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Registration Statement No. 333-81983
As filed with the Securities and Exchange Commission on August 25, 1999
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Universal Display Corporation
(Exact name of registrant as specified in charter)
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Pennsylvania 3575 23-2372688
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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Three Bala Plaza East, Suite 104
Bala Cynwyd, PA 19004
(610) 617-4010
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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Sherwin I. Seligsohn
Chief Executive Officer and Chairman of the Board
Three Bala Plaza East, Suite 104
Bala Cynwyd, PA 19004
(610) 617-4010
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copy to:
Stephen M. Goodman, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
(215) 963-5000
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Approximate date of commencement of proposed sale and distribution to the
public: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), may determine.
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The information in this prospectus is not complete and may change. The selling
stockholders may not sell these securities publicly until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Subject to Completion -- August 25, 1999
[GRAPHIC OMITTED]
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PROSPECTUS
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The stockholders of Universal Display Corporation identified elsewhere in
this prospectus are offering up to 4,378,170 shares of our common stock for
resale to the public. These selling stockholders will be selling shares of
common stock they own or that they can acquire by exercising warrants they own.
We will not receive any proceeds from the resale of shares of our common
stock by the selling stockholders. We are paying the expenses of this offering.
The primary market for our common stock is the NASDAQ SmallCap Market,
where it trades under the symbol "PANL." Our common stock is also traded on the
Philadelphia Stock Exchange under the symbol "PNL." On August 23, 1999, the last
reported sale price of our common stock on the NASDAQ SmallCap Market was
$4.0625 per share.
An investment in our common stock involves significant risks. You should
carefully consider the risk factors described on pages 6 to 10 before investing
in our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August --, 1999
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TABLE OF CONTENTS
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Page
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Cautionary Statement Concerning Forward-Looking Statements .............................. 3
Summary ................................................................................. 4
Risk Factors ............................................................................ 6
The Offering ............................................................................ 11
Use of Proceeds ......................................................................... 11
Price Range of Common Stock ............................................................. 12
Management's Discussion and Analysis of Financial Condition and Results of Operations ... 13
Our Business ............................................................................ 16
Our Management .......................................................................... 22
Security Ownership of Certain Beneficial Owners and Management .......................... 25
Certain Relationships and Related Transactions .......................................... 27
Selling Stockholders .................................................................... 28
Plan of Distribution .................................................................... 30
Description of Securities ............................................................... 31
Legal Proceedings ....................................................................... 32
Legal Matters ........................................................................... 32
Experts ................................................................................. 32
Where You Can Find Additional Information ............................................... 33
Index of Financial Statements ........................................................... F-1
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CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve a number
of risks and uncertainties. For such statements, we claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. A number of factors could cause our actual
results, performance or achievements or those of the display technology
industry to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, but are not limited to:
o competition in the display technology industry in general and in our
specific target markets;
o changes in prevailing interest rates and the availability of and terms of
financing to fund the growth of our business;
o inflation;
o changes in costs of goods and services;
o economic conditions in general and in our specific target markets;
o changes in consumer preferences and tastes;
o demographic changes;
o changes in, or failure to comply with, federal, state, local or foreign
government regulation;
o liability and other claims asserted against us;
o changes in our commercialization strategy;
o the ability to attract and retain qualified personnel;
o changes in our capital expenditure plans; and
o other factors referred to in this prospectus
In addition, the forward-looking statements included in this prospectus are not
meant to predict future events or circumstances and may not be realized.
Forward-looking statements can be identified by, among other things, the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seek," "pro forma," "anticipates," "intends," or "potential" or the
negative of, or any other variations on, those terms or comparable terminology,
or by discussion of strategy or intentions. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on these
forward-looking statements. We disclaim any obligation to update these factors
or to announce the results of any revisions to any of the forward-looking
statements contained in this prospectus publicly to reflect future events or
developments.
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SUMMARY
This is a summary of information appearing elsewhere in this prospectus.
This summary does not contain all of the information you should consider before
investing in our common stock. This summary is qualified in its entirety by,
and should be read in conjunction with, the more detailed information and
financial statements, including the notes to the financial statements,
appearing elsewhere in this prospectus or in our annual and quarterly reports
and other filings with the Securities and Exchange Commission. References in
this prospectus to "we," "us" and "our" refer to Universal Display Corporation,
together with its wholly-owned subsidiary, UDC, Inc.
Our Company
Universal Display Corporation is engaged in the research, development and
commercialization of organic light emitting diode, or OLED, technology for use
in flat panel displays, lasers and light generating devices. We expect the
initial market for our technology to be in the electronic flat panel display
industry. This industry includes such products as:
o cellular phone displays;
o portable "palm pilot" type devices;
o laptop computers; and
o television and computer monitors.
Stanford Resources, Inc. estimated the size of the electronic display
market to be $40 billion in 1998. The flat panel part of this market was
approximately $16 billion in 1998.
We have the exclusive, perpetual, worldwide license to commercialize all
OLED technology, intellectual property and know-how developed by Princeton
University and the University of Southern California, subject to the terms of
our license agreement with those universities. To date, ten patents have been
issued in the United States. Approximately 40 patent applications (with
corresponding foreign protection) have been filed, and additional patents are
being filed monthly.
Our OLED Technology
Organic light emitting diodes are made of material containing a
carbon-based substance that has the capability to emit light when electric
current is passed through it. We, in collaboration with our research partners,
are working towards commercializing four patented proprietary OLED technology
platforms that offer significant advantages over standard OLEDs. They are:
o TOLED Technology: Our transparent OLED can be used to create transparent
displays for information displays on windshields, cockpit displays on
aircraft and head mounted displays. TOLEDs can also be used in numerous
portable electronic applications because of their bright colors, high
contrast and low power requirements.
o SOLED Technology: Unlike traditional side-by-side display architecture,
which places the red, green and blue picture elements, or pixels,
horizontally next to each other, our stacked OLED stacks the red, green
and blue pixels vertically on top of each other. Thus, to display green in
the conventional architecture, you turn off the red and blue pixels,
leaving spaces between each of the illuminated green pixels. In SOLED, to
display green, you turn off the red and blue sections of the stacked pixel
component. The stacked architecture of the SOLED may increase the
resolution of the display by a factor of three.
o FOLED Technology: Unlike conventional displays, our flexible OLEDs can be
built on flexible materials such as plastic. We believe that such displays
will be lighter in weight and will have
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lower power requirements. The FOLED also may provide the opportunity to
apply low cost roll to roll (web processing) technologies to display
fabrication, which can reduce the cost, and therefore expand the market,
of electronic flat panel displays.
o Organic Laser Technology: We and our research partners are attempting to
develop a fourth technology platform based upon the ability to fabricate
an organic laser utilizing OLED technology. In the September 25, 1997
issue of Nature, our research partners announced what they believed to be
the first evidence of lasing from vacuum deposited thin films of organic
molecules. We believe this is a significant first step towards the
realization of electrically pumped, solid-state lasers based on organic
thin films.
Our Research Partners
Princeton and USC have been performing research on OLED technology for
many years, and have continued that research for us since 1994. The sponsored
research agreement between us and our research partners, which was originally
executed in 1994, was extended in 1997 for five additional years and is subject
to further extension by mutual agreement.
Key members of our research team include Dr. Stephen Forrest and Dr. Paul
Burrows at Princeton and Dr. Mark R. Thomson at USC. There are approximately 25
researchers at Princeton and USC who are engaged in OLED research.
Our Commercialization Strategy
Our approach to developing products and penetrating the electronic display
market as quickly as possible has three major components:
o We are continuing to fund our research partners under the current sponsored
research agreement and to obtain the worldwide exclusive rights to all
intellectual property invented in the project.
o We are working on the development of reliable commercial prototypes and the
optimization of the fabrication processes. We recently leased an 11,000
square foot space near Princeton, New Jersey to serve as a pilot line
facility and technology transfer center.
o We intend to license our proprietary OLED technology and enter into joint
ventures and other strategic alliances with experienced manufacturers and
users of display products for the volume manufacture, distribution and sale
of products based upon this technology. We do not presently intend to become
a volume manufacturer.
Executive Offices
Our executive offices are located at Three Bala Plaza East, Suite 104,
Bala Cynwyd, Pennsylvania 19004. Our phone number is (610) 617-4010. Our web
site can be found at www.universaldisplay.com.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. In
addition to the other information contained in this prospectus, you should
carefully consider the following risk factors before making an investment
decision concerning our common stock. You should not purchase our common stock
if you cannot afford the loss of your entire investment.
We do not expect to be profitable in the foreseeable future, and may never be
profitable.
Since inception, we have not generated any product revenues, and have
incurred significant losses, resulting in an accumulated deficit of
approximately $15.8 million, as of June 30, 1999. We expect to incur losses
for the foreseeable future and until such time, if ever, as we are able to
achieve sufficient levels of revenue from the commercial exploitation of the
OLED technology to support our operations. You should note, however, that:
o OLED technology may never become commercially viable;
o markets for flat panel displays utilizing the OLED technology may be
limited; and
o we may never generate sufficient revenues from the commercial
exploitation of the OLED technology to become profitable.
Additionally, even if we find commercially viable applications for our
OLED technology, we may never recover our research and development costs.
If we do not receive additional financing in the future, we will not be able
continue the research, development and commercialization of our OLED
technology.
Our capital requirements have been and will continue to be significant.
The completion of the research, development and commercialization of the OLED
technology for potential applications will require significant additional
effort and resources. Our cash on hand is not sufficient to meet all of our
future obligations. However, when we need additional funds, we might not be
able to obtain those funds on commercially reasonable terms or at all. If we
cannot obtain more money when we need it, our business might fail.
Additionally, if we attempt to raise money in an offering of our common stock,
the issuance of additional stock will dilute our then existing stockholders.
If our OLED technology is not feasible for product applications, we may never
generate significant revenues.
At this time, we are unable to determine the feasibility of our OLED
technology for the commercial viability of any potential applications. We must
make substantial advances in our research and development efforts in a number
of areas including:
o reliability;
o the development of more fully saturated colors for full color displays;
o integration with drive electronics; and
o issues related to scalability and cost effective fabrication
technologies for product applications
before products utilizing the OLED technology are manufactured and sold. The
development of an electrically pumped laser is also necessary before products
based on the organic laser research are manufactured and sold. Our efforts may
never demonstrate the feasibility of our OLED technology, particularly for use
in full color, large area, high resolution, high information content flat panel
display applications.
Our research and development efforts remain subject to all of the risks
associated with the development of new products based on emerging and
innovative technologies, including, without limitation, unanticipated technical
or other problems and the possible insufficiency of the funds allocated to
complete its development. Technical problems may result in delays and cause us
to incur additional expenses that would increase our
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losses. If we cannot complete our research and development of the OLED
technology successfully, or if we experience delays in completing our research
and development of the OLED technology for use in potential applications,
particularly after the occurrence of significant expenditures, our business may
fail.
Even if our technology is technically feasible, it may not be accepted by the
market.
The potential size, timing and viability of market opportunities targeted
by us are uncertain at this time. Market acceptance of the OLED technology will
depend, in part, upon such technology providing benefits comparable to CRT and
LCD technology (the current standard for display quality) at an appropriate
cost, and its adoption by consumers, neither of which have been achieved. Many
potential licensees of the OLED technology manufacture flat panel displays
utilizing competing technologies and may, therefore, be reluctant to redesign
their products or manufacturing processes to incorporate the OLED technology.
Potential licensees may never utilize the commercially viable OLED technology.
If our research partners fail to make advances in their research, or if they
terminate their relationship with us, we might not succeed in commercializing
our OLED technology.
Research and development of commercially viable applications for OLED
technology is dependent on the success of the research efforts of our research
partners conducted under our sponsored research agreement with them. We cannot
assure you that our research partners will make additional advances in the
research and development of the OLED technology.
Although we fund the OLED technology research, the scope of and technical
aspects of the research as well as the resources and efforts directed to such
research is subject to the control of our research partners. Our sponsored
research agreement provides that if Dr. Forrest is unavailable to continue to
serve as a principal investigator, either because he is no longer associated
with Princeton or otherwise, and a successor acceptable to both us and
Princeton is not available, Princeton has the right to terminate the sponsored
research agreement. The 1997 sponsored research agreement, which expires in
July 2002, may not be extended. Princeton may also terminate the 1997 license
agreement if we fail to make a first commercial sale or use within two years
following a demonstration of efficacy of an OLED-based product. The termination
or expiration of the sponsored research agreement or the 1997 license agreement
would materially and adversely affect our ability to research, develop and
commercialize our OLED technology.
If we cannot form strategic relationships with companies that manufacture and
use products that incorporate our OLED technology, our commercialization
strategy will fail.
Our strategic plan depends upon the development of strategic relationships
with companies that will manufacture and use products incorporating its OLED
technology. We have not yet entered into any such strategic relationships. We
are building a pilot line and technology transfer facility with the proceeds
from our recent private placement, as well as the proceeds received upon the
exercise of publicly traded warrants by the holders of those warrants. We
cannot assure you that such a facility will allow us to enter into such
strategic relationships.
Our prospects will be significantly affected by its ability to sublicense
the OLED technology and successfully develop strategic alliances with third
parties for incorporation of the OLED technology into flat panel displays
manufactured by others. Strategic alliances may require financial or other
commitments by us. We might not be able, for financial or other reasons, to
enter into strategic alliances on commercially acceptable terms, or at all.
Failure to do so would have a material adverse effect on us.
If we cannot protect our intellectual property rights, or if our technology
infringes the rights of others, our business will suffer.
Our rights to the OLED technology are dependent on patents and other
intellectual property rights relating to the OLED technology that are licensed
to us by Princeton and USC. Ten US patents have already been issued,
approximately 40 additional patent applications are pending in the United
States and
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corresponding international patent applications have been filed to cover the
major industrial countries. However, there can be no assurance that additional
patents applied for will be obtained or that any such patents will afford us
commercially significant protection of our OLED technology, or will be found
valid if challenged.
The patent laws of other countries may differ from those of the United
States as to the patentability of the OLED technology and the degree of
protection afforded. Older companies and institutions may independently develop
equivalent or superior technologies and may obtain patent or similar rights
with respect thereto. There are a number of other companies and organizations
that have been issued patents and are filing additional patent applications
relating to OLED technology, including Eastman Kodak Corporation, which holds a
number of patents related to OLED technology. There can be no assurance that
the exercise of some aspects of our licensing rights respecting its OLED
technology being developed by Princeton and USC will not infringe on the
patents of others, in which event we or our research partners may be required
to obtain a license, pay damages, modify their products or method of operation
or be prohibited from making, using, selling or offering to sell some or all
products incorporating our OLED technology. We also might not have the
financial or other resources necessary to enforce or defend a patent
infringement action, and Princeton University might not enforce an action in a
timely manner. If products incorporating our OLED technology are found to
infringe upon the patent or other intellectual property rights of others, it
could have a material adverse effect on us.
The federal government has rights to our OLED technology that might prevent us
from realizing its benefits.
The United States government, through the Defense Advanced Research
Projects Agency, has provided funding to Princeton for research activities
related to certain aspects of its OLED technology. The federal government could
obtain rights to this technology, which would affect our rights as follows:
o If all or certain aspects of the OLED technology develop from our funding
to Princeton, and those aspects are deemed to fall within the planned and
committed activities of DARPA's funding, the federal government, pursuant
to federal law, could have certain rights relating to the OLED technology.
o If the federal government determines that we have not taken effective
steps to achieve practical application of such technology in a field of
use in a reasonable time, it may require us to grant licenses to other
parties in any such field of use.
o The federal government could restrict our ability to market the OLED
technology to the federal government for military and other applications.
o The federal government's continued funding of Princeton's research
activities may also give it rights to aspects of the OLED technology
developed in the future.
If so, we might not realize the benefits of that technology.
Because many of our competitors have better name-recognition, and greater
financial, technical, marketing and research capabilities than us, we may never
be able to compete successfully in the flat panel display industry.
The flat panel display industry is characterized by intense competition.
The market is currently, and will likely continue to be, dominated by products
utilizing LCD technology. Numerous companies are making substantial investments
in, and conducting research to improve characteristics of, LCD technology.
Several other flat panel display technologies have been, or are being,
developed, including field emission, inorganic electroluminescence, polymeric
light emitting diode, gas plasma and vacuum fluorescent displays. In addition,
other companies are engaged in research and development activities with respect
to technology using OLEDS. Advances in LCD technology or any of these
developing technologies may overcome their limitations or become the leading
technology for flat panel displays, either of which could limit the potential
market for flat panel displays utilizing the Company's OLED technology.
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Substantially all of these competitors have better name recognition and
greater financial, technical, marketing, personnel and research capabilities
than us. Our competitors may succeed in developing technologies and
applications that are more cost-effective or have fewer display limitations
than our OLED technology. We may never be able to compete successfully or
develop commercial applications for our OLED technology.
If we cannot keep our key employees or hire other talented persons as we grow,
our business might not succeed.
Our performance is substantially dependent on the continued services of
senior management and other key personnel, and its ability to offer competitive
salaries and benefits to its employees. We do not have employment agreements
with any of our management or key personnel. Additionally, competition for
highly skilled technical, managerial and other personnel is intense. We might
not be able to attract, hire, train, retain and motivate the highly skilled
managers and employees we need to be successful. If we fail to attract and
retain the necessary technical and managerial personnel, we will suffer and
might fail.
We can issue shares of preferred stock that can adversely affect your rights as
a stockholder.
Our articles of incorporation authorize use to issue up to 5,000,000
shares of preferred stock with designations, rights and preferences determined
from time-to-time by our board of directors. Accordingly, our board is
empowered, without shareholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights superior to those of
our common stockholders. For example, an issuance of shares of preferred stock
could:
o adversely affect the voting power of the common stockholders;
o make it more difficult for a third party to gain control of us;
o discourage bids for our common stock at a premium; or
o otherwise adversely affect the market price of the common stock.
Our board has designated and issued 200,000 shares of Series A Preferred Stock,
all of which are held by an entity controlled by Sherwin Seligsohn. We may
issue additional shares of our authorized preferred stock at any time in the
future.
The market price of our common stock might be highly volatile.
The market price of our common stock might be highly volatile, as has been
the case with the securities of other emerging growth companies. Factors such
as:
o our operating results;
o announcements by us or our competitors of technological developments, new
product applications or license arrangements; and
o other factors affecting the flat panel display industry generally may
have a significant impact on the market price of our common stock.
In recent years, the stock market has experienced a high level of price and
volume volatility and market prices for the stock of many companies,
particularly small and emerging-growth companies.
If our shares are delisted, you might not be able to sell your investment in
our company.
Our common stock is listed on the Nasdaq SmallCap Market. To continue to
be listed on that market, however, we must maintain, with certain exceptions,
maintenance criteria, including:
o specified levels for total assets;
o market value of the public float;
o total capital and surplus; and
o a minimum bid price per share.
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The failure to meet such maintenance criteria in the future may result in the
delisting of the our common stock from the Nasdaq SmallCap Market. Thereafter,
trading, if any, in our common stock would be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, you could find it more
difficult to dispose of, or to obtain accurate quotations as to the market
value of, our common stock.
If we are delisted, trading in our common stock may become subject to
additional regulation that could further limit the liquidity of your
investment.
In addition, if our common stock were to become delisted from trading on
Nasdaq and the trading price of the common stock were to remain below $5.00 per
share, trading in the common stock would also be subject to the requirements of
additional rules under the Exchange Act. These rules require additional
disclosure by broker-dealers in connection with any trades involving any
non-Nasdaq equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. Such rules require the delivery, prior to
any so-called penny stock transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it, and impose various sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The broker-dealer also must disclose the commissions
payable to the broker-dealer, current bid and offer quotations for the penny
stock and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Such information must be provided to the customer orally or in writing
prior to effecting the transaction and in writing before or with the customer
confirmation. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in our common stock, which could severely limit the
market liquidity of your investment.
This offering, as well as the issuance of other publicly traded shares, could
drive our stock price down.
Following the effectiveness of our registration statement, the shares of
common stock offered by the selling stockholders will become freely salable in
the public market. Although the sale of these additional shares to the public
might increase the liquidity of our stockholders' investments, the increase in
the number of shares available for public sale could drive the price of our
common stock down, thus reducing the value of your investment and perhaps
hindering our ability to raise additional funds in the future. To the extent
other restricted shares become freely salable, whether through an effective
registration statement or under Rule 144 of the Securities Act, or we issue
additional shares that might be or become freely salable, you could expect our
stock price to decrease.
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THE OFFERING
The selling stockholders are offering for resale up to 4,378,170 shares of
our common stock. Of the shares, 2,842,501 shares of common stock will be
issued upon the exercise of outstanding warrants.
