directly and indirectly by Paul Cronson. This includes (i) 13,294 shares of common stock held indirectly by a family member of Paul Cronson; and (ii) 186,011 shares of common stock and 397,088 shares of common stock underlying Series B Convertible Preferred Stock held indirectly by Navacorp III, LLC. Mr. Cronson exercises sole voting power with respect to significant corporate regulation as a public company and failure to comply with all applicable regulations could subject us to liability or negatively affect our stock price.the shares held in the name of Navacorp III, LLC.

As a publicly traded company, we(3)This figure represents 42,843 shares of common stock owned by Jill Wittels, and 970,469 shares underlying options.

(4)This figure represents 48,519 shares of common stock owned by Stephen Seay, and 490,046 shares underlying options.

(5)This figure represents 44,490 shares owned by Ellen Richstone, and 490,046 shares underlying options.

(6)This figure represents 312,306 shares of common stock owned by Andrew G. Sculley, and 150,000 shares underlying options.

(7)This figure represents 31,578 shares of common stock owned by Eric Braddom and 255,232 shares underlying options.

(8)This figure represents 43,371 shares of common stock owned by Amalkumar Ghosh, and 50,000 shares underlying options.

(9)This figure represents 41,666 shares of common stock owned by Mark Koch and 25,000 shares underlying options.

(10)Includes one other executive officers.

There are subjectno arrangements known to a significant bodythe Company, including any pledge by any person of regulation, including the Sarbanes Oxley Act of 2002. While we have developed and instituted a corporate compliance program based on what we believe are the current best practices in corporate governance, internal and disclosure controls and continue to update this program in response to newly implemented or changing regulatory requirements, we cannot provide assurance that we are or will be in compliance with all applicable regulations. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, fines or other sanctions or litigation. As partsecurities of the reviewCompany, the operation of our compliance program, we continually review and analyze our internalwhich may at a subsequent date result in a change in control over financial reporting for Sarbanes-Oxley Section 404 compliance. As part of that process we have and in the future may discover material weaknesses or significant deficiencies in our internal control as defined under standards adopted by the Public Company Accounting Oversight Board that require remediation. For example, in connection with our 2020 year end audit, we identified a significant deficiency in our internal controls over financial reporting related to our failure to reflect an increase in potentially dilutive common stock equivalents that could be issued as a result of sales of our common stock under our at-the -market sales agreement priced below our Series B preferred stock conversion rate. This correction had no impact on any financial statement amounts or earnings per share. Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect our ability to remain listed with NYSE American. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities.Company.

‎

Risks Related To Our IndebtednessEquity Compensation Plan Information

The following table summarizes the equity compensation plans under which our securities may be issued as of December 31, 2022.

Our ABL Facility contains various covenants limiting

(1)Represents 145,024 shares of common stock issuable upon the discretionexercise of outstanding options under our 2008 Stock Incentive Plan (the “2008 Plan”), 203,000 shares of common stock issuable upon the exercise of outstanding options under our 2011 Stock Incentive Plan (the “2011 Plan”), 588,765 shares of common stock issuable upon the exercise of outstanding options under our 2013 Stock Incentive Plan (the “2013 Plan”), 1,893,093 shares of common stock issuable upon the exercise of outstanding options under our 2017 Stock Option and Incentive Plan (the “2017 Plan”), 630,000 shares of common stock issuable upon the exercise of outstanding options under our 2019 Non-Employee Director Stock Option and Incentive Plan (the “2019 Director Plan”), and 1,859,237 shares of common stock subject to RSUs under our 2019 Employee and Consultant Stock Option and Incentive Plan (the “2019 Employee Plan”).

(2)The weighted-average exercise price is calculated based solely on the exercise price of the outstanding options to purchase shares of our management in operatingcommon stock. It does not reflect the shares of our business,common stock that will be issued upon the vesting of outstanding RSUs, which could prevent us from capitalizing on business opportunitieshave no exercise price.

(3)As of December 31, 2022, there were 2,967,099 shares available for grant under the 2019 Employee Plan and taking some corporate actions.1,370,000 shares available for grant under the 2019 Director Plan. No additional equity awards may be granted under the 2008 Plan, the 2011 Plan, the 2013 Plan or the 2017 Plan.

