UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
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þ
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the quarterly period ended June 30, 2007
or
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the transition period from
to
Commission
File Number 1-12031
UNIVERSAL
DISPLAY CORPORATION
(Exact
name of registrant as specified in its charter)
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Pennsylvania
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23-2372688
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification No.)
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incorporation
or organization)
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375
Phillips Boulevard
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Ewing,
New Jersey
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08618
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (609) 671-0980
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):
Large
accelerated filer o
Accelerated
filer þ
Non-accelerated
filer o
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No þ
As
of August 3, 2007, the registrant had outstanding 34,910,246 shares of common
stock.
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PART
I – FINANCIAL INFORMATION
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Item 1.
Financial Statements (unaudited)
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Consolidated
Balance Sheets – June 30, 2007 and December 31, 2006
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3
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Consolidated
Statements of Operations – Three months ended June 30, 2007 and
2006
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4
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Consolidated
Statements of Operations – Six months ended June 30, 2007 and
2006
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5
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Consolidated
Statements of Cash Flows – Six months ended June 30, 2007 and
2006
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6
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Notes
to Consolidated Financial Statements
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7
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
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13
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Item 3.
Quantitative and Qualitative Disclosures About Market Risk
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16
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Item 4.
Controls and Procedures
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16
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PART
II – OTHER INFORMATION
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Item 1.
Legal Proceedings
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16
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Item 1A.
Risk Factors
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17
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Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
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17
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Item 3.
Defaults Upon Senior Securities
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17
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Item 4.
Submission of Matters to a Vote of Security Holders
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17
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Item 5.
Other Information
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18
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Item 6.
Exhibits
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18
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ITEM
1. FINANCIAL STATEMENTS
UNIVERSAL
DISPLAY CORPORATION AND SUBSIDIARY
(UNAUDITED)
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June
30,
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December
31,
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2007
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2006
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ASSETS
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CURRENT
ASSETS:
|
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Cash
and cash equivalents
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|
$
|
61,495,627
|
|
|
$
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31,097,533
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|
Short-term
investments
|
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22,747,530
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17,957,752
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Accounts
receivable
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1,837,673
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|
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2,113,263
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Inventory
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2,209
|
|
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30,598
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Other
current assets
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739,044
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606,267
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|
|
|
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Total
current assets
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86,822,083
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51,805,413
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PROPERTY
AND EQUIPMENT, net
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13,474,034
|
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14,074,093
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ACQUIRED
TECHNOLOGY, net
|
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5,471,952
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|
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6,319,488
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INVESTMENTS
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95,940
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42,770
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OTHER
ASSETS
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94,772
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89,772
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|
|
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|
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TOTAL
ASSETS
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$
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105,958,781
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$
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72,331,536
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|
|
|
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CURRENT
LIABILITIES:
|
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Accounts
payable
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$
|
1,800,554
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$
|
1,808,869
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Accrued
expenses
|
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3,039,027
|
|
|
|
5,245,536
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Deferred
license fees
|
|
|
7,178,267
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|
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7,178,268
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Deferred
revenue
|
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|
650,000
|
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150,000
|
|
|
|
|
|
|
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Total
current liabilities
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12,667,848
|
|
|
|
14,382,673
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DEFERRED
LICENSE FEES
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2,710,700
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2,966,500
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DEFERRED
REVENUE
|
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568,605
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600,000
|
|
|
|
|
|
|
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Total
liabilities
|
|
|
15,947,153
|
|
|
|
17,949,173
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|
|
|
|
|
|
|
|
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SHAREHOLDERS’
EQUITY:
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Preferred
Stock, par value $.01 per share, 5,000,000 shares authorized, 200,000
shares of Series A Nonconvertible Preferred Stock issued and
outstanding (liquidation value of $7.50 per share or $1,500,000),
300,000
shares of Series B Convertible Preferred Stock authorized and none
outstanding, 5,000 shares of Series C-1 Convertible Preferred Stock
authorized and none outstanding, 5,000 shares of Series D Convertible
Preferred Stock authorized and none outstanding
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2,000
|
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|
2,000
|
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Common
Stock, par value $0.01 per share, 50,000,000 shares authorized,
34,875,962
and 31,385,408 shares issued and outstanding at June 30, 2007 and
December 31, 2006, respectively
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348,760
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|
|
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313,854
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Additional
paid-in-capital
|
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244,821,277
|
|
|
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199,505,981
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Unrealized
loss on available for sale securities
|
|
|
(44,611
|
)
|
|
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(82,846
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)
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Accumulated
deficit
|
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|
(155,115,798
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)
|
|
|
(145,356,626
|
)
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
|
90,011,628
|
|
|
|
54,382,363
|
|
|
|
|
|
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TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
105,958,781
|
|
|
$
|
72,331,536
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The
accompanying notes are an integral part of these statements.
UNIVERSAL
DISPLAY CORPORATION AND SUBSIDIARY
(UNAUDITED)
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|
|
|
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Three
Months Ended June 30,
|
|
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|
2007
|
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|
2006
|
|
REVENUE:
|
|
|
|
|
|
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Contract
research revenue
|
|
$
|
1,305,246
|
|
|
$
|
901,529
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|
Development
chemical revenue
|
|
|
366,998
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|
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|
296,624
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|
Commercial
chemical revenue
|
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|
229,631
|
|
|
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336,365
|
|
Royalty
and license revenue
|
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163,295
|
|
|
|
807,185
|
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Technology
development revenue
|
|
|
250,000
|
|
|
|
667,613
|
|
|
|
|
|
|
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|
Total
revenue
|
|
|
2,315,170
|
|
|
|
3,009,316
|
|
|
|
|
|
|
|
|
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|
|
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Cost
of chemicals sold
|
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|
165,039
|
|
|
|
72,473
|
|
Research
and development
|
|
|
5,543,824
|
|
|
|
5,388,686
|
|
General
and administrative
|
|
|
2,568,217
|
|
|
|
2,234,535
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|
Royalty
and license expense
|
|
|
36,595
|
|
|
|
166,794
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
8,313,675
|
|
|
|
7,862,488
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|
|
|
|
|
|
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Operating
loss
|
|
|
(5,998,505
|
)
|
|
|
(4,853,172
|
)
|
INTEREST
INCOME
|
|
|
823,739
|
|
|
|
544,626
|
|
INTEREST
EXPENSE
|
|
|
(605
|
)
|
|
|
(4,105
|
)
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(5,175,371
|
)
|
|
$
|
(4,312,651
|
)
|
|
|
|
|
|
|
|
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
|
$
|
(0.16
|
)
|
|
$
|
(0.14
|
)
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER
COMMON
SHARE
|
|
|
33,143,347
|
|
|
|
30,982,309
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these statements.