We issued the shares of common stock, and the warrants exercisable for
shares of common stock, that the selling stockholders are offering as follows:
o We issued an aggregate of 1,414,034 units in a two-tranche private
placement to accredited investors at $3.75 per unit. Each unit consisted
of one share of common stock and one warrant to purchase one share of
common stock. The exercise price of the warrants underlying the units
issued in the first and second tranches were $4.31 and $4.28,
respectively. All of the shares of common stock that are part of the units
and shares of common stock to be issued upon the exercise of the warrants
are included in this offering. In connection with this offering, two
placement agents (or their respective designees) received an aggregate of
27,987 shares of common stock and 188,719 warrants to purchase shares of
common stock with exercise prices ranging from $4.28 to $4.53.
o We issued warrants to two consultants to purchase 125,000 shares of
common stock at exercise prices ranging from $7.00 to $7.25 per share. Of
these warrants, 25,000 warrants issued to one consultant vested
immediately. The remaining warrants were granted to the other consultant,
25,000 of which vested immediately and 75,000 will vest upon our successful
entrance into the Taiwanese market.
o We issued warrants to one employee and one director to purchase 200,000
shares of common stock at an exercise price of $6.38. These warrants
vested immediately and expire in 2008.
o We issued 140,000 shares of common stock and 175,000 warrants to purchase
common stock to Princeton and 60,000 shares of common stock and 75,000
warrants to purchase common stock to the USC in connection with the 1997
license agreement and 1997 sponsored research agreement. The warrants have
an exercise price of $7.25, vested immediately and expire in 2007.
o We issued warrants to consultants to purchase 200,000 shares of common
stock at an exercise price of $4.80. These warrants vested immediately and
expire in 2002.
o We issued warrants to purchase 20,000 shares of common stock to an
individual in exchange for consulting services. These warrants have an
exercise price of $6.00, vested immediately and expire in 2006.
o The remainder of the common stock offered for resale by the selling
stockholders underlie warrants either issued from time to time by us for
services rendered to our company or transferred to the selling stockholder
as a gift from the prior holder.
The shares of common stock offered for resale may be sold in a secondary
offering by the selling stockholders pursuant to this prospectus. Under the
terms of the transactions described above, we are contractually required to
register the shares of common stock that are part of the units and the shares
of common stock to be issued upon the exercise of the warrants.
USE OF PROCEEDS
The selling stockholders will receive the proceeds from the resale of the
shares of common stock. We will not receive any proceeds from the resale of the
shares of common stock by the selling shareholders.
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PRICE RANGE OF COMMON STOCK
The primary market for our common stock is the NASDAQ SmallCap Market,
where it trades under the symbol "PANL." Our common stock is also traded on the
Philadelphia Stock Exchange under the symbol "PNL." We completed our initial
public offering of common stock on April 11, 1996, at $5.00 per share. The
following table sets forth the high and low sales prices for the shares for the
periods indicated.
Year/Quarter High Close Low Close
- ------------ ------------ ----------
1996
Second Quarter (from April 11, 1996) ........... 10 1/2 4
Third Quarter .................................. 8 4 5/8
Fourth Quarter ................................. 6 5/8 4 3/4
1997
First Quarter .................................. 7 3/8 3 5/8
Second Quarter ................................. 5 3/4 3 7/8
Third Quarter .................................. 6 4
Fourth Quarter ................................. 7 7/8 4 1/4
1998
First Quarter .................................. 6 11/16 4 17/32
Second Quarter ................................. 6 17/32 5 1/2
Third Quarter .................................. 6 3/4 3 9/16
Fourth Quarter ................................. 5 1/8 3 9/16
1999
First Quarter .................................. 4 13/16 3 9/16
Second Quarter ................................. 4 5/16 3
Third Quarter (through August 23, 1999) ........ 5 9/32 3 11/16
As of August 23, 1999, we had 13,187,214 shares of common stock outstanding
and more than 300 stockholders of record.
DIVIDEND POLICY
We have not declared or paid any cash dividends since our inception. We
currently intend to retain future earnings, if any, for use in the operation
and expansion of our business and do not intend to pay any cash dividends in
the foreseeable future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Since our inception, we have been engaged, and for the foreseeable future
expect to be engaged, exclusively in the research, development and
commercialization of our OLED technology for use in flat panel displays and
other applications. To date, we have generated minimal revenues and do not
expect to generate any meaningful revenues for the foreseeable future. We
likely will not generate meaningful revenues until we successfully demonstrate
that our OLED technology is commercially viable for flat panel displays and
other applications, and enter into license agreements, joint ventures or
strategic alliances with third parties with respect to the technology. We have
incurred significant losses since inception, resulting in an accumulated
deficit of $15,846,197, as of June 30, 1999.
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
We had a net loss of $2,271,860 ($.18 per share) for the six months ended
June 30, 1999, compared to $952,766 ($.09 per share) for the same period in
1998. The increase is primarily attributed to increased research and development
and general and administrative expenses.
General and administrative expenses were $1,669,582 for the six months
ended June 30, 1999 compared to $821,204 for the same period in 1998. The
increase was due primarily to an equity grant authorized by the Board of
Directors to our executives, which amounted to $764,660 in compensation expenses
being incurred in the period compared to none for the same period in 1998.
Research and development expenses were $851,440 for the six months ended June
30, 1999 compared to $444,944 for the same period in 1998. Research and
development costs were higher in 1999 compared to 1998 primarily because of an
increase in research being performed at Princeton by our employees and increased
patent expenses. In 1998, research and development costs consisted primarily of
patent expenses and payments under the 1997 sponsored research agreement.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
We had a net loss of $2,793,842 ($.27 per share) for the year ended
December 31, 1998, compared to a net loss of $5,927,718 ($.64 per share) for
the year ended December 31, 1997. The decrease in the net loss was primarily
attributable to the decrease in research and development expenses, which in
1997 included a non-cash expense related to the value of common stock and
warrants issued to Princeton and USC in the amount of $3,120,329 ($.34 per
share). We earned $368,794 from contract research revenue in 1998, compared to
$93,605 in 1997. The revenue was derived primarily from a subcontract with
Princeton, pursuant to a three year, $3 million contract Princeton received
from DARPA, a National Science Foundation grant and a grant from the New Jersey
Commission on Science and Technology.
Research and development expenses were $1,419,394 for the year ended
December 31, 1998, compared to $4,207,898 for the year ended December 31, 1997.
For the year ended December 31, 1998, research and development expenses
consisted of:
o payments in the amount of $125,842 to Princeton under the 1997 sponsored
research agreement;
o payments in the amount of $630,929 for patent applications, prosecution
and other intellectual property rights; and
o costs in the amount of $662,623 associated with our Princeton
development team.
Research and development expenses for the same period in 1997 consisted of:
o the issuance of common stock and warrants in connection with 1997
sponsored research agreement, which resulted in a non-cash charge of
$3,120,329;
o payments in the amount of $347,374 to Princeton under the 1994 sponsored
research agreement; and
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o payments in the amount of $740,195 for patent applications, prosecution,
and other intellectual property rights expenses.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
We had a net loss of $5,927,718 ($.64 per share) for the year ended
December 31, 1997, compared to a net loss of $1,768,995 ($.21 per share) for
the year ended December 31, 1996. The increase in the net loss was primarily
attributable to increased research and development expenses, of which
$3,120,329 ($.34 per share), was a non-cash expense related to the value of
common stock and warrants issued to Princeton and USC, and increased general
and administrative expenses in 1997 compared to 1996. We earned $93,605 from
contract research revenue in 1997, compared to no revenue in 1996. The revenue
was derived primarily from a subcontract with Princeton, pursuant to a
three-year, $3 million contract Princeton received from DARPA.
Research and development expenses were $4,207,898 for the year ended
December 31, 1997, compared to $948,568 for the year ended December 31, 1996.
For the year ended December 31, 1997, research and development expenses
consisted of:
o the issuance of common stock and warrants in connection with our 1997
sponsored research agreement, which resulted in a non-cash charge of
$3,120,329;
o payments in the amount of $347,374 to Princeton under the 1994 sponsored
research agreement; and
o payments in the amount of $740,195 for patent applications, prosecution,
and other intellectual property rights expenses.
Research and development expenses for the same period in 1996 consisted
primarily of payments to Princeton under the 1994 sponsored research agreement.
General and administrative expenses were $1,986,628 for the year ended
December 31, 1997, compared to $938,741 for the year ended December 31, 1996.
The increase in general and administrative expenses in 1997 compared to 1996
was primarily associated with;
o the hiring of executives, technical personnel, and support staff;
o the leasing of office space for our headquarters; and
o a non-cash charge in the amount of $100,000, which was related to a
consulting agreement with the underwriter of our 1996 initial public
offering.
Liquidity and Capital Resources
As of June 30, 1999, we had cash and cash equivalents of $8,703,768 and
short-term investments of $1,008,184, compared to cash and cash equivalents of
$1,828,381 and short-term investments of $527,502 as of December 31, 1998. In
April 1999, publicly-traded warrants to purchase shares of our common stock
were exercised, resulting in our receipt of net cash proceeds of approximately
$4,350,000. The remaining warrants expired unexercised. In May 1999, we
completed a private placement, and issued 1,414,034 shares of common stock and
warrants, resulting in net proceeds of approximately $4,800,000.
We expect to move into a leased 11,000 square foot facility in Ewing, New
Jersey in September 1999. This facility will serve as our technology development
and pilot line facility and corporate headquarters. We will no longer be using
the office space in Bala Cynwyd, Pennsylvania. In connection with our new
facility, we expect to incur costs of approximately $3,750,000 related to new
equipment and other facility costs over the next ten months. As of August 23,
1999, we have incurred costs of approximately $981,000. In addition, we have
entered into an equipment lease agreement which requires minimum annual lease
payments of approximately $90,000 for three years.
During 1997, private placement warrants to purchase 1,124,000 shares of
our common stock were exercised, resulting in our receipt of net cash proceeds
of $3,940,800. On April 11, 1996, we completed a public offering of 1,300,000
shares of common stock at a price of $5.00 per share, and redeemable warrants
to purchase 1,495,000 shares of common stock at an exercise price of $3.50 per
share, at a price of $.10 per warrant. We received net cash proceeds of
$5,282,665 from the public offering (excluding $223,263, which represents a
portion of the offering expenses previously charged to general and
administrative expenses). Net working-capital decreased to $2,429,390 as of
December 31, 1998, from working-capital of $5,003,863 as of December 31, 1997,
which is the result of our using it as working capital to fund operations. Our
net cash used in operating activities was $2,247,731 in 1998, $2,441,698 in
1997 and $2,370,449 in 1996. Non-cash expenses related to the issuance of
common stock, warrants and options were $330,575 in 1998, $3,436,329 in 1997,
and $25,000 in 1996.
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We anticipate, based on management's internal forecasts and assumptions
relating to its operations (including assumptions regarding our working-capital
requirements, the progress of research and development, the availability and
amount of other sources of funding available to Princeton for research related
to OLED technology, the time and costs associated with preparing, filing and
prosecuting patent applications, and the enforcement of intellectual property
rights) that we will not need additional cash to meet our obligations for 1999.
The 1997 sponsored research agreement requires us to pay up to $4.4
million to Princeton from July 1998 through July 2002. This period is subject
to extension. We expect funding under this agreement in 1999 to be less than
$1.1 million maximum, per the agreement. Substantial additional funds will be
required for the research, development and commercialization of OLED
technology, obtaining and maintaining intellectual property rights, working
capital and other purposes, the timing and amount of which is difficult to
ascertain. There can be no assurance that additional funds will be available on
commercially reasonable terms when needed.
Year 2000
At the end of this year, computer programs using two digits rather than
four to define the applicable year may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in system failures or
miscalculations causing a temporary inability to engage in normal business
activities. Currently, we believe our most likely Year 2000 worst case scenario
would involve the failure of the information systems of our research partners
or other persons with whom we do business.
Our information systems consist of commercially available hardware and
software purchased within the last several years. Accordingly, we believe that
we do not have material exposure to, or anticipate any material disruption as a
result of, the Year 2000 issue with respect to our information systems.
With respect to our non-information technology systems, we have made
reasonable efforts to contact providers of products and services with
non-information technology concerning their Year 2000 readiness. Based on this
contact, we believe that we do not have material exposure to the Year 2000
issue with respect to our non-information systems.
We continue to analyze whether others with whom we do business have Year
2000 issues. These include our research partners. We are currently unable to
predict the extent to which the Year 2000 issue will affect these persons, or
the extent to which we would be vulnerable to their failure to remediate any
Year 2000 issues on a timely basis. The failure of any one of these persons
subject to the Year 2000 issue to convert its systems on a timely basis could
adversely affect our attempts to research, develop and commercialize our OLED
technology.
We do not expect the cost to modify such infrastructure for Year 2000
compliance will be material to our financial condition.
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OUR BUSINESS
General
We are engaged in the research, development and commercialization of OLED
technology for use in flat panel displays, lasers and light generating devices.
We have been funding research for this project at Princeton (since 1994) and at
USC (since 1995, when one of our principal researchers accepted a faculty
position at USC). We have the exclusive, worldwide license to commercialize all
technology developed in this project pursuant to a license agreement between us
and our research partners.
Our mission is to commercialize our OLED technology for widespread
application for a number of different product applications. We intend to carry
out that mission through the creation of strategic partnerships to leverage the
core competencies of research organizations, manufacturing organizations and
marketing organizations to develop products and penetrate the market as quickly
as possible. This strategy has three major components:
o First, we are continuing to fund the research in this project at
Princeton and USC and striving to obtain the worldwide exclusive rights to
all intellectual property invented in this project.
o Second, we are working on the development of reliable commercial
prototypes and the optimization of the fabrication processes at our
recently leased, 11,000 square foot facility near Princeton, NJ, which
will serve as our pilot line facility and technology transfer center.
o Third, we intend to license our proprietary OLED technology and enter
into joint ventures and other strategic alliances with experienced
manufacturers and users of display products for the volume manufacture,
distribution and sale of products based upon this technology.
There can be no assurance, however, that commercial applications of our
technology can be accomplished at any time, or if at all, which would have a
material adverse impact on us and our business. We do not presently intend to
become a volume manufacturer.
We believe that products incorporating OLEDs should have superior
performance characteristics at a lower cost than existing technologies for a
wide variety of product applications. Our first products will likely be low
information, monochrome or multicolor devices, such as cellular phone displays.
We intend to move forward as quickly as possible to larger area, full-color
devices, such as low power, personal digital assistants and rugged, lightweight
laptop computers. The long-term goals of our proprietary display technology
include thin, wall-size televisions, electronic newspapers, and transparent
conformable displays that could be attached anywhere.
We were incorporated in Pennsylvania in April 1985 under the name of
Enzymatics, Inc. In June 1995, we changed our name to Universal Display
Corporation. Our executive offices are located at Three Bala Plaza East, Suite
104, Bala Cynwyd, Pennsylvania 19004. Our phone number is (610) 617-4010 and
our website can be found at www.universaldisplay.com.
Our Role in the Electronic Display Market
Electronic displays are found today in thousands of products from
wristwatches and cellular telephones to notebook computers and TVs. They are
also a key component in the plethora of emerging communication and computing
products. Stanford Resources estimated the electronic display market to be
approximately a $40 billion industry in 1998.
We believe that competition in this market, particularly for full color,
large area, high resolution, high information content displays is based upon
image and color quality, viewing angle, power requirements, cost and
manufacturability. The dominant technology for displays today is the cathode
ray tube, or CRT the type of technology used in most televisions and computer
monitors. The dominant technology today for flat panel displays is the liquid
crystal display, or LCD, the type of technology used in most laptop computers
and cellular telephones. However, the display industry continues to search for
new technology that offers higher brightness, lower power consumption, lighter
weight, higher definition, fuller color, wider viewing angles and
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faster response time at a lower cost. We believe that our OLED technology has
the potential to meet these increasingly complex demands for portable
information-age products, and provide products that are less expensive and
higher quality than other display technology. With flat panel display demand
projected to double over the next five years to an estimated $32 billion market
(according to Stanford Resources), we believe that there is a great opportunity
for OLED technology to have a material impact in the flat panel display market.
This assumes of course, that our OLED technology will not be superseded by
technologies existing today or to be developed in the future.
Our OLED Technology
In its most basic form, an OLED is a monolithic, solid state electronic
device consisting of a series of organic thin films sandwiched between two
conductors. When a voltage is applied across the device, it emits efficient,
bright light. This light emission is based upon a luminescence phenomenon in
which electrons and holes are injected and migrate from the contacts toward the
organic heterojunction under the applied electric field. When these carriers
meet, they form excitons (electron-hole pairs) that recombine to emit colored
light that is characteristic of the specific organic materials employed.
OLEDs are lightweight, durable and power efficient; thus they are ideal
for portable applications. In full production, OLEDs should be highly
manufacturable, given existing semiconductor and flat panel display
manufacturing tools. We believe that OLEDs will cost less than LCDs because
OLEDs require fewer process steps and use fewer and lower-cost materials than
LCDs. In addition, we believe that OLEDs can have the following performance
advantages over LCD technology:
Higher brightness Faster response time
Fuller viewing angle Lighter weight
Higher power efficiency Greater environmental durability
Lower manufacturing costs Greater reliability
Broader temperature ranges
We believe that flat panel displays which use our OLED technology, if
successfully developed, will provide image and color quality, brightness,
contrast, scalability, video and viewing angles comparable to CRT displays.
These flat panel displays are also expected to be manufacturable from
lightweight, low cost materials and to require a relatively low power source.
o TOLED Technology:
-----------------
Using a proprietary transparent contact, TOLED displays can be
transparent, thus creating many new product opportunities. This is possible
because, in addition to having transparent contacts, the organic materials are
themselves transparent over their own emission spectrum and throughout most of
the visible spectrum. Our TOLEDs may be used to create transparent displays for
information displays on windshields, cockpit displays on aircraft and head
mounted displays. TOLEDs can be integrated with standard silicon semiconductor
technology through a proprietary transparent cathode. TOLEDs may also be used
in numerous portable electronic applications because of their bright colors,
high contrast and low power requirements.
This invention was first published in the scientific journal, Nature, in
March 1996 and has been issued U.S. patent number 5,703,436.
o SOLED Technology:
-----------------
Our novel pixel architecture, know as the SOLED, can provide up to three
times the display resolution as traditional side by side display architectures.
The SOLED stacks the red, green and blue pixels vertically on top of each
other. Thus, any color of light can be generated from each pixel by adjusting
the current to the pixel. To display green in the SOLED, one can tune each
pixel to green and turn off the red and blue pixels,
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which increases the resolution of the display by a factor of three. To tune
color and brightness separately, each of the red, green and blue sub-pixel
elements is individually controlled. By adjusting the ratio of current in the
elements, the emission color is tuned. By varying the total current through the
stack, brightness is varied. By modulating the pulse width, grayscale is
achieved.
This invention was first published in the scientific journal, Science, in
July 1997. U.S. patent numbers 5,707,745; 5,721,160; 5,757,026 and 5,757,139
have been issued with respect to the SOLED. Drs. Forrest, Thompson and Burrows,
the principal inventors of our OLED technology, received the Distinguished
Inventor of the Year award from the Intellectual Property Owners Association in
April 1998, and they received the Thomas Alva Edison Award from the Research and
Development Council for New Jersey in November 1998 for their SOLED invention.
o FOLED Technology:
-----------------
Unlike conventional displays, our FOLED can be built on lighter weight
plastic and other rugged, conformable surfaces. Our proprietary FOLED
technology is the innovative result of our research partners' research to
demonstrate that OLEDs are functional and durable in a flexible format and can
be built with similar performance to their rigid substrate equivalents. Plastic
displays should provide lighter weight and lower power requirements. They are
expected to extend the lifetime of portable electronic products because their
displays would no longer be made from glass. As flexible plastics permit
displays to conform to different shapes and surfaces, the boxy electronic
display form may no longer be necessary.
The FOLED has the potential to offer compelling performance advantages
over existing technology. In addition, it may also provide the opportunity to
apply low cost roll to roll (web processing) technologies to display
fabrication, which can reduce the cost, and therefore expand the market, for
electronic flat panel displays. First published in Optics Letters in February
1997, this invention has received U.S. patent number 5,844,363.
o Organic Laser Technology:
-------------------------
We and our research partners are researching a fourth technology platform
based upon the ability to fabricate an optically pumped organic laser. In the
September 25, 1997 issue of Nature, our research partners announced what they
believed to be the first evidence of laser from vacuum deposited thin films of
organic molecules using optical pumping. We believe this is a significant first
step towards the realization of electrically pumped, solid-state lasers based
on organic thin films. Our research partners will need to complete the
development of an electrically pumped laser for this technology to have
commercial viability.
We believe that an electrically pumped organic semiconductor laser could
have applications in a number of markets, including fiber-optic communications,
CDs, CD-ROM drives, DVD discs, DVD-ROMs, laser printers, rewriteable optical
storage drives, bar code scanners and digital printing presses.
Our Research Partners
Research activities relating to our OLED technology are currently being
conducted at Princeton's Advanced Technology Center for Photonics and
Optoelectronic Materials and at the USC Synthetic Materials Laboratories. In
October 1997, we entered into a new five year sponsored research agreement for
research activities related to organic light emitters, which continues and
expands the scope of the 1994 sponsored research agreement.
Under the 1997 sponsored research agreement, we have agreed to pay up to
$4.4 million to Princeton from July 1998 thorough July 2002, subject to
extension, in connection with research in this project. In October 1997, we and
our research partners also entered into an amended license agreement, which
modified the terms of our 1994 license agreement. The development of
commercially viable applications for our OLED technology is principally
dependent on the success of the research efforts of our research partners
conducted under these agreements. The scope and technical aspects of the
research and the resources and efforts directed to this research is subject to
the control of our research partners. The 1997 sponsored research agreement
provides that if Dr. Forrest is unavailable to continue to serve as a principal
investigator, either because he is
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no longer associated with Princeton or otherwise, the contract reverts back to
us. As long as we spend $800,000 per annum on research, marketing or
commercialization of our OLED technology, the 1997 sponsored research agreement
cannot be terminated by Princeton.