Our ABL Facility imposes operating and financial restrictions on us. These restrictions limit or restrict, among other things, our ability to:ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

incur additional indebtedness;At the beginning of each calendar year, each member of our Board of Directors and each executive officer is required to complete an extensive questionnaire that we utilize when preparing our annual proxy statement, as well as our Annual Report on Form 10-K and other SEC filings. The purpose of the questionnaire is to obtain information from directors and executive officers to verify disclosures about them that are required to be made in these documents. Regarding related person transactions, the questionnaire serves two purposes: first, to remind each executive officer and director of their obligation to disclose any related person transactions in which they have or will have a direct or indirect material interest (or a transaction in which their family members or entities in which they hold an interest have a material interest) and in which we participate that in the aggregate exceed $120,000 (“related person transaction”) that might arise in the upcoming year; and second, to ensure disclosure of any related person transaction that is currently proposed or that occurred since the beginning of the preceding year. When completing the questionnaire, each director and executive officer is required to report any such transaction, as well as any payments (including any non-cash payment) by anyone other than the Company or its subsidiaries for services performed for the Company or its subsidiaries. If a reported or proposed related person transaction is identified, the Audit Committee will review the relevant facts and circumstances, including whether the transaction is on terms comparable to those that could be obtained in arm's length dealings with an unrelated third party and the extent of the related person's interest in the transaction, take into account our Code of Business Conduct, and either approve, ratify or disapprove the related person transaction. The Audit Committee will also review the material terms of any agreements or arrangements between a director and any third party relating to compensation for services performed for the Company or its subsidiaries and direct that such arrangements be disclosed in the Company's annual proxy materials or other public reports as appropriate.

make restricted payments (including paying dividends on, redeeming, repurchasingAt no time during 2022 or retiring our capital stock);

make investments;

create liens;

sell assets;

engage2021, has any executive officer, director or any member of these individuals’ immediate families, any corporation or organization with whom any of these individuals is an affiliate or any trust or estate in transactions with affiliates;which any of these individuals serves as a trustee or in a similar capacity or has a substantial beneficial interest, been indebted to the Company or been involved in any transaction in which the amount exceeded $120,000 and

consolidate, merge such person had a direct or sell all or substantially all of our assets.indirect material interest.

In addition, the ABL Facility also requires us to maintain compliance with certain financial covenants. Our ability to comply with these covenants may be affected by events beyond our control, including those described in this “Risk Factors” section. Any breach of any of the covenants contained in the ABL Facility could result in an event of default under one or more of the documents governing such obligations which would allow the lenders under the ABL Facility to prevent us from borrowing under the ABL Facility and/or declare all borrowings outstanding to be due and payable. Although relations with the lender under our ABL Facility are positive, there can be no assurance that the lender will grant a future covenant waiver or continue to lend to us at present availability levels, or at all. In the event of an acceleration of payment obligations under the ABL Facility, we may be unable to pay our outstanding indebtedness with our cash and cash equivalents then on hand. We could be required to seek alternative sources of funding, which may not be available on commercially reasonable terms, or terms as favorable as our current agreement or at all. If we are unable to provide alternative means of financing our operations, we may be required to reduce our operations or take other actions that are inconsistent with our current business practices or strategy.

Repayment of any outstanding indebtedness under our ABL Facility is dependent, and repayment of any future indebtedness we may incur, will be dependent upon our ability to generate cash from operations.

Our ability to make payments on our ABL Facility and to fund planned capital expenditures depends, and our ability to make payments on any additional future debt we may incur will depend, upon our ability to generate cash from our future operations. This, to a certain extent, is subject to financial, competitive, legislative, regulatory, and other factors that are beyond our control. In addition, if we cannot service the indebtedness under our ABL Facility, or any future indebtedness we may incur, we may have to take actions such as selling assets, raising additional capital or reducing or delaying capital expenditures, any of which could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or negatively affect our financial condition and results of operations.

Our ABL Facility matures on December 31, 2022 and there can be no assurance that we will be able to extend or renew the facility.

Our ABL Facility expires on December 31, 2022. While relations with the lender are positive, there is no assurance the lender will renew or extend this facility, or continue to make funds available during 2022 and beyond at present availability levels, or at all. We may not be able to refinance our indebtedness under our ABL Facility, or any future indebtedness we may incur, or take such other actions, if necessary, on commercially reasonable terms, or at all. Our ability to meet our obligations as they become due is dependent, in part, on our ability to borrow under our ABL Facility. If the ABL Facility is not renewed or extended it may impair our ability to continue current operations and to execute on our plans.

