Good day, ladies and gentlemen, and welcome to the eMagin Corporate second quarter 2012 earnings call. My name is Ian. I will be your operator today. At this time all participants are in a listen-only mode. We will conduct a question and answer session toward the end of the conference. (Operator Instructions) As a reminder the call is being recorded for replay purposes. I’d like to hand the call over to Mr. Paul Campbell, Chief Financial Officer. Please proceed, sir.

Thanks, Ian. Welcome everyone to eMagin Corporation's second quarter 2012 earnings conference call. As always, before we begin, I would like to remind you that we will be referring to numbers that are part of our 10-Q for the second quarter of 2012 ended June 30, 2012. During today’s call we may make forward looking statements as they are defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the company’s current expectations, projections, beliefs and estimates and are subject to a number of risks and uncertainties. Such statements include reference to projections of future revenues, plans for product development and production, the company’s ability to ramp up production at its manufacturing facilities, future contracts and commercial arrangements, future product benefits, future operations, liquidity and capital resources as well as statements containing words like believes, expects, estimates, plans, target, will, intend, could and other similar expressions. Risk factors are included in the company’s Form 10-K for 2011 on file with the Securities and Exchange Commission. Except if it’s directly required by federal securities laws, we undertake no obligation to publicly update or revise any forward looking statements whether as a result of new information, future events, changes in circumstances or any other reasons. With that I’d like to turn the call over to Andrew Sculley, President and CEO of eMagin.