In connection with the 1997 license agreement and the 1997 sponsored
research agreement, we issued:
o 140,000 shares of common stock and ten-year warrants to purchase 175,000
shares of common stock at an exercise price of $7.25 per share to
Princeton, of which (a) 19,316 shares of common stock were distributed
to Dr. Forrest, (b) 17,463 shares of common stock were distributed to Dr.
Burrows, and (c) an aggregate of 15,873 shares of common stock were
distributed among 12 members of the Princeton research team, and
o 60,000 shares of of common stock and ten-year warrants to purchase 75,000
shares of common stock at an exercise price of $7.25 per share to USC, of
which 30,000 shares of common stock and 37,500 warrant shares were
distributed to Dr. Thompson.
There are approximately 25 researchers at the two universities working in
the program, which we believe is one of the largest OLED research teams in the
world.
Our Intellectual Property
Our rights to the OLED technology are governed by the 1997 sponsored
research agreement and the 1997 license agreement. Under these agreements, all
patents and other intellectual property rights relating to the OLED technology
are the property of Princeton or USC, as applicable. We have the worldwide
exclusive license to manufacture and market products based on such patents,
pending patent applications and any future patent applications and inventions
conceived or discovered under the 1997 sponsored research agreement, and to
sublicense those rights. When we sublicense the OLED technology (except to
affiliates), or sell products utilizing the OLED technology, we will be
required to pay to Princeton a royalty in the amount of 3% of our net
sublicense fees or net sales of products utilizing the OLED technology. We are
also required to reimburse Princeton for all costs incurred in filing,
prosecuting and maintaining patent applications and patents for inventions
developed under the sponsored research agreement.
In December 1997, the first patent titled "Transparent Contacts for
Organic Light Emitters", was issued to Princeton by the U.S. Patent and
Trademark Office in connection with the sponsored research. Nine additional
U.S. patents were issued in 1998 and in 1999 to Princeton and/or USC, including
those for the three flat panel display technology platforms -- TOLED, SOLED,
and FOLED. Princeton and USC have collectively filed approximately 40
additional patent applications in the U.S. relating to the OLED technology, and
have filed for corresponding intellectual property protection internationally
to cover the other major industrial countries. In addition, we have obtained an
exclusive worldwide royalty-free license from USC to manufacture and market
products based on inventions claimed in a patent issued to USC in May 1994
relating to, among other things, a method of depositing ultra-thin, very
smooth, ordered organic layers using vacuum deposition, which is required for
the manufacturing of OLEDs.
Under the 1997 license agreement, we are required to use commercially
reasonable efforts to bring the OLED technology to market. This requirement is
deemed satisfied if we perform our obligations under the 1997 sponsored
research agreement, and, upon expiration or termination that agreement, we
invest a minimum of $800,000 per year in research, development,
commercialization or patenting efforts respecting the OLED technology.
Princeton has the right to terminate the 1997 license greement in certain
specified circumstances, and prior to any termination, all disputes under the
1997 license agreement and the 1997 sponsored research agreement are subject to
mediation and arbitration, except those relating to the validity, construction
or effect of patents.
Government Support
The United States government is also playing a role in tile development
and commercialization of advanced display technologies, both as a source of
funding and as a potential customer. For example, the federal government was
instrumental in forming the United States Display Consortium, a cooperative
effort between industry and government aimed at developing an infrastructure to
support a North American flat panel display infrastructure. USDC's members
include over 130 flat panel display manufacturers, developers and users, and is
supported by DARPA. We joined the USDC in September 1997 and are one of
fourteen members on its governing board.
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We are part of a team that includes Princeton, USC and Hughes Research
Laboratories that was awarded a $3 million research contract from DARPA to fund
the development of "Multi-Color Ultra lightweight Organic Light Emitting Diode
(OLED) Displays." The three-year contract commenced September 1, 1997. We
expect to receive approximately $700,000 for our part of the project relating
principally to the fabrication of prototypes and reliability improvements.
In September 1997, we and Princeton were jointly awarded a $100,000 Phase
I grant by the National Science Foundation under the Small Business Technology
Transfer Program for further development of its OLED technology, principally
related to more fully saturated colors. This grant was successfully completed,
and we are now waiting to hear whether we have been awarded a Phase II proposal
for $400,000 which was submitted to the National Science Foundation.
In September 1997, we and Princeton received a $100,000 contract award
from the New Jersey Commission on Science and Technology for further
development of its OLED technology and to study the feasibility of
manufacturing OLED displays in New Jersey. We believe that there will be
additional significant government funding opportunities in 1999 for our OLED
technology development program.
Development Activities
We currently have four engineers, including two Ph.Ds, working on
developing manufacturing technology and fabricating product prototypes. They
are presently guest researchers at the Manufacturing Technologies Development
facility located in Princeton, where they engage in fabricating prototypes and
developing manufacturing technology that will be further refined in our
technology development and pilot line facility, described below.
Our newly leased facility near Princeton, New Jersey will serve as our
technology development and pilot line facility, as well as our corporate
headquarters. We have begun building the new development and pilot line
facility in the second quarter of 1999. The core purpose of this facility is to
complete product and process technology transfer packages for production and
product commercialization. Specifically, we believe it will satisfy several key
objectives:
o engineering and commercial prototype fabrication;
o continued device and process optimization;
o manufacturing scale-up, technology development; and
o process and product reliability validation.
We also expect this facility to serve as a training site for manufacturing
partners and customers. The central feature of this facility is an OLED display
pilot line and technology transfer center. The pilot line is designed to produce
several thousand displays per month, in sizes up to 6" x 6". It will contain
glass preparation, photolithography, vacuum deposition, packaging and metrology
labs within Class 100 and Class 10,000 clean room environments. The facility
also has support capabilities including optoelectronic testing, reliability, and
prototype assembly laboratories.
Competition
The display industry is characterized by intense competition. CRTs
currently dominate the television and desktop computer monitor market, as
improvements in CRTs have further increased display quality. Flat panel
displays have been developed and are in commercial use in certain applications
where the weight, power requirements, and bulky size of the CRT inhibit its
use. Flat panel displays have been available for a significant period of time
and a variety of advancements in flat panel displays have been made over the
last several years. However, flat panel displays with the capabilities
necessary to replace CRTs in all applications have yet to be developed.
The flat panel display market is currently dominated by products utilizing
LCD technology and is expected to be dominated by LCD technology for the
foreseeable future. We believe that LCDs have certain limitations, such as a
limited viewing angle, limited scalability, low response rate, low contrast and
inferior
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image and color quality when compared to CRT displays. LCDs are also more
expensive to produce as compared to CRTs. However, compared to CRTs, LCDs are
smaller, have lower power requirements, emit no measurable radiation, are not
affected by magnetic fields generated by speakers or VCRs and have uniform
brightness throughout the screen. Numerous companies, however, are making
substantial investments in, and conducting research to improve these
characteristics of LCD technology.
Several other flat panel display technologies have recently been developed
or are being developed. They are as follows:
o Field Emissive Displays. Field emissive displays essentially employ an
array of miniature CRTs. Although these may be efficient in converting
electrical power into light at a relatively low cost, high voltage power
sources and high temperature fabrication equipment may be required.
o Inorganic Electroluminescent Displays. Inorganic electroluminescent
displays offer better contrast and broader viewing angles than LCDs and
gas plasma displays, but also use more power than LCDs and are difficult
to view in bright ambient light.
o Polymeric Light Emitting Diodes. Displays utilizing polymeric light
emitting diodes may, if successfully developed, offer better image and
color quality and broader viewing angles than LCDs, but require further
improvements in operating life, saturated colors and manufacturing
technologies.
o Gas Plasma Displays. Gas plasma displays, used in outdoor signs, some
laptop computers and recently introduced for large screen televisions are
durable and reliable, have long lives and superior video speed but have
high power requirements.
Numerous domestic and foreign companies have developed or are developing
CRT, LCD, gas plasma and other technologies. Substantially all of these
competitors, including Sony Corporation, NEC Corporation, Fujitsu Corporation,
Hitachi Corporation, Toshiba Corporation and Samsung Corporation, have better
name recognition and greater financial, technical, marketing, personnel and
research capabilities than us. In addition, a number of companies, including
those mentioned above, Eastman Kodak Company, Pioneer Electronic Corporation,
Sharp Corporation, Sanyo Corporation, TDK Corporation, Mitsubishi Chemical
Corporation, Seiko-Epson Corporation and Idemitsu Corporation, are engaged in
research and development activities with respect to technology using OLEDs.
Employees
As of August 23, 1999, we had fifteen employees.
Facilities
Our corporate offices are located at Three Bala PIaza East, Suite 104,
Bala Cynwyd, Pennsylvania. We have leased an 11,000 square foot facility in
Ewing, New Jersey to serve as its technology development and pilot line facity
and corporate headquarters. We intend to move our corporate headquarters to
this facility in the third quarter of 1999.
21
<PAGE>
OUR MANAGEMENT
Our present directors and executive officers are listed below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Sherwin I. Seligsohn 65 Chairman, Chief Executive Officer and Director
Steven V. Abramson 47 President, Chief Operating Officer and Director
Sidney D. Rosenblatt 52 Executive Vice President, Chief Financial Officer, Treasurer,
Secretary and Director
Dean L. Ledger 50 Executive Vice President and Director
Camille Naffah 72 Director
Elizabeth H. Gemmill 52 Director
Stephen R. Forrest, Ph.D 49 Director
</TABLE>
Each executive officer and director is elected annually and holds office
until his or her successors are elected and qualified, or until his or her
earlier death, resignation or removal. There are no family relationships
between any director, executive officer or significant employee.
Mr. Sherwin Seligsohn has been our Chairman and Chief Executive Officer
since its founding in 1994. He was President until May 1996. Mr. Seligsohn
founded IDC, which developed and patented the fundamental technology for TDMA
digital cellular radio, and served as its chairman from 1972 until he retired
in 1991. Mr. Seligsohn is a member of the Advisory Board of the Advanced
Technology Center for Photonics and Optoelectronic Materials (POEM) at
Princeton. Mr. Seligsohn also founded, and since August 1991 has served as sole
Director, Chairman, President and Secretary of American Biomimetics
Corporation, International Multi-Media Corporation, and Wireless Unified
Network Systems Corporation.
Mr. Steven V. Abramson joined us as President, Chief Operating Officer and
Director in 1996. He is responsible for the development and execution of our
commercialization plan, its strategic partnering program, and overall
day-to-day management of our company. Mr. Abramson is also a member of the
Board of Directors of Global Photonic Energy Corporation. He was previously
Vice President, General Counsel, Secretary and Treasurer of Roy F. Weston,
Inc., a worldwide environmental consulting and engineering firm. From 1982 to
1991, Mr. Abramson worked with Mr. Seligsohn at IDC where he held various
positions, including Executive Vice President, General Counsel, founder and
General Manager of the Technology Licensing Division. Mr. Abramson received his
B.A. from Bucknell University in 1973, an M.A. from Ohio State University in
1975, and his J.D. from Temple University in 1979. He is also a member of the
Governing Board of the USDC and of POEM's Advisory Board. He is also a member
of the Board of Trustees of the Delaware Valley Science Fairs, Inc.
Mr. Sidney D. Rosenblatt has been our Executive Vice President, Chief
Financial Officer, Treasurer and Secretary since 1995, and a member of the
Board of Directors since 1996. He is responsible for all of our internal and
external financial, treasury and administrative functions. Mr. Rosenblatt is
also Executive Vice President, Chief Financial Officer, Secretary and Treasurer
of Global Photonic Energy Corporation, and a member of its Board of Directors.
Mr. Rosenblatt is the owner, and served as the President and Chief Executive
Officer of S. Zitner Company from August 1990 until 1998. From 1982 to 1990, he
served as Senior Vice President, Chief Financial Officer and Treasurer of IDC.
While there, he worked with Messrs. Seligsohn and Abramson to commercialize
IDC's proprietary technology, obtaining more than $100 million in investment
capital and strategic partnerships with Fortune 50 companies and major foreign
concerns. Mr. Rosenblatt received his B.B.A. from Temple University in 1973 and
became a certified public accountant in 1976. He graduated from the Temple
University School of Law in 1979 and also received his Masters of Law in
taxation (L.L. M.) in 1982. He is a Director of a number of boards including
the Board of Directors and Executive Committee for the Greater Philadelphia
Chamber of Commerce.
Dean L. Ledger has been a director since 1995. From January 1997 until the
present and from June 1995 to November 1995, Mr. Ledger was our Executive Vice
President. From November 1995 to December 1996, he was a consultant to our
company. Since October 1992, Mr. Ledger has been Vice President -- Corporate
Development and a consultant to American Biomimetics.
22
<PAGE>
Camille Naffah has been a director since October 1996. Since 1990, he has
been President of Camille Naffah Enterprises, a holding company for leisure
enterprises including hotels, lounges and restaurants.
Elizabeth H. Gemmill has been a director since April 1997. Since March
1995, she has been managing Trustee of the Warwick Foundation. From 1998 to
March 1999, Ms. Gemmill was Vice President of Tasty Baking Company, a
manufacturer of bakery products. Ms. Gemmill is on the Boards of American Water
Works Company, Inc., Philadelphia College of Textiles & Science, Philadelphia
College of Osteopathic medicine, the Pennsylvania Chamber of Business &
Industry and metropolitan YMCA of Greater Philadelphia and Vicinity.
Dr. Stephen R. Forrest is the principal investigator responsible for the
research and development of the OLED technology. Dr. Forrest also serves on our
Scientific Advisory Committee, and became a member of our Board of Directors in
1998. Dr. Forrest has been the James S. McDonnell Distinguished University
Professor of Electrical Engineering at Princeton University Department of
Engineering since 1992. Since August of 1997, he has also been Chairman of the
Electrical Engineering Department. From 1992 to 1997 Dr. Forrest was the
Director of the Princeton University Advanced Technology Center for Photonics
and Optoelectronic Materials. Dr. Forrest is a recognized pioneer and leading
authority in OLED research, having started work in this area in 1992. Dr.
Forrest has published over 230 papers and holds 30 patents, with an additional
30 patents pending.
Information Concerning the Board of Directors and its Committees
The board of directors has established an audit committee and has not
established either a nominating committee or a compensation committee.
The audit committee is composed of Elizabeth H. Gemmill, Chairman, and
Camille Naffah, two non-employee directors. The committee is responsible for
providing general oversight with respect to accounting principles employed in
our financial reporting. It meets periodically with our principal financial and
accounting officer and independent public accountants to review the scope of
auditing procedures and our policies related to internal auditing and
accounting procedures and controls.
Members of our board of directors do not receive cash compensation.
However, they do receive options to purchase 5,000 shares of common stock for
service on the board.
Summary Compensation Table
The following table sets forth the total compensation of the chief
executive officer and our other two most highly-compensated executive officers
for services in all capacities to us or our subsidiary, UDC, Inc., for fiscal
year 1998, and the two previous fiscal years.
<TABLE>
<CAPTION>
Securities Underlying Options
Name and Principal Position Year Salary ($) and Warrants
- --------------------------- ---- ---------- -----------------------------
<S> <C> <C> <C>
Sherwin I. Seligsohn ........... 1998 85,000 20,000
Chairman of the Board 1997 85,000 25,000
and Chief Executive Officer 1996 85,000 200,000(3)
Steven V. Abramson ............. 1998 180,000 120,000
President and 1997 180,000 25,000
Chief Operating Officer 1996 110,796(1) 200,000(3)
Sidney D. Rosenblatt ........... 1998 180,000 120,000
Executive Vice President, Chief 1997 180,000 25,000
Operating Officer, Secretary 1996 128,672(2) 125,000(3)
And Treasurer
</TABLE>
(1) Mr. Abramson joined us effective May 13, 1996.
(2) Mr. Rosenblatt joined us full-time effective April 15, 1996.
(3) Represents warrants vesting over five years.
23
<PAGE>
No individual named above received prerequisites or non-cash compensation
during the years indicated which exceeded the lesser the $50,000 or an amount
equal to 10% of such person's salary. No other executive officer received
compensation and bonuses that exceeded $100,000 during any year.
The following table summarizes stock options granted during 1998 to the
persons named in the Summary Compensation Table.
Option Grants in 1998 Fiscal Year
<TABLE>
<CAPTION>
% of Total Options
Name Options Granted Granted Exercise Price Expiration Date
- ---- --------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Sherwin I. Seligsohn ............. 20,000 8.1% $ 4.50 12/08
Steven V. Abramson ............... 20,000 8.1% $ 4.50 12/08
Sidney D. Rosenblatt ............. 20,000 8.1% $ 4.50 12/08
All employees as a group ......... 242,047 100.0% $ 3.75-6.22 4/08-12/08
</TABLE>
We do not currently grant any long-term incentives, other than stock
options and warrants, to its executives or other employees. Similarly, we do
not sponsor any defined benefit or actuarial plans at this time.
24
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 23, 1999 certain information
regarding the beneficial ownership of shares of our common stock:
o by each of our directors;
o by each person who is known by us to beneficially own 5% or more of the
outstanding shares of common stock;
o by each of our executive officers named in the Summary Compensation
Table; and
o by all of our executive officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percentage
Name and Address of Beneficial Owner (1) Beneficial Ownership (2) of Common Stock (2)
- ---------------------------------------- ------------------------ -------------------
<S> <C> <C>
Lori S. Rubenstein (3)(4) ..................... 3,301,000 25.0%
Scott Seligsohn (3)(4) ........................ 3,554,000 27.0
Clifford D. Schlesinger (3) ................... 3,000,000 22.7
Sherwin I. Seligsohn (5) ...................... 316,500 2.4
Dean L. Ledger (6) ............................ 315,000 2.4
Steven V. Abramson (2) ........................ 390,000 3.0
Sidney D. Rosenblatt (2) ...................... 445,000 3.4
Camille Naffah ................................ 305,000 2.3
Elizabeth H. Gemmill .......................... 5,500 *
Stephen R. Forrest ............................ 239,316 1.8
All executive officers and directors as a group
(seven people) ............................... 2,016,316 15.3
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is Three
Bala Plaza East, Suite 104, Bala Cynwyd, Pennsylvania 19004.
(2) Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of common
stock beneficially owned by them. The percentage for each beneficial owner
listed above is based on 13,187,214 shares outstanding as of August 23,
1999. In accordance with the rules of the Securities and Exchange
Commission, options to purchase shares of common stock that are
exercisable as of August 23, 1999, or exercisable within 60 days thereafter,
are deemed to be outstanding and beneficially owned by the person holding
such options for the purpose of computing such person's percentage
ownership, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The numbers of
shares indicated in the table include the following number of shares
issuable upon the exercise of warrants or options: Scott Seligsohn --
230,000; Sherwin I. Seligsohn -- 243,000; Dean L. Ledger -- 245,000;
Steven V. Abramson -- 285,000; Sidney D. Rosenblatt -- 340,000; Camille
Naffah -- 5,000; Elizabeth H. Gemmill -- 5,000; and Stephen R. Forrest --
220,000.
(3) Includes:
o 1,500,000 shares of common stock owned by the Sherwin I. Seligsohn
Irrevocable Indenture of Trust dated 7/29/93 FBO Lori S. Rubenstein (the
"Rubenstein Trust") of which Lori S. Rubenstein, Scott Seligsohn and
Clifford D. Schlesinger are co-trustees; and
o 1,500,000 shares of common stock owned by the Sherwin I. Seligsohn
Irrevocable Indenture of Trust dated 7/29/93 FBO Scott Seligsohn (the
"Seligsohn Trust"), of which Lori S. Rubenstein, Scott Seligsohn and
Clifford D. Schlesinger are co-trustees.
Mr. Schlesigner's address is 1500 Chestnut Street, Philadelphia,
Pennsylvania.
25
<PAGE>
(4) Includes 176,000 shares of common stock owned by American Biomimetics
Corporation, of which the Rubenstein Trust and Seligsohn Trust are the
principal shareholders.
(5) Does not include the following shares for which Mr. Seligsohn disclaims
beneficial ownership:
o 176,000 shares of common stock owned by American Biomimetics
Corporation;
o 200,000 shares of Series A Preferred Stock owned by American Biomimetics
Corporation;
o 1,500,000 shares of common stock owned by the Rubenstein Trust;
o 1,500,000 shares of common stock owned by the Seligsohn Trust;
o 125,000 shares of common stock owned by Lori S. Rubenstein, his
emancipated daughter; and
o 125,000 shares of common stock owned by Scott Seligsohn, his emancipated
son.
(6) Does not include 24,000 shares of common stock owned by the Ledger Family
Trust II, for which Mr. Ledger disclaims beneficial ownership.
26
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1998, pursuant to our stock option plan, the following
officers and directors were granted options to purchase the amounts of common
stock reflected below, at an exercise price of $4.50, the fair market value on
the date of the grant:
o Sherwin I. Seligsohn -- 20,000
o Steven V. Abramson -- 20,000
o Sidney D. Rosenblatt -- 20,000
o Dean L. Ledger -- 20,000
o Stephen R. Forrest -- 20,000
Additionally, on April 2, 1998, we granted warrants to purchase 100,000
shares of common stock to Mr. Abramson, Mr. Rosenblatt, Dr. Forrest and Dr.
Thomson at an exercise price of $6.38, the fair market value on the date of
grant.
We share office space and certain related expenses with Global Photonic
Energy Corporation, a company for which Mr. Seligsohn, Mr. Rosenblatt and Mr.
Ledger are directors and executive officers and Mr. Abramson is a director.
27
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of common stock by the selling stockholders as of August 25,
1999, and the number of shares of common stock covered by this prospectus.