Our debt is variable rate debt, and increases in interest rates could adversely affect us by causing us to incur higher interest costs with respect to such variable rate debt.Director Independence

The ABL Facility subjects usCompany has separated the positions of Chair of the Board of Directors and Chief Executive Officer. Given the demanding nature of these positions, the Board of Directors believes it is appropriate to interest rate risk. The rateseparate the positions of Chair and Chief Executive Officer. Our Chair presides over all meetings of the Board of Directors, including executive sessions of the independent directors, which are held at which we pay interesteach Board meeting. She briefs the Chief Executive Officer on amounts borrowed under such facility fluctuatesissues arising in executive sessions and communicates frequently with changes in interest rates. Accordingly,him on matters of importance. She has responsibility for shaping the Board of Directors’ agenda and consults with respectall directors to any amounts fromensure that the Board agendas and Board materials provide the Board of Directors with the information needed to fulfill its responsibilities. From time to time outstanding undershe may also represent the ABL Facility, we are and will be exposed to changesCompany in interest rates. If we are unable to adequately manageinteractions with external stakeholders at the discretion of the Board.

The Board of Directors has determined that each of our debt structure in response to changescurrent directors, except for Mr. Sculley, is an “independent director” as that term is defined in the market, our interest expense could increase, which would negatively affect our financial condition and resultslisting standards of operations. There were $2.0 million net outstanding borrowings under the ABL Facility asNYSE American, LLC. The Board of December 31, 2021.

Directors has also determined that each

Risks Related To Our Intellectual Propertymember of the Audit Committee, Compensation Committee and Governance and Nominating Committee meets the independence standards applicable to those committees prescribed by the NYSE American, LLC and the SEC. In making this decision, the Board of Directors considered all relationships between the Company and the directors. The Board of Directors determined each such relationship, and the aggregate of such relationships, to be immaterial to the applicable director’s ability to exercise independent judgment.

We may not be successfulOur Board of Directors has overall responsibility for risk oversight. The oversight is conducted primarily through committees of the Board of Directors, as disclosed in protecting our intellectual propertyeach of the descriptions of each of the committees above and proprietary rights.in the charters of each of the committees, but the full Board of Directors has retained responsibility for general oversight of risks.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

We relywere billed by RSM US LLP (Stamford, Connecticut, PCAOB ID: 49) (“RSM”), in fiscal 2022 and 2021, as follows:

Audit Fees

RSM served as eMagin’s independent auditors for the years ended December 31, 2022 and 2021. For the years ended December 31, 2022 and 2021, the fees for audit services associated with the annual audit and review of the Company’s quarterly reports on a combinationForm 10-Q totaled approximately $305,000 and $229,000, respectively.

Audit Related Fees

For the years ended December 31, 2022 and 2021, fees related to audit services related to the Company’s statutory and regulatory filings totaled approximately $17,500 and $29,000, respectively, from RSM.

Tax Fees

No fees were billed for the years ended December 31, 2022 and 2021 for professional services rendered by RSM for tax compliance, tax advice, and tax planning.

All Other Fees

All other fees billed by RSM for the year ended December 31, 2022 and 2021 were approximately $16,125 and $11,521, respectively and were primarily related to out of patents, trade secret protection, licensing agreementspocket costs incurred during provision of audit services to the Company.

Pre-Approval Policies and other arrangements to establishProcedures

The Audit Committee pre-approves all audit 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; and protection of our intellectual property rights may be limited in certain foreign countries. Any future infringement or other claims or prosecutions we may bring against third parties based on our intellectual property could have a material adverse effect on our business. Any such claims could be time consuming to assert, result in costly litigation, divert management’s attention and resources, or result in our entering into royalty or licensing agreements. Protection of intellectual property has historically been a large yearly expense for us. For a period prior to 2008, we were not 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 researchnon-audit services performed by the Company’s independent auditor and the protectingfees to be paid in connection with such services in order to assure that the provision of such services does not impair the resulting intellectual property. Someauditor’s independence.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of our commercial agreements may limit our ability to enforce certain of our intellectual property rights against certain parties.this Annual Report on Form 10-K/A:

In addition to patent protection, we also rely on trade secrets and other non1.-patented proprietary information relating to our product development and manufacturing activities. We try to protect this information through appropriate efforts to maintain its secrecy, including requiring employees and third parties to sign confidentiality agreements. We cannot be sure that these efforts will be successful or that the confidentiality agreements will not be breached. We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our trade secrets or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others.Financial Statement Schedules: None.

2.

We might incur intellectual property and technology riskExhibits: The following exhibits are filed herewith or are incorporated by conducting business in certain foreign jurisdictions.

Conducting business in certain foreign jurisdictions might increase our risk of direct or indirect theft or compromise of our intellectual property. We rely on a combination of patents, trade secret protection, licensing agreements, and other arrangementsreference to establish and protect our proprietary technologies. We cannot be sure that these efforts will be successful nor can we be sure that we have appropriate remedies for any breach.

Changes toexhibits previously filed with the patent lawCommission, as indicated in the United States could diminish the valuedescription of patents in general, thereby impairing our ability to protect our products.