Thanks, Paul, and thanks everyone for joining us on the call today. I’d like to begin with a brief overview of our business, some key highlights. Paul will then discuss our financial results for the second quarter of 2012 and finally we’ll open it up to your questions. I’m pleased to report record revenues of $8.6 million for the second quarter. This was driven by a 20% increase in the OLED micro display sales versus last year. And this is from both new and existing customers. During the quarter we captured the highest level of new business bookings in our history, which drove our backlog to new heights. We also saw further improvement in our manufacturing processes which resulted in greater throughput and higher yields so we’re very happy about this. For the remainder of 2012, we expect further strengthening of demand in our key segments. Our most advanced OLED micro displays, including the new WUXGA micro display which we successfully unveiled at the Society for Information Display in Boston this June. It’s also called SID. There it’s – really the displays are virtually unmatched in being able to address the most demanding requirements that we have from all of our customers. Based on the response from security analysts and others attending SID conference, I’m proud to say that our reputation as a leading innovator and partner of choice continues to grow. With a strong product portfolio, a pipeline of new products in development, additional manufacturing capacity coming online and growing our intellectual property portfolio we believe we are well positioned to meet our key goals for the remainder of this year and beyond. We’re manufacturing displays on our new OLED deposition tool. We’re still working on full automation for the tool for operations and this will optimize production capacity. Displays coming off the new tool are of much higher quality with significantly improved uniformity. This improvement in uniformity is both a benefit to the customer so every display looks the same. It will allow us to tighten speck and/or get better yield. Once fully optimized the new machine is expected to provide a tenfold increase in OLED deposition capacity, as we said before. During the period we will continue to also produce on the OLED deposition machine that we have now during the rest of this quarter. And that’s in order to optimize or enhance our throughput and meet the increasing customer demand. Worth mentioning that the new tool, the OLED deposition tool is unique. No other OLED deposition tool has its particular design characteristics. It was jointly designed by us and the manufacturer, SNU Precision, to meet what we think of as our future display requirements. Now let me give you an update on some specific programs and then I’ll turn the call back over to Paul to review the financial results. First as I mentioned above, or previously, we unveiled and demonstrated out new WXGA full color display in June in the SID conference. This new product generated excitement among security analysts and industry trade reporters and a number of positive articles written highlighting our cutting edge technology. And just as a reminder, I should remind you that the WUXGA display has phenomenal resolution of 19 20 by 1200 pixels and that’s better or higher resolution than the full HDTV in your living room. Its contrast ratio is 100,000 to one which is exceptional and I have to say it’s much better than the TV in your living room unless it’s an OLED. Its power consumption is very low for such a big display, we’re very impressed and so are the customers who’ve taken a look at it including the night vision lab. It’s much less than competing technologies and if you’re using this display for night vision goggles and therefore using a micro display, it would be running at half the power of the colored display. So people are really impressed with the power consumption of this display. It also has full dynamic range at low luminance for night vision applications which is very important for military applications, aviation and even night time cinematography where the cinematographer needs to keep the luminance low in the view finder so he can look away from the camera and see what’s going on in a dark environment. But he still needs full dynamic range of that display and our displays deliver that and I don’t think there’s anybody else who can do that today. First samples of the XGA display that we’re developing for electronic viewfinder applications are at the final stage of production now. Actually it’s due at first light tomorrow so we’ll get to take a look at it. To date most of the viewfinders use VGA displays instead of an XGA. We plan to supply a number of potential customers with samples. People who buy higher end digital cameras generally want view finders and there are two possible choices for digital camera; an optical viewfinder like those on a single lens reflux camera, of OLED and also in high end digital cameras, or an electronic viewfinder with a display. The electronic viewfinder you can put additional information on the display like battery life, et cetera. And they’re also much simpler and smaller and therefore you can shrink the camera and that’s one of the attractions for the camera manufacturers. Smaller is an advantage to us, the user, and smaller is an advantage to the manufacturer to make it cheaper. So we’re really excited about getting a chance to take a look at that and deliver samples. We have successfully developed high brightness displays that can be used in avionic applications. Prior to this time OLED wasn’t bright enough and we could never break through that barrier. Now we can run these displays at over 15,000 candelas per meter squared and I’ll give an example of what that means just in case that’s not a familiar term. For a comparison if you are sitting now in a brightly lit office using good florescent lighting the brightness in that office will be at about 500 candelas per meter squared, so we’re at 15,000 on the smallest light. Even at this high brightness our display has a contrast ratio of 50,000 to one. That is really hard to do with you dial the display to that bright. To our knowledge both the brightness above 15,000 candelas per meter squared, and the contrast at this high brightness level is far superior to that offered by any other company. And we have seen presentations at shows like SPIE as such that and at least one other company presented and this confirms out statements above that our display’s brighter and has a great contrast ratio at that brightness. We also continue to improve our high brightness capability recently we announced $2.4 million R&D contract form the US Navy for a high brightness 2,000 by 2,000 OLED micro display so this will be the biggest one we made and of course they’d also like full color so phase one is for $1.1 million and we’ve actually begun that and will run through September. Phase 2 is for $1.3 million and runs for an additional year. We were awarded a $3.5 million subcontract for display beacon fine assembly, that’s our display of course, for the enhanced night vision goggle program from ITT excellence. Our military business continues to expand with new programs. Recently we received $2.75 million multiyear purchase order from a subcontractor on a light thermal weapons sight program. Now this is a clip-on sight, thermal sight, and what the clip on means this little piece has a thermal sensor display with some optics and it goes on the front of a regular optic sight on a gun. What this means is you really only need one sight in this clip-on instead of two whole separate sights, so it’s a great advantage, much cheaper. And of course each one leaving this program has our display. The U.S. SOCOM program funded by a $1.1 million SPIRE grant is on schedule and qualification testing is progressing and this is the commercialization of our WUXGA display. U.S. SOCOM was interested enough to get us going on this to commercialize it. We continue to ship on a $3.1 million follow on order for the U.S. army remote viewer, thermal weapon sight. These displays must be delivered in 2012. Deliveries continue for our other programs like the Javelin shoulder mounted anti-type missile launcher, the FELIN soldier modernization program which is in its second year of fielding now. And we have continued to ship displays for the three FLIR industrial thermal cameras. In addition we’re continuing to ship our product for the high end cinematographer digital camera. Today we’re also moving forward with development work on a direct patterning for color displays. No other company to our knowledge is capable of patterning the yellow led emissions layer at the small pixel size of our displays. OLED micro display companies use color filters with a whited knitting OLED to get a full colored display. Direct patterning will improve the efficiency or brightness by a factor of four to five on our displays so this will be a great advantage for us. And as a reminder of the pixel size we’ve demonstrated our ability for an 8.1 micron full colored pixel. That means just again a full color means there are three sub-pixels including a small gap between each one all within the 8.1 microns. And again, to our knowledge, no one else has that size pixel. Now I’d like to turn the call back over to Paul who will take you through our financial result.