Except as otherwise noted below, none of the selling stockholders has held any
position or office, or has had any other material relationship with us or any
of our affiliates within the past three years.
<TABLE>
<CAPTION>
Beneficial Ownership
After Resale of Shares
Maximum ------------------------
Name of Number of Shares Number of Shares Number of
Selling Stockholder Beneficially Owned Being Offered Shares Percent (1)
------------------- ------------------ ---------------- --------- -----------
<S> <C> <C> <C> <C>
Aries Domestic Fund II, L.P (2) ................ 400 400 0 0
Thomas C. Moss, Jr. C/F Alice F. Boyle (3) ..... 500 500 0 0
Thomas C. Moss, Jr. C/F Connor Boyle (3) ....... 500 500 0 0
Ben Berschler, DMD (3) ......................... 500 500 0 0
Marilyn Burlage (3) ............................ 600 600 0 0
Samuel Weiser (3)............................... 700 700 0 0
Randy Flink (3)................................. 750 750 0 0
Christina R. Mast (3) .......................... 1,000 1,000 0 0
Kimberly Bernehim (3) .......................... 1,000 1,000 0 0
T.J. Marolda (2)................................ 1,200 1,200 0 0
Timothy J. Hurley (2)........................... 3,960 3,960 0 0
Mark R. Dukas (2) .............................. 6,000 6,000 0 0
Gregory K. & Mary Chomenko Hinckley (2) ........ 6,000 6,000 0 0
Jeff Zucker (3)................................. 7,033 7,033 0 0
Andrew Kurkulis (2) ............................ 8,000 8,000 0 0
Abigail F. Elkins (2) .......................... 8,000 8,000 0 0
Lloyd W. Aubry, Co., Inc. Pension Plan #161-
16419 (2) ..................................... 10,000 10,000 0 0
Lloyd W. Aubry Co., Inc. Profit Sharing Plan
#161-16418 (2) ................................ 10,000 10,000 0 0
Lea Residual Trust, Zelda G. Lea TTEE #161-
16411 (2) ..................................... 10,000 10,000 0 0
RE & MR Bewley Rev Family Trust/Marliyn
#0930 (2) ..................................... 10,000 10,000 0 0
Len Becker (3) ................................. 10,000 10,000 0 0
James F. Mongiardo (3).......................... 10,000 10,000 0 0
Robin Chapelle (2) ............................. 12,000 12,000 0 0
AJW Partners, LLC (2) .......................... 13,332 13,332 0 0
Stephen D. Libowsky (2) ........................ 13,332 13,332 0 0
Robert A. Center (2) ........................... 13,334 13,334 0 0
Robert Jay Gordon (2) .......................... 13,340 13,340 0 0
Dillon Capital, LLC (4) ........................ 45,100 45,100 0 0
Constance J. & R. Hugh A. Fitzpatrick (2) ...... 14,000 14,000 0 0
Nancy Allen Fitzpatrick (2) .................... 14,000 14,000 0 0
W. Douglas Weller (2) .......................... 14,000 14,000 0 0
ALCYON SA--Acct. #2 (2) ........................ 14,000 14,000 0 0
Anne E. McCaslin (2) ........................... 16,000 16,000 0 0
Tedman Breiter (2) ............................. 16,000 16,000 0 0
Patrick Michael Andersen (2).................... 17,760 17,760 0 0
Albinas Kurkulis (2) ........................... 18,666 18,666 0 0
Kenneth B. Leonard (2) ......................... 20,000 20,000 0 0
Sheldon Stillman (2) ........................... 20,000 20,000 0 0
Michael G. Chieco (2) .......................... 20,000 20,000 0 0
Irwin H. Markowitz, DDS, TTEE Irwin
H. Markowitz, DDS Retirement Fund (2) ......... 20,000 20,000 0 0
William J. Burns (3) ........................... 20,000 20,000 0 0
Stroller Tod White and Linda White TTEE of
the T and L White Revocable Trust (2) ......... 24,000 24,000 0 0
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
After Resale of Shares
Maximum ------------------------
Name of Number of Shares Number of Shares Number of
Selling Stockholder Beneficially Owned Being Offered Shares Percent (1)
------------------- ------------------ ---------------- --------- -----------
<S> <C> <C> <C> <C>
Juggers Pty. Ltd (2) ......................... 24,000 24,000 0 0
Banque Piguet & Cie SA (2) ................... 24,000 24,000 0 0
Oliver H. Van Horn, Co., Inc. (3) ............ 24,000 24,000 0 0
Barry Barnholtz (3) .......................... 25,000 25,000 0 0
Harmonic Money Purchase Pension Plan (2)...... 33,054 33,054 0 0
Bryce W. Smith (3) ........................... 25,000 25,000 0 0
Wechsler & Co., Inc. (2) ..................... 26,666 26,666 0 0
W.H. Reaves (2) .............................. 28,000 28,000 0 0
Michael C. Wright and Joan A. Parish TTEES
FBO D. Robert Parish Irrev. Trust (2) ....... 28,000 28,000 0 0
George F. Claussen, III (3) .................. 28,000 28,000 0 0
RE & MR Bewley Rev Family
Trust/Retirement #0927 (2) .................. 30,000 30,000 0 0
TJC Option Limited Partnership (2) ........... 32,000 32,000 0 0
Lynette F. Moss (5)........................... 48,000 48,000 0 0
Aries Domestic Fund, L.P. (2) ................ 39,600 39,600 0 0
Carl G. McCaslin, Jr. (2) .................... 40,000 40,000 0 0
J. Edward Willard (2) ........................ 40,000 40,000 0 0
Gregory R. Gomes (2) ......................... 40,000 40,000 0 0
Andy McGuire (3) ............................. 40,000 40,000 0 0
Harry Leopold Roth IRA (3) ................... 50,000 50,000 0 0
William Evans (3) ............................ 50,000 50,000 0 0
Susan T. Schaumberger (2) .................... 56,000 56,000 0 0
Wimerton Int'l. Inc (2) ...................... 60,000 60,000 0 0
Zachary Salmon (3) ........................... 60,000 60,000 0 0
Grover C. Maxwell, III (3) ................... 195,000 70,000 125,000 *
Richard L. Abrahams, Trustee (2) ............. 74,000 74,000 0 0
University of Southern California (6) ........ 67,500 37,500 30,000 *
Whale Securities Co. (3) ..................... 80,000 80,000 0 0
The Aries Master Fund (2) .................... 93,334 93,334 0 0
Interlink Management Corporation (7) ......... 100,000 100,000 0 0
Stephen R. Forrest (8) ....................... 239,316 100,000 139,316 1.1
Mark E. Thompson (9) ......................... 287,500 137,500 150,000 1.1
The Titan Industrial Corp. (2) ............... 100,000 100,000 0 0
Arnold S. Ross (2) ........................... 100,000 100,000 0 0
Norman Berman (3) ............................ 100,000 100,000 0 0
Albert Halegoua (3) .......................... 100,000 100,000 0 0
PGP Investors I, LLC (2) ..................... 133,332 133,332 0 0
LBC Capital Corporation (3) .................. 20,314 20,314 0 0
Harmonic Research, Inc. (3) .................. 120,000 120,000 0 0
Princeton University (10) .................... 262,348 262,348 0 0
Duck Partners, L.P. (2) ...................... 200,000 200,000 0 0
Barclays Bank (Suisse) SA (2) ................ 260,000 260,000 0 0
Paradigm Group LLC (11) ...................... 440,183 440,183 0 0
Lawrence Lacerte (2) ......................... 533,332 533,332 0 0
Totals ....................................... 4,822,486 4,378,170 444,316 3.4
</TABLE>
- ------------
*Less than 1%.
(1) Based on 13,187,214 shares outstanding as of August 23, 1999.
(2) Of the shares of common stock beneficially owned, one-half represent shares
of common stock that may be acquired immediately upon exercise of warrants.
(3) Includes shares of common stock that may be acquired immediately upon
exercise of warrants.
(4) Of the shares of common stock beneficially owned, 38,400 shares represent
shares of common stock that may be acquired immediately upon exercise of
warrants.
(5) Includes shares of common stock that may be acquired immediately upon
execise of warrants, of these shares:
o 40,800 shares are held by Lynette F. Moss
o 2,500 shares are held by Lynette F. Moss C/F D. Connor Moss
o 2,500 shares are held by Lynette F. Moss C/F Cameron Moss
o 2,500 shares are held by Lynette F. Moss C/F Lelane Moss
(6) Of the shares of common stock beneficially owned, 37,500 shares represent
shares of common stock that may be acquired immediately upon exercise of
warrants. The shares offered are those underlying the warrants. USC is one
of our research partners.
29
<PAGE>
(7) Includes 25,000 shares of common stock that may be acquired immediately
upon exercise of warrants and 75,000 shares of common stock that may be
acquired upon exercise of warrants that vest upon our successful entrance
into the Taiwanese market.
(8) Of the shares of common stock beneficially owned, 100,000 shares represent
shares of common stock that may be acquired immediately upon exercise of
warrants and 120,000 shares represent shares of common stock that may be
acquired upon exercise of options granted under our stock option plan. The
shares offered are those underlying the warrants. Dr. Forrest is a director
and one of our principal researchers.
(9) Of the shares of common stock beneficially owned, 137,500 shares represent
shares of common stock that may be acquired immediately upon exercise of
warrants and 120,000 shares represent shares of common stock that may be
acquired immediately upon exercise of options granted under our stock
option plan. The shares offered are those underlying the warrants. Dr.
Thompson is one of our principal researchers.
(10) Of the shares of common stock beneficially owned, 175,000 shares represent
shares of common stock that may be acquired immediately upon exercise of
warrants. The shares offered are those underlying the warrants. Princeton
is one of our research partners.
(11) Of the shares of common stock beneficially owned, 240,183 shares represent
shares of common stock that may be acquired immediately upon exercise of
warrants.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell all or a portion of
the shares of common stock on any market upon which the common stock my be
quoted, in privately negotiated transactions or otherwise, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The shares of common
stock may be sold by the selling stockholder by one or more of the following
methods, without limitation:
o block trades in which the broker or dealer so engaged will attempt to sell
the shares of common stock as agent, but may petition and resell a portion
of the block as principal to facilitate the transaction;
o purchases by the broker or dealer as principal and resale by the broker or
dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of the exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o privately negotiated transactions;
o market sales (both long an short to the extent permitted under the federal
securities laws); and
o a combination of any of these methods of sale.
In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers
or dealers may receive commissions or discounts from the selling stockholders
or, if any such broker-dealer acts as agent for the purchaser of such shares,
from such purchaser, in amounts to be negotiated. These commissions or
discounts are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with the selling stockholders
to sell a specified number of shares of common stock at a stipulated price per
share, and, to the extent such broker-dealer is unable to do so acting as agent
for the selling stockholder, to purchase as principal any unsold shares of
common stock at the price required to fulfill the broker dealer commitment to
the selling stockholders. Broker-dealers who acquire shares of common stock as
principal may thereafter resell such shares of common stock form time to time
in transactions (which may involve block transactions and sales to and through
other broker-dealers, including transactions of the nature described above) at
prices and on terms then prevailing at the time of sale, at prices then related
to then-current market price or in negotiated transactions. In connection with
such resales, broker-dealers may pay to or receive from the purchasers of
shares of common stock commissions as described above. The selling stockholders
may also sell the shares of common stock in accordance with Rule 144 under the
Securities Act of 1933 rather than pursuant to this prospectus.
The selling stockholders and any broker-dealers or agents that participate
with the selling stockholders in sales of the shares of common stock may be
deemed to be "underwriters" within the meaning of the Securities
30
<PAGE>
Act in connection with those sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares of
common stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
From time to time, the selling stockholders may pledge their shares of
common stock pursuant to the margin provisions of its customer agreements with
its brokers. Upon default by a selling stockholder, the broker may offer and
sell such pledged shares of common stock from time to time. Upon a sale of the
shares of common stock, the selling stockholder intends to comply with the
prospectus delivery requirements under the Securities Act by delivering a
prospectus to each purchaser in the transaction. We intend to file any
amendments or other necessary documents in compliance with the Securities Act
that may be required in the event a selling stockholder defaults under any
customer agreement with brokers.
We are required to pay all fees and expenses incident to the registration
of the shares of common stock, including fees and disbursements of counsel to
the selling stockholders. We have agreed to indemnify the selling stockholder
against certain losses, claims damages and liabilities, including liabilities
under the Securities Act.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 25,000,000 shares of common stock
and 5,000,000 shares of preferred stock, of which 200,000 shares have been
designated as Series A Nonconvertible Preferred Stock. As of August 23, 1999,
the common stock was held by more than 300 stockholders of record and the
Series A Nonconvertible Preferred Stock is held by one stockholder.
Common Stock
Each stockholder is entitled to one vote on all matters submitted to a
vote of stockholders for each share of common stock held. Cumulative voting for
the election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the shares of
common stock voted can elect all of the directors then standing for election.
Subject to any preferences as may apply to preferred stock outstanding at the
time, the holders of outstanding shares of common stock are entitled to receive
dividends out of assets legally available for dividends, at such times and in
such amounts as our board of directors deems appropriate. The common stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon liquidation, dissolution or winding up of our affairs, the
holders of common stock, and any participating preferred stock outstanding at
that time, will be entitled to share ratably in all assets remaining after the
payment of liabilities and the payment of any liquidation preferences with
respect to any outstanding preferred stock.
Preferred Stock
The board of directors is authorized, subject to any limitations
prescribed by the general corporation law of Pennsylvania, to:
o provide for the issuance of shares of preferred stock in one or more
series
o establish the number of shares to be included in each series; and
o determine the designations, privileges, rights, restrictions and
conditions attached to the shares of each class or series.
The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. Therefore, the issuance of
preferred stock may have the effect of delaying, deterring or preventing a
change in control.
The board of directors authorized and issued 200,000 shares of Series A
Nonconvertible Preferred Stock. All of the Series A Nonconvertible Preferred
Stock was issued to American Biomimetics. Holders of Series A Nonconvertible
Preferred Stock are not entitled to receive dividends. Each share of Series A
Nonconvertible Preferred Stock is entitled to one vote per share.
31
<PAGE>
Upon liquidation, dissolution or winding up of our affairs, after payment
of debts and liabilities and before any payment of cash or distribution of other
property to the holders of common stock, the holders of Series A Nonconvertible
Preferred Stock are entitled to receive a liquidation preference of $7.50. If
our assets are insufficient to permit payment to such holders of the full
liquidation preference, then our entire assets and funds legally available for
distribution shall be distributed ratably among holders of Series A
Nonconvertible Preferred Stock, based on each holders' proportionate shares of
the shares. The holders of the Series A Nonconvertible Preferred Stock are
entitled to treat certain disposition transactions by us as a liquidation and to
cause the proceeds of such transaction, or any property deliverable from such
transaction, to be distributed among the holders of Series A Nonconvertible
Preferred Stock as a liquidation preference.
Warrants
As of August 23, 1999, we had warrants outstanding providing for the
purchase of an aggregate of 4,173,340 shares of common stock. The exercise
prices of the warrants range from $4.125 to $7.25 per share, with terms
expiring on dates ranging from April 2001 to April 2008.
Pennsylvania Law and Bylaws Provisions Affecting Shareholders
Chapter 17, Subchapter D of the Pennsylvania Business Corporation Law of
1988, as amended contains provisions permitting indemnification of officers and
directors of a business corporation in Pennsylvania. Sections 1741 and 1742 of
the PBCL provide that a business corporation may indemnify directors and
officers against liabilities and expenses they may incur as such in connection
with any threatened, pending or completed civil, administrative or
investigative proceeding, provided that the particular person acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 1743 of the PBCL provides that the corporation is required to
indemnify directors and officers against expenses they may incur in defending
actions against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions.
Our Bylaws provide a right to indemnification to the full extent permitted
by law, for expenses (including attorney's fees), damages, punitive damages,
judgments, penalties, fines and amounts paid in settlement, actually and
reasonably incurred by any director or officer whether or not the indemnified
liability arises or arose from any threatened, pending or completed proceeding
by or in the right of our company (a derivative action) by reason of the fact
that such director or officer is or was serving as our director, officer,
employee or agent or, at our request, as a director, officer, partner,
fiduciary or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, unless the act or failure to act
giving rise to the claim for indemnification is financially determined by a
court to have constituted willful misconduct or recklessness. The Bylaws
provide for the advancement of expenses to an indemnified party upon receipt of
an undertaking by the party to repay those amounts if it is finally determined
that the indemnified party is not entitled to indemnification.
LEGAL PROCEEDINGS
We are not party to any legal proceeding.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the
validity of these shares.
EXPERTS
The audited financial statements in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included in reliance upon the authority of said firm as experts in giving said
report.
32
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports, proxy statements and
additional information with the Securities and Exchange Commission. You may
read and copy any reports, statements or other information on file at the SEC's
Public Reference Section in Washington, D.C. You can also request copies of
those documents, upon payment of a duplicating fee, by writing to the SEC at
the Public Reference Section of the Commission, 450 Fifth Street, M.W.,
Washington, D.C. 20549.
We have filed a registration statement on Form SB-2 with the SEC. This
prospectus, which forms part of the registration statement, does not contain
all information included in the registration statement. Thus, you should refer
to the registration statement and its exhibits. The references made in this
prospectus to any of our contracts or documents are not necessarily complete.
Thus, you should refer to the exhibits attached to the registration statement
for copies of the actual contract or document mentioned. You may review a copy
of the registration statement at the SEC's public reference room, and at the
SEC's regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Please call the Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our filings and registration
statement can also be reviewed by accessing the SEC's web site at
http://www.sec.gov.
33
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
INDEX TO FINANCIAL STATEMENTS
The following financial statements are filed as part of this prospectus:
Consolidated Financial Statements for the years ended December 31, 1998 and
1997 and six months ended June 30, 1999 and 1998.
<TABLE>
<S> <C>
Report of Independent Public Accountants ......................................... F-2
Consolidated Balance Sheets ...................................................... F-3
Consolidated Statements of Operations ............................................ F-4
Consolidated Statements of Shareholders' Equity (Deficit) ........................ F-5
Consolidated Statements of Cash Flows ............................................ F-6
Notes to Consolidated Financial Statements ....................................... F-7
Consolidated Financial Statements for the six months ended June 30, 1999..........
Consolidated Balance Sheet--June 30, 1999 (unaudited) ............................ F-18
Consolidated Statements of Operations--Six months ended June 30, 1999 and 1998,
and inception to June 30, 1999 (unaudited) ...................................... F-19
Consolidated Statements of Cash Flows--Six months ended June 30, 1999 and 1998,
and inception to June 30, 1999 (unaudited) ...................................... F-20
Notes to Consolidated Financial Statements (unaudited) ........................... F-21
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Universal Display Corporation:
We have audited the accompanying consolidated balance sheets of Universal
Display Corporation (a Pennsylvania corporation in the development-stage) and
subsidiary as of December 31, 1998 and 1997, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1998 and the period
from inception (June 17, 1994) to December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Universal Display Corporation and subsidiary as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998 and the period from inception (June
17, 1994) to December 31, 1998, in conformity with generally accepted
accounting principles.
Philadelphia, PA ARTHUR ANDERSEN LLP
March 5, 1999 (except with respect to
the matter discussed in Note 2, as to
which the date is April 15, 1999)
F-2
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (See Note 3) .................................... $ 1,828,381 $ 85,470
Short-term investments (See Note 3) ....................................... 527,502 4,539,570
Contract research receivables ............................................. 121,941 88,366
Interest receivable ....................................................... -- 51,906
Prepaid consulting fee .................................................... 376,493 428,985
Other current assets ...................................................... 70,393 89,806
------------ ------------
2,924,710 5,284,103
------------ ------------
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$67,233 and $39,353 ...................................................... 56,211 57,401
DEPOSITS .................................................................. 98,073 76,073
------------ ------------
$ 3,078,994 $ 5,417,577
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ..................................... $ 495,320 $ 280,240
------------ ------------
SHAREHOLDERS' EQUITY
Preferred Stock, par value $0.01 per share, 5,000,000 shares authorized,
Series A Nonconvertible Preferred Stock, par value $.01 per share,
200,000 issued and outstanding (liquidation value of $7.50 per share
or $1,500,000) ........................................................... 2,000 2,000
Common Stock, par value $.01 per share, 25,000,000 shares authorized,
10,312,943 and 10,302,268 shares issued and outstanding, respectively
(see Note 2) ............................................................. 103,130 103,023
Additional paid-in capital ................................................ 16,052,881 15,812,809
Deficit accumulated during development-stage .............................. (13,574,337) (10,780,495)
------------ ------------
Total shareholders' equity ................................................ 2,583,674 5,137,337
------------ ------------
$ 3,078,994 $ 5,417,577
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended
December31, 1998 December 31, 1997
---------------- -----------------
<S> <C> <C>
REVENUE:
Contract research revenue ..................... $ 368,794 $ 93,605
----------- -----------
OPERATING EXPENSES:
Research and development (See Note 3) ......... 1,419,394 4,207,898
General and administrative .................... 1,933,976 1,986,628
----------- -----------
Total operating expenses .................... 3,353,370 6,194,526
----------- -----------
Operating loss ................................ (2,984,576) (6,100,921)
INTEREST INCOME 190,734 173,203
----------- -----------
NET LOSS ....................................... $(2,793,842) (5,927,718)
=========== ===========
BASIC AND DILUTED NET LOSS PER
COMMON SHARE .................................. $ (0.27) $ (0.64)
=========== ===========
WEIGHTED AVERAGE SHARES USED IN
COMPUTING BASIC AND DILUTED
NET LOSS PER COMMON SHARE ..................... 10,310,353 9,327,521
=========== ===========
<CAPTION>
Period from Inception
Year Ended (June 17, 1994) to
December 31, 1996 December 31, 1998
----------------- ---------------------
<S> <C> <C>
REVENUE:
Contract research revenue ..................... $ -- $ 462,399
----------- ------------
OPERATING EXPENSES:
Research and development (See Note 3) ......... 948,568 8,649,599
General and administrative .................... 938,741 5,869,388
----------- ------------
Total operating expenses .................... 1,887,309 14,518,987
----------- ------------
Operating loss ................................ (1,887,309) (14,056,588)
INTEREST INCOME 118,314 482,251
----------- ------------
NET LOSS ....................................... $(1,768,995) $(13,574,337)
=========== ============
BASIC AND DILUTED NET LOSS PER
COMMON SHARE .................................. $ (0.21)
===========
WEIGHTED AVERAGE SHARES USED IN
COMPUTING BASIC AND DILUTED
NET LOSS PER COMMON SHARE ..................... 8,287,268
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Series A
Nonconvertible
Preferred Stock Common Stock
-------------------- -------------------------
Shares Amount Shares Amount
---------- -------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE, INCEPTION -- (JUNE 17,
1994) ...................................... -- $ -- 6,000,000 $ 6,000
Net Loss ................................... -- -- -- --
------- ------ --------- --------
BALANCE, DECEMBER 31, 1994 .................. -- -- 6,000,000 6,000
Recapitalization by issuance of Common
Stock to Enzymatics, Inc. (Note 2) ........ -- -- 523,268 59,233
Issuance of Common Stock options to
former sole director of Enzymatics,
Inc. to satisfy an Enzymatics, Inc.
liability (Note 2) ........................ -- -- -- --
Issuance of Series A Nonconvertible
Preferred Stock in connection with
assignment of research and license
agreements (Note 2) ....................... 200,000 2,000 -- --
Issuance of Common Stock through
private Placements, net of issuance
expenses of $50,000 (Note 2) .............. -- -- 1,114,000 11,140
Issuance of Common Stock options
(Note 2) .................................. -- -- -- --
Net loss ................................... -- -- -- --
------- ------ --------- --------
BALANCE, DECEMBER 31, 1995 .................. 200,000 2,000 7,637,268 76,373
Issuance of Common Stock (Note 2) .......... -- -- 1,300,000 13,000
Issuance of Common Stock warrants
(Note 6) .................................. -- -- -- --
Net loss ................................... -- -- -- --
------- ------ --------- --------
BALANCE, DECEMBER 31, 1996 .................. 200,000 2,000 8,937,268 89,373
Exercise of private placement warrants ..... -- -- 1,124,000 11,240
Issuance of Common Stock warrants .......... -- -- -- --
Issuance of Common Stock options ........... -- -- -- --
Issuance of Common Stock and warrants
in connection with 1997 Sponsored
Research Agreement (Note 4) ............... -- -- 200,000 2,000
Exercise of Common Stock options and
warrants .................................. -- -- 41,000 410
Net loss ................................... -- -- -- --
------- ------ --------- --------
BALANCE, DECEMBER 31, 1997 .................. 200,000 2,000 10,302,268 103,023
Exercise of private placement warrants ..... -- -- 675 7
Exercise of Common Stock options and
public warrants ........................... -- -- 10,000 100
Issuance of Common Stock warrants
(Note 6) .................................. -- -- -- --
Net loss ................................... -- -- -- --
------- ------ ---------- --------
BALANCE, DECEMBER 31, 1998 .................. 200,000 $2,000 10,312,943 $103,130
======= ====== ========== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During Total
Paid-In Development Shareholders'
Capital Stage Equity (Deficit)
-------------- ----------------- -----------------
<S> <C> <C> <C>
BALANCE, INCEPTION -- (JUNE 17,
1994) ...................................... $ -- $ -- $ 6,000
Net Loss ................................... -- (11,121) (11,121)
----------- ------------ -----------
BALANCE, DECEMBER 31, 1994 .................. -- -- (5,121)
Recapitalization by issuance of Common
Stock to Enzymatics, Inc. (Note 2) ........ (243,393) -- (184,160)
Issuance of Common Stock options to
former sole director of Enzymatics,
Inc. to satisfy an Enzymatics, Inc.
liability (Note 2) ........................ 140,000 -- 140,000
Issuance of Series A Nonconvertible
Preferred Stock in connection with
assignment of research and license
agreements (Note 2) ....................... 348,000 -- 350,000
Issuance of Common Stock through
private Placements, net of issuance
expenses of $50,000 (Note 2) .............. 2,166,860 -- 2,178,000
Issuance of Common Stock options
(Note 2) .................................. 9,950 -- 9,950
Net loss ................................... -- (3,072,661) (3,072,661)
----------- ------------ -----------
BALANCE, DECEMBER 31, 1995 .................. 2,421,417 (3,083,782) (583,992)
Issuance of Common Stock (Note 2) .......... 5,492,928 -- 5,505,928
Issuance of Common Stock warrants
(Note 6) .................................. 25,000 -- 25,000
Net loss ................................... -- (1,768,995) (1,768,995)
----------- ------------ -----------
BALANCE, DECEMBER 31, 1996 .................. 7,939,345 (4,852,777) 3,177,941
Exercise of private placement warrants ..... 3,929,560 -- 3,940,800
Issuance of Common Stock warrants .......... 528,985 -- 528,985
Issuance of Common Stock options ........... 216,000 -- 216,000
Issuance of Common Stock and warrants
in connection with 1997 Sponsored
Research Agreement (Note 4) ............... 3,118,329 -- 3,120,329
Exercise of Common Stock options and
warrants .................................. 80,590 -- 81,000
Net loss ................................... -- (5,927,718) (5,927,718)
----------- ------------ -----------
BALANCE, DECEMBER 31, 1997 .................. 15,812,809 (10,780,495) 5,137,337
Exercise of private placement warrants ..... 2,356 -- 2,363
Exercise of Common Stock options and
public warrants ........................... 2,800 -- 2,900
Issuance of Common Stock warrants
(Note 6) .................................. 234,916 -- 234,916
Net loss ................................... -- (2,793,842) (2,793,842)
----------- ------------ -----------
BALANCE, DECEMBER 31, 1998 .................. $16,052,881 $(13,574,337) $ 2,583,674
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Inception
Year Ended December 31, (June 17, 1994)
----------------------------------- to
1998 1997 1996 December 31, 1998
---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss ................................... $(2,793,842) $(5,927,718) $(1,768,995) $(13,574,337)
Depreciation ............................... 27,879 27,398 10,926 67,232
Issuance of Common Stock options and
warrants for services ...................... 330,575 316,000 25,000 505,197
Issuance of Common Stock and warrants
as consideration in connection with
amended research and license
agreements ................................. -- 3,120,329 -- 3,120,329
Acquired in-process technology .............. -- -- -- 350,000
Adjustments to reconcile net loss to
net cash used in operating activities:
(Increase) decrease in assets:
Contract research receivables .............. (33,575) (88,366) -- (121,941)
Receivable from related party .............. 51,906 (51,906) -- ---
Other current assets ....................... (23,754) (30,715) (59,091) 62,768
Deposits ................................... (22,000) 17,346 (93,419) (98,073)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses .................................. 215,080 175,934 (379,394) 451,160
Payable to related parties ................. -- -- (105,476) 250,000
----------- ----------- ----------- ------------
Net cash used in operating activities (2,247,731) (2,441,698) (2,370,449) (8,987,665)
----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES: ................................. --
Purchases of equipment ...................... (26,689) (23,287) (67,294) (123,443)
Purchases of short-term investments ......... (270,932) (5,019,570) (2,430,000) (7,720,502)
Proceeds from sale of short-term
investments ................................ 4,283,000 2,910,000 -- 7,193,000
----------- ----------- ----------- ------------
Net cash provided by (used) in
investing activities .................... 3,985,379 (2,132,857) (2,497,294) (650,945)
----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of Common
Stock and warrants ......................... 5,263 4,021,800 5,505,928 11,466,991
----------- ----------- ----------- ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................ 1,742,911 (552,755) 638,185 1,828,381
CASH AND CASH EQUIVALENT,
BEGINNING OF PERIOD ......................... 85,470 638,225 40 --
----------- ----------- ----------- ------------
CASH AND CASH EQUIVALENTS, END
OF PERIOD: .................................. $ 1,828,381 $ 85,470 $ 638,225 $ 1,828,381
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND
Universal Display Corporation (the "Company"), a development-stage
company, is engaged in the research and development and commercialization of
organic light emitting diode ("OLED") technology for potential flat panel
display applications.
The Company, formerly known as Enzymatics, Inc. ("Enzymatics"), was
incorporated under the laws of the Commonwealth of Pennsylvania on April 24,
1985 and commenced its current business activities on August 1, 1994. The New
Jersey corporation formerly known as Universal Display Corporation ("UDC") was
incorporated under the laws of the State of New Jersey on June 17, 1994. See
Note 2.
Research and development of the OLED technology is being conducted at the
Advanced Technology Center for Photonics and Optoelectronic Materials at
Princeton University and at the University of Southern California ("USC") (on a
subcontract basis with Princeton University), pursuant to a Sponsored Research
Agreement dated August 1, 1994, as amended (the "1994 Sponsored Research
Agreement"), originally between the Trustees of Princeton University
("Princeton University") and American Biomimetics Corporation ("ABC"), a
privately held Pennsylvania corporation and affiliate of the Company. In
October 1997, the Company entered into a new 5-year Sponsored Research
Agreement with Princeton University and USC (the "1997 Sponsored Research
Agreement") for research and development of the OLED technology. (See Note 4).
Pursuant to a license agreement dated August 1, 1994 (the "1994 License
Agreement") between Princeton University and ABC, assigned to the Company by
ABC in June 1995, the Company has a worldwide exclusive license to manufacture
and market products based on Princeton University's pending patent application
relating to the OLED technology and the right to obtain a similar license to
inventions conceived or discovered under the 1994 Sponsored Research Agreement
and to sublicense such rights. In October 1997, the Company amended the 1994
License Agreement (the "1997 Amended License Agreement") to modify certain
terms of the license (See Note 4). The Company's Chairman and Chief Executive
Officer holds similar positions in ABC, a company which is controlled by
members of his family. See Notes 2 and 8.
The Company is a development-stage entity with no significant operating
activity to date. Expenses incurred have primarily been in connection with
research and development funding, obtaining financing and administrative
activities. The developmental nature of the activities is such that significant
inherent risks exist in the Company's operations. To the extent that Princeton
University's research efforts do not result in the development of commercially
viable applications for the OLED technology, the Company will not have any
meaningful operations. Even if a product incorporating the OLED technology is
developed and introduced into the marketplace, additional time and funding may
be necessary before significant revenues are realized. Completion of the
commercialization of the Company's technology will require funds substantially
greater than the Company currently has available. Notwithstanding the risks
discussed above, the Company anticipates, based on management's internal
forecasts and assumptions relating to its operations, that it requires funds in
addition to its current cash and short-term investments to meet its obligations
for at least 1999, the current fiscal year. There is no assurance that such
financing will be available to the Company, on commercially reasonable terms or
at all. Also, while the Company funds the OLED technology research, the scope
of and technical aspects of the research and the resources and efforts directed
to such research is subject to the control of Princeton University and the
principal investigators. Accordingly, the Company's success is dependent on the
efforts of Princeton University and the principal investigators. The 1997
Sponsored Research Agreement provides that if certain of the principal
investigators are unavailable to continue to serve as principal investigators,
because such persons are no longer associated with Princeton University or
otherwise, and successors acceptable to both the Company and Princeton
University are not available, the 1997 Sponsored Research Agreement will
terminate.
2. LIQUIDITY AND SUBSEQUENT EVENT:
As of December 31, 1998, the Company has an accumulated deficit of
$13,574,337. In addition, the Company has incurred losses since its inception
and is subject to those risks associated with companies in the
F-7
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. LIQUIDITY AND SUBSEQUENT EVENT: -- (Continued)
early stages of development. The completion of the commercialization of the
Company's technology will require funds substantially greater than the Company
currently has available. As of April 15, 1999, 1,241,625 of the Company's
public warrants were exercised, generating proceeds of approximately $4,000,000.
The Company is currently working on other alternatives, including the private
sale of equity, to raise additional funds. However, management believes that the
proceeds from the exercise of the public warrants together with available cash
and short-term investments will provide sufficient funds to maintain operations
through 1999.
3. STOCK TRANSACTIONS, MERGER, RECAPITALIZATION AND PUBLIC
OFFERING
On June 22, 1995, a wholly-owned subsidiary of the Company consummated an
Agreement and Plan of Reorganization ("Merger Agreement") with a New Jersey
corporation formerly known as Universal Display Corporation (herein referred to
as "UDC"). At the time of the merger, UDC was engaged in the business which is
currently being conducted by the Company. Prior to the merger, the Company was
known as Enzymatics, an inactive Pennsylvania corporation, and was engaged in a
business separate from and unrelated to that of UDC. Enzymatics had incurred
significant losses since its inception in 1985 and, notwithstanding a public
offering, failed to find significant alternative sources of financing to enable
it to continue its operations on any scale. In June 1994, the shareholders of
Enzymatics approved the sale of substantially all of its assets to a third
party. Management of UDC concluded that merging with a former publicly traded
company, and acquiring access to its shareholder base, would facilitate its
ability to raise additional capital in the private or public markets.
Management of UDC determined that such additional capital would be necessary to
fulfill its financial obligations under the Transfer Agreement (as herein
defined) pursuant to which it obtained certain rights and obligations related
to the OLED technology, obtain funds to commercialize the OLED technology, fund
the acquisition of additional intellectual property rights useful to the OLED
technology and to fund working capital. As of June 22, 1995, Enzymatics had
523,268 shares issued and outstanding (after giving effect to a reverse stock
split of 10.9672) which were not actively traded. Pursuant to the Merger
Agreement, the former Enzymatics shareholders received 523,268 shares of the
merged entity's Common Stock. Additionally, Nachman, Hays & Associates (NHA), a
consulting firm, received options to purchase 84,234 shares of the merged
entity's Common Stock at an exercise price of $.29 per share (see Note 6) as
payment of NHA's consulting services in connection with the wind-down of
Enzymatics. These options were issued to satisfy a liability which was
reflected on the balance sheet of Enzymatics on the date of the merger. The
sole director of Enzymatics, is also a principal of NHA.
The merger was treated, for accounting purposes, as a recapitalization of
UDC whereby UDC issued 523,268 shares of Common Stock to the Enzymatics
shareholders and assumed Enzymatics shareholders' deficit of $184,160. The
assets and liabilities of both companies have been recorded at their historical
book values in these financial statements. The assets of Enzymatics consisted
of cash and its liabilities consisted of payables related to the merger and
other professional fees.
Upon consummation of the merger, UDC's shareholders collectively owned
approximately 92% of the outstanding shares of the merged entity, with the
former Enzymatics shareholders retaining the balance of approximately 8%. UDC
was the surviving corporation in the merger, changed its name to UDC, Inc.,
and, as a result of the merger, became a wholly-owned subsidiary of Enzymatics.
At the effective time of the merger, Enzymatics changed its name to Universal
Display Corporation. Universal Display Corporation and its wholly owned
subsidiary, UDC, Inc., are herein referred to collectively as the "Company."
Contemporaneous with the merger, the Company and ABC entered into a
Technology Transfer Agreement dated June 22, 1995 (the "Transfer Agreement")
pursuant to which, among other things, ABC assigned the 1994 License Agreement
to the Company, and granted to the Company an exclusive worldwide sublicense to
patents and other intellectual property rights to display technology developed
under a Sponsored Research
F-8
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
3. STOCK TRANSACTIONS, MERGER, RECAPITALIZATION AND PUBLIC
OFFERING -- (Continued)
Agreement dated October 22, 1993 between ABC and Princeton University (the
"1993 Sponsored Research Agreement") in exchange of (i) reimbursement of ABC's
scheduled payments and expenses previously made to Princeton University under
the 1994 Sponsored Research Agreement in the amount of $674,000 and a payment
of $500,000 for the sublicense under the 1993 Sponsored Research Agreement
which were charged to research and development expense (see Notes 3 and 4);
(ii) the Company's assumption of ABC's obligation to pay all future scheduled
payments under the 1994 Sponsored Research Agreement, which were approximately
$1,610,000, plus expenses related thereto estimated to be $500,000 for a total
of $2,110,000; and (iii) 200,000 shares of the Company's Series A
Nonconvertible Preferred Stock (see Notes 3 and 6) with a fair value of
$350,000.
Also, contemporaneous with the merger, the Company sold 781,500 units
("Units") at a price of $2.00 per Unit, in a private placement, which generated
proceeds of $1,513,000, net of offering expenses in the amount of $50,000. Each
Unit consisted of one share of Common Stock and one warrant to purchase one
share of Common Stock at an exercise price of $3.50 per share. Additionally,
125,000 Units with a fair value of $250,000, based upon the price of the Units,
were transferred to a non-affiliate debt holder of ABC to satisfy $250,000 of
ABC's outstanding debt. Therefore, the Company had a receivable of this amount
from ABC. Accordingly, ABC netted this $250,000 receivable against the
Company's payable to related parties account as shown on the accompanying
Consolidated Balance Sheets (see Note 8). In addition, on July 17, 1995, the
Company sold an additional 207,500 Units which generated gross proceeds of
$415,000.
On April 11, 1996, the Company consummated a public offering of 1,300,000
shares of Common Stock at a price of $5.00 per share and redeemable warrants to
purchase 1,495,000 shares of Common Stock at an exercise price of $3.50 per
share, at a price of $.10 per warrant. The Company received net cash proceeds
of $5,282,665 from the public offering (excluding $223,263 representing a
portion of the offering expenses previously charged to general and
administration expenses).
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of Universal
Display Corporation and its wholly-owned subsidiary, UDC, Inc. (see Note 3).
All significant intercompany transactions and accounts have been eliminated.
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash, Cash Equivalents and Short-term Investments
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Investments
are carried at market value, and at December 31, 1997, were classified as
short-term investments. In 1998, all of the Company's investments that were
classified as available for sale pursuant to Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," (SFAS 115) were sold. At December 31, 1997, unrealized holding
F-9
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)
gains or losses were not material. The gross proceeds from sales and maturities
of investments were $4,283,000 and $2,910,000 for the year ended December 31,
1998 and 1997, respectively. Gross realized gains and losses for the year ended
December 31, 1998 and 1997 were not material. For the purpose of determining
gross realized gains and losses, the cost of securities sold is based upon
specific identification.
Cash, cash equivalents and short-term investments consisted of the
following:
<TABLE>
<CAPTION>
December 31
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash and cash equivalents:
Money market funds and demand accounts ......... $1,828,381 $ 85,470
========== ==========
Short-term investments:
Certificates of deposit ........................ $ 527,502 $2,622,014
Corporate bonds ................................ -- 1,917,556
---------- ----------
$ 527,502 $4,539,570
========== ==========
</TABLE>
Property and Equipment
Property and equipment are stated at cost and depreciated on a
straight-line basis over 3 to 7 years.
Net Loss Per Common Share
The Company applies Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings per Share" to compute net loss per share. SFAS 128
requires dual presentation of basic and diluted earnings per share ("EPS") for
complex capital structures on the face of the Statements of Operations. Basic
EPS is computed by dividing net income by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
from the exercise of conversion of securities into common stock. For the years
ended December 31, 1998, 1997 and 1996 the effects of the exercise of
outstanding stock options and warrants were excluded from the calculation of
diluted EPS because their effect was antidilutive.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and presenting comprehensive income
and its components in a full set of general-purpose financial statements that
is presented with equal prominence as other financial statements. SFAS 130
became effective for fiscal years beginning after December 15, 1997 and was
adopted by the Company in 1998. As the Company had no other comprehensive
income items, SFAS No. 130 had no effect on the Company's financial statement
disclosures.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This statement establishes additional
standards for segment reporting in the financial statements and is effective
for fiscal years beginning after December 15, 1997. As the Company operates in
one reportable segment, SFAS No. 131 had no effect on the Company's financial
statements.
F-10
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)
Contract Research Revenue
Contract research revenues are recognized as the related expenses are
incurred.
Research and Development
Expenditures for research and development are charged to operations as
incurred. Research and development expenses consist of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
------------------- ------------------- ------------------
<S> <C> <C> <C>
Payments made to Princeton University and to
University of Southern California under the 1997
Sponsored Research Agreement (See Note 5) ......... $ 125,842 $ -- $ --
Payments made to Princeton University under the
1994 Sponsored Research Agreement
(See Note 3) ...................................... -- 347,374 713,815
Patent application expenses ........................ 630,929 715,406 234,753
Issuance of 200,000 shares of the Company's
Common Stock and warrants to purchase 250,000
shares of Common Stock under the 1997
Sponsored Research Agreement (See Note 4) ......... -- 3,120,329 --
Other Expenses ..................................... 662,623 24,789 --
---------- ---------- --------
$1,419,394 $4,207,898 $948,568
========== ========== ========
</TABLE>
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." SFAS No. 109 requires the liability method of accounting for deferred
income taxes. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the tax rate expected to be in effect when taxes are actually
paid or recovered.