Obtaining and enforcing our patents involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Patent reform legislation in the United States, including the Leahy-Smith America Invents Act, or the America Invents Act, could increase those uncertainties and costs. The America Invents Act was signed into law on September 16, 2011, and many of the substantive changes became effective on March 16, 2013. The America Invents Act reforms United States patent law in part by changing the U.S. patent system from a “first to invent” system to a “first inventor to file” system, expanding the definition of prior art, and developing a post-grant review system. This legislation changes United States patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 16, 2013.

Further, the America Invents Act created new procedures to challenge the validity of issued patents in the United States, including post-grant review and inter partes review proceedings, which some third parties have been using to cause the cancellation of selected or all claims of issued patents. For a patent with an effective filing date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in a nine-month window from issuance of the patent. A petition for inter partes review can be filed immediately following the issuance of a patent if the patent has an effective filing date prior to March 16, 2013. A petition for inter partes review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with an effective filing date of March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of invalidity, whereas inter partes review proceedings can only raise an invalidity challenge based on published prior art and patents. In these adversarial actions, the U.S. Patent and Trademark Office or USPTO reviews patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts and uses a lower burden of proof than used in litigation in U.S. federal courts. Therefore, it is generally considered easier for a competitor or third party to have a U.S. patent invalidated in a USPTO post-grant review or inter partes review proceeding than invalidated in a litigation in a U.S. federal court. If any of our patents are challenged by a third party in such a USPTO proceeding, there is no guarantee that we will be successful in defending the patent, which could result in a loss of the challenged patent right to us.

Depending on future actions by the U.S. Congress, the U.S. courts and the USPTO, the laws and regulations governing U.S. patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.each.

Third parties may assert claims against us which could harm our business.

We may face third party claims from competitors, non-practicing entities, and others that our business practices or products infringe adversely held intellectual property rights. We may face third party claims that our employees or contractors have misappropriated and unlawfully disclosed to us for our benefit third party trade secrets or other proprietary information. Furthermore, we have agreed to indemnify customers, licensees and partners for certain intellectual property claims brought against them. Defending any such claims, whether or not meritorious, would cause us to incur costs and may divert the attention of management and technical personnel. Resolution of any such claims by litigation or settlement may entail payment of damages, entry into license agreements, changes to our business practices or products, and changes in our relationships with our customers, employees, licensees, partners, or contractors.

Risks Related to Governmental, Legal or Regulatory Matters

Procurement of microdisplays for military systems is subject to changes in federal budget priorities and if government funding is discontinued or reduced, our ability to develop or enhance products could be limited and our business results, operations and financial conditions could be adversely affected.

Historically, a large portion of our revenue is from military contracts. Procurement of microdisplays for military systems is subject to changes in federal budget priorities. Government programs are subject to authorization, appropriation and allocation of funding on an annual basis. Additionally, funding can be shifted to other programs if the government changes budget priorities, such as in a time of war or for other reasons. Government contracts are also subject to the risk that the government may not appropriate and allocate all funding contemplated by the contract. Government contracts generally permit the contracting authority to terminate the contract for the convenience of the government and in the event of a premature termination of a contract, the full value of such contract will not be realized.

The research and development and product procurement contracts of the customers we supply may be similarly impacted by government budget decisions. If the government funding is discontinued or reduced, our ability to develop or enhance products could be limited and our business results, operations and financial conditions could be adversely affected.

In addition, we must comply with certain laws and regulations relating to the administration and performance of federal government contracts. These laws and regulations affect how we conduct business under our federal government contracts, including in our role as a subcontractor. In complying with these laws and regulations, we may incur additional costs, and non-compliance may lead to the assessment of fines and penalties, including contractual damages or the loss of business.

If government agencies or companies discontinue or curtail their funding for our research and development programs, our business may suffer.

Changes in federal budget priorities could adversely affect our contract and display product revenue. Historically, U.S. government agencies have funded a significant part of our research and development activities. Our funding has the risk of being redirected to other programs when the government changes budget priorities, such as in time of war or for other reasons. Government contracts are also subject to the risk that the government agency may not appropriate and allocate all funding contemplated by the contract. In addition, our government contracts generally permit the contracting authority to terminate the contract for the convenience of the government. The full value of the contracts would not be realized if they were prematurely terminated. We may be unable to incur sufficient allowable costs to generate the full estimated contract values. Furthermore, the research and development and product procurement contracts of the customers we supply may be similarly impacted. If the government funding is discontinued or reduced, our ability to develop or enhance products could be limited and our business results or operations and financial conditions could be adversely affected.

We are subcontracted by certain prime contractors who obtain their military contracts through a request for proposal, or RFP, process, which is a competitive bidding process that involves unique risks that could materially reduce our revenues or profits.