UNIVERSAL
DISPLAY CORPORATION AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Six
Months Ended June 30,
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
REVENUE:
|
|
|
|
|
|
|
Contract
research revenue
|
|
$ |
2,419,770
|
|
|
$ |
1,437,590
|
|
Development
chemical revenue
|
|
|
576,204
|
|
|
|
972,530
|
|
Commercial
chemical revenue
|
|
|
1,542,631
|
|
|
|
734,844
|
|
Royalty
and license revenue
|
|
|
291,195
|
|
|
|
1,738,031
|
|
Technology
development revenue
|
|
|
500,000
|
|
|
|
1,397,727
|
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
|
5,329,800
|
|
|
|
6,280,722
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Cost
of chemicals sold
|
|
|
446,588
|
|
|
|
308,810
|
|
Research
and development
|
|
|
10,997,153
|
|
|
|
10,231,862
|
|
General
and administrative
|
|
|
4,921,731
|
|
|
|
4,232,227
|
|
Royalty
and license expense
|
|
|
131,593
|
|
|
|
353,319
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
16,497,065
|
|
|
|
15,126,218
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(11,167,265 |
) |
|
|
(8,845,496 |
) |
INTEREST
INCOME
|
|
|
1,408,698
|
|
|
|
1,019,016
|
|
INTEREST
EXPENSE
|
|
|
(605 |
) |
|
|
(8,211 |
) |
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$ |
(9,759,172 |
) |
|
$ |
(7,834,691 |
) |
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
|
$ |
(0.30 |
) |
|
$ |
(0.26 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER
COMMON
SHARE
|
|
|
32,338,358
|
|
|
|
30,508,972
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these statements.
UNIVERSAL
DISPLAY CORPORATION AND SUBSIDIARY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Six
months ended June 30,
|
|
|
|
2007
|
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(9,759,172
|
)
|
|
$
|
(7,834,691
|
)
|
Non-cash
charges to statement of operations:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
920,179
|
|
|
|
902,613
|
|
Amortization
of intangibles
|
|
|
847,536
|
|
|
|
847,535
|
|
Amortization
of premium and discount on investments
|
|
|
(116,351
|
)
|
|
|
(71,031
|
)
|
Stock-based
employee compensation
|
|
|
555,687
|
|
|
|
430,882
|
|
Stock-based
non-employee compensation
|
|
|
9,497
|
|
|
|
105,011
|
|
Non-cash
expense under a Development Agreement
|
|
|
536,102
|
|
|
|
1,955,101
|
|
Stock-based
compensation to Board of Directors and Scientific Advisory
Board
|
|
|
228,911
|
|
|
|
—
|
|
(Increase)
decrease in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
275,590
|
|
|
|
(589,484
|
)
|
Inventory
|
|
|
28,389
|
|
|
|
(61,556
|
)
|
Other
current assets
|
|
|
(132,777
|
)
|
|
|
(203,435
|
)
|
Other
assets
|
|
|
(5,000
|
)
|
|
|
(5,000
|
)
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
(475,921
|
)
|
|
|
(275,593
|
)
|
Deferred
license fees
|
|
|
(255,801
|
)
|
|
|
494,200
|
|
Deferred
revenue
|
|
|
468,605
|
|
|
|
(1,310,227
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(6,874,526
|
)
|
|
|
(5,615,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(320,120
|
)
|
|
|
(1,569,252
|
)
|
Purchases
of investments
|
|
|
(17,548,363
|
)
|
|
|
(11,300,639
|
)
|
Proceeds
from sale of investments
|
|
|
12,860,000
|
|
|
|
7,753,000
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(5,008,483
|
)
|
|
|
(5,116,891
|
)
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
38,029,023
|
|
|
|
—
|
|
Proceeds
from the exercise of common stock options and warrants
|
|
|
4,252,080
|
|
|
|
5,273,300
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
42,281,103
|
|
|
|
5,273,300
|
|
|
|
|
|
|
|
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
30,398,094
|
|
|
|
(5,459,266
|
)
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
31,097,533
|
|
|
|
30,654,249
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
61,495,627
|
|
|
$
|
25,194,983
|
|
|
|
|
|
|
|
|
The
following non-cash activities occurred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) on available-for-sale securities
|
|
$
|
38,235
|
|
|
$
|
(1,058
|
)
|
Common
stock issued to Board of Directors and Scientific Advisory Board
that was
earned in a previous period
|
|
|
260,000
|
|
|
|
588,200
|
|
Common
stock issued to employees that was earned in a previous
period
|
|
|
956,994
|
|
|
|
838,854
|
|
Common
stock issued for royalties that was earned in a previous
period
|
|
|
499,993
|
|
|
|
—
|
|
Common
stock issued under a Development Agreement that was earned in a
previous
period
|
|
|
21,915
|
|
|
|
22,515
|
|
The
accompanying notes are an integral part of these statements.
UNIVERSAL
DISPLAY CORPORATION AND SUBSIDIARY
(UNAUDITED)
1.
BACKGROUND
Universal
Display Corporation (the “Company”) is engaged in the research, development and
commercialization of organic light emitting diode (“OLED”) technologies and
materials for use in flat panel display, solid-state lighting and other product
applications. The Company’s primary business strategy is to develop and license
its proprietary OLED technologies to product manufacturers for use in these
applications. In support of this objective, the Company also develops new
OLED
materials and sells those materials to product manufacturers. Through internal
research and development efforts and relationships with entities such as
Princeton University (“Princeton”), the University of Southern California
(“USC”), the University of Michigan (“Michigan”), Motorola, Inc. (“Motorola”)
and PPG Industries, Inc. (“PPG”), the Company has established a significant
portfolio of proprietary OLED technologies and materials (Note 4, 5 and
6).
The
Company conducts a substantial portion of its OLED technology and material
development activities at its technology development and transfer facility
in
Ewing, New Jersey. The Company also leases approximately 850 square feet
of
office space in Coeur d’Alene, Idaho.
2.
BASIS OF PRESENTATION
Interim
Financial Information
In
the
opinion of management, 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,
2007, the results of operations for the three and six months ended June 30,
2007
and 2006, and cash flows for the six months ended June 30, 2007 and 2006.
While
management believes that the disclosures presented are adequate to make the
information not misleading, these unaudited consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and the notes thereto in the Company’s latest year-end financial statements,
which are included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2006.
Management’s
Use of Estimates
The
preparation of financial statements in conformity with U.S. 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.
Recent
Accounting Pronouncements
In
June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(“FIN 48”), an interpretation of Statement of Financial Accounting Standards
(“SFAS”) No. 109, Accounting for Income Taxes (“SFAS 109”). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS 109. FIN 48 prescribes
a two-step process to determine the amount of tax benefit to be recognized.
First, the tax position must be evaluated to determine the likelihood that
it
will be sustained upon examination. If the tax position is deemed
“more-likely-than-not” to be sustained, the tax position is then measured to
determine the amount of benefit to recognize in the financial statements.
The
tax position is measured at the largest amount of benefit that is greater
than
50% likely of being realized upon ultimate settlement. FIN 48 was adopted
by the
Company on January 1, 2007. The adoption of FIN 48 has not had an impact on
the Company’s results of operations and financial position.