5. SPONSORED RESEARCH AGREEMENT WITH PRINCETON UNIVERSITY
On October 9, 1997, the Company entered into a new 5-year Sponsored
Research Agreement (the "1997 Sponsored Research Agreement"), with Princeton
University and entered into an Amended License Agreement with Princeton
University and USC amending its 1994 License Agreement with Princeton
University (the "1997 Amended License Agreement"). The 1997 Sponsored Research
Agreement continues and expands the sponsored research which commenced in 1994
under which the Company funds additional research and development work at
Princeton University (and at USC under a subcontract with Princeton University)
in OLED technology. The 1997 Sponsored Research Agreement requires the Company
to pay up to $4.4 million commencing on July 31, 1998 through July 31, 2002,
which period is subject to extension. The amounts due to Princeton University
will be expensed when paid by the Company. Under the 1997 License Agreement,
the Company has the exclusive worldwide license to manufacture and market
products, and to sublicense those rights, based on Princeton University's and
USC's pending patent applications relating to the OLED technology and conceived
under the 1994 and 1997 Sponsored Research Agreements. The Company is
F-11
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. SPONSORED RESEARCH AGREEMENT WITH PRINCETON UNIVERSITY -- (Continued)
required to pay Princeton University a royalty in the amount of 3% of the
Company's net sales of products utilizing the OLED technology. In circumstances
where the Company sublicenses the OLED technology (except to affiliates), the
royalty required to be paid by the Company was reduced in the 1997 License
Agreement from 50% to 3%. These royalty rates are subject to upward adjustments
under certain conditions. In connection with the 1997 License Agreement and
Sponsored Research Agreement, in October 1997, the Company has issued 140,000
common shares and 175,000 warrants to purchase Common Stock to Princeton
University as well as 60,000 common shares and 75,000 warrants to purchase
Common Stock to the University of Southern California. The Company recorded a
charge of $3,120,329 related to the issuance of the Common Stock and warrants
to purchase Common Stock. The value of the warrants was determined in
accordance with Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation." This charge is included in
research and development expenses in the accompanying Consolidated Statement of
Operations.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- ------------------
<S> <C> <C>
Accrued professional fees .......... $158,150 $156,857
Other .............................. 337,170 123,383
-------- --------
$495,320 $280,240
======== ========
</TABLE>
7. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND
WARRANTS:
Series A Nonconvertible Preferred Stock
In 1995, the Company issued 200,000 shares of Series A Nonconvertible
Preferred Stock ("Series A") to ABC (See Notes 3 and 4), which has a
liquidation value of $7.50 per share. Series A holders, as a single class, have
the right to elect two of the Company's Board of Directors. The holders of
Series A shares are entitled to one vote per share on matters which
shareholders are generally entitled to vote. The Series A holders are not
entitled to any dividends.
The 200,000 shares of the Company's Series A Nonconvertible Preferred
Stock that were issued in 1997, were valued at $1.75 per share which was based
upon an independent appraisal.
Stock Options
Enzymatics 1992 Stock Option Plan
The stock options granted prior to the merger by Enzymatics under the 1992
Stock Option Plan and which have been assumed by the Company and after giving
effect to the reverse stock split, were converted into options to purchase
20,538 shares of Common Stock of the Company at exercise prices ranging from
$11.74 to $29.61 per share. All of such options are currently exercisable and
expired on December 31, 1998.
1995 Stock Option Plan
In 1995, the directors of the Company adopted the 1995 Stock Option Plan
(the "1995 Plan"), under which a maximum of 500,000 options may be granted at
prices not less than 100% of the fair market value of the Common Stock on the
date of grant as determined by the Board of Directors. In 1997, the
Shareholders
F-12
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND
WARRANTS: -- (Continued)
approved the Plan to increase the number of Common shares reserved for the 1995
Plan to 800,000 options. In 1998, the Shareholders approved the Plan to
increase the number of Common shares reserved for the 1995 Plan to 1,200,000
options. The 1995 Plan provides for the granting of both incentive and
nonqualified stock options to employees, officers, directors and consultants of
the Company. The stock options are exercisable over a period determined by the
Board of Directors, but no longer than ten years after the grant date.
In June 1995, the Company granted options to purchase 70,000 shares of
Common Stock to an officer of the Company at an exercise price of $2.00 per
share, which approximated the fair market value of the Common Stock at the
grant date. These options vest as follows: 20,000 options vested immediately
upon grant with the remaining 50,000 options vesting in equal amounts over
three years. Accordingly, as of December 31, 1998, 70,000 options were
exercisable. These options expire in 2005. In addition, in June 1995, the
Company granted options to purchase 5,000 shares of Common Stock to the same
officer of the Company at an exercise price of $.01 per share, all of which
were exercised in October 1997. These options vested on the grant date. The
Company recorded a charge of $9,950, which represents the difference between
the deemed value of the Common Stock for accounting purposes and the exercise
price of the options at the grant date. This charge is included in general and
administrative expenses in the accompanying Consolidated Statements of
Operations.
In 1995, the Company granted nonqualified stock options to three principal
investigators who are conducting research under the 1994 Sponsored Research
Agreement and the 1993 Sponsored Research Agreement. The Company granted
options to purchase an aggregate of 240,000 shares of Common Stock to the three
principal investigators at an exercise price of $4.00 per share, which
approximated the fair market value of the Common Stock at the grant date. These
options vest as follows: 33% at the grant date with the remaining 67% vesting
over two years. Accordingly, as of December 31, 1998, options to purchase
240,000 shares of Common Stock were exercisable. These options expire in 2005.
In 1996, the Company granted nonqualified stock options to two employees
and one consultant. The Company granted options to purchase an aggregate of
30,000 shares of Common Stock at an exercise price of $4.12 per share, which
was the fair market value of the Common Stock at the date of grant. These
options vest as follows: 10,000 shares at the grant date with the remaining
20,000 shares vesting over 5 years. During 1997, 6,000 of these options were
forfeited when an employee left the Company. As of December 31, 1998, options
to purchase 9,000 shares of Common Stock were exercisable. These options expire
in 2006.
In 1997, the Company granted incentive and nonqualfied stock options to
several employees, officers, and principal investigators. The Company granted
options to purchase an aggregate of 271,500 shares of Common Stock at exercise
prices ranging from $4.06 to $5.25 per share, which was the fair market value
of the Common Stock at the date of grant. These options vest either immediately
upon grant or over a five year period. As 55,000 of these options were granted
to non-employee principal investigators, the Company recorded a charge of
$216,000, which represents the value of the options as determined in accordance
with SFAS 123. This charge included general and administrative expenses in the
accompanying Consolidated Statements of Operations. As of December 31, 1998,
options to purchase 233,300 shares of Common Stock were exercisable. These
options expire in 2007.
In 1998, the Company granted nonqualified stock options to several
employees. The Company granted options to purchase an aggregate of 242,047
shares of Common Stock at exercise prices ranging from $3.75 to $6.22 per
share, which was the fair market value of the Common Stock at the date of
grant. These options vest either immediately upon grant or over a five year
period. As of December 31, 1998, options to purchase 181,417 shares of Common
Stock were exercisable. These options expire in 2008.
F-13
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND
WARRANTS: -- (Continued)
Other Options
In connection with NHA's services relative to consummation of the merger
discussed in Note 2, in June 1995, the Company granted options to purchase
84,234 shares of Common Stock at an exercise price of $.29 per share to NHA.
These options were used to satisfy a liability reflected on the balance sheet
of Enzymatics on the date of the merger. These options vested 100% upon grant
and 15,000 were exercised in 1997. Accordingly, as of December 31, 1998, 59,234
options were exercisable. These options expire in 2005.
The following table summarizes all stock option activity:
<TABLE>
<CAPTION>
1998 1997
-------------------------------- --------------------------------
Weighted Average Weighted Average
------------------ ------------------
Shares Exercise Price Shares Exercise Price
------------ ------------------ ------------ ------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
year ............................ 690,272 $ 4.17 449,772 $3.72
Granted .......................... 242,047 $ 4.70 271,500 $4.99
Exercised ........................ (10,000) $ 0.29 (25,000) $1.00
Forfeited ........................ (14,538) $20.67 (6,000) $4.12
------- -------
Outstanding at end of year ....... 907,781 $ 4.09 690,272 $4.17
======= =======
Exercisable at end of year ....... 792,951 $ 4.00 604,006 $4.16
======= =======
Available for future grant ....... 377,991 189,500
Weighted average fair value
of options granted .............. $ 3.60 $3.85
====== =====
<CAPTION>
1996
----------------------------
Weighted Average
-----------------
Shares Exercise Price
--------- -----------------
<S> <C> <C>
Outstanding at beginning of
year ............................ 419,772 $3.69
Granted .......................... 30,000 $4.12
Exercised ........................ -- --
Forfeited ........................ -- --
-------
Outstanding at end of year ....... 449,772 $3.72
=======
Exercisable at end of year ....... 316,439 $3.80
=======
Available for future grant ....... 155,000
Weighted average fair value
of options granted .............. $3.18
=====
</TABLE>
<PAGE>
The weighted average remaining contractual life for options outstanding at
December 31, 1998, 1997 and 1996 was 8 years.
Common Stock Warrants
In connection with the June 22, 1995 private placement and the July 17,
1995 private placement (See Note 3), the Company issued 906,500 warrants and
207,500 warrants, respectively each warrant entitled the holder to purchase one
share of Common Stock at an exercise price of $3.50 per share. In 1997, all of
these outstanding warrants were exercised.
On April 11, 1996, the Company consummated a public offering of 1,300,000
shares of Common Stock at a price of $5.00 per share and redeemable warrants to
purchase 1,495,000 shares of Common Stock at an exercise price of $3.50 per
share. These warrants expire April 12, 1999 (see Note 2). In connection with
the public offering, the Company issued warrants to its underwriter to purchase
up to 130,000 shares of Common Stock at an exercise price of $8.25 per share
and warrants to purchase an additional 130,000 shares of Common Stock at an
exercise price of $3.675 per share. In April 1996, the Company issued warrants
to third parties to purchase up to 578,000 shares of Common Stock at an
exercise price of $4.125 per share.
In August 1996, the Company granted warrants to purchase 20,000 shares of
Common Stock to an individual in exchange for consulting services. These
warrants have an exercise price of $6.00 per share, vest immediately, and
expire in August 2006. The Company recorded a charge of $25,000, which
represents the value of the warrant as determined in accordance with SFAS 123.
This charge is included in general and administrative expenses in the
accompanying Consolidated Statements of Operations.
F-14
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND
WARRANTS: -- (Continued)
In April 1996, the Company granted warrants to four employees and one
consultant to purchase 925,000 shares of the Company's Common Stock at an
exercise price of $4.125 per share, which approximated the fair market value of
the Common Stock at the date of grant. These warrants vest at 25% at the date
of grant and the remaining 75% over 5 years, provided these employees are
employed by the Company on the vesting date. These warrants expire in 2006.
In 1997, the Company granted warrants to Princeton University and the
University of Southern California under the 1997 Sponsored Research Agreement
(see Note 5) to purchase an aggregate of 250,000 shares of Common Stock at an
exercise price of $7.25 per share, which approximated the fair market value of
the Common Stock at the date of grant. These warrants vest immediately upon
grant and expire in 2007. Also in 1997, the Company granted warrants to
consultants to purchase 200,000 shares of Common Stock at an exercise price of
$4.80 per share. These warrants vest immediately upon grant and expire in 2002.
The Company valued the warrants in accordance with SFAS 123. The warrants will
be expensed over the three year consulting period. In 1998 and 1997, the
Company recorded a charge of $176,328, $100,000, respectively which is included
in general and administrative expenses in the accompanying Consolidated
Statement of Operations. The unamortized portion of this charge is recorded as
prepaid consulting fee on the accompanying Consolidated Balance Sheet.
In 1998, the Company granted warrants to two employees and two directors
to purchase 400,000 shares of Common Stock at an exercise price of $6.38 per
share, which was the fair market value of the Common Stock at the date of
grant. These warrants vest immediately and expire in 2008. Also in 1998, the
Company granted warrants to two consultants to purchase 125,000 shares of
Common Stock at exercise prices ranging from $7.00 to $7.25 per share. Of the
125,000 warrants granted, 25,000 warrants were granted to one consultant which
vested immediately. These warrants were valued using the Black- Scholes option
pricing model. Accordingly, the Company recorded a charge to record expense in
the amount of $113,913, which is included in general and administrative
expenses. The remaining 100,000 warrants were granted to another consultant of
which 25,000 vested immediately and 75,000 will vest based upon the Company's
successful entrance into the Taiwanese market. Only the 25,000 which vested
were valued using the Black-Scholes option pricing model. The remaining 75,000
will be valued upon ultimate determination of performance. As the consulting
agreement is for a period of three years, the Company is recognizing expense
ratably over a three year period. Accordingly, in 1998, the Company recorded a
charge of $40,334, which is included in general and administrative expenses.
The unamortized portion of this charge is recorded as prepaid consulting fee on
the accompanying Consolidated Balance Sheets.
Pro Forma Disclosure for Stock-Based Compensation
The Company accounts for its employee stock-based compensation plans under
APB Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense has been recognized other than the $9,950 charge relating
to 5,000 options granted to an officer in the Company in 1995. In 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS
123 establishes a fair value based method of accounting for stock-based
compensation plans. SFAS 123 requires that an employer's financial statements
include certain disclosures about stock-based employee compensation
arrangements regardless of the method used to account for the plan. Had the
Company recognized compensation cost for its stock based compensation plans
consistent with the provisions of SFAS 123, the Company's net loss and net loss
per share would have been increased to the following pro forma amounts:
F-15
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
7. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND
WARRANTS: -- (Continued)
1998 1997 1996
------------ ------------ -----------
Net Loss:
As Reported ......... $(2,793,842) $(5,927,718) $(1,768,995)
Pro Forma ........... (5,803,012) (6,985,174) (2,432,979)
Net Loss per Share:
As Reported ......... $ (.27) $ (.64) $ (.21)
Pro Forma ........... $ (.56) $ (.75) (.29)
The fair value of each option or warrant granted is estimated on the date
of grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 1998, 1997 and 1996, respectively: risk-free
interest rates of 4.7% to 5.7%, 5.9% to 6.7% and 6.6%, expected dividend yields
of zero for each year, expected volatility of 81%, 81% and 80% and expected
lives of 7 years for each year.
Because the SFAS 123 method of accounting has not been applied to options
and warrants granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
8. RESEARCH CONTRACTS
Contract research revenue consists of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
------------------- ------------------
<S> <C> <C>
Department of Defense Advanced Research Projects Agency (DARPA) $190,008 $72,630
New Jersey Commission on Science and Technology (NJCST) ......... 94,521 15,736
National Science Foundation (NSF) ............................... 84,265 5,239
-------- -------
$368,794 $93,605
======== =======
</TABLE>
9. RELATED PARTY TRANSACTIONS
As discussed in Note 3, the Company had a payable to ABC of $1,174,000
(due to the Transfer Agreement) and a receivable from ABC of $250,000 (see Note
3). As of December 31, 1995, the Company had reimbursed ABC the net amount due
of $924,000.
In 1997, the Company shared certain administrative support and office
space with Global Photonic Energy Corporation managed by certain officers of
the Company and in which certain shareholders have a significant minority
interest. The officers of the Company are also the officers of this related
company. The Company charged Global Photonic Energy Corporation $51,906 in 1997
for these services. In 1998, this amount was written off, as the balance was
deemed uncollectible. The charge for the write-off was included in selling,
general and administrative expense in the accompanying Consolidated Statements
of Operations.
In 1998, there were no related party transactions.
F-16
<PAGE>
UNIVERSAL DISPLAY CORPORATION
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
10. COMMITMENTS
Lease Commitments
The Company has several operating lease arrangements for office space and
office equipment. Total rent expense was $91,467 and $78,078 for the year ended
December 31, 1998 and 1997, respectively. Minimum future rental payments for
operating leases as of December 31, 1998 are as follows:
Year Amount
---- ------
1999 $220,089
2000 $216,698
2001 $167,049
2002 $132,000
2003 $132,000
--------
$867,836
========
11. INCOME TAXES
The components of income taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
------------------- ------------------- ------------------
<S> <C> <C> <C>
Current .......................................... $ -- $ -- $ --
Deferred ......................................... (484,848) (2,015,424) (601,344)
--------- ----------- ---------
(484,848) (2,015,424) (601,344)
Increase in valuation allowance provision ........ (484,848) $ 2,015,424 $ 601,344
--------- ----------- ---------
$ -- $ -- $ --
========= =========== =========
</TABLE>
The difference between the Company's federal statutory income tax rate and
its effective income tax rate is primarily due to non-deductible expenses and
the valuation allowance.
As of December 31, 1998, the Company had net operating loss carryforwards
of approximately $6,120,000, which will begin to expire in 2010. The net
operating loss carryforwards differ from the accumulated deficit principally
due to the timing of the recognition of certain expenses. In accordance with
the Tax Reform Act of 1986, the net operating loss carryforwards could be
subject to certain limitations.
Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- ------------------
<S> <C> <C>
Gross deferred tax assets
Net operating loss carryforwards ......... $ 2,080,146 $ 2,051,418
Capitalized start-up costs ............... 1,557,836 1,192,472
Capitalized technology license ........... 170,000 170,000
Other .................................... 259,786 169,030
----------- -----------
4,067,768 3,582,920
Valuation allowance ....................... $(4,067,768) $(3,582,920)
----------- -----------
Net deferred tax assets ................... -- --
=========== ===========
</TABLE>
A valuation allowance was established for 100% of the net deferred tax
asset, since the Company has incurred substantial operating losses and expects
additional losses in 1999. The Company's management has concluded that the
realizability of the deferred tax assets is uncertain.
F-17
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1999
(unaudited)
ASSETS ----------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents (See Note 2) .............................. $ 8,703,768
Short-term investments (See Note 2) ................................. 1,008,184
Contract research receivables ....................................... 104,584
Prepaid consulting fee .............................................. 288,328
Other current assets ................................................ 39,070
------------
Total current assets ............................................. 10,143,934
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$79,097 ............................................................. 301,560
DEPOSITS ............................................................. 138,073
------------
Total assets ..................................................... $ 10,583,567
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES: .................................................
Accounts payable and accrued expenses ............................... $ 673,455
------------
SHAREHOLDERS' EQUITY .................................................
Preferred Stock, par value $0.01 per share, 5,000,000 shares autho-
rized, 200,000 shares designated ..................................
Series A Nonconvertible Preferred Stock, par value $.01 per share,
200,000 issued and outstanding (liquidation value of $ 1,500,000) 2,000
Common Stock, par value $.01 per share, 25,000,000 shares autho-
rized, 13,168,602 issued and outstanding .......................... 131,686
Additional paid-in capital .......................................... 25,622,623
Deficit accumulated during development-stage ........................ (15,846,197)
------------
Total shareholders' equity .......................................... 9,910,112
------------
Total liabilities and shareholders' equity .......................... $ 10,583,567
============
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Period from Inception
Six Months Ended (June 17, 1994) to
June 30, June 30, 1999
--------------------------------- ----------------------
1999 1998
--------------- ---------------
<S> <C> <C> <C>
REVENUE:
Contract research revenue ..................... $ 186,965 $ 198,365 $ 649,364
----------- ----------- ------------
OPERATING EXPENSES:
Research and development (See Note 3) ......... 851,440 444,944 9,501,039
General and administrative .................... 1,669,582 821,204 7,538,970
----------- ----------- ------------
Total operating expenses .................... 2,521,022 1,266,148 17,040,009
----------- ----------- ------------
Operating loss .............................. (2,334,057) (1,067,783) (16,390,645)
INTEREST INCOME ................................ 62,197 115,017 544,448
----------- ----------- ------------
NET LOSS ....................................... $(2,271,860) $ (952,766) $(15,846,197)
----------- ----------- ------------
BASIC AND DILUTED NET LOSS PER
COMMON SHARE .................................. $ (.18) $ (.09)
----------- -----------
WEIGHTED AVERAGE SHARES USED IN
COMPUTING BASIC AND DILUTED
NET LOSS PER COMMON SHARE ..................... 12,391,929 10,307,268
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Period from Inception
Ended June 30, (June 17, 1994) to
1999 1998 June 30, 1999
-------------- -------------- ----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .............................................. $(2,271,860) $(952,766) $(15,846,197)
Depreciation .......................................... 11,864 15,917 79,096
Issuance of Common Stock options and warrants ......... -- -- 681,525
Issuance of Common Stock and warrants in
connection with amended research and license
agreements .......................................... -- -- 3,120,329
Issuance of Common Stock in connection
with executives' compensation........................ 423,220 -- 423,220
Acquired in-process technology ........................ -- -- 350,000
Adjustments to reconcile net loss to net cash used
in operating activities:
(Increase) decrease in assets:
Contract research receivables ....................... 17,357 52,223 (104,584)
Other current assets ................................ 119,488 62,155 5,928
Deposits ............................................ (40,000) -- (138,073)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ............... 178,133 (102,219) 629,293
Payable to related parties .......................... -- -- 250,000
---------- --------- ------------
Net cash used in operating activities .............. (1,561,798) (924,690) (10,549,463)
---------- --------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment ................................ (257,213) (3,341) (380,656)
Purchases of short-term investments ................... (1,008,189) -- (8,728,686)
Proceeds from sale of short-term investments .......... 527,507 1,096,050 7,720,502
---------- --------- ------------
Net cash provided by (used in) investing activities (737,895) 1,092,709 (1,388,840)
---------- --------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock ................ 9,175,080 2,900 20,642,071
---------- --------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS .................. 6,875,387 170,919 8,703,768
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD ............................................. 1,828,381 85,470 --
---------- --------- ------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD ................................................ $ 8,703,768 $ 256,389 $ 8,703,768
---------- --------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1. -- BACKGROUND
Universal Display Corporation (the "Company"), a development-stage
company, is engaged in the research and development and commercialization of
organic light emitting diode ("OLED") technology for flat panel display
applications.
