Making Virtual Imaging a Reality Investor Presentation Needham Growth Conference January 18, 2018
Disclaimer Certain statements made by us in this presentation that are not historical facts or that relate to future plans, events or performances are forward looking statements within the meaning of the federal securities laws. Our actual results may differ materially from those expressed in any forward looking statement made by us. Forward looking statements involve a number of risks or uncertainties including, but not limited to, the risks described under the heading Risk Factors in the Company s filings with the Securities and Exchange Commission, including, but not limited to, the Company s Report on Form 10 K for the year ended December 31, 2016. All forward looking statements are qualified by those Risk Factors as well as the Company s Statement of Forward Looking Information in such filings. All statements made by us in this presentation are further qualified in all respects by the information disclosed in the Company s filings with the Securities and Exchange Commission. These statements are only predictions. We are under no duty to update or revise any forward looking statements to conform such statements to actual results or events, and do not intend to do so. This presentation is the property of, and contains the proprietary and confidential information of the Company and is being provided solely for informational purposes. The projections, estimates and forecasts contained herein have been prepared by the Company in good faith based on assumptions believed by the Company to be reasonable at the time of preparation thereof. Forecasts and estimates regarding the Company s industry and end markets are based on third party sources the Company believes to be reliable. There can be no assurance however that any particular projection, estimate, forecast or other forward looking information will prove to be accurate in whole or in part or that any of the information contained herein is reflective of future performance to any degree. No representation or warranty is made with respect to the information included herein. 2
emagin: Enabling an Uncompromised AR/VR Experience 3
15+ Years Industry Leader in Manufacturing OLED Microdisplays $20 million Trailing Twelve Month Revenue emagin At a Glance 63 Patents and Applications 3 Tier 1 Consumer Electronics AR/VR Agreements >4 million pixels Technology and Market Leader in OLED Microdisplays Incorporated into a broad range of military and industrial applications Enabling next generation Consumer and Enterprise AR / VR A growing pipeline of OEM, Technology and Mass Production partners to commercialize and scale High barriers to entry Capitalizing on the Accelerating Growth of Augmented and Virtual Reality Broad IP portfolio Deep technology and manufacturing know how Highly experienced management and engineering team 4
emagin Technology Enabling Ubiquitous AR/VR AR/VR companies demand greater display performance to realize market potential OLED Vivid color and extremely high contrast ratio High brightness through EMAN proprietary direct patterning technology Low power consumption Microdisplay Designed and built for magnification (standard display technology is not) Highest pixel density = sharp image under magnification Small form factor to accommodate smaller headsets 5
emagin s Proprietary Direct Patterning Technology 2Kx2K full color OLED microdisplay fabricated with advanced backplane and directly patterned OLED emitters to achieve greater than 5,000 nits luminance ¾ ¾ ¾ ¾ Advanced backplane and directly patterned 2Kx2K microdisplay World s first directly patterned OLED microdisplay with highest brightness >5,000 nits and >2,700 ppi resolution 6
emagin s Direct Patterned Microdisplay Advantage Magnification Highlights emagin s Superior Form Factor Samsung Galaxy S5 OLED Cell Phone Display emagin OLED Microdisplay (Shown at same scale) Direct Patterned OLED Required for Immersive Experience 7
emagin s OLED Provides Superior AR/VR Experience 1 mm 1 mm Magnified Cell Phone Display ~600 ppi emagin Microdisplay >2,500 ppi 8
emagin s OLED Technology Advantage Lowest Power and Highest Brightness Brightest OLED monogreen over 15,000 NITS; full color 5,000 NITS demonstrated, full color 10,000 NITS targeted Very high contrast greater than 1,000,000:1 Lower power consumption longer battery life More compact form factor Light weight solution Field tested for reliability and performance Nausea free operation Superior performance at a competitive cost at higher volumes 9
emagin Intellectual Property emagin s intellectual property consists of patents and over 15 years of manufacturing know how and proprietary technologies to create high performance OLED on silicon Patents Over 60 US and foreign patents issued and pending Include Silicon backplane, OLED architecture, process and packaging Key patents include high brightness directly patterned OLED displays Know how Includes Silicon backplane, OLED architecture, process and packaging Key know how includes back plane design, anode patterning, direct patterning of OLED, thin film encapsulation and packaging methodology 10
Progress on Key Strategic AR/VR initiatives Executing well against our consumer AR/VR strategy Leveraging technology leadership into key CE agreements and potential high volume manufacturing relationships 1 2 3 Leading Edge Technology Tier 1 CE Companies High Volume Manufacturing Development of 2Kx2K direct patterned microdisplay, with advanced backplane and optics technology >5,000 nits brightness while reducing power consumption 20% Developing common display design to support ODM Partner Strategy Next generation advancements continuously ongoing Technology leadership has attracted interest from multiple CE companies Milestone Tier 1 deals Q1 2016 license to headset technology and commitment to use 2k x 2k displays in the company s headset Q1 2017 microdisplay design and development agreement for the company s headset Q4 2017 development and licensing agreement We believe consumer electronics companies extensive due diligence validates emagin s superior technology Necessary to have significant traction with CE companies in order to secure high volume manufacturing relationship Deeply engaged with potential manufacturing partners over the last four months Recently signed technology agreement with global chipmaker to support scaling of production In Process 11