In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (“SFAS 157”). SFAS 157 clarifies the definition of fair value,
establishes a framework for measuring fair value and expands disclosures
on fair
value measurements. SFAS 157 is effective for financial statements issued
for
fiscal years beginning after November 15, 2007. The Company does not expect
the adoption of SFAS 157 to have a material impact on its results of operations
and financial position.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits
entities to measure many financial instruments and certain other items at
fair
value at specified election dates. Under SFAS 159, any unrealized holding
gains
and losses on items for which the fair value option has been elected are
reported in earnings at each subsequent reporting date. If elected, the fair
value option (1) may be applied instrument by instrument, with a few
exceptions, such as investments otherwise accounted for by the equity method;
(2) is irrevocable (unless a new election date occurs); and (3) is
applied only to entire instruments and not to portions of instruments. SFAS
159
is effective for fiscal years beginning after November 15, 2007. The
Company does not expect the adoption of SFAS 159 to have a material impact
on
its results of operations and financial position.
In
June
2007, the FASB approved Emerging Issues Task Force Issue No. 07-03 (“Issue
No. 07-03”), Accounting for Nonrefundable Advance Payments for Goods
or Services to be Used in Future Research and Development
Activities. Issue No. 07-03 requires that nonrefundable advance
payments for future research and development activities be deferred and
capitalized. Such amounts should be recognized as an expense as goods are
delivered or the related services are performed. Issue No. 07-03 is
effective for fiscal years beginning after December 15, 2007. The Company
does not expect the adoption of Issue No. 07-03 to have a material impact
on its results of operations and financial position.
Adjustment
of Prior Year Consolidated Financials Statements
Certain
prior year amounts have been adjusted to conform to the current year
presentation. The adjustment results in an increase in reported cost of
chemicals sold and a reduction in research and development expenses by $27,540
and $185,436 for the three and six months ended June 30, 2006,
respectively. The adjustment had no impact on the Company’s balance sheet,
reported net loss or cash flows.
3.
CASH, CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM
INVESTMENTS
The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The Company classifies
its existing marketable securities as available-for-sale. These securities
are
carried at fair market value, with unrealized gains and losses reported in
shareholders’ equity. Gains or losses on securities sold are based on the
specific identification method.
Investments
at June 30, 2007 and December 31, 2006 consist of the following:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Market
Value
|
|
Investment
Classification
|
|
Cost
|
|
|
Gains
|
|
|
(Losses)
|
|
|
Aggregate
Fair
|
|
June
30, 2007-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit
|
|
$
|
12,376,000
|
|
|
$
|
—
|
|
|
$
|
(31,847
|
)
|
|
$
|
12,344,153
|
|
US
Government bonds
|
|
|
10,512,081
|
|
|
|
1,073
|
|
|
|
(13,837
|
)
|
|
|
10,499,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,888,081
|
|
|
$
|
1,073
|
|
|
$
|
(45,684
|
)
|
|
$
|
22,843,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2006-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates
of deposit
|
|
$
|
11,243,000
|
|
|
$
|
—
|
|
|
$
|
(79,070
|
)
|
|
$
|
11,163,930
|
|
US
Government bonds
|
|
|
6,840,368
|
|
|
|
668
|
|
|
|
(4,444
|
)
|
|
|
6,836,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,083,368
|
|
|
$
|
668
|
|
|
$
|
(83,514
|
)
|
|
$
|
18,000,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON, USC AND
MICHIGAN
The
Company has funded OLED technology research at Princeton and, on a subcontractor
basis, at USC, under a Research Agreement executed with Princeton in
August 1997 (as amended, the “1997 Research Agreement”). In
April 2002, the 1997 Research Agreement was amended to provide for, among
other things, an additional five-year term, which expired July 31, 2007.
Payments to Princeton under this agreement are charged to research and
development expenses as they become due. The Company has paid $3,571,226
to
Princeton under the 1997 Research Agreement. Although the payments were charged
to expense when they became due, the actual work performed by Princeton and
USC
did not always equate to the fixed amounts actually paid for each period.
In the
third quarter of 2006, Princeton refunded $1,011,358 to the Company for
cumulative amounts overpaid under the 1997 Research Agreement. The Company
recorded the refund as an offset to research and development
expenses.
On
October 9, 1997, the Company, Princeton and USC entered into an Amended
License Agreement under which Princeton and USC granted the Company worldwide,
exclusive license rights, with rights to sublicense, to make, have made,
use,
lease and/or sell products and to practice processes based on patent
applications and issued patents arising out of work performed by Princeton
and
USC under the 1997 Research Agreement (as amended, the “1997 Amended License
Agreement”). Under this agreement, the Company is required to pay Princeton
royalties for licensed products sold by the Company or its sublicensees.
For
licensed products sold by the Company, the Company is required to pay Princeton
3% of the net sales price of these products. For licensed products sold by
the
Company’s sublicensees, the Company is required to pay Princeton 3% of the
revenues received by the Company from these sublicensees. These royalty rates
are subject to renegotiation for products not reasonably conceivable as arising
out of the 1997 Research Agreement if Princeton reasonably determines that
the
royalty rates payable with respect to these products are not fair and
competitive. The Company is obligated under the 1997 Amended License Agreement
to pay to Princeton minimum annual royalties. The minimum royalty payment
is
$100,000 per year. The Company accrued $71,581 of royalty expense in connection
with the agreement for the six months ended June 30, 2007.
The
Company also is required under the 1997 Amended License Agreement to use
commercially reasonable efforts to bring the licensed OLED technology to
market.
However, this requirement is deemed satisfied provided the Company performs
its
obligations under the 1997 Research Agreement and, when that agreement ends,
the
Company invests a minimum of $800,000 per year in research, development,
commercialization or patenting efforts respecting the patent rights licensed
to
the Company.
In
January 2006, the Principal Investigator conducting research at Princeton
under the 1997 Research Agreement transferred to Michigan. As a result of
this
transfer, the Company has entered into a new Sponsored Research Agreement
with
USC to sponsor OLED technology research at USC and, on a subcontractor basis,
Michigan. This new Research Agreement (the “2006 Research Agreement”) was
effective as of May 1, 2006, and has a term of three years. The 2006
Research Agreement supersedes the 1997 Research Agreement with respect to
all
work being performed at USC and Michigan. Under the 2006 Research Agreement,
the
Company is obligated to pay USC up to $4,636,296 for work actually performed
during the period from May 1, 2006 through April 30, 2009. Amounts
paid to Princeton under the 1997 Research Agreement offset any amounts the
Company is obligated to pay USC under the 2006 Research Agreement. Payments
under the 2006 Research Agreement are made to USC on a quarterly basis as
actual
expenses are incurred. Through the period ended June 30,
2007, the Company has incurred $651,601 in research and development expense
under the 2006 Research Agreement.
In
connection with entering into the 2006 Research Agreement, the Company amended
the 1997 Amended License Agreement to include Michigan as a party to that
agreement effective as of January 1, 2006. Under this amendment, Princeton,
USC and Michigan have granted the Company a worldwide exclusive license,
with
rights to sublicense, to make, have made, use, lease and/or sell products
and to
practice processes based on patent applications and issued patents arising
out
of work performed under the 2006 Research Agreement. The financial terms
of the
1997 Amended License Agreement were not impacted by this amendment.
5.