The Company, formerly known as Enzymatics, Inc. ("Enzymatics"), was
incorporated under the laws of the Commonwealth of Pennsylvania on April 24,
1985 and commenced its current business activities on August 1, 1994. UDC Inc.,
a wholly-owned subsidiary of the Company and a New Jersey corporation, formerly
known as Universal Display Corporation ("UDC"), was incorporated under the laws
of the State of New Jersey on June 17, 1994.
Research and development of the OLED technology is being conducted at the
Advanced Technology Center for Photonics and Optoelectronic Materials at
Princeton University and at the University of Southern California ("USC") (on a
subcontract basis with Princeton University), pursuant to a Sponsored Research
Agreement dated August 1, 1994, as amended (the "1994 Sponsored Research
Agreement"), originally between the Trustees of Princeton University
("Princeton University") and American Biomimetics Corporation ("ABC"), a
privately held Pennsylvania corporation and affiliate of the Company. In
October 1997, the Company entered into a new 5-year Sponsored Research
Agreement (the "1997 Sponsored Research Agreement") for OLED technology (see
Note 3). Pursuant to a license agreement dated August 1, 1994 (the "1994
License Agreement") between Princeton University and ABC, assigned to the
Company by ABC in June 1995, the Company has a worldwide exclusive license to
manufacture and market products based on Princeton University's pending patent
application relating to the OLED technology and the right to obtain a similar
license to inventions conceived or discovered under the 1994 Sponsored Research
Agreement and to sublicense such rights. In October 1997, the Company amended
the 1994 License Agreement (the "1997 Amended License Agreement") in which
certain terms were modified (see Note 3). The Company's Chairman and Chief
Executive Officer holds similar positions in ABC, a company which is controlled
by members of his family.
The Company is a development-stage entity with no significant operating
activity to date. Expenses incurred have primarily been in connection with
research and development funding, obtaining financing and administrative
activities. The developmental nature of the activities is such that significant
inherent risks exist in the Company's operations. Completion of the
commercialization of the Company's technology will require funds substantially
greater than the Company currently has available. There can be no assurance
that such financing will be available to the Company when needed, on
commercially reasonable terms or at all. The Company anticipates, based on
management's internal forecasts and assumptions relating to its operations,
that it has sufficient cash to meet its obligations for at least the next
twelve months. To the extent that Princeton University's research efforts do
not result in the development of commercially viable applications for the OLED
technology, the Company will not have any meaningful operations. Even if a
product incorporating the OLED technology is developed and introduced into the
marketplace, additional time and funding may be necessary before significant
revenues are realized. While the Company funds the OLED technology research,
the scope of and technical aspects of the research and the resources and
efforts directed to such research is subject to the control of Princeton
University and the principal investigators. Accordingly, the Company's success
is dependent on the efforts of Princeton University and the principal
investigators. The 1997 Sponsored Research Agreement provides that if certain
of the principal investigators are unavailable to continue to serve as a
principal investigator, because such person is no longer associated with
Princeton University or otherwise, and a successor acceptable to both the
Company and Princeton University is not available, the 1997 Sponsored Research
Agreement will terminate.
F-21
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) -- (Continued)
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY FINANCIAL
INFORMATION AND RESULTS OF OPERATIONS
INTERIM FINANCIAL INFORMATION
In the opinion of the Company, the accompanying unaudited Consolidated
Financial Statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as of
June 30, 1999, the results of operations for the six months ended June 30, 1999
and 1998, and the cash flows for the six months ended June 30, 1999 and 1998.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, these Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial Statements and
the notes in the Company's latest year end financial statements, which were
included in the Company's Annual Report Form 10-KSB/A for the year ended
December 31, 1998.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company
and its wholly-owned subsidiary, UDC, Inc. All significant intercompany
transactions and accounts have been eliminated.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Investments
are carried at market value, and at June 30, 1999 and December 31, 1998, are
classified as short-term investments. At June 30, 1999 and December 31, 1998,
all of the Company's investments are classified as available for sale pursuant
to Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," (SFAS 115). Therefore, any
unrealized holding gains or losses should be presented as a separate component
of shareholders' equity. At June 30, 1999 and December 31, 1998, unrealized
holding gains or losses were not material.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated on a
straight-line basis over 3 years.
NET LOSS PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128 (SFAS 128), "Earnings per Share", which superscedes APB Opinion No. 15,
"Earnings per Share." SFAS 128 requires dual presentation of basic and diluted
earnings per share (EPS) for complex capital structures on the face of the
Statement of Operations. Basic EPS is computed by dividing income by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution from the exercise or conversion of
securities into Common Stock.
F-22
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) -- (Continued)
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY FINANCIAL
INFORMATION AND RESULTS OF OPERATIONS -- (Continued)
Options and warrants to purchase Common Stock were outstanding during the
six month period ended June 30, 1999 and 1998 are not included in the
computation of diluted net loss per share because they are antidilutive.
RESEARCH AND DEVELOPMENT
Expenditures for research and development expense are charged to
operations as incurred.
NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 requires the reporting of comprehensive income in addition to net
income from operations. The Company has reviewed SFAS 130 and has determined
that for the six months ended June 30, 1999 and 1998, no items meeting the
definition of comprehensive income as specified in SFAS 130 existed in the
financial statements.
NOTE 3. -- SPONSORED RESEARCH AGREEMENT WITH PRINCETON
UNIVERSITY
On October 9, 1997, the Company entered into a new 5-year Sponsored
Research Agreement (the "1997 Sponsored Research Agreement), with Princeton
University and entered into an Amended License Agreement with Princeton
University and USC amending its 1994 License Agreement with Princeton
University (the "1997 Amended License Agreement). The 1997 Sponsored Research
Agreement continues and expands the sponsored research which commenced in 1994
(the "1994 Sponsored Research Agreement") under which the Company funds
additional research and development work at Princeton University (and at USC
under a subcontract with Princeton University) in OLED technology. The 1997
Sponsored Research Agreement requires the Company to pay up to $4.4 million
commencing on July 31, 1998 through July 31, 2002, which period is subject to
extension. The amounts due to Princeton University will be expensed when paid
by the Company. Under the 1997 License Agreement, the Company has the exclusive
worldwide license to manufacture and market products, and to sublicense those
rights, based on Princeton University's and USC's pending patent applications
relating to the OLED technology and conceived under the 1994 Sponsored Research
Agreement, and to inventions conceived or discovered under the 1997 Sponsored
Research Agreement. The Company is required to pay Princeton University a
royalty in the amount of 3% of the Company's net sales of products utilizing
the OLED technology. In circumstances where the Company sublicenses the OLED
technology (except to affiliates), the royalty required to be paid by the
Company was reduced from 50% to 3%. These royalty rates are subject to upward
adjustments under certain conditions. In connection with the 1997 License
Agreement and 1997 Sponsored Research Agreement, in October 1997, the Company
issued 140,000 Common Shares and 175,000 warrants to purchase Common Stock to
Princeton University as well as 60,000 Common Shares and 75,000 warrants to
purchase Common Stock to USC.
NOTE 4. -- LIQUIDITY
As of June 30, 1999, the Company has an accumulated deficit of
$15,846,197. In addition, the Company has incurred losses since its inception
and is subject to those risks associated with companies in the early stages of
development. The completion of the commercialization of the Company's
technology will require funds substantially greater than the Company currently
has available. As of April 15, 1999, 1,214,625 of the Company's public warrants
were exercised, generating proceeds of approximately $4,350,000. In May 1999,
the Company completed a private placement, and issued 1,414,034 shares of
common stock and warrants, resulting in net proceeds of approximately
$4,800,000.
F-23
<PAGE>
4,378,170 Shares of Common Stock
[GRAPHIC OMITTED]
------------------------------------------
PROSPECTUS
------------------------------------------
August __, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Chapter 17, Subchapter D of the Pennsylvania Business Corporation
Law of 1988, as amended (the "PBCL") contains provisions permitting
indemnification of officers and directors of a business corporation in
Pennsylvania.
Sections 1741 and 1742 of the PBCL provide that a business
corporation may indemnify directors and officers against liabilities and
expenses they may incur as such in connection with any threatened, pending or
completed civil, administrative or investigative proceeding, provided that the
particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In general, the power to indemnify under these
sections does not exist in the case of actions against a director or officer by
or in the right of the corporation if the person otherwise entitled to
indemnification shall have been adjudged to be liable to the corporation unless
it is judicially determined that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnification for specified expenses.
Section 1743 of the PBCL provides that the corporation is required
to indemnify directors and officers against expenses they may incur in defending
actions against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions.
Section 1746 of the PBCL grants a corporation broad authority to
indemnify its directors and officers for liabilities and expenses incurred in
such capacity, except in circumstances where the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
Section 1747 of the PBCL permits a corporation to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
representative of another corporation or other enterprise, against any liability
asserted against such person and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify the person against such liability under Chapter 17,
Subchapter D of the PBCL.
The Registrant's Bylaws provide a right to indemnification to
the full extent permitted by law, for expenses (including attorney `s fees),
damages, punitive damages, judgments, penalties, fines and amounts paid in
settlement, actually and reasonably incurred by any director or officer whether
or not the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Registrant (a derivative action)
by reason of the fact that such director or officer is or was serving as a
director, officer, employee or agent of the Registrant or, at the request of the
Registrant, as a director, officer, partner, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, unless the act or failure to act giving rise to the claim for
indemnification is financially determined by a court to have constituted willful
misconduct or recklessness. The Bylaws provide for the advancement of expenses
to an indemnified party upon receipt of an undertaking by the party to repay
those amounts if it is finally determined that the indemnified party is not
entitled to indemnification.
The Registrant's Bylaws authorize the Registrant to take steps
to ensure that all persons entitled to indemnification are properly indemnified,
including, if the Board of Directors so determines, purchasing and maintaining
insurance.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
II-1
<PAGE>
SEC Registration fee........................... $ 4,610
Transfer agent and registrar fees.............. $ 1,500
Printing and engraving fees.................... $ 5,000
Legal fees..................................... $15,000
Blue Sky fees and expenses .................... $ 5,000
Accounting fees................................ $ 5,000
Miscellaneous ................................. $ 5,000
Total......................................... $41,510
The selling stockholders will not pay any of the expenses of this offering.
Item 26. Recent Sales of Unregistered Securities.
Since June 1, 1996, the Registrant has issued and sold the following
unregistered securities:
1. On May 15, 1999, the Registrant completed a two-tranche offering
of an aggregate of 1,414,034 units, each of which consists of one
share of common stock and one warrant to purchase one share of
common stock. The Registrant sold the units at a price of $3.75
per unit, and raised a total of $5,302,627.50 from approximately
50 accredited individual and institutional investors. The
exercise prices of the warrants underlying the units issued in
the first and second tranches of the offering were $4.31 and
$4.28, respectively. In connection with the offering, two
placement agents received an aggregate of 27,987 shares of common
stock and 188,719 warrants to purchase shares of common stock
with exercise prices ranging from $4.28 to $4.53.
2. In 1998, the Registrant granted warrants to two consultants to
purchase 125,000 shares of common stock at exercise prices
ranging from $7.00 to $7.25 per share. Of these warrants, 25,000
warrants granted to one consultant in June 1998 vested
immediately. The remaining warrants were granted to the other
consultant in April 1998, 25,000 of which vested immediately and
75,000 will vest upon the Registrant's successful entrance into
the Taiwanese market.
3. In April 1998, the Registrant granted warrants to two employees
and two directors to purchase 400,000 shares of common stock at
an exercise price of $6.38. These warrants vested immediately and
expire in 2008.
4. In October 1997, the Registrant issued (i) 140,000 shares of
common stock and 175,000 warrants to purchase common stock to
Princeton University and (ii) 60,000 shares of common stock and
75,000 warrants to purchase common stock to the University of
Southern California in connection with the 1997 license agreement
and 1997 sponsored research agreement. The warrants have an
exercise price of $7.25, vested immediately and expire in 2007.
5. In July 1997, the Registrant granted warrants to consultants to
purchase 200,000 shares of common stock at an exercise price of
$4.80. These warrants vested immediately and expire in 2002.
6. In August 1996, the Registrant granted warrants to purchase
20,000 shares of common stock to an individual in exchange for
consulting services. These warrants have an exercise price of
$6.00, vested immediately and expire in 2006.
The Registrant believes that the transactions described in paragraph 1
above were exempt from registration under Rule 506 promulgated under the
Securities Act of 1933 because the subject securities were sold to a limited
group of persons, each of whom was believed to have been an accredited investor,
and was purchased for investment without a view to further distribution. The
Registrant believes that the remainder of the transactions described above were
exempt from registration under Section 4(2) the Securities Act of 1933 as
transactions by an issuer not involving a public offering. Restrictive legends
were placed on stock certificates evidencing the shares and/or agreements
relating to the right to purchase such shares described above.
<PAGE>
Item 27. Exhibits.
The following is a list of exhibits filed as part of this Registration
Statement.
<TABLE>
<CAPTION>
Exhibit Description
Number
<S> <C>
3.1 Articles of Incorporation of the Company. (Exhibit 3.1) (1)
3.2 Bylaws of the Company. (Exhibit 3.2) (1)
4.1 Specimen stock certificate representing the Common Stock. (Exhibit 4.1) (3)
4.2 Specimen warrant certificate representing the Warrants. (Exhibit 4.2) (3)
4.3 Form of Public Warrant Agreement. (Exhibit 4.3) (1)
4.4 Form of Underwriter's Warrant Agreement. (Exhibit 4.4) (1)
4.5 Statement of Designations and Preferences of Series A Non-Convertible Preferred Stock. (Exhibit
4.5) (2)
4.6 Form of Private Placement Warrant.*
5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality of the shares of common stock
being registered.*
10.1 License Agreement dated August 1, 1994 between The Trustees of Princeton University and American
Biomimetics Corporation. (Exhibit 10.1) (3)
10.2 Amendment to License Agreement (August 1, 1994) dated April 11, 1995 between the Trustees of Princeton
University and American Biomimetics Corporation. (Exhibit 10.2) (2)
10.3 Sponsored Research Agreement dated August 1, 1994 between the Trustees of Princeton University and
American Biomimetics Corporation. (Exhibit 10.3) (3)
10.4 Letter Amendment dated May 5, 1995, between the Trustees of Princeton University and American
Biomimetics Corporation. (Exhibit 10.4) (3)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.5 Amendment to Sponsored Research Agreement (August 1, 1994) dated April 18, 1995 between the
Trustees of Princeton University and American Biomimetics Corporation. (Exhibit 10.5) (2)
10.6 Technology Transfer Agreement dated June 22, 1995 between American Biomimetics Corporation and
Universal Display Corporation. (Exhibit 10.6) (2)
10.7 Assignment and Assumption of License dated June 22, 1995 between American Biomimetics Corporation
and Universal Display Corporation. (Exhibit 10.7) (3)
10.8 Sublicense Agreement and Option dated June 22, 1995 between American Biomimetics Corporation and
Universal Display Corporation. (Exhibit 10.8) (3)
10.9 Assignment and Assumption of Agreement dated August 1, 1995 between the Trustees of Princeton
University and the University of Southern California. (Exhibit 10.9) (2)
10.10 Subcontract No. 341-4014-1 dated August 16, 1995 between the Trustees of Princeton University and
the University of Southern California. (Exhibit 10.10) (3)
10.11 Assignment of 1994 Sponsored Research Agreement dated November 1, 1995 between American
Biomimetics Corporation and Universal Display Corporation. (Exhibit 10.11) (2)
10.12 # Stock Option Agreement dated as of June 23, 1995 between Universal Display Corporation and Thomas
D. Hays, III. (Exhibit 10.12) (2)
10.13 # Stock Option Agreement dated as of June 23, 1995 between Universal Display Corporation and Harvey
Nachman. (Exhibit 10.13) (2)
10.14 Registration Rights Agreement dated as of June 23, 1995 between Universal Display Corporation and
Thomas D. Hays, III. (Exhibit 10.14) (2)
10.15 Registration Rights Agreement dated as of June 23, 1995 between Universal Display Corporation and
Harvey Nachman. (Exhibit 10.15) (2)
10.16 Form of Registration Rights Agreement between Universal Display Corporation and Certain
Subscribers to Purchase Common Stock of Universal Display Corporation. (Exhibit 10.16) (2)
10.17 # Form of Stock Option Agreement dated as of June 23, 1995 between Universal Display Corporation and
Sidney D. Rosenblatt. (Exhibit 10.17) (2)
10.18 # 1992 Stock Option Plan. (Exhibit 10.18) (2)
10.19 # 1995 Stock Option Plan. (Exhibit 10.19) (2)
10.20 # Employment Agreement dated as of November 1, 1995 between Universal Display Corporation and
Sherwin I. Seligsohn. (Exhibit 10.20) (2)
10.21 # Form of Services Agreement dated as of December 1, 1995 between Universal Display Corporation and
Dean L. Ledger. (Exhibit 10.21) (2)
10.22 # Form of Stock Option Agreement dated as of June 23, 1995 between Universal Display Corporation and
Sidney D. Rosenblatt. (Exhibit 10.22) (2)
10.23 # Form of Stock Option Agreement dated as of September 1, 1995 between Universal Display Corporation
and Stephen R. Forrest. (Exhibit 10.23) (2)
10.24 # Form of Stock Option Agreement dated as of September 1, 1995 between Universal Display Corporation
and Mark E. Thompson. (Exhibit 10.24) (2)
10.25 # Form of Stock Option Agreement dated as of September 1, 1995 between Universal Display Corporation
and Paul E. Burrows. (Exhibit 10.25) (2)
10.26 License Agreement dated January 26, 1996 between Universal Display Corporation and University of
Southern California. (Exhibit 10.26) (2)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.27 Letter Agreement dated September 20, 1995 Agreeing to a Royalty Rate between the Trustees of
Princeton University and Universal Display Corporation. (Exhibit 10.27) (2)
10.28 Agreement and Plan of Reorganization dated as of April 6, 1995 between Enzymatics, Inc.,
Enzymatics Merger Subsidiary, Inc. and Universal Display Corporation. (Exhibit 10.28) (2)
10.29 Form of Consulting Agreement between the Universal Display Corporation and Whale Securities Co.,
L.P. (Exhibit 10.29) (2)
10.30 # Warrant Agreement dated April 25, 1996 between the Company and Steven V. Abramson. (Exhibit 10.30)
(4)
10.31 Warrant Agreement dated April 25, 1996 between the Company and Sherwin I. Seligsohn. (Exhibit
10.31) (4)
10.32 # Warrant Agreement dated April 25, 1996 between the Company and Dean L. Ledger. (Exhibit 10.32) (4)
10.33 # Warrant Agreement dated April 25, 1996 between the Company and Sidney D. Rosenblatt. (Exhibit
10.33) (4)
10.34 1997 Sponsored Research Agreement between the Company and Princeton
University. (Exhibit 10.34) (5)
10.35 1997 Amended License Agreement between the Company, Princeton University and the University of
Southern California. (Exhibit 10.35) (5)
21 Subsidiaries of the Registrant.**
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed as Exhibit 5.1 hereto).*
24.1 Power of Attorney.**
27.1 Financial Data Schedule (six months ended June 30, 1999).*
27.2 Financial Data Schedule (year ended December 31, 1998).*
27.3 Financial Data Schedule (year ended December 31, 1997).*
</TABLE>
* Filed herewith.
** Previously filed.
# Management contract or compensatory plan or arrangement
(1) Filed as an Exhibit to Registration Statement (No. 33-80703) on Form
SB-2 filed with the Securities and Exchange Commisson on December 21,
1995
(2) Filed as an Exhibit to Amendment No. 1 to Registration Statement
(No. 33-80703) on Form SB-2 filed with the Securities and Exchange
Commission on March 20, 1996
(3) Filed as an Exhibit to Amendment No. 1 to Registration Statement
(No. 33-80703) on Form SB-2 filed with the Securities and Exchange
Commission on March 20, 1996
(4) Filed as an Exhibit to the Annual Report on Form 10-KSB for the year
ended December 31, 1996 filed with the Securities and Exchange
Commission on March 31, 1997
(5) Filed as Exhibit to the Annual Report on Form 10-KSB for the year ended
December 31, 1997 filed with the Securities and Exchange Commission on
March 31, 1998.
II-4
<PAGE>
Item 28. Undertakings.
The Registrant hereby undertakes to:
(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) include any additional or changed material information on the plan of
distribution;
(2) for determining liability under the Securities Act, treat each such
post-effective amendment as a new registration of the securities offered,
and the offering of such securities at that time to be the initial bona fide
offering; and
(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the termination of this offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has authorized this
Amendment No. 1 to Form SB-2 Registration Statement to be signed on its behalf
by the undersigned, in the Township of Lower Merion (Bala Cynwyd), Commonwealth
of Pennsylvania on August 25, 1999.