Our customers include certain prime contractors who contract directly with the military and U.S. government agencies, and then subcontract certain of those contracts to us. These prime contractors customers obtain their military and government agency contracts through an RFP process, which typically involves intense competition and presents a number of risks that may not typically be present in the market, including the need to devote substantial time and attention of management and key employees to the preparation of a proposal that may not be accepted. The rules governing government purchasing typically require open bidding by possible providers against a list of requirements established under existing or specially created procedures, which results in significant pricing pressure in order to ensure a bid is competitive. This pricing pressure can lead our prime contractor customers to seek lower prices for our products and services, as a subcontractor, which could lead to lower margins than we may otherwise be able to obtain from other parties in the market. Additional risks associated with RFPs which may impact the revenue we receive from our prime contractor customers include the ability of the U.S. government unilaterally to:

suspend or prevent contractors for a set period of time from receiving new U.S. government contracts or extending existing

contracts based on violations or suspected violations of laws or regulations;

terminate our customers’ existing U.S. government contracts, including for poor performance or if funds become unavailable or are not provided to the applicable governmental agency;

reduce the scope and value of our customers’ U.S. government contracts and/or revise the timing for work to be performed;

audit and object to our customers’ contract-related costs and fees, including allocated indirect costs;

control and potentially prohibit the export of our customers’ products developed under the contract;

claim rights to products, including intellectual property, developed under our customers’ contracts;

change certain terms and conditions in our customers’ U.S. government contracts; and

cancel outstanding RFP solicitations.

The rules governing RFPs also allow the U.S. government to terminate any of its contracts with our prime contractor customers, either for its convenience or if our customers default by failing to perform in accordance with the contract schedule and terms, and also allow our prime contractor customers to terminate their contracts with subcontractors, including our company, in the event of U.S. government terminations, or if we default by failing to perform. Termination-for-convenience provisions generally enable our customers to recover only costs incurred or committed, settlement expenses, and profit on the work completed prior to termination. Termination-for-default provisions do not permit these recoveries and would make our prime contractor customers liable for excess costs incurred by the government in procuring undelivered items from another source. These factors may reduce or eliminate our expected revenue from subcontracts with our prime contractor customers.

We may not be able to satisfy all of the conditions of the total of $39.1 million in U.S. governmental awards we were awarded during 2020 for purchases of capital equipment over a three-year period. The receipt of the significant amount of U.S. government awards during 2020 may impact the U.S. government’s decisions regarding future awards for capital equipment contracts for R&D development work we may apply for. As a result, our business and prospects may be adversely affected. Our customers and potential customers applying for government grants, incentives or loans may condition purchases of our products upon their receipt of these funds or delay purchases of our products until their receipt of these funds.

We have been awarded a total of $39.1 million in awards under government programs designed specifically for microdisplay industry contractors and participants. We anticipate that in the future there will be new opportunities for us to apply for grants, incentives and other forms of funding from the United States government. Despite our position as the only U.S. commercial manufacturer of OLED microdisplays, there is a risk that future funding decisions, including awards of contracts for R&D development work may be influenced by political or other considerations that encompass the significant amount of awards we received during 2020. Our ability to obtain grants, incentives and other forms of funding from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these grants, incentives and other forms of funding is and will be highly competitive, often involving multiple levels of military and U.S. government approval before a grant or incentive can be approved and funds disbursed, each of which is subject to risk and uncertain timing.

Moreover, we may not be able to satisfy or continue to satisfy the requirements and milestones imposed by the granting authority as conditions to the receipt of the $39.1 million in awards we received during 2020. Some of these conditions include, improvements in yield, throughput and profitability, sourcing and installation of related equipment, and quarterly and annual reporting of progress and compliance with program terms. In addition, not all of the terms and conditions associated with such funds have been finalized, and once disclosed, there may be terms and conditions with which we are unable to comply or which are commercially unacceptable to us. There is also a risk that the actual price of equipment purchased may exceed the amounts budgeted under the awards, which would require use of our resources. The U.S. government will retain title to approximately 80% of the equipment purchased under this multi-year program, until a determination of performance is made at the end of the program. The award agreements contain an obligation to prioritize U.S. Department of Defense related orders, as well as penalties if we do not continue to produce OLED microdisplays for five years past the end of the program. Should the U.S. government retain title to our equipment at the end of the program, this could cause a disruption or limitation in our ability to operate. In addition, conditions imposed by these government awards could limit our flexibility, or the desire of potential partners to engage in business combinations.

There is no assurance that any future applications we submit for grants, incentives or other forms of funding will ultimately be approved, and if approved, that approval and funding will occur within our desired timeframe or that we will be able to satisfy or continue to meet any ongoing requirements or milestones. If we are not successful in obtaining government grants or incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.

In addition, certain of our customers and potential customers that also apply for government grants, incentives or loans may condition purchases of our products and systems upon receipt of such funds or delay purchases of our products and systems until receipt of such funds, and if those customers and potential customers do not receive these funds or the receipt of these funds is significantly delayed, our results of operations could suffer.

Some of our business is subject to U.S. government procurement laws and regulations.

We must comply with certain laws and regulations relating to the formation, administration and performance of federal government contracts, including the EAR and the ITAR. These laws and regulations affect how we conduct business under our federal government contracts, including the business that we do as a subcontractor. In complying with these laws and regulations, we may incur additional costs, and non-compliance may lead to the assessment of fines and penalties, including contractual damages, or the loss of business.

Our international sales and operations are subject to export laws and regulations.

We must comply with all applicable export control laws, including the EAR and ITAR. Certain of our products may be deemed to be controlled for export by the U.S. Commerce Department’s Bureau of Industry and Security under the EAR or by the DDTC under the ITAR. Certain of our products are controlled as defense articles and subject to license requirements from the DDTC for export. Failure to comply with these export control laws can lead to severe penalties, both civil and criminal, and can include debarment from contracting with the U.S. government.

Continued trade tensions among the United States, China, and Russia have led to increased tariffs, trade restrictions and buy American initiatives, and have affected customer ordering patterns. The United States has imposed restrictions on the export of U.S.-regulated products and technology to our international customers, including those located in China, Russia, and certain regions of Ukraine. As a result of these ongoing tensions, we believe there is a risk that U.S. laws and regulations governing the export of goods and technology, including the EAR and ITAR, may be revised to impose even tighter restrictions, which could negatively impact our ability to successfully market and sell our non-military products to customers located in China, Russia, and certain regions of the Ukraine. Existing and future restrictions could also potentially interfere with our ability to pursue manufacturing in China and our efforts to partner with consumer companies who might seek to build displays using our technology at high volume manufacturing facilities located in China.

Our business is subject to environmental regulation and possible liability.

Our operations are subject to various federal, state and local regulations related to toxic, volatile, experimental, and other hazardous chemicals used in our design and manufacturing process. Although we believe that we are currently in material compliance with all applicable environmental regulations, we cannot be certain that we or our suppliers have not in the past violated applicable laws or regulations, which violations could result in required remediation or other liabilities. We also cannot be certain that past use or disposal of environmentally sensitive materials in conformity with then existing environmental laws and regulations will protect us from required remediation or other liabilities under current or future environmental laws or regulations. Any failure to comply with environmental regulations could result in the imposition of fines or in the suspension or cessation of our operations, and our business, results of operations and financial condition could be adversely affected.

Risks Related To Information Technology

We rely on our information technology systems to conduct our business. If we experience an interruption in our operation, our business and financial results could be adversely affected.

The efficient operation of our business is highly dependent on our information technology systems including our manufacturing equipment and process. If our information technology systems are damaged or an interruption is caused by a computer systems failure, viruses, fire, natural disasters, or power loss, the disruption to our normal business operations and impact on our costs, competitiveness, and financial results could be significant.

Security breaches and other disruptions could compromise our information technology systems and expose us to liability, which could cause our business and reputation to suffer.

In the ordinary course of our business, we will collect and store sensitive data on our systems and networks, including our proprietary business information and that of our customers and suppliers, and personally identifiable information of our customers and employees. The secure storage, processing, maintenance, and transmission of this information is critical to our operations. Despite the security measures we employ, our information technology systems and networks may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.Any such breach could compromise such systems and networks and the information stored therein could be accessed, publicly disclosed and/or lost or stolen. Although we have cyber insurance coverage, any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disruption to our operations, damage to our reputation and/or loss of competitive position.

General Risks

Our success depends in large part on attracting and retaining highly skilled and qualified management, technical and consulting personnel.

We must recruit and hire highly skilled technical personnel as employees and as independent contractors in order to develop our products and to assist with servicing and upgrades to our equipment. 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, including salaries, bonuses, stock options and other fringe benefits, offered to employees in order to attract and retain such personnel. The costs of attracting and retaining new personnel may have a materially adverse effect on our business and our operating results.

Changes in management could have an adverse effect on our business. We are dependent upon the active participation of several key management personnel in our strategic planning and in our day-to-day business operations. We also need to recruit additional management in order to expand our business. The failure to attract and retain additional management or personnel could have a material adverse effect on our operating results and financial performance.

Due to our limited resources, if we are unable to retain our key employees, we may not be able to effectively manage our operations or timely replace qualified personnel, which may result in weaknesses in operations, further loss of employees and/or reduced productivity among remaining employees.