ACQUIRED TECHNOLOGY
Acquired
technology consists of acquired license rights for patents and know-how obtained
from PD-LD, Inc. (“PD-LD”) and Motorola. These intangible assets consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
PD-LD,
Inc.
|
|
$
|
1,481,250
|
|
|
$
|
1,481,250
|
|
Motorola,
Inc.
|
|
|
15,469,468
|
|
|
|
15,469,468
|
|
|
|
|
|
|
|
|
|
|
|
16,950,718
|
|
|
|
16,950,718
|
|
Less:
Accumulated amortization
|
|
|
(11,478,766
|
)
|
|
|
(10,631,230
|
)
|
|
|
|
|
|
|
|
Acquired
technology, net
|
|
$
|
5,471,952
|
|
|
$
|
6,319,488
|
|
|
|
|
|
|
|
|
On
July 19, 2000, the Company, PD-LD, its president Dr. Vladimir Ban and
Princeton entered into a Termination, Amendment and License Agreement whereby
the Company acquired all PD-LD’s rights to certain issued and pending OLED
technology patents in exchange for 50,000 shares of the Company’s common stock.
Pursuant to this transaction, these patents were included in the patent rights
exclusively licensed to the Company by Princeton under the 1997 Amended License
Agreement. The acquisition of these patents had a fair value of
$1,481,250.
On
September 29, 2000, the Company entered into a License Agreement with
Motorola. Pursuant to this agreement, the Company licensed from Motorola
what
are now 74 issued U.S. patents and corresponding foreign patents relating
to
OLED technologies. These patents expire between 2012 and 2018. The Company
has
the sole right to sublicense these patents to OLED product manufacturers.
As
consideration for this license, the Company issued to Motorola 200,000 shares
of
the Company’s common stock (valued at $4,412,500), 300,000 shares of the
Company’s Series B Convertible Preferred Stock (valued at $6,618,750) and a
warrant to purchase 150,000 shares of the Company’s common stock at $21.60 per
share. This warrant became exercisable on September 29, 2001, and will
remain exercisable until September 29, 2008. The warrant was recorded at a
fair market value of $2,206,234 based on the Black-Scholes option-pricing
model,
and was recorded as a component of the cost of the acquired
technology.
The
Company also issued a warrant to an unaffiliated third party to acquire 150,000
shares of the Company’s common stock as a finder’s fee in connection with the
Motorola transaction. This warrant was granted with an exercise price of
$21.60
per share, was exercisable immediately and will remain exercisable until
September 29, 2007. This warrant was accounted for at its fair value based
on the Black-Scholes option pricing model and $2,206,234 was recorded as
a
component of the cost of the acquired technology. The Company used the following
assumptions in the Black-Scholes option pricing model for the 300,000 warrants
issued in connection with this transaction: (1) 6.3% risk-free interest
rate, (2) expected life of 7 years, (3) 60% volatility and
(4) zero expected dividend yield. In addition, the Company incurred $25,750
of direct cash transaction costs that have been included in the cost of the
acquired technology. In total, the Company recorded an intangible asset of
$15,469,468 for the technology acquired from Motorola.
Amortization
expense was $847,536 for the six months ended June 30, 2007 and $847,535
for the same period in 2006. For each of the years 2007 through 2009,
amortization expense will be $1,695,072 and for 2010 amortization expense
will
be $1,234,272.
The
Company is required under the License Agreement to pay Motorola based on
gross
revenues earned by the Company from its sales of OLED products or components,
or
from its sublicensees for their sales of OLED products or components, whether
or
not these products or components are based on inventions claimed in the patent
rights licensed from Motorola. All royalty payments are payable, at the
Company’s discretion, in either all cash or up to 50% in shares of the Company’s
common stock and the remainder in cash. The number of shares of common stock
used to pay the stock portion of the royalty payment is calculated by dividing
the amount to be paid in stock by the average daily closing price per share
of
the Company’s common stock over the 10 trading days ending two business days
prior to the date the stock is issued.
The
Company was required to pay Motorola minimum royalties of $1,000,000 for
the
two-year period ended on December 31, 2006. In satisfaction of this
obligation, the Company issued to Motorola 37,075 shares of the Company’s common
stock, valued at $499,993, and paid Motorola $500,007 in cash. For the six
months ended June 30, 2007, the Company accrued $55,012 of royalty expense
in
connection with the Motorola License Agreement. The Company is no
longer subject to a minimum royalty obligation under this
agreement.
6.
EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS
On
October 1, 2000, the Company entered into a five-year Development and
License Agreement (“Development Agreement”) and a seven-year Supply Agreement
(“Supply Agreement”) with PPG. Under the Development Agreement, a team of PPG
scientists and engineers assisted the Company in developing its proprietary
OLED
materials and supplied the Company with these materials for evaluation purposes.
Under the Supply Agreement, PPG supplied the Company with its proprietary
OLED
materials that were intended for resale to customers for commercial
purposes.
For
the
period from inception of the Development Agreement through December 2004,
the Company issued shares of its common stock and warrants to acquire its
common
stock to PPG on an annual basis in consideration of the services provided
under
the agreement. The consideration to PPG for these services was determined
by
reference to an agreed-upon annual budget and was subject to adjustment based
on
costs actually incurred for work performed during the budget period. The
specific number of shares of common stock and warrants issued to PPG was
determined based on the average closing price of the Company’s common stock
during a specified period prior to the start of the budget period. In
January 2003, the Company and PPG amended the Development Agreement,
providing for additional consideration to PPG for additional services to
be
provided under that agreement, which services were paid for in cash. All
materials provided by PPG under the Supply Agreement were also paid for in
cash.
In
December 2004 and again in March 2005, the Company and PPG amended
both the Development Agreement and the Supply Agreement to alter the charges
and
method of payment for services and materials provided by PPG under both
agreements during 2005. Under the amended Development Agreement, the Company
compensated PPG on a cost-plus basis for the services provided during each
calendar quarter. The Company was required to pay for some of these services
in
cash and for other of the services in common stock. Payment for up to 50%
of the
remaining services was able to be paid, at the Company’s sole discretion, in
cash or shares of common stock, with the balance payable in all cash. The
actual
number of shares of common stock issuable to PPG was determined based on
the
average closing price for the Company’s common stock during a specified period
prior to the end of that quarter. If, however, this average closing price
was
less than $6.00, the Company was required to compensate PPG in all cash.
The
Company recorded these expenses to research and development as they were
incurred. Under the amended Development Agreement, the Company was no longer
required to issue warrants to PPG.
Under
the
amended Supply Agreement, the Company also compensated PPG on a cost-plus
basis
for services and materials provided during each calendar quarter of 2005.
The
Company was required to pay for all materials and for some of these services
in
cash. Payment for up to 50% of the remaining services was able to be paid,
at
the Company’s sole discretion, in cash or shares of common stock, with the
balance payable in all cash. Again, the specific number of shares of common
stock issuable to PPG was determined based on the average closing price for
the
Company’s common stock during a specified period prior to the end of that
quarter. If, however, this average closing price was less than $6.00, the
Company was required to compensate PPG in all cash.