Thanks, Andrew. Total second quarter revenues were $8.6 million and that was a record high for any quarter in the company’s history. We’re really happy about that. Product revenues which are mostly displays as Andrew mentioned were up 20%, really strong increase and total revenues were up 15% from the year-ago quarter. As Andrew also mentioned, in Q2 order bookings were up sharply to record highs resulting in a record backlog of $19.8 million at the end of the June quarter. The back log increased 72% from $11.5 million backlog as of January 31, 2012 as we reported in our 10-K. Now regarding our backlog, the backlog consists of display order only. So no R&D contract revenues in there at all and consists primarily of relatively short cycled time non-binding purchase orders. About 75% of the backlog is for Q3 and Q4 shipments. We expect more purchase order will hit the backlog for both Q3 and Q4 because many of our customers expect a quick turn around on shipment and therefore wait to place purchase orders until they near their desired ship date. Although for these reasons we believe the backlog is a limited utility in predicting future revenue, the increase in and the record level of the backlog as well as our knowledge of the balance of your opportunities that we have all contribute to feeling comfortable with our revenue guidance. Therefore, we are reaffirming our total revenue guidance of $30 million to $34 million for 2012. R&D contract revenue in Q2 rebounded nicely considering we have fewer contract to date this year compared to 2011. We posted $1.5 million in R&D contract revenue in the quarter up significantly from first quarter and strong compared to the average of our quarters in 2011 but down a dip from a strong Q2 last year. It’s been reported in the media that some defense related companies are seeing lower revenue levels and attributing those to government spending cuts. As you’ve heard we’re certainly not seeing that on the display side of the business which is over 80% of our total business. Year to date display revenue is up 26% from last year. However government cuts could affect us on the R&D side of the business, although we’ve been awarded some nice contracts this year including the 2.4 million Navy-air contract Andrew just spoke about. R&D contracts are the smaller part of our business, only 19% of our revenue last year was in the R&D contracts. The display side, the prominent part of our business, continues to increase in revenues so we’re seeing no ill effects there of military spending cuts. Gross margin for the second quarter increased to 53%. Gross profit of $4.5 million and that was over four points higher than last year same quarter. The year over year improvement was mainly due to fixed production cost or mostly fixed production cost, being spread over a higher revenue days and improved yield in second quarter this year. Operating expenses are comprised of internal R&D expenses and selling general and administrative expenses or SG&A. R&D expenses rose to $1.3 million primarily due to an increase in personnel cost to support company funded R&D activities including the development of our new XGA display which Andrew talked about which will accelerate our entry into the electronic viewfinder market so a very important undertaking for us. SG&A expenses increased about $115,000 from Q2 last year, but they decreased significantly as a percentage of revenue to 27% this year versus 30% in Q2 last year, so a three point reduction there in SG&A. Income from operations increased 46% to $911,000 in second quarter from $624,000 last year. Adjusted net income for this second quarter also increased 46%. That’s $577,000 compared to $394,000 of second quarter last year. Second quarter EBITDA increased 38% to $1.6 million from $1.2 million last year. So we have some very significant nice increases in profitability and cash flow on the revenue increase. This is typical. We usually get pretty good flow on incremental revenues. In fact this time about 40% of the revenue increased flowed through to EBITDA and this is because and our business has been, and we foresee this going forward most of our costs are fixed or semi fixed so you get a revenue increase and you get a good flow of that to the bottom line. Looking at the balance sheet at June 30 we had cash, cash equivalents, CDs and corporate bonds all totaling $13.3 million compared to $14.3 million at year end last year. We’ve invested in $1 million in new equipment year to date and we invested $368,000 in the purchase of eMagin shares during the second quarter. The company purchased 125 shares of its common stock in the open market at an average price of $2.95 per share. As of June 30 there were approximately 2 million remaining in our stock repurchase plan. Finally we continue to have no debt and we have been sole funding for 3.5 years now with no equity raises or dissolution from equity raises. Our financial position has been and remains strong. Our business is growing and well controlled and we’re looking forward to a great second half of 2012. And with that I would like to turn I back over to Andrew.

Thanks Paul. I would just like to say again that we are very pleased with the progress we’ve been making of building the company. Gaining revenue, putting in the equipment we need. We’re looking forward to a strong second half of and expect to meet our 2012 revenue guidance. The important thing now is to think the people of eMagin. The team is very strong. They have been working like mad to make this happen and I just want to make sure everybody recognizes this team. Our efforts have been recognized in the trade and business media which is very gratifying and our customers the business that we’ve been getting is also recognition to the work this group has been doing. We hope that all of you will take a look at the recent articles that we’ve mentioned and posted in the section of our website called in the news. This is something new that we’ve done, some extra effort from Paul in the finance group. We also hope that many of you can attend the Rodman & Renshaw Conference September 10 and 11 in New York City. We will be presenting there at the analyst event and we have an analyst and investor event on October 2nd also in New York City. So with that, I again thank everyone on the phone and the eMagin team. So let us open it up for questions.