Economic conditions may adversely impact our business, operating results and financial condition.

Economic conditions, market and political instability, changes in trade agreements and conflicts, such as the conflict between Russia and Ukraine, could adversely affect global markets and transactions and may adversely affect our customers and suppliers. Any adverse financial or economic impact to our customers may impact their ability to pay timely, or result in their inability to pay. It may also impact their ability to fund future purchases, or increase the sales cycles which could lead to a reduction in revenue and accounts receivable. Our suppliers may increase their prices or may be unable to supply needed raw materials on a timely basis which could result in our inability to meet customers’ demand or affect our gross margins. Our suppliers may also impose more stringent payment terms on us. The timing and nature of any recovery from the effects of adverse economic conditions or market and political instability on credit and financial markets is uncertain, and there can be no assurance that market conditions will improve in the near future or that our results will not be materially and adversely affected.

Our business depends on international transactions.

We purchase materials from and subcontract manufacturing processes to companies located abroad and may be adversely affected by political and currency risk, as well as the additional costs of doing business with foreign entities. In addition, 39% and 44% of our sales were to OEMs outside the United States in 2021 and 2020, respectively. These sales expose us to currency and political risk. For example, the U.S. government has imposed sanctions through several executive orders restricting U.S. companies from conducting business with specified Russian and Ukrainian individuals and companies. As a result of the uncertainty regarding these executive orders we have stopped shipments to Russia and placed all orders on hold. In addition, some of our non-U.S. customers have longer receivable periods as is customary in those countries.

Our business may expose us to product liability claims.

Our business may expose us to potential product liability claims. We may face liability to product users for damages resulting from the faulty design or manufacture of our products. While we 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 reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

GAAP are subject to interpretation by the Financial Accounting Standards Board, or FASB, the United States Securities and Exchange Commission, or the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results for periods prior and subsequent to such change. The adoption of new standards may require enhancements or changes in our systems and will continue to require significant time and effort of our financial management team. We cannot predict the impact of all of the future changes to accounting principles or our accounting policies on our consolidated financial statements going forward, which could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of the change. In addition, if we were to change our critical accounting estimates, including those related to inventory, contract revenue and other revenue sources, our

operating results could be significantly affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our manufacturing facility and corporate headquarters are located in Hopewell Junction, NY, where we lease approximately 63,000 square feet. The NY facility houses our equipment for OLED microdisplay fabrication, assembly operations, research and development, and product development functions. In November 2020, we entered into a new ten-year lease expanding our footprint from approximately 50,000 to 63,000 square feet, including an additional 8,000 square foot of space to be used as a class 10 clean room and additional storage space. The lease expires in 2031. Additionally, we have two five-year options to extend the lease as part of this agreement. In October 2021, the Company signed an additional two-year extension of the lease of approximately 2,000 square feet of office space for design and product development in Santa Clara, CA.

We believe our facilities are adequate for our current and near-term needs. We believe we will be able to renew these leases or obtain alternative spaces or additional spaces as necessary under acceptable terms. See Note 10 to the Consolidated Financial Statements included elsewhere in this report for more information about our lease commitments.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. In March 2019, we received a demand letter seeking payment of $0.9 million of outstanding invoices relating to purchased inventory from Suga Electronics Limited, or Suga, a contract manufacturer located in China, which manufactured product sold by our consumer night vision business. We have responded to the demand letter, and requested that Suga provide substantiation of purchased inventory. On August 1, 2019 we were notified by Suga that they intend to pursue arbitration. During September and October 2019, we held preliminary discussions with Suga to attempt to reach a settlement, however in November 2019 we received a formal request for arbitration which Suga filed with the International Chamber of Commerce or ICC. We retained local counsel in Hong Kong to represent it before the ICC and in December 2019 filed an answer to Suga’s request for arbitration including a counterclaim seeking repayment of amounts previously paid to Suga. An arbitrator was appointed and arbitral proceedings for the consideration of the claims and counterclaims began during 2021. The parties were permitted to settle at any point during the arbitration proceedings and the parties reached a tentative settlement in April 2021. On May 12, 2021 the parties executed settlement agreements and mutual releases from all claims in exchange for a payment of $0.6 million to Suga from the Company.

As disclosed in the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018, the Company made a decision to exit the consumer night vision business and accrued approximately $1.0 million related to invoices received for inventory purchased by Suga in anticipation of future production. As a result of the May 12, 2021 settlement of the arbitration with Suga, the Company removed the $1.0 million accrual from its balance sheet, wrote off $0.3 million in prepayments and recorded a gain of $0.1 million in Other Income/Expense during the second quarter of 2021.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

‎

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the NYSE American under the symbol “EMAN”.