On
July 29, 2005, the Company entered into an OLED Materials Supply and
Service Agreement with PPG. This Agreement superseded and replaced in their
entireties the amended Development and Supply Agreements effective as of
January 1, 2006, and extended the term of the Company’s existing
relationship with PPG through December 31, 2008. Under the new agreement,
PPG has continued to assist the Company in developing its proprietary OLED
materials and supplying the Company with those materials for evaluation purposes
and for resale to its customers. The financial terms of the new agreement
are
substantially similar to those of the amended Development and Supply Agreements,
and include a requirement that the Company pay PPG in a combination of cash
and
the Company’s common stock.
The
Company issued to PPG 37,694 and 122,844 shares of the Company’s common stock as
consideration for services provided by PPG under the OLED Materials Supply
and
Service Agreement during the six months ended June 30, 2007 and 2006,
respectively. Of these shares, 35,091 shares were issued on April 16, 2007,
3,660 shares were issued on October 19, 2006 and 119,184 shares were issued
on April 19, 2006. For these shares, the Company recorded a charge of
$536,102 and $1,707,669 to research and development expense for the six months
ended June 30, 2007 and 2006, respectively. The Company also recorded
$539,350 and $727,496 to research and development expense for the cash portion
of the work performed by PPG during the six months ended June 30, 2007 and
2006,
respectively.
Also,
in
accordance with the OLED Materials Supply and Service Agreement, the Company
is
required to reimburse PPG for its raw materials and conversion costs for
all
development chemicals produced on behalf of the Company. The Company recorded
$265,726 and $98,516 to research and development expense for this activity
during the six months ended June 30, 2007 and 2006, respectively.
Through
the end of 2006, the Company was required under its agreements with PPG to
grant
options to purchase the Company’s common stock to PPG employees performing
development services for the Company, in a manner consistent with that for
issuing options to its own employees. Subject to certain contingencies, these
options were to vest one year following the date of grant and will expire
10 years from the date of grant. However, in connection with a transition
to the Company in 2006 of all work being performed by the PPG development
team,
all outstanding options granted to PPG employees became vested as of
December 31, 2006.
On
December 30, 2005, the Company granted to PPG employees performing
development services under the Development Agreement options to purchase
31,500
shares of the Company’s common stock at an exercise price of $10.51. In April
2006, the Company hired several PPG employees as full-time employees of the
Company. As a result of these hirings, the Company accelerated the vesting
of
18,500 of the options granted on December 30, 2005. Accordingly, the Company
recorded $225,882 in research and development costs related to these options
for
the period ended June 30, 2006. The Company also recorded $72,428 in research
and development costs for the remaining 13,000 options for the period ended
June
30, 2006. The Company determined the fair value of the options earned during
the
periods ended June 30, 2006 using the Black-Scholes option-pricing model
with
the following assumptions: (1) risk free interest rate of 4.39-5.07%, (2)
no
expected dividend yield, (3) contractual life of 10 years and (4) expected
volatility of 77.18-77.59%, respectively.
In
lieu
of stock options, and consistent with awards made to the Company’s own
employees, shares of stock were granted to certain PPG employees performing
development services on the Company’s behalf during 2006. On January 9,
2007, the Company issued 1,500 shares of its common stock as a bonus to these
PPG research and development team members for the year ended December 31,
2006. Accordingly, the Company accrued $21,915 as of December 31, 2006 in
research and development costs relating to the issuance. The Company has
no
obligation to issue options or shares of stock to any PPG employees in 2007
or
thereafter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
Preferred
Stock,
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Loss
on
|
|
|
|
|
|
|
|
|
|
Series
A
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Available
for
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Sale
Securities
|
|
|
Deficit
|
|
|
Equity
|
|
BALANCE,
JANUARY 1, 2007
|
|
|
200,000
|
|
|
$ |
2,000
|
|
|
|
31,385,408
|
|
|
$ |
313,854
|
|
|
$ |
199,505,981
|
|
|
$ |
(82,846 |
) |
|
$ |
(145,356,626 |
) |
|
$ |
54,382,363
|
|
Issuance
of common stock through public offering, net of expenses of
$2,570,977(A)
|
|
|
—
|
|
|
|
—
|
|
|
|
2,800,000
|
|
|
|
28,000
|
|
|
|
38,001,023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,029,023
|
|
Exercise
of common stock options and warrants(B)
|
|
|
—
|
|
|
|
—
|
|
|
|
518,415
|
|
|
|
5,184
|
|
|
|
4,246,896
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,252,080
|
|
Stock-based
employee compensation (C)
|
|
|
—
|
|
|
|
—
|
|
|
|
68,074
|
|
|
|
681
|
|
|
|
1,512,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,512,681
|
|
Stock-based
non-employee compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,497
|
|
|
|
|
|
|
|
|
|
|
|
9,497
|
|
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
(D)
|
|
|
—
|
|
|
|
—
|
|
|
|
27,796
|
|
|
|
278
|
|
|
|
488,633
|
|
|
|
—
|
|
|
|
—
|
|
|
|
488,911
|
|
Issuance
of common stock in connection with Development and License Agreements
(E)
|
|
|
—
|
|
|
|
—
|
|
|
|
76,269
|
|
|
|
763
|
|
|
|
1,057,247
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,058,010
|
|
Unrealized
gain on available-for-sales securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,235
|
|
|
|
—
|
|
|
|
38,235
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,759,172 |
) |
|
|
(9,759,172 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,720,937 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
JUNE 30, 2007
|
|
|
200,000
|
|
|
$ |
2,000
|
|
|
|
34,875,962
|
|
|
$ |
348,760
|
|
|
$ |
244,821,277
|
|
|
$ |
(44,611 |
) |
|
$ |
(155,115,798 |
) |
|
$ |
90,011,628
|
|
|
|
|
|
(A)
|
In
May 2007, the Company sold 2,800,000 shares of common stock through
a
public offering at $14.50 per share. The offering resulted in
net proceeds
to the Company of $38,029,023, net of $2,570,977 in associated
costs.
|
(B)
|
During
the six months ended June 30, 2007, the Company issued 518,415
shares of
common stock upon the exercise of common stock options and warrants,
resulting in cash proceeds of $4,252,080.
|
(C)
|
Includes
$956,994 that was earned in a previous period and charged to
expense when
earned, but issued in 2007.
|
(D)
|
Includes
$260,000 that was earned in a previous period and charged to
expense when
earned, but issued in 2007.
|
(E)
|
Includes
$521,908 that was earned in a previous period and charged to
expense when
earned, but issued in 2007 (see Notes 5 and
6).
|
8.