UNIVERSAL DISPLAY CORPORATION
By: /s/ Sidney D. Rosenblatt
-------------------------------------
Sidney D. Rosenblatt
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
In accordance with the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chief Executive Officer and Chairman August 25, 1999
- ------------------------------------- of the Board (principal executive officer)
Sherwin I. Seligsohn
* President, Chief Operating Officer August 25, 1999
- ------------------------------------- and Director
Steven V. Abramson
/s/ Sidney D. Rosenblatt Executive Vice President, Chief Financial August 25, 1999
- ------------------------------------- Officer, Treasurer, Secretary and Director
Sidney D. Rosenblatt (principal finanical and accounting officer)
* Executive Vice President and Director August 25, 1999
- -------------------------------------
Dean L. Ledger
* Director August 25, 1999
- -------------------------------------
Camille Naffah
* Director August 25, 1999
- -------------------------------------
Elizabeth H. Gemmill
* Director August 25, 1999
- -------------------------------------
Stephen R. Forrest, Ph.D
</TABLE>
* By: /s/ Sidney D. Rosenblatt
-------------------------
Sidney D. Rosenblatt
as Attorney-in-fact
II-6
<PAGE>
Exhibit 4.6
WARRANT
WARRANT HOLDER: ____________________________ WARRANT NO. __
____________________________
____________________________
____________________________
NUMBER OF WARRANT SHARES: _______________
THE WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE WARRANT AND SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE DISPOSED OF WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
UNIVERSAL DISPLAY CORPORATION
Common Stock Purchase Warrant
Universal Display Corporation, a Pennsylvania corporation (the "Company"),
for value received, hereby grants to the warrant holder identified above, its
successors and permitted assigns (collectively, the "Holder"), this right (the
"Warrant"), subject to the terms set forth below, to purchase at the Exercise
Price (as defined in Section 1.1 below), up to ______ shares of common stock,
$.01 par value per share, of the Company (the "Common Stock"), subject to
adjustment as herein provided. The total number of shares of Common Stock that
may be purchased hereunder are referred to herein as the "Warrant Shares."
1. Exercise of Warrant.
1.1 Purchase Price. The Warrant may be exercised, subject to the terms
specified herein, at the purchase price of $____ per Warrant Share (as may be
adjusted from time to time, the "Exercise Price"), by payment of lawful money of
the United States.
1.2 Exercise Period. The Warrant may be exercised at any time for a
period of five years from the date hereof.
<PAGE>
1.3 Exercise in Full. Subject to the limitations stated above, this
Warrant may be exercised in full at the option of the Holder by surrender of
this Warrant, with the form of subscription at the end hereof duly executed by
the Holder, to the Company at its principal office in the United States,
accompanied by payment in the amount obtained by multiplying the number of
Warrant Shares for which this Warrant may be exercised by the Exercise Price.
1.4 Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in subsection
1.3 along with payment in the amount determined by multiplying (a) the number of
Warrant Shares designated by the Holder in the subscription at the end hereof by
(b) the Exercise Price. On any such partial exercise, the Company at its expense
will forthwith issue and deliver to or upon the order of the Holder a new
Warrant or Warrants of like tenor, in the name of the Holder or as the Holder
(upon payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the number of Warrant Shares for which such
Warrant or Warrants may still be exercised.
1.5 Cashless Exercise.
(a) During the period in which the Common Stock is listed or
admitted to trading on any national securities exchange or is quoted on the
NASDAQ Small Cap Market or a similar organization, all or any portion of this
Warrant may be exercised on a "cashless" basis, by stating in the form of
subscription the Holder's intention to purchase Warrant Shares in consideration
of cancellation of Warrants in payment for such exercise. The number of Warrant
Shares the Holder shall receive upon such cashless exercise shall equal the
difference between the number of Warrant Shares for which such exercise is made
(the "Cashless Exercise Number") and the quotient that is obtained when the
product of the Cashless Exercise Number and the then current Exercise Price is
divided by the Current Market Price per share of Common Stock on date of
exercise (as hereinafter determined).
(b) The "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices for the
most recent five trading days prior to such date. The closing price for any day
shall be the last reported sales price or, in case no such reported sale takes
place on such day, the closing bid price, in either case on the principal
national securities exchange (including, for purposes hereof, the NASDAQ
National Market or the NASDAQ Small Cap Market) on which the Common Stock is
listed or admitted to trading, or, in case no such bid prices are available on
such day, the highest reported bid price for the Common Stock as furnished by
the National Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information.
2. Delivery of Share Certificates on Exercise.
2.1 As soon as practicable after the exercise of this Warrant in full
or in part, the Company, at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable Warrant Shares (or Other Securities, as defined
below) to which the Holder shall be entitled on such exercise, plus, in lieu of
any fractional share to which the Holder would otherwise be entitled, cash equal
to such fraction multiplied by the Current Market Price (as defined above) of
one full share, together with any other stock or other securities and property
(including cash, where applicable) to which the Holder is entitled upon such
exercise pursuant to Section 1 or otherwise. "Other Securities" refers to any
stock (other than the Warrant Shares) or other securities of the Company or any
other person (corporate or otherwise) that the Holder at
2
<PAGE>
any time shall be entitled to receive, or shall have received, on the exercise
of this Warrant, in lieu of or in addition to the Warrant Shares, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of the Warrant Shares, including securities of the same class issued
in exchange for or in respect of the Warrant Shares pursuant to a plan of
merger, consolidation, recapitalization or reorganization, the sale of
substantially all of the Company's assets or a similar transaction.
3. Covenants.
3.1 Issuance of Shares upon Exercise. All Warrant Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company will at
all times have authorized and reserved, free from preemptive rights, a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issuance or sale of securities or otherwise, avoid or
take any action that would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, and shall at all times in good faith assist in carrying out all of the
provisions of this Warrant. If any Warrant Shares required to be reserved for
the purpose of exercise of this Warrant require registration with or approval of
any governmental authority under any federal law (other than the Securities Act
of 1933, as amended (the "Securities Act")) or under any state law, before such
Warrant Shares may be issued upon exercise of this Warrant, the Company shall,
at its expense, use commercially reasonable efforts to cause such Warrant Shares
to be duly registered or approved, as the case may be.
3.2 Restrictions on Transfer. By acceptance of this Warrant, Holder
represents to the Company that it is acquiring the Warrant for its own
investment account and without a view to the subsequent public distribution of
the Warrant or Warrant Shares otherwise than pursuant to an effective
registration statement under the Securities Act and applicable state securities
laws. This Warrant and each certificate for Warrant Shares issued to the Holder
and any subsequent holder that have not been sold to the public pursuant to an
effective registration statement under the Securities Act or as to which the
restrictions on transfer have not been removed as hereinafter provided, shall
bear a restrictive legend reciting that the same have not been registered
pursuant to the Securities Act and applicable state securities laws and may not
be transferred in the absence of an effective registration statement under the
Securities Act. Each proposed transfer shall be accompanied by a notice which
shall describe the manner of the proposed transfer and shall be accompanied by
an opinion of counsel experienced in securities laws matters and reasonably
acceptable to the Company and its counsel to the effect that the proposed
transfer may be effected without registration under the Securities Act,
whereupon, the holder of such Warrants or Warrant Shares shall be entitled to
transfer such securities in accordance with the terms of its notice and such
opinion. Restrictions imposed under this Section 3 upon the transferability of
the Warrants or of Warrant Shares shall cease when:
(a) a registration statement covering such Warrant Shares
becomes effective under the Securities Act and such Warrant Shares have been
disposed of pursuant to such effective registration statement, or
(b) the Company receives from the holder thereof an opinion of
counsel experienced in securities laws matters, which counsel shall be
reasonably acceptable to the Company, that such restrictions are no longer
required in order to insure compliance with the Securities Act.
3
<PAGE>
When such restrictions terminate, the Company shall, or shall instruct the
warrant agent or transfer agent, if any, to issue new securities in the name of
the holder not bearing the legends required by this Section 3.
4. Adjustment for Reorganization; Consolidation or Merger. If at any time
or from time to time, the Company shall (a) effect a plan of merger,
consolidation, recapitalization or reorganization or similar transaction with a
corporation (the "Acquiror") whereby the shareholders of the Company will
exchange their shares of the Company for the shares of the Acquiror, or (b)
transfer all or substantially all of its properties or assets to any other
person (which along with any transactions set forth in (a) hereof shall be an
"Extraordinary Transaction"), then as a condition of such Extraordinary
Transaction, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the Warrant Shares immediately theretofore acquirable upon the exercise of
this Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for the number of Warrant Shares
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such Extraordinary Transaction not taken place. In any such case, the
Company will make appropriate provision to insure that the provisions of this
Section 4 hereof will thereafter be applicable as nearly as may be practicable
in relation to any shares of stock or securities thereafter deliverable upon the
exercise of this Warrant. The Company will not effect any Extraordinary
Transaction unless prior to the consummation thereof, the successor corporation
(if other than the Company) assumes by written instrument the obligations under
this Section 4 and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
5. Adjustments for Other Events.
5.1 If the outstanding shares of Common Stock shall be subdivided or
split into a greater number of shares, or a dividend in shares of Common Stock
shall be paid in respect of the shares of Common Stock, then the Exercise Price
in effect immediately prior to such subdivision or at the record date of such
dividend shall, simultaneously with the effectiveness of such subdivision or
split or immediately after the record date of such dividend, be proportionately
reduced. If the outstanding shares of Common Stock shall be combined or
reverse-split into a smaller number of shares, then the Exercise Price in effect
immediately prior to such combination or reverse-split shall, simultaneously
with the effectiveness of such combination or reverse-split be proportionately
increased. When any adjustment is required to be made in the Exercise Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i) an amount equal to the number
of Warrant Shares issuable upon the exercise of this Warrant immediately prior
to such adjustment, multiplied by the Exercise Price in effect immediately prior
to such adjustment, by (ii) the Exercise Price in effect immediately after such
adjustment.
5.2 Except as provided in Sections 4, 5.1 and 5.6, if and whenever on
or after the date of issuance of this Warrant, the Company issues, or in
accordance with Section 5.3(c) hereof is deemed to have issued, any shares of
Common Stock ("Additional Stock"), for no consideration or for a consideration
per share less than the Exercise Price on the date of issuance of such
Additional Stock (a "Dilutive Issuance"), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the sum
of (x) the number of shares of Common Stock outstanding immediately prior to the
Dilutive Issuance, plus (y) the quotient of the aggregate consideration,
calculated as set forth in Section 5.3 hereof, received by the Company upon such
Dilutive Issuance divided by the Exercise Price in effect immediately prior to
the Dilutive Issuance, and (ii) the denominator of which is the number of shares
of Common Stock outstanding immediately prior to the Dilutive Issuance, plus the
number
4
<PAGE>
of shares of such Additional Stock; provided that, for purposes of this Section
5.2, all shares of Common Stock (except as otherwise provided in Section 5.3)
issuable upon the conversion, exchange or exercise of any convertible preferred
stock, warrant, option, right or other security shall be deemed to be
outstanding, and immediately after any shares of Additional Stock are deemed to
be issued pursuant to Section 5.3(c), such shares of Additional Stock shall be
deemed to be outstanding. In such event, the number of Warrant Shares issuable
upon the exercise of this Warrant shall be increased to the number obtained by
dividing (x) the product of (A) the number of Warrant Shares issuable upon the
exercise of this Warrant before such adjustment, and (B) the Exercise Price in
effect immediately prior to the issuance giving rise to this adjustment by (y)
the new Exercise Price.
5.3 For the purposes of any adjustment of the Exercise Price pursuant
to subsection 5.2 above, the following provisions shall be applicable:
(a) In the case of the issuance of shares of Common Stock for
cash, the consideration shall be deemed to be the amount of cash received by the
Company therefor.
(b) In the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the "fair value" of such consideration, as
determined in the good faith judgment of the board of directors of the Company.
(c) In the case of the issuance of any (x) option to purchase
or right to subscribe for shares of Common Stock, (y) security by its terms
convertible into or exchangeable for shares of Common Stock or (z) option to
purchase or right to subscribe for such convertible or exchangeable security:
(i) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of any such option to purchase or right to
subscribe for shares of Common Stock shall be deemed to have been issued at the
time such option or right was issued and for a consideration equal to the
consideration (determined in the manner provided in Sections 5.3(a) and 5.3(b)
above), if any, received by the Company upon the issuance of such option or
right, plus the minimum purchase price provided in such option or right for the
shares of Common Stock covered thereby;
(ii) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of such option to purchase or right
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such option or right was issued and for a
consideration equal to the consideration received by the Company for any such
security and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the additional consideration, if
any, to be received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the consideration
in each case to be determined in the manner provided in subdivisions (a) and (b)
above);
(iii) on any change in the consideration payable to
the Company upon exercise of any such option or right or upon the conversion or
exchange of any such convertible or exchangeable security (other than a change
resulting from the anti-dilution provisions thereof), the Exercise Price in
effect at the time of such change shall forthwith be readjusted to the Exercise
Price that would have been in effect at such time had such option, right or
convertible or exchangeable securities still outstanding at such time provided
for such changed consideration at the time initially granted, issued or sold;
and
5
<PAGE>
(iv) on the expiration of any such option or right,
the termination of any right to convert or exchange or the expiration of any
option or right related to such convertible or exchangeable securities, the
Exercise Price then in effect shall forthwith be readjusted to the Exercise
Price that would have been in effect at the time of such expiration or
termination had such options, rights, securities or options or rights related to
such securities, to the extent outstanding immediately prior to such expiration
or termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
(d) In the case of the issuance of (v) shares of Common Stock,
(w) options to purchase or rights or warrants to subscribe for shares of Common
Stock, (x) securities by their terms which are convertible into or exchangeable
for shares of Common Stock, or (y) options to purchase or rights or warrants to
subscribe for such convertible or exchangeable securities (each of the
securities referred to in the clauses (v), (w), (x) or (y) above, an "Additional
Security"), together with other shares or securities (including another
Additional Security) of the Company, the consideration for such Additional
Securities and other shares or securities shall be the proportion of the
aggregate consideration received for such Additional Securities and other shares
or securities, computed as provided in (a), (b) and (c) above, as determined
reasonably and in good faith by the board of directors of the Company.
5.4 No adjustment in the per share Exercise Price shall be required
unless such adjustment would require an increase or decrease in the Exercise
Price of at least $0.01; provided, however, that any adjustments which by reason
of this Section 5.4 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be.
5.5 Whenever the Exercise Price or the number of Warrant Shares
issuable upon exercise of the Warrants shall be adjusted as provided in this
Section 5, the Company shall forthwith file, at its principal office or at such
other place as may be designated by the Company, a statement, signed by its
president or chief financial officer and by its treasurer, showing in detail the
facts requiring such adjustment to the Exercise Price and the number of Warrant
Shares issuable upon exercise of the Warrants that shall be in effect after such
adjustment. The Company shall within 15 business days of any adjustment cause a
copy of such statement to be sent by first-class, certified mail, return receipt
requested, postage prepaid, to each Holder of Warrants at such holder's address
appearing in the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of a notice required to be mailed under the
provisions of this Warrant.
5.6 No adjustment to the Exercise Price will be made (i) upon the
exercise of any warrants, options or convertible securities granted, issued and
outstanding as of the date of issuance of the Warrant; (ii) upon the exercise of
the Warrant or (iii) upon the grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee benefit plan of the
Company now existing or to be implemented in the future, so long as the issuance
of such stock or options is approved by a majority of the independent members of
the Board of Directors of the Company or a majority of the members of a
committee of independent directors established for such purpose.
6
<PAGE>
6. Notices of Record Date, etc. In the event of:
6.1 any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
6.2 any merger, consolidation or capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company
with or into any other person, or any transfer of all or substantially all of
the assets of the Company, or
6.3 any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then and in each such event the Company will mail or cause to be
mailed to the Holder a notice specifying (a) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, and
(b) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of shares of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities) for
securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 30
days prior, and not more than 90 days prior, to the date specified in such
notice on which any such action is to be taken.
7. Transfers.
7.1 The Warrants and the Warrant Shares are not transferable, in whole
or in part, without compliance with the Securities Act, and any applicable state
securities laws.
7.2 Subject to Section 7.1, this Warrant, or any portion hereof, may be
transferred by the Holder's execution and delivery of the form of assignment
attached hereto along with this Warrant upon reasonable prior notice to the
Company. Any transferee shall be required, as a condition to the assignment, to
deliver all such documentation as the Company deems appropriate. However, until
such assignment and such other documentation are presented to the Company at its
principal offices in the United States, the Company shall be entitled to treat
the registered holder hereof as the absolute owner hereof for all purposes.
7.3 Upon a transfer of this Warrant in accordance with this Section 7,
the Company, at its expense, will issue and deliver to or on the order of the
Holder a new Warrant or Warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, representing the aggregate number of Warrant Shares represented by the
Warrant or Warrants so surrendered. If this Warrant is divided into more than
one Warrant, or if there is more than one Holder thereof, all references herein
to "this Warrant" shall be deemed to apply to the several Warrants, and all
references to "the Holder" shall be deemed to apply to the several Holders,
except in either case to the extent that the context indicates otherwise.
7
<PAGE>
8. Replacement of Warrants.
8.1 On receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of any Warrant and, in the case of
any such loss, theft or destruction of any Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver in the Holder's
name in exchange and substitution for the Warrant so lost, stolen, destroyed or
mutilated, a new Warrant of like tenor.
9. Notices.
9.1 All notices required hereunder shall be deemed to have been given
and shall be effective only when personally delivered or sent by Federal
Express, DHL or other express delivery service or by certified or registered
mail to the address of the Company's principal office in the United States as
follows:
Universal Display Corporation
Three Bala Plaza, East
Suite 104
Bala Cynwyd, PA 19004
in the case of any notice to the Company, and until changed by notice to the
Company, to the address of the Holder set forth above in the case of any notice
to the Holder.
10. Miscellaneous.
10.1 This Warrant and any term hereof may be changed, waived,
discharged or terminated, other than on expiration, only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be construed and enforced
in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officer on the date set forth below.
UNIVERSAL DISPLAY CORPORATION
By:__________________________________________________
Sidney D. Rosenblatt
Executive Vice President, Chief Financial Officer,
Treasurer & Secretary
Date: ______, 1999
8
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ______________________________:
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise such Warrant for, and to purchase thereunder,
__________ Warrant Shares (as defined in the Warrant Agreement governing the
attached Warrant) and herewith makes payment of $________ therefor, including
(i) $_______ by certified or bank cashier's check, and (ii) cancellation of
Warrant to purchase _____Warrant Shares based upon a Cashless Exercise Number
(as therein defined) of ______, in accordance with the terms thereof,
representing the full Exercise Price for such Warrant Shares at the price per
share provided for in such Warrant, and requests that the certificates for such
shares be issued in the name of, and delivered to ____________________, whose
address is ________________________________________.
Dated:_________________ __________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
__________________________________________________
__________________________________________________
(Address)
<PAGE>
-----------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto_______________ the right represented by the attached Warrant to
purchase____________________ Warrant Shares (as defined in the Warrant
Agreement governing the attached Warrant) to which the within Warrant relates,
and appoints Attorney to transfer such right on the books of
- --------------------------------------------------- with full power of
substitution in the premises.
Dated:____________________ ________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
________________________________________
________________________________________
(Address)
Signed in the presence of:
____________________________________
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm in or made part of this registration
statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
August 25, 1999
<PAGE>
Exhibit 23.2
[LETTERHEAD OF MORGAN, LEWIS & BOCKIUS LLP]
August 25, 1999
Universal Display Corporation
Three Bala Plaza East, Suite 104
Bala Cynwyd, PA 19004
Re: Universal Display Corporation -- Registration Statement on Form SB-2
relating to the registration of 4,378,170 shares of common stock, $.01 par
value
Ladies and Gentlemen:
We have acted as counsel to Universal Display Corporation, a Pennsylvania
corporation (the "Company"), in connection with the preparation of the subject
Registration Statement on Form SB-2 (the "Registration Statement") to be filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), relating to 4,378,170 shares
(the "Registered Shares") of the Company's common stock, par value $.01 per
share (the "Common Stock") to be sold by the Selling Stockholders named in the
Registration Statement. Of the Registered Shares, (i) 1,535,669 shares (the
"Shares") have been issued to Selling Stockholders and (ii) 2,842,501 shares
(the "Warrant Shares") will be issued from time to time upon exercise of
warrants (the "Warrants") by Selling Stockholders.
In rendering the opinion set forth below, we have examined the Registration
Statement and the exhibits thereto, certain records of the Company's corporate
proceedings as reflected in its minute books and such statutes, records and
other documents as we have deemed relevant. In our examination, we have assumed
the genuineness of documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies thereof. As to
certain matters of fact material to this opinion, we have relied upon a
certificate of an officer of the Company.
Based on the foregoing, it is our opinion that the Shares are, and the Warrant
Shares (when issued pursuant to the Warrants) will be, validly issued, fully
paid and nonassessable.
The opinion set forth above is limited to the Business Corporation Law of the
Commonwealth of Pennsylvania, as amended. We hereby consent to the use of this
opinion as Exhibit 5.1 to the Registration Statement. In giving such consent, we
do not thereby admit that we are acting within the
<PAGE>
Universal Display Corporation
August 25, 1999
Page 2
category of persons whose consent is required under Section 7 of the Act and the
rules or regulations of the Commission thereunder.
The opinion expressed herein is solely for your benefit and may be relied upon
only by you.
Very truly yours,
/S/ MORGAN, LEWIS & BOCKIUS LLP
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<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 85,470
<SECURITIES> 4,539,570
<RECEIVABLES> 88,366
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