As of December 31, 2021, there were 131 holders of record of our common stock. This does not include persons whose stock is in nominee or “street name” accounts through brokers.

Dividends

There were no declared dividends in 2021 and 2020. Our ABL Facility restricts us from paying cash dividends while any obligations are outstanding under the facility. Subject to this restriction, any future decisions to pay cash dividends will be at the discretion of our Board of Directors. It is our current intention to retain any future profits for use in the development and expansion of our business and for general corporate purposes.

Securities Authorized for Issuance under Equity Compensation Plans

Information about our equity compensation plans is incorporated herein by reference to Part IV, Note 14 of this Annual Report.

Purchases of Equity Securities by the Issuer

There were no repurchases of our common stock during the year ended December 31, 2021.

ITEM 6. [RESERVED]
‎

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion should be read in conjunction with our financial statements and notes thereto. Our fiscal year ends December 31. This Report contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Please see “Statement Regarding Forward-Looking Statements” and Part I, Item 1A, "Risk Factors" of this Report. Actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include changes in external factors or in our internal budgeting process which might impact trends in our results of operations; unanticipated working capital or other cash requirements; changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which we operate; and various competitive market factors that may prevent us from competing successfully in the marketplace. Forward-looking statements do not represent our views as of any date other than the date of this Report.

Business

We design, develop, manufacture and market organic light emitting diode, or OLED miniature displays, which we refer to as OLED-on-silicon microdisplays, virtual imaging products that utilize OLED microdisplays, and related products. We also perform research in the OLED field. Our virtual imaging products integrate OLED technology with silicon chips to produce high-resolution microdisplays which, when viewed through a magnifying headset, create virtual images that appear comparable in size to that of a computer monitor or a large‑screen television. Our products enable our original equipment manufacturer, or OEM, customers in the military and commercial markets to develop and market improved or new electronic products which enable the visualization of digital information and imagery.

We believe that our OLED microdisplays offer a number of significant advantages over comparable liquid crystal microdisplays, including higher contrast, greater power efficiency, less weight, more compact size, and negligible image smearing. Using our active matrix OLED technology, many computer and electronic system functions can be built directly into the OLED microdisplays silicon backplane, resulting in compact, high resolution and power efficient systems. Already proven in military and commercial systems, our product portfolio of OLED microdisplays deliver high‑resolution, virtual images that perform effectively even in extreme temperatures and high‑vibration conditions.

We have been deemed to be an essential business in the State of New York and have continued to produce and ship products during the COVID-19 pandemic. We have implemented employee health and safety measures per Centers for Disease Control and Prevention, or CDC, guidelines, and monitor, federal, state and local governmental regulations to respond to the latest health and safety guidelines. As of the date of this Report, we have experienced disruptions in supply, had several employees test positive for the COVID-19 virus and had to close our facilities for cleaning purposes. There is no assurance that our operations will not be disrupted in the future by additional impacts of the COVID-19 pandemic, the Omicron variant, or other resurgences of the virus, on either our internal operations or those of our suppliers or customers, including the possible impact of disruptions in the supply of silicon wafers or other raw materials that could harm our ability to meet demand for our products in a timely manner, or within budget. In addition, please review the various risk factors relating to the COVID-19 pandemic discussed in Part II, Item 1A of this Report.

Operating expenses for 2021, including R&D expenses, increased approximately $1.3 million compared to 2020. The majority of the increase was in R&D expenses due to materials and other overhead costs related to development and qualification of our higher brightness XLE and dPd displays and a decrease in costs allocated to contracts cost of goods sold, reflecting lower contract revenues in the 2021 periods.

We are continually making improvements in production processes; however the majority of our equipment is older and malfunctions in single point of failure equipment has the potential to delay our production until repairs can be made. We experienced equipment issues in 2020, and experienced some equipment issues during 2021. In addition, we have also experienced delays in the delivery of certain of the components used in the manufacture of our products, and also had delays in getting vendor support personnel, due to COVID-19 travel restrictions, resulting in occasional production disruptions. Equipment purchased during 2021, and expected to be purchased in 2022 under our government awards programs is expected to reduce our single point of failure risk and improve manufacturing yields and throughput. As part of our ongoing efforts to improve our throughput, yield, and quality practices, we are working with an industrial engineering firm to develop an operations excellence strategy and to obtain the AS9100 quality certification.

Our backlog at December 31, 2021 was $13.8 million compared to backlog of $10.9 million at December 31, 2020. Backlog is comprised of orders believed to be firm with scheduled delivery dates over the next twelve months and does not include contract revenues.