STOCK-BASED COMPENSATION
On
January 1, 2006, the Company adopted SFAS No. 123R utilizing the
modified prospective transition method. SFAS No. 123R requires employee
stock options to be valued at fair value on the date of grant and charged
to
expense over the applicable vesting period. Under the modified prospective
method, compensation expense is recognized for all share based payments issued
on or after January 1, 2006, and for all share payments issued to employees
prior to January 1, 2006 that remain unvested. In accordance with the
modified prospective method, the consolidated financial statements for prior
periods have not been restated to reflect, and do not include, the impact
of
SFAS No. 123R. The adoption of SFAS No. 123R did not change the Company’s
accounting for stock-based payments issued to non-employees.
Equity
Compensation Plan
In
1995,
the Board of Directors of the Company adopted a Stock Option Plan (the “1995
Plan”), under which options to purchase a maximum of 500,000 shares of the
Company’s common stock were authorized to be granted at prices not less than the
fair market value of the common stock on the date of the grant, as determined
by
the Compensation Committee of the Board of Directors. Through June 30,
2007, the Company’s shareholders have approved increases in the number of shares
reserved for issuance under the 1995 Plan to 7,000,000, and have extended
the
term of the plan through 2015. The 1995 Plan was also amended and restated
in
2003, and is now called the Equity Compensation Plan. The Equity Compensation
Plan provides for the granting of incentive and nonqualified stock options,
stock, stock appreciation rights and performance units to employees, directors
and consultants of the Company. Stock options are exercisable over periods
determined by the Compensation Committee, but for no longer than 10 years
from the grant date.
During
the six months ended June 30, 2007, the Company granted 4,750 common stock
options to employees. These stock options vested immediately and had exercise
prices equal to 100% of the market price of the Company’s common stock on the
date of grant. The fair value of the options granted during the six months
ended
June 30, 2007 was $35,650. For the six months ended June 30, 2007, compensation
expense related to all outstanding common stock options was
$312,848.
In
addition, during the six months ended June 30, 2007, the Company granted
a total
of 116,394 shares of restricted stock to employees and members of the Scientific
Advisory Board. These shares of restricted stock had a value of $1,705,001
on
the date of grant and will vest in equal increments over three
years from the date of grant. For the six months ended June 30, 2007, the
Company recorded as compensation charges related to all restricted stock
awards
a general and administrative expense of $158,745 and a research and development
expense of $159,005.
On
each
of March 31, 2007 and June 30, 2007, the Company issued 5,000 shares of
fully vested common stock to members of its Board of Directors as partial
payment for services performed for the three-month periods ending on such
dates.
The fair value of the shares issued was $154,000, which was recorded as a
compensation charge in general and administrative expense for the six months
ended June 30, 2007.
Net
Loss Per Common Share
Basic
net
loss per common share is computed by dividing the net loss by the
weighted-average number of shares of common stock outstanding for the period.
Diluted net loss per common share reflects the potential dilution from the
exercise or conversion of securities into common stock. For the six months
ended
June 30, 2007 and 2006, the effects of the exercise of the combined outstanding
stock options and warrants of 6,275,067 and 6,983,751, respectively, were
excluded from the calculation of diluted EPS as the impact would have been
antidilutive.
9.
COMMITMENTS AND CONTINGENCIES
Commitments
Under
the
2006 Research Agreement with USC, the Company is obligated to make certain
payments to USC. See Note 4 for further explanation.
Under
the
terms of the 1997 Amended License Agreement, the Company is required to make
minimum royalty payments to Princeton. See Note 4 for further
explanation.
Patent
Interference Concerning U.S. Patent No. 6,734,457
In
June 2006, Patent Interference No. 105,461 was declared by the United
States Patent and Trademark Office (the “USPTO”) between Semiconductor Energy
Laboratory Co., Ltd. (“SEL”), and Princeton and USC (the “Universities”). The
dispute concerned U.S. Patent No. 6,734,457, which had been issued to SEL.
The SEL patent claimed aspects of the Company’s phosphorescent OLED technology
that the Company believes was disclosed and claimed in U.S. Application Serial
No.10/913,211, which the Company exclusively licenses from the Universities.
The
Universities sought a ruling by the USPTO that they should be granted a patent
to the claimed invention and that the SEL patent is invalid because the
Universities were first-to-invent and their invention was made prior to that
of
SEL. Under the Company’s agreement with the Universities, it was required to pay
all legal costs and fees associated with the interference
proceeding.
An
oral
hearing in the matter was held before the Board of Patent Appeals and
Interferences (the “BPAI”) of the USPTO on April 25, 2007. The following
day, the BPAI issued a decision in favor of the Universities. The BPAI decision
confirmed that the Universities were first-to-invent the subject matter of
the
interference and that the Universities’ invention is prior art to SEL’s patent.
As a result, all claims of the SEL patent were canceled. SEL has not sought
to
appeal from the BPAI decision, and Company management expects that the
proceeding will soon be formally terminated.
Notice
of Opposition to European Patent No. 0946958
On
December 8, 2006, Cambridge Display Technology, Ltd. (“CDT”) filed a Notice
of Opposition to European Patent No. 0946958 (the “EP ‘958 patent”). The EP
‘958 patent, which issued on March 8, 2006, is a European counterpart patent
to
U.S. patents 5,844,363, 6,602,540 and 6,888,306, and to pending U.S. patent
application 10/966,417, filed on October 15, 2004. These patents and patent
applications relate to the Company’s flexible OLED technology. They are
exclusively licensed to the Company by Princeton, and under the license
agreement the Company is required to pay all legal costs and fees associated
with this proceeding.
The
European Patent Office (the “EPO”) set a date of May 12, 2007 for the
Company to file a response to the facts and arguments presented by CDT in
its
Notice of Opposition. The Company filed this response in a timely manner
and is
now awaiting a reply from CDT. Since the Company is still in the early stages
of
this proceeding, Company management cannot make any prediction as to the
probable outcome of this opposition. However, based on the Company’s preliminary
analysis of the evidence presented, Company management believes there is
a
substantial likelihood that the patent being challenged will be declared
valid,
and that all or a significant portion of its claims will be upheld.
Notices
of Opposition to European Patent No. 1449238
On
March 8, 2007, Sumation Company Limited (“Sumation”), a joint venture
between Sumitomo Chemical Company and CDT, filed a first Notice of Opposition
to
European Patent No. 1449238 (the “EP ‘238 patent”). The EP ‘238 patent,
which issued on November 2, 2006, is a European counterpart patent, in
part, to U.S. patents 6,830,828, 6,902,830 and 7,001,536, and to pending
U.S.
patent application 11/233,605, filed on September 22, 2005. These patents
and patent application relate to the Company’s PHOLED technology. They are
exclusively licensed to the Company by Princeton, and under the license
agreement the Company is required to pay all legal costs and fees associated
with this proceeding.
Two
other
parties also filed oppositions to the EP ‘238 patent just prior to the August 2,
2007 filing deadline. On July 24, 2007, Merck Patent GmbH, of
Darmstadt, Germany, filed a second Notice of Opposition to the EP ‘238 patent,
and on July 27, 2007, BASF Aktiengesellschaft, of Mannheim, Germany, filed
a
third Notice of Opposition to the EP ‘238 patent.