AR/VR Market Evolution Current Generation: Cell phone based Easy to implement optics are simpler Lower resolution See through not possible Next Generation: Microdisplay based High resolution and high field of view (FOV) Smaller display featuring advanced optics See through easily accomplished Enables smaller form factor headsets 12
emagin Global Dominance of Military and Aviation Markets 1 SOURCE: VARIANT MARKET RESEARCH Military microdisplays projected CAGR 23% between 2016 and 2024, from $255mm to $1.3b 1 1 st mover in AR/VR for domestic and foreign military applications Longstanding customer relationships Long program / product lifecycles Predominately sole source supplier US Army, Special Forces, Navy/Marines Goggles, thermal weapon sights, binoculars US and Foreign Military Markets Accelerating activity and program wins in aviation We Believe the Military Provides a Stable, Growing Base of Revenues and Development Funding 13
emagin Military and Aviation Recent Developments Completed the Critical Design Review (CDR) with a major aviation prime contractor for an OLED upgrade to a fixed wing production helmet under the F 35 program. This program will replace LCD displays with our OLED displays and eliminate problematic green glow Awarded a follow on contract for the Army s Enhanced Night Vision Goggle III (ENVGIII) and Family of Weapons Sight Individual (FWS I) programs Received an order to support the Light Weight Thermal Sight (LWTS) program Received a multi year order from a European military prime contractor to provide displays for a see through, augmented reality HMD We Believe the Growing momentum in military, aviation and commercial markets will provide a consistent, profitable revenue base 14
Senior Management Team Andrew Sculley CEO Jeffrey Lucas CFO Dr. Amal Ghosh PhD SVP Technology Olivier Prache SVP Product Development Stephen Costello SVP Strategic Partnerships Joseph Saltarelli VP Operations Doug Hughes VP Business Development Over 20 years experience in OLED technology and manufacturing. Led Kodak OLED Systems. MS Physics Cornell, MBA Carnegie Mellon. CFO of public technology and manufacturing companies. Emphasis on technology commercialization and operations improvement. MBA Harvard, CPA, CFA. Pioneering inventor of disruptive OLED technology at emagin and Kodak. PhD Physics MIT. President of the prestigious Society for Information Display (SID). OLED product commercialization pioneer at Pixtech (France) and OIS Optical Imaging Systems. Diplôme d'ingénieur from E.N.S.E.R.G. Grenoble France. Sales, market development and channel management of enterprise, commercial government and military markets. BS Babson, MS Marketing Bentley. Over 25 years of semiconductor, thin films, and packaging manufacturing. Senior Director of Manufacturing Operations, GLOBALFOUNDRIES. BS Ceramic Engineering and Materials Science Rutgers, MBA in Technology Management. Sr. Director, Legislative at Raytheon; Office of the Secretary of the Navy; Commanding Officer, US Navy, Pearl Harbor. MS Naval War College. 15
Operating Results (millions) Consistent $20 25mm base business with military and aviation markets Approximately 30% gross margins Year to Date Revenue Year to Date Quarterly Adjusted EBITDA (1) $18.0 $16.0 $0.0 ($1.3) ($1.5) ($2.4) $14.0 ($1.0) $12.0 $10.0 ($2.0) $8.0 $6.0 ($3.0) $4.0 ($4.0) $2.0 $0.0 $16.8 $15.6 9 Mo. Ended 9/30/16 9 Mo. Ended 9/30/17 ($5.0) Q1'17 Q2'17 Q3'17 NOTE: (1) SEE APPENDIX FOR RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME(LOSS) 16
Balance Sheet and Capital Structure (millions) Balance Sheet ($) Sept 30, 2017 Cash & Equivalents $2.0 Total Assets $25.1 Total Debt* $0.9 Total Liabilities $5.5 Total Shareholders Equity $19.6 * Borrowing Availability $3.7 Capital Structure (shares) Basic Shares Outstanding 35.0 Options (WAEP @$2.96) 5.1 Warrants (WAEP @$2.50) 5.1 Series B Preferred (Conv. Price @$0.75) 7.5 Total Shares and Potentially Dilutive Shares 52.7 $134MM of NOLs at Sept 30, 2017 17
emagin Investment Highlights Large, High Growth Addressable Market Leader in OLED Microdisplays Enabling Ubiquitous Adoption of AR/VR Technologies Extensive IP Portfolio with 15+ Years of Microdisplay Know How Transformative Agreements with Tier 1 CE Companies and Strong Traction with High Volume Manufacturing Partners Highly Experienced Management and Engineering Team 18
APPENDIX 19
Non GAAP Financial Measures To supplement the Company s consolidated financial statements presented on a GAAP basis, the Company has provided non GAAP financial information, namely earnings before interest, taxes, depreciation and amortization, and non cash compensation expense ( Adjusted EBITDA ). The Company s management believes that this non GAAP measure provides investors with a better understanding of how the results relate to the Company s historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financial statements. Management believes that these adjusted measures reflect the essential operating activities of the Company. A reconciliation of non GAAP financial information appears below. ($ in thousands) 3Months Ended Sept 30, 2017 3Months Ended June 30, 2017 3Months Ended March 31, 2017 Net Income (Loss) ($2,992) ($2,270) ($1,999) Non Cash Compensation 190 116 214 Depreciation and Intangibles Amortization Expense 406 481 486 Interest Expense 27 188 35 Provision for Income Taxes Adjusted EBITDA ($2,367) ($1,485) ($1,264) 20