Thank you, sir. (Operator Instructions) Our question comes from Dennis Van Zelfden of Brazos Research. Please go ahead, Dennis.

Good afternoon Paul and Andrew. Congratulations on what appears to be a breakout quarter. I was wondering was any of the production in the second quarter, did it come from the new machine?

Yes we have been producing on the new machine. We’ve given samples but we’re holding the production and inventory in order to complete the qualification. We have a very stringent requirement of it’s actually 1,000 hours, 40 days in the light test. Dennis Van Zelfden - Brazos Research So none of the revenue came from the new machine?

That’s correct. Right

Okay. And you made a comment I think you said that everything you are producing on the new machine is in fact up to standard as good as or better than they were.

We’re really pleased the new machine can obviously produce what the old lead stack says would color and luminance. The two things that are so much better are the uniformity. So you get from one display to the other they look exactly the same so it allows us to get a better yield and tighten up the specs so that’s what’s tremendous.

Okay. So what needs to be done to get, it in your words, optimized?

There’s a piece of the system that really we’re doing by hand now and it’s a pain in the neck but it can be done and that we’ve asked to have a redesign of that by the company because it doesn’t do the job as well as it should and that we’re going to put in, let’s see, this month and we’ll turn the machine, we’ll have to take it down for a few weeks and they’ll have to turn it back over to us in September.

Okay. So it’s already been if its software it’s already been written, if it’s mechanical it’s already been made you’ll just be installing it?

Yes. We could run it, but it’s not as fast because we’re doing some pieces that the equipment should do all automatically.

Okay. Regarding the increase in the backlog do you think it was because your customers know that your new machine is coming up to speed and it began to give you orders that maybe you were withholding? Or was it because of your new products, period.

No I don’t think customers were holding POs. I thinks it’s just more business and we’re fortunate that we’re also fielding a couple of programs that have been ongoing that we’ve announced in the press like the remote viewer so we’re just getting a lot of new orders. And second quarter was like we said our highest ever. And it’s good to see.

Just one other mention an example of a new order, we mentioned a new clip-on thermal weapon sight, we haven’t been significant in thermal weapon sights I the past and we’re seeing companies that weren’t using our products come to us now. And it’s all a piece of doing an outstanding job on the R&D and having the government labs make sure the military knows what outstanding products we’re producing. Then they tell the integrators and we get business. That’s all going very nicely.

Okay. You also make a comment in your press release that you continuously evaluate your capital needs or your machine needs or something along those lines. Does that imply that you’re already thinking about a new machine?

Well, you know, the Iola deposition machine that we just put in is one machine but we have a whole, you know, assembly line or a whole manufacturing line of equipment and so we need to continually address our future needs and then – okay, when will we need an upgrade in this piece of equipment or when will we need to do something differently. That comment was meant to say, you know, we do this process of looking out into the future and trying to estimate what our volumes will be and we do make adjustments as we go forward and purchase the things that we need to purchase and that kind of thing. So for example we’re looking at a few additional pieces of equipment and one of them is a stepper for later this year. And so it’s a process that’s ongoing and we constantly look at that.

Okay. So last question from me and I’ll get back in the queue. Regarding the contract revenue, Paul, you all talked about how you’ve gotten some contracts recently, can we just generally assume that it could stay at these levels for the next couple quarters?

Well, you know, the NAVAIR has to be the $1.1 million of it has to be done by September so that’s saying that it’ll be in third quarter. so third quarter should be pretty good in R&D. We don’t like to look far ahead and break down, you know, revenues other than what we see in our guidance but you can just by looking at our contracts you could infer some future quarters.

Okay. Thanks guys, and good luck.

Thank you. Operator: Yes thank you very much for your question. We have another question, this one from the line of Andrew Abrams with Avian Securities. Please go ahead Andrew.

Thank you, couple of quick questions. The XGA samples that you’re going to ship in August for the viewfinder, is this a military or is this a commercial company?

No. The XGA are for electronic viewfinders of consumer cameras.

So it would be a commercial customer as opposed to military?

Yes. Absolutely no military at all.

Got you. And was this designed to customer spec or is this what you would consider close to a standard product that you could sell to other people?

Well, we worked closely with making sure we got it designed correctly.

Got it. And this, the samples, were they produced on new machine or is this from the old machine.

That’s a good question. I think that they’re probably on the old machine because they’re we wanted some send ahead so they’re probably on the old machine.

Okay. Got it. And your comments on patterning, this is a big change for anybody moving from non-patterning to patterning, what the – I mean I don’t want to pin you down to a time frame but what do you think the time frame would be and what’s the actual development cycle like, I mean are you moving from, you know, normal to (lidee) or something along those lines or is this something, you know, with interim steps in between?

Well we were actually working on the two methodologies for this. It is a longer term thing but I’m not talking about it’ll be multiple years because we have to prove it and we have to design equipment. The smartest thing to do is build some prototype equipment and then we have to design a production piece of equipment. So I think it’ll be a few years.

And you’re still unsure as to what your process is going to be. You’re still working on two different processes?

We have – we are working two different ones for particular reasons I’d prefer not to let everybody know. But one of them we could do. I feel very comfortable that it can be done and we’ve come close to demonstrating it. There are things that we need to do in terms of alignment to make sure we can do it in a form so that the pixels are in the right place, but I feel comfortable we could do it. The other one's rather unique that I don’t know that anyone has tried. And so we’re pushing along with that one as well.

And CapEx for 2012 and 2013?

I don’t know if we said what CapEx would be. We did say we spent $1 million so far this year. I think our budget was somewhere around $5 million in total cutbacks this year. We haven’t really looked – we haven’t said what 9Capex) would be next year.

Okay. And lastly the backlogs you were talking about the backlog being short term backlog. I’m assuming the backlog still does include what needs to be delivered under contract for the military over the next two quarters. I did think you did mention one that was.

Yes. If it’s displays, yes, it’s …

If it’s display for the military and it delivers in the next two quarters …

No because we, you know, we do get PO’s even for on the military side, very close to ship dates. So no, we expect actually quite a bit of new purchase orders to hit both especially Q4 but also in Q3 that aren’t that weren’t there in June 30.

Got it. Terrific. Thanks very much.

Thank you.

And thank you very much for your question. We have another question. This one’s from the line of Aram Fuchs from Fertilemind Capital. Please go ahead Aram.

Yes I was just going through the 10-Q and I noticed the sales were disproportionately balanced towards North America. Is that a random occurrence or is there something that we could read into? Paul Campbell Well we were shipping a lot on this remote viewer contract. In fact they were one of our larger customers in the quarter. So that definitely had some effect. And the RND contract that we’re doing for SOCOM we recognize quite a bit of revenue on that contract in the second quarter, which is also US. So those two items sort of tipped the percentage toward US revenues.

And the other – EMEA was actually down? Was there anything to read in there?

What was that?

EMEA, Europe, Middle East, Africa?

Nothing specific that I know about. Sometimes there's just the normal ebb and flow with purchase orders. Sometimes people purchase a few months or they purchase six months at a time. It's hard to read much into that.

And Andrew, there's still a lot of buzz after this Google Project Glass. I was wondering if you can give an update on any sort of augmented reality applications both in education, industrial and the grand slam hope of a consumer application.

Well, we do have customers that one customer is a very high-end that's doing an augmented-type reality application. And we talked to a number of others. Our goal here is – with the new equipment is to put in that new equipment so that we can respond if that – I don't know what you called it again – the consumer application, the holy grail if you will, our goal is to be able to respond to that and we talked to a number of customers, potential customers who are interested in doing that more than just the ones you hear about. So if it should come, we'll be ready for it. And augmented reality, again, we have one customer at a very high end.

Right. But your …

Aram, let me add on the Europe, Middle East, Africa, actually the quarter was down in revenue but actually year-to-date it was an increase year-to-date over last year for that group, not much but a significant increase. If you look at that by country, you'll notice a particular country is soft but another one is going well.

Right.

So it's an ebb and flow.

Right, okay.

(Inaudible) number and it looks pretty constant.

Okay. And then just to further – a few questions, just reference the optimizing the new machine. Is there a – it sounds like this is something that the manufacturer has to do. Is that what you're implying, Andrew?

Yes, actually, the manufacturer designed a new piece for us, I'll call it that, because the old one wasn't – it didn't work as it should. It wasn't fast enough, et cetera. So they designed another piece and a team is coming probably next week to put it in and do the final acceptance test. And we simply won't accept the machine, of course, we shouldn't. And this manufacturer has been very good for us. They put a large enough team to get this going and we actually asked them to pull it up two weeks because we need it and they did. So the manufacturer will put in, yes. And we'll work with them, obviously to make sure it's optimized to our liking.

Right. And so that team's coming to Hopewell Junction to do the install.

Yes. Yes, we still have some of the folks here as we run it helping us out and making sure everything's working right. But the installation team, a group of engineers, will come I guess next week but don't quote me on that.

Okay. Okay, great. Thanks for your time, then.

You're welcome.

Thanks, Aram

Thank you very much for your question. We have another question and this one's from the line of Bill Sutherland at Northland Capital Markets. Please go ahead, Bill.

Thank you. Hey, guys. I wanted to just explore a little bit more of the opportunity for the viewfinder, the electronic viewfinder. So you've sent out samples to how many manufacturers?

Well, actually, as I mentioned, we have First Light coming tomorrow on some send ahead parts. So when we get first light, maybe we complete enough pars after that and then we send it to one customer we're working closely with. I think we said that in our release. And then we send it to other ones. What I'd like to do is send a team there and send it to the other guys by bringing the team and showing it to them. And how many? You could count on – actually count the ones that use significantly electronic view finder in no particular order. I’m just going to say it. There's – Olympus is a large user. There is a big Korean company's a large user. There's Ricoh is a large user. There's Fuji Film is a large user. And then the other ones like Nikon only uses a few and Cannon is a purist, only optical. Those are the ones that we would talk to, not Cannon, of course, and not – well, Nikon, we might as well.

Okay and then I'm not too familiar with the volume shipment levels at the sort of high end. I mean, are we talking hundreds of units a year or …

No, if I were to pick on a camera, a high-end camera – and you can go to stores and take a look at them. Go to a camera store and if you pick one like from Olympus or Fuji, most of them have electronic view finders. If you go there, if you pick a camera model, it might have 100,000 to 200,000 units for that model.

A year.

In a year, yes.

And what kind of ASP would you be thinking about for the display?

Yes, I got you but first let me assure you that we've done the calculation and with the volume in the new machine, we can hit those ASPs and they are lower than the ones that – our business is by volume, so the very high volume customer is going to get a lower price point and the low volume customers get a high price point, right.

No, I understand, Andrew, but I’m just trying to just get a sense of the market opportunity if it's 100 – I’m sorry, what did you say annually -- $100,000?

Yes, $100,000, $200,000 would be …

Then the ASP per view finder for you?

I don't want to tell you – tell people this because then they'll hold …

Oh, Okay.

I'd rather give a higher ASP if I could.

Okay, okay. And then last one for me, if the – with the manufacturer you're working closely with, if the samples fly through the approval process, could there be orders before year-end or are we thinking more next year?

Well, really, if you look at anything like this – and in my past life we did a larger size OLED display for digital camera – what kind – what you'd be looking at are samples now and the production of the actual camera would be more like end of March type thing. So we'd have very small samples now but production would be next year.

Okay, well, great job. Thanks a lot.

Well, thank you. I appreciate it.

Thank you. We have another question. This one is from the line of (Tom McGraw). He's a private investor. Please go ahead, Tom.

Okay, thank you. Hi, Andrew and Paul. In regards to the new machine, you're going to get this optimization fix sometime in September hopefully. Then what's the process to bring the machine to full production? Does that take weeks or months or whatever? And is that an owner's process or what?

Well, I'm sure there's a few things waiting for us, just like there always are, in bringing up a machine like this but if it can operate in full auto mode then I don't see a problem with taking over the – what we're doing is we're making the largest runner on this machine now for production. And then what we'll do is we'll move more and more of this over and then we'll qualify each and every other product we're making. So the old machine, which is the Satella, so in case I slip you'll know what I’m talking about. The Satella will be dedicated to R&D. And this will be -- the production volume I think would be reasonably quickly to take on a significant load. In fact, we're attempting over the next – the month of September to take off on a significant load on the new machine as well. So I'm sure there are other things – and we'll still use the Satella machine over the next few months but I would expect the majority of production to be taken up by the new machine over the next few months.

Okay, great. And then one question on the Satella, this is a machine – I don't know, is it 15 years old? It's really old. It's fully depreciated but it keeps on ticking. So tell me how many more years of life or value do you see with this machine?

Well, my desire is to keep this going as an R&D tool. And I can give you a specific example that – well, I'll give you a general one. But the ideal situation is that if you run into some problem on a particular product, it's nice to be able to take that problem over to the other machine and see if there is something you can do to fix it. If there's a problem in the OLED structure, for example, is there something I can do to fix it or improve it, and then move it back onto the production machine. So I'd like to see the Satella stay around for a long time. It's a late '90s vintage machine designed for R&D.

Okay, good, really good call and good quarter. Thanks so much.

Thanks, Tom.

Thanks, Tom.

Thank you very much for your question. (Operator Instructions) I have another question already in the queue. This one is from the line of Jonathan Pierce. Please go ahead, Jonathan.

Hello, Paul and Andrew. Thanks for taking my call.

Hello.

Hey, I had – I was wondering if you had picked out a name for the new machine yet.

Actually that's been a little controversy. We've had a lot of different names for it. But no.

Okay. And with this handicap, is it producing at least as fast as the Satella?

Well, it has a much better tack time than the Satella. But because of the manual intervention we have, it – we can't produce a run of a number of wafers quicker than the Satella.

Okay. And have you made final payment on the machine yet?

No, we wouldn't do that until it's all done.

Okay.

Yes, that's one of the things we did in the negotiation up front. We made sure there was enough at the end so that there was great motivation to get it finished.

Is the new machine allowing you to pursue the direct patterning.

Well, the direct patterning will be an add on to the machine when we get it done. So it's certainly necessary in that the – I'd hate to do that on the R&D tool, although a prototype on the R&D tool would be okay.

Okay, so it is possible or your path forward is possible on the Satella.

Well, it could be, sure. But let me say it differently. Our path forward is no encumbered by the fact that we have these two tools that don't do direct patterning.

Okay. Oh, on the clip-on thermal imagers, I notice there were three contracts recently and it looks like – I'm not sure if you mentioned, do they all use your display or just the one that you mentioned you have a contract with?

Well, actually, there are two – at least two very large thermal weapon sites. One has been going on for a while. That's the one that we got a reorder. It's the remote viewer thermal weapon site. That's been going on maybe a couple years now. And now it's really picking up volume, so that's one. And the clip-on is another one.

Okay, yes, the clip-on had three contracts issued: (DRS, Optix1 and Flur). And I was wondering are you in all three of those?

I can't tell you that.

Oh, okay.

NDAs with customers.

Sure, sure. As far as the augmented reality goes, I was looking at some of the wave guided-based technology. I was wondering could you tell me is your product a good fit with this wave guide-based technology?

Yes, our product would be fine in that.

And is there anything specifically, like is the high brightness or the low power, I assume, make it especially attractive to use.

Well, if you're doing augmented reality and it's a see-through so that you could see through it in light, it's important to have high brightness otherwise when you're running around outside and it's sunny you won't be able to see the augmented part of – well, you wouldn't be able to see what the display is showing you. So high brightness is important there. So that's one. And this power consumption, obviously, it's a portable device, so power is also very important and we know this from our military as well. The number one thing they look at first is power, so and you know that for your cell phone, et cetera. So our displays would be good for augmented reality portable devices.

Okay. Yes, last time you mentioned you had ordered a Zeiss headset. I was wondering if you got that yet, if you'd had a chance to analyze it and is it as good as your display?

Well, actually, we don’t have a Zeiss. We actually can't get one. Let me ask if you could get one would you tell us? I don't quite know. They keep on saying it's going to be out, it's going to be out but we can't get one.

Maybe they should be using your displays.

I was wondering but this is just wondering whether display source was a problem for them. We have taken – we've bought the Sony headset for example and taken a look at that. There's some – the headset's a little clunky but the display looks nice. It just can't get very bright. So if you get a Zeiss headset, let us know.

Okay. Hey, as far as competition goes, do you regard Micro OLED or (Olight Tech)? Is one of those stronger than the other in your opinion?

Well, it's interesting. Both of them are competitors, as is Sony on the OLED side. If I look at both of them, I do wonder whether – my guess is the (Olight Tech) has more funding from the government of China, so that might be a reason that they have some strength. But to be honest with you, we haven't seen many of their displays or Micro OLEDs for that matter, anywhere.

That's great. I'm a little bit concerned about – well, I'm glad that you guys have the XGA viewfinder coming out but I’m concerned that I won't be able to tell if it's a Sony display or eMagin display. I don't suppose there is any marketing technique you could use so that we would be able to tell or anything.

Yes, that's a good question. I think the question you have to ask on the Sony display is will they sell to others and they may. They may not, so Sony display will be in the Sony camera. The thing that I would guess is can you turn it up very brightly if you get it. We've noticed in the Sony camera itself we couldn't turn it up very bright.

Okay.

Yes, we tried to get rights to press release what customer we would have but we don't know if we would be able to do that yet. That would be one way to know.

Okay, all right.

We'll let you know but …

Do you have any updates for us as far as – regarding that – a while ago you mentioned both a Japanese OEM and an NDA contract that you were doing. I think it was like two or three years ago. Is there any updates on those?

The Japanese customer is still going. They're at the very high end of augmented reality type device. And what was the other one did you say?

It was a non disclosure agreement that you were working on I think two years ago. And it's okay if you don't remember. I'm sorry to be so vague.

Okay, it just sounded like you said an NBA and I thought what. So NDA – I don't know. The Japanese customer is going okay.

Okay. All right, I just have one last …

Okay, one more and then we have to see if there is any other people with questions.

Okay. At Quakecon 2012, eMagin got a mention by John Carmack. I think he has 120 hertz – I'm not sure what – probably SXGA headset that he's using for some of his virtual reality. And one of the big topics was another headset with a high FOB and I just wanted to ask if there is anything you can say about that topic in general, if you've been talking to John Carmack or if field of view, virtual reality field of view was a – is something that has come up recently with you guys.

Well, certainly we talk to people involved in that. I can't say that we do or do not talk to any one particular one. But the field of view is important, of course. That's more – once you have a big enough display, it's more an optics question. And are SXGA or the WUXGA would be outstanding in a headset like this. So we do talk to folks like him. And we – oh, we did show our WUXGA display as I mentioned earlier at SID and we did show it in the headset that we put together under the TATRC contract. That's a very nice headset running 3D during SID and we got a lot of favorable comments and press out of it. Okay?

Yes, thanks for taking my questions. I appreciate it.

You're welcome. Thanks very much. Ian, do we have any more questions?

We do have one final question in the queue. This is form the line of Dennis Van Zelfden at Brazos Research. Please go ahead, Dennis.

Thanks, just a follow-up – Andrew, what is your confidence level of actually getting a contract from one of these major camera manufacturers?

Good question. I'm an optimist but I don't like to delve – give optimistic statements to this group on the phone. So I think we're reasonably confident. I'll leave it at that. Our displays will make the cut.

Okay …

(Inaudible) cautiously optimistic?

Yes, maybe that’s it.

Okay, well, can you point? Which particular factor do you think would they like best? Would it be your ability to produce them quickly, the quality, the size, the price, all of the above?

Well, certainly, all of the above. But the thing that we have that looks very good is we are given some tough specs in terms of brightness and lifetime and we put together a piece to show that we could make this and they gave us a price point that we could meet at these volumes and our power is outstanding. I'll mention one other thing on power and I have to give an example away from the XGA, so forgive me. We have an SXGA that's an older one that's 12 microns and that's about 250 milliwatts. And if you read press you'll see that another OLED manufacturer has mentioned 250 milliwatts. We built a smaller SXGA that's more the size of this other manufacturer and this is the 9.6 micron pixel pitch and that came out to be lower than 200 milliwatts, like about 150. So our power consumption, our efficiency of our OLED stack is very good.

Okay, last question, I promise. This is – I guess it's for Paul. Regarding the backlog again, you had mentioned that 75% of it would be realized in the third and fourth quarters but yet you also seemed pretty confident that you would be getting more purchase orders during that timeframe. Does that mean that you've got pretty good visibility about the business trends, whatever they may be, beyond the backlog number?

Well, yes. The backlogs increased 72% since January to the end of June. It's a big number. It's the biggest we've ever had. And in all of our quarters we get what we refer to as run rate business but basically it's quick turnaround business and people that expect quick turnarounds from the time they submit a PO to the time we can ship it. So we always get that kind of business. That's why we're confident we'll have more purchase orders for Q3 and quite a bit more for Q4 coming in and hitting the backlog. It's just our normal course of business.

Okay, and will you be giving a backlog number at the end of each quarter from now on?

Well, I think there will be people that want us to. We'll have to think about that.

Okay, thanks, guys, appreciate it.

Okay, welcome.

Thank you very much for your question. There's no further questions now, so I'd like to turn over to Andrew Sculley for some closing remarks, thank you.

Okay, well, again, I think everybody on the phone for questions. If you have any suggestions for us and the eMagin team, please let us know. We appreciate it. Any other markets or ideas, I'd appreciate that too. And I just want to thank one more time the great team that we have at eMagin that make all of this possible. And I really mean that they've been working like mad to bring up this new equipment, at the same time making a record quarter in terms of revenue and keeping everything else running smoothly, so great team we have and I thank them and I thank you for participating in our conference call. Okay.

Thank you, Andrew. Thank you for your participation in today's conference, ladies and gentlemen. That concludes the presentation and you may now disconnect. Enjoy the rest of your day.