The
next
step is for the EPO to set a due date for the Company to file its responses
to
the oppositions. Company management anticipates that this due date will be
in
late 2007 or early 2008. Company management is in the process of reviewing
each
Notice of Opposition and preparing its response to each. There appears to
be
considerable overlap in the prior art evidence relied upon in each Opposition.
It is Company management’s understanding that the three Oppositions will likely
be combined by the EPO and then handled in a single proceeding. At
this time, Company management cannot make any prediction as to the probable
outcome of these oppositions to the EP ‘238 patent. However, based on the
Company’s preliminary analysis of the evidence presented, Company management
believes there is a substantial likelihood that the patent being challenged
will
be declared valid, and that all or a significant portion of its claims will
be
upheld.
10.
CONCENTRATION OF RISK
All
contract research revenue has been derived from contracts with United States
government agencies.
Two
non-government customers accounted for 44% and 12% of consolidated revenue
for
the six months ended June 30, 2007 and 2006, respectively. Accounts receivable
from these customers were $227,550 at June 30, 2007. Revenues from outside
of
North America represented 52% and 75% of consolidated revenue for the six
months
ended June 30, 2007 and 2006, respectively.
The
following discussion and analysis of our financial condition and results
of
operations should be read in conjunction with the consolidated financial
statements and related notes above.
CAUTIONARY
STATEMENT
CONCERNING
FORWARD-LOOKING STATEMENTS
This
discussion and analysis contains some “forward-looking statements.”
Forward-looking statements concern our possible or assumed future results
of
operations, including descriptions of our business strategies and customer
relationships. These statements often include words such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may” or similar
expressions. These statements are based on assumptions that we have made
in
light of our experience in the industry, as well as our perceptions of
historical trends, current conditions, expected future developments and other
factors we believe are appropriate in these circumstances.
As
you
read and consider this discussion and analysis, you should not place undue
reliance on any forward-looking statements. You should understand that these
statements involve substantial risk and uncertainty and are not guarantees
of
future performance or results. They depend on many factors that are discussed
further in the section entitled “Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2006, as supplemented by any disclosures in
Item 1A. of Part II of our Quarterly Report for the quarter ended March 31,
2007
and in Item 1A. of Part II below. Changes or developments in any of
these areas could affect our financial results or results of operations,
and
could cause actual results to differ materially from those contemplated in
the
forward-looking statements.
All
forward-looking statements speak only as of the date of this report or the
documents incorporated by reference, as the case may be. We do not undertake
any
duty to update any of these forward-looking statements to reflect events
or
circumstances after the date of this report or to reflect the occurrence
of
unanticipated events.
OVERVIEW
We
are a
leader in the research, development and commercialization of organic light
emitting diode, or OLED, technologies for use in flat panel display, solid-state
lighting and other applications. Since 1994, we have been exclusively engaged,
and expect to continue to be exclusively engaged, in funding and performing
research and development activities relating to OLED technologies and materials,
and in attempting to commercialize these technologies and materials. Our
revenues are generated through contract research, sales of development and
commercial chemicals, technology development and evaluation agreements and
license fees and royalties. We anticipate that in the future revenues from
licensing our intellectual property will become a more significant part of
our
revenue stream.
While
we
have made significant progress over the past few years developing and
commercializing our family of OLED technologies (PHOLED, TOLED, FOLED, etc.)
and
materials, we have incurred significant losses and will likely continue to
do so
until our OLED technologies and materials become more widely adopted by product
manufacturers. We have incurred significant losses since our inception,
resulting in an accumulated deficit of $155,115,798 as of June 30,
2007.
We
anticipate fluctuations in our annual and quarterly results of operations
due to
uncertainty regarding:
§
|
the
timing of our receipt of license fees and royalties, as well as
fees for
future technology development and
evaluation;
|
§
|
the
timing and volume of sales of our OLED materials for both commercial
usage
and evaluation purposes;
|
§
|
the
timing of our customers’ introduction and discontinuance of OLED
products;
|
§
|
the
timing and magnitude of expenditures we may incur in connection
with our
ongoing research and development activities;
and
|
§
|
the
timing and financial consequences of our formation of new business
relationships and alliances.
|
RESULTS
OF OPERATIONS
Three
Months Ended June 30, 2007 Compared to Three Months Ended June 30,
2006
We
had a
net loss of $5,175,371 (or $0.16 per diluted share) for the quarter ended
June
30, 2007, compared to a net loss of $4,312,651 (or $0.14 per diluted share)
for
the same period in 2006. The increased loss was primarily due to decreased
revenues and increased general and administrative expenses, as described
below.
Our
revenues were $2,315,170 for the quarter ended June 30, 2007, compared to
$3,009,316 for the same period in 2006.
Our
commercial chemical sales and royalty and license revenues for the quarter
ended
June 30, 2007 were $229,631 and $163,295, respectively, compared to $336,365
and
$807,185, respectively, for the corresponding period in 2006. Almost
all of our commercial chemical sales revenue for the quarter ended June 30,
2007
was from sales of our materials to Samsung SDI Co., Ltd. (“Samsung
SDI”). During the same period in 2006, we recorded most of our
commercial chemical sales revenues, as well as our license revenues, from
sales
of our materials to AU Optronics Corporation (“AUO”). As previously
discussed, AUO discontinued manufacturing the product for which it ordered
our
materials in the third quarter of 2006, and we have not sold any commercial
chemicals to AUO since that time. We cannot accurately predict the timing
and
frequency of such purchases by our customers due to the early stage of the
OLED
industry.
During
the quarter ended June 30, 2007, we entered into new commercial supply
agreements with two OLED display manufacturers, Chi Mei EL Corporation (“CMEL”)
and LG.Philips LCD Co., Ltd. (“LPL”). These agreements are similar to
the commercial supply agreement we had entered into with AUO, in that we
will
record both commercial chemical sales and license revenues from sales of
our
materials under the agreements. A small portion of our commercial
chemical and license revenues for the quarter ended June 30, 2007 were from
sales of our materials to CMEL. We cannot accurately predict the
timing and frequency of such purchases by our customers due to the early
stage
of the OLED industry.
We
recorded royalty revenue of $31,395 from Samsung SDI for the quarter ended
June
30, 2007, with no corresponding revenues from Samsung SDI for the same period
of
2006. This revenue represents royalties received under our patent license
agreement with Samsung SDI, which we entered into in April 2005. Our
royalty and license revenue for each of the quarters ended June 30, 2007
and
2006 also included license fees of $127,900. These revenues were from
our patent license agreement with Samsung SDI, as well as the cross-license
agreement we executed with DuPont Displays, Inc. (“DuPont”) in
December 2002. In connection with each of these agreements, we received
upfront payments that have been classified as deferred license fees and deferred
revenue. The deferred license fees are being recognized as license revenue
over
the life of the agreement with Samsung SDI and over 10 years with
DuPont.
We
earned
$1,305,246 in contract research revenue from the U.S. government for the
quarter
ended June 30, 2007, compared to $901,529 for the same period in 2006. The
increase was mainly due to the timing of revenue recognition in connection
with
several new and continuing government programs that commenced during the
second
and third quarters of 2006.
We
recognized $250,000 in technology development revenue for the quarter ended
June
30, 2007 in connection with one technology development and evaluation agreement
that we entered into in 2006. This compares to $667,613 in technology
development revenue for the same period in 2006, which was in connection
with
four such agreements. The decrease was due to the completion of work under
three
of these technology development agreements in 2006. Also, we received a
non-refundable payment for the continuation of one of the technology development
agreements, which payment is creditable against future amounts payable under
a
commercial license agreement, if one is executed. Therefore, we have recorded
this payment as a deferred license fee rather than technology development
revenue. The amount and timing of our receipt of fees for technology development
and similar services is difficult to predict due to the early stage of the
OLED
industry.
We
earned
$366,998 from sales of developmental chemicals during the quarter ended June
30,
2007, compared to $296,624 for the same period in 2006. The increase was
mainly
due to an increased volume of purchases of OLED materials by potential OLED
display manufacturers for pre-commercial scale up and test marketing purposes.
We cannot accurately predict the timing and frequency of such purchases by
our
customers due to the early stage of the OLED industry.
General
and administrative expenses were $2,568,217 for the quarter ended June 30,
2007, compared to $2,234,535 for the same period in 2006. The increase in
general and administrative expenses was mainly due to increased personnel
costs
and a change in the timing of payments to independent members of our Board
of
Directors.
Interest
income increased to $823,739 for the quarter ended June 30, 2007, compared
to
$544,626 for the same period in 2006. This increase resulted mainly from
higher
rates of return on investments during the second quarter of 2007, as well
as an
increase in funds received from a common stock offering we completed in May
2007.
Six
Months Ended June 30, 2007 Compared to Six Months Ended June 30,
2006
We
had a
net loss of $9,759,172 (or $0.30 per diluted share) for the six months ended
June 30, 2007, compared to a net loss of $7,834,691 (or $0.26 per diluted
share)
for the same period in 2006. The increased loss was primarily due to decreased
revenues and increased operating expenses, as described below.
Our
commercial chemical revenue and royalty and license revenues for the six
months
ended June 30, 2007 were $1,542,631 and $291,195, respectively, compared
to
$734,844 and $1,738,031, respectively, for the corresponding period in 2006.
Almost all of our commercial chemical revenue for the six months ended June
30,
2007 was from sales of our materials to Samsung SDI. During the same
period in 2006, we recorded most of our commercial chemical revenue, as well
as
our license revenues, from sales of our materials to AUO. As
previously indicated, we have not sold any commercial chemicals to AUO since
the
third quarter of 2006. We cannot accurately predict the timing and frequency
of
such purchases by our customers due to the early stage of the OLED
industry.
We
recorded royalty revenue of $31,395 from Samsung SDI for the six months ended
June 30, 2007, with no corresponding revenues from Samsung SDI for the same
period of 2006. Under our patent license agreement with Samsung SDI, we receive
royalty reports a specified period of time after the end of the quarter during
which royalty-bearing products are sold by Samsung SDI. Consequently, the
royalty revenue from Samsung SDI for the six months ended June 30, 2007
represents only royalties earned during the first quarter of 2007.
Our
royalty and license revenue for each of the six-month periods ended June
30,
2007 and 2006 also included license fees of $255,800. These revenues
were from our patent license agreement with Samsung SDI and our cross-license
agreement with DuPont.
We
earned
$2,419,770 in contract research revenue from the U.S. government for the
six
months ended June 30, 2007, compared to $1,437,590 for the same period in
2006.
The increase was mainly due to the recognition of revenue on several new
and
continuing government programs that commenced during the second and third
quarters of 2006.
We
recognized $500,000 in technology development revenue for the six months
ended
June 30, 2007 in connection with one technology development and evaluation
agreement that we entered into in 2006. This compares to $1,397,727
in technology development revenue for the same period in 2006, which was
in
connection with four such agreements. The decrease was due to the completion
of
work under three of these technology development agreements in 2006. Also,
we
received a non-refundable payment for the continuation of one of the technology
development agreements, which payment is creditable against future amounts
payable under a commercial license agreement, if one is executed. Therefore,
we
have recorded this payment as a deferred license fee rather than technology
development revenue. The amount and timing of our receipt of fees for technology
development and similar services is difficult to predict due to the early
stage
of the OLED industry.
We
earned
$576,204 from sales of developmental chemicals during the six months ended
June
30, 2007, compared to $972,530 for the same period in 2006. The decrease
was
mainly due to a decrease in high-volume purchases of OLED materials from
us by
potential OLED display manufacturers for pre-commercial scale up and test
marketing purposes. We cannot accurately predict the timing and frequency
of
such purchases by our customers due to the early stage of the OLED
industry.
We
incurred research and development expenses of $10,997,153 for the six
months ended June 30, 2007, compared to $10,231,862 for the same period in 2006.
The increase was mainly due to increased personnel costs, increased direct
materials and subcontract costs resulting from efforts on our government
programs, increased operating costs associated with the expansion of our
New
Jersey facility and increased legal expenses associated with patent application,
prosecution, maintenance and defense costs, offset to some extent by a decrease
in amounts payable to PPG as a result of our hiring certain PPG employees
(see
Note 6 to the Notes to Consolidated Financial Statements).
General
and administrative expenses were $4,921,731 for the six months ended June
30,
2007, compared to $4,232,227 for the same period in 2006. The increase was
mainly due to increased personnel costs and a change in the timing of payments
to independent members of our Board of Directors.
Interest
income increased to $1,408,698 for the six months ended June 30, 2007, compared
to $1,019,016 for the same period in 2006. This increase resulted
mainly from higher rates of return on investments during the second quarter
of
2007, as well as an increase in funds received from a common stock offering
we
completed in May 2007.
Liquidity
and Capital Resources
As
of
June 30, 2007, we had cash and cash equivalents of $61,495,627, short-term
investments of $22,747,530 and investments in certificates of deposit and
other
liquid instruments with an original maturity of more than one year of $95,940,
for a total of $84,339,097. This compares to cash and cash equivalents of
$31,097,533, short-term investments of $17,957,752 and investments in
certificates of deposit and other liquid instruments with an original maturity
of more than one year of $42,770, for a total of $49,098,055, as of
December 31, 2006. The overall increase in cash and cash equivalents and
short-term and long-term investments of $35,241,042 was primarily due to
proceeds received from the common stock offering we completed in May 2007,
as
described below.
Cash
used
in operating activities was $6,874,526 for the six months ended June 30,
2007,
compared to $5,615,675 for the same period in 2006. The increase in the use
of
cash is due mainly to the decrease in revenues and increase in operating
expenses.
Cash
provided by financing activities was $42,281,103 for the six months ended
June
30, 2007, compared to $5,273,300 for the same period in 2006. The
increase was mainly due to the completion of our common stock offering in
May
2007.
In
May
2007, we completed a public offering of 2,800,000 shares of our common stock
at
a price of $14.50 per share. The offering resulted in proceeds to us
of $38,029,023, net of $2,570,977 in underwriting discounts and commissