<PAGE>
[UNIVERSAL DIPLAY CORPORATION logo]
--------------------------------------
SUPPLEMENT DATED NOVEMBER 15, 1999
TO
PROSPECTUS DATED AUGUST 27, 1999
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This prospectus supplement provides supplemental and updated
information to the attached prospectus, dated August 27, 1999, which relates to
resales of shares of our common stock. The information set forth in this
prospectus supplement is hereby added to and deemed to be included in the
prospectus.
This prospectus supplement does not contain complete information about
the offering of our common stock. Additional information is contained in the
prospectus, a copy of which is attached hereto. We urge prospective purchasers
of common stock to read both the prospectus and the prospectus supplement in
full.
1. FINANCIAL INFORMATION.
We are setting forth below information derived from the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Form 10-QSB for the quarter ended September 30,
1999, which we filed with the Securities and Exchange Commission on November 15,
1999.
General
Since our inception, we have engaged exclusively in the research,
development and commercialization of organic light emitting diode, or OLED,
technology for use in flat panel displays and other applications. We expect
these activities to continue for the foreseeable future.
To date, we have generated minimal revenues and do not expect to
generate any meaningful revenues for the foreseeable future. We will likely 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.
We have incurred significant losses since our inception, which have
resulted in an accumulated deficit of $16,833,422 at September 30, 1999. We
expect the rate of loss to increase as our activities increase. We also expect
our losses to continue for the foreseeable future and until such time, if ever,
as we generate enough revenues from the commercial exploitation of the OLED
technology to support our operations.
Results Of Operations
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
We had a net loss of $987,225 (or $.07 per share) for the quarter ended
September 30, 1999, compared to a loss of $746,514 or ($.07 per share) for the
same period in 1998. We attribute this increase in net loss to increased
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research and development costs and general and administrative expenses. We
earned $145,532 from contract research revenue in the quarter ended September
30, 1999, compared to $83,341 for the same period in 1998. We derived this
increase in revenue from additional research performed by us, as compared to the
same period in 1998, from a subcontract under a three year, $3 million contract
between Princeton University and the Defense Advanced Research Project Agency.
Our research and development costs were $700,929 for the quarter ended
September 30, 1999, compared to $426,270 for the same period in 1998. Research
and development costs were higher in 1999 compared to 1998 primarily because of:
o an increase in the research being performed at Princeton University by our
employees;
o our hiring additional researchers; and
o increased patent expenses.
General and administrative expenses were $550,576 for the quarter ended
September 30, 1999, compared to $436,000 for the same period in 1998. This
increase resulted from the increased expenses associated with the additional
employees we hired.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
We had a net loss of $3,259,085 (or $.27 per share) for the nine months
ended September 30, 1999, compared to $1,700,280 (or $.16 per share) for the
same period in 1998. We attribute the increase in net loss primarily to
increased general and administrative and research and development expenses.
Research and development expenses were $1,552,369 for the nine months
ended September 30, 1999, compared to $871,520 for the same period in 1998.
Research and development costs were higher in 1999 compared to 1998 primarily
because of:
o an increase in the research being performed at Princeton University by our
employees;
o our hiring additional researchers; and
o increased patent expenses.
General and administrative expenses were $2,220,158 for the nine months
ended September 30, 1999, compared to $1,257,898 for the same period in 1998.
The increase was due primarily to an equity grant authorized by our board of
directors to executives of the Company. As a result of this grant, $764,660 in
compensation expenses were incurred in 1999, compared to none for the same
period in 1998.
Liquidity and Capital Resources
As of September 30, 1999, we had cash and cash equivalents of
$1,947,894 and short-term investments of $4,985,640, compared to cash and cash
equivalents of $1,828,381 and short-term investments of $527,502 at December 31,
1998. In 1999, investors exercised publicly traded warrants to purchase shares
of our common stock. As a result, we received net cash proceeds of $4,345,689.
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 $4,810,730. In September 1999, we consolidated our operations
into a new facility in Ewing, New Jersey. The facility is anticipated to cost
approximately $900,000. Additionally, we have committed to purchase equipment
for approximately $3,600,000 in the next twelve months. We have already
purchased approximately $1,700,000 of this equipment and included it in our
September 30, 1999 balance sheet.
2
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We believe that we have sufficient cash to meet our obligations for at
least the next twelve months. This belief is based on management's internal
forecasts and assumptions relating to our operations, including assumptions
regarding:
o our working capital requirements;
o the progress of research and development;
o the availability and amount of other sources of funding available to
Princeton University for research relating to the OLED technology;
o the timing and costs associated with the preparation, filing and prosecution
of patent applications; and
o the enforcement of intellectual property rights.
Management believes that additional financing sources include long-term and
short-term borrowings, public and private equity and the exercise of warrants.
The 1997 Sponsored Research Agreement requires us to pay up to $4.4 million to
Princeton University from July 1998 through July 2002. This period is subject to
extension. We will need substantial additional funds for the research,
development and commercialization of OLED technology, as well as for obtaining
and maintaining intellectual property rights, working capital and other
purposes. It is difficult for us to determine when we will need additional
funding or how much additional funding we will need. We can not assure you that
additional funds will be available to us when needed or, if available, whether
it will be available to us on commercially reasonable terms.
Beginning on page 4 of this prospectus supplement, we have included the
unaudited financial statements, including the notes to the financial statements,
that we included in our Form 10-QSB for the quarter ended September 30, 1999.
2. RESIGNATION OF DIRECTOR.
On October 12, 1999, Dr. Stephen Forrest resigned from our board of
directors. On October 12, 1999, our board of directors filled the vacancy
created by Dr. Forrest's resignation by appointing Mr. Lawrence Lacerte to the
board.
3. CHANGE IN EXECUTIVE OFFICES
Our executive offices are now located at 375 Phillips Boulevard, Ewing,
New Jersey 08618. Our new phone number is (609) 671-0980.
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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, 1999 December 31, 1998
(unaudited)
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (See Note 2) $ 1,947,894 $ 1,828,381
Short-term investments (See Note 2) 4,985,640 527,502
Contract research receivables 250,117 121,941
Prepaid consulting fee 256,746 376,493
Other current assets 113,160 70,393
------------ -----------
Total current assets 7,553,557 2,924,710
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $112,129 and
$67,233 1,722,729 56,211
DEPOSITS 58,211 98,073
------------ -----------
Total assets $ 9,334,497 $ 3,078,994
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 292,320 $ 495,320
------------ -----------
SHAREHOLDERS' EQUITY
Preferred Stock, par value $0.01 per share,
5,000,000 shares authorized, 200,000
shares designated Series A Nonconvertible
Preferred Stock, 200,000 issued and
outstanding (liquidation value of $1,500,000) 2,000 2,000
Common Stock, par value $0.01 per share,
25,000,000 shares authorized, 13,181,202
and 10,312,943 issued and outstanding 131,936 103,130
Additional paid-in capital 25,741,663 16,052,681
Deficit accumulated during development-stage (16,833,422) (13,574,337)
------------ -----------
Total shareholders' equity 9,042,177 2,583,674
------------ -----------
Total liabilities and shareholders' equity $ 9,334,497 $ 3,078,994
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Period from Inception
Three Months Ended (June 17, 1994) to
September 30, September 30, 1999
------------------------- ---------------------
1999 1998
<S> <C> <C> <C>
REVENUE:
Contract research revenue $ 145,532 $ 83,341 $ 794,896
----------- --------- -----------
OPERATING EXPENSES:
Research and development
(See Note 3) 700,929 426,270 10,219,468
General and administrative 550,576 436,000 8,072,046
----------- --------- -----------
Total operating 1,251,505 862,270 18,291,514
----------- --------- -----------
Operating loss (1,105,973) (778,929) (17,496,618)
----------- --------- -----------
INTEREST INCOME $ 118,748 32,415 663,196
----------- --------- -----------
NET LOSS $ (987,225) $(746,514) $(16,833,422)
=========== ========= ============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $ (.07) $ (.07)
----------- ---------
WEIGHTED AVERAGE SHARES
USED IN COMPUTING BASIC
AND DILUTED NET LOSS PER
COMMON SHARE 13,176,754 10,312,583
----------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
5
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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Period from Inception
Nine Months Ended (June 17, 1994) to
September 30, September 30, 1999
------------------------------- ---------------------
1999 1998
----------- -----------
<S> <C> <C> <C>
REVENUE:
Contract research revenue $ 332,497 $ 281,706 $ 794,896
----------- ---------- ------------
OPERATING EXPENSES:
Research and development
(See Note 3) 1,552,369 871,520 10,219,468
General and administrative 2,220,158 1,257,898 8,072,046
----------- ---------- ------------
Total operating 3,772,527 2,129,418 18,291,514
----------- ---------- ------------
Operating loss (3,440,030) (1,847,712) (17,496,618)
----------- ---------- ------------
INTEREST INCOME 180,945 147,432 663,196
----------- ---------- ------------
NET LOSS $ (3,259,085) $(1,700,280) $(16,833,422)
============ =========== ============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE $ (.27) $ (.16)
----------- ----------
WEIGHTED AVERAGE SHARES
USED IN COMPUTING BASIC
AND DILUTED NET LOSS PER
COMMON SHARE 11,913,789 10,309,481
----------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
6
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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Period from Inception
Nine Months Ended (June 17, 1994) to
September 30, September 30, 1999
----------------------------- ----------------------
1999 1998
------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (3,259,085) $(1,700,280) $(16,833,422)
Depreciation 44,897 23,983 112,129
Issuance of Common Stock options and warrants 30,000 -- 711,525
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 (128,176) 4,885 (250,117)
Other current assets 76,980 82,784 (36,580)
Deposits 39,862 -- (58,211)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (203,001) (65,952) 248,159
Payable to related parties -- -- 250,000
----------- ----------- ------------
Net cash provided by (used in) operating
activities (2,975,303) (1,654,580) (11,962,968)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (1,603,665) (10,937) (1,727,108)
Purchases of short-term investments (4,745,938) -- (12,466,440)
Proceeds from sale of short-term investments 288,000 1,629,275 7,481,000
----------- ----------- ------------
Net cash porvided by (used in) investing activities (6,061,603) 1,618,338 (6,712,548)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 9,156,419 5,263 20,623,410
----------- ----------- ------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 119,513 (30,979) 1,947,894
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,828,381 85,470 --
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,947,894 $ 54,491 $ 1,947,894
</TABLE>
The accompanying notes are an integral part of these statements.
7
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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 the current fiscal year. 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.
8
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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 September
30, 1999, the results of operations for the three months and nine months ended
September 30, 1999 and 1998, and the cash flows for the nine months ended
September 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 September 30, 1999 and December 31, 1998,
are classified as short-term investments. At September 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 September 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 3-7 years.
NET LOSS PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings per Share", which supersedes 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.
Options and warrants to purchase Common Stock were outstanding during the three
month and nine month periods ended September 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.
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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
three months and nine months ended September 30, 1999 and 1998, no items meeting
the definition of comprehensive income as specified in SFAS 130 existed in the
financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made for consistent presentation.
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
which amended 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
Amended 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 fifteen issued patents 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 Amended
License Agreement and 1997 Sponsored Research Agreement, in October 1997, the
Company issued 140,000 shares of Common Stock and 175,000 warrants to purchase
Common Stock to Princeton University as well as 60,000 shares of Common Stock
and 75,000 warrants to purchase Common Stock to USC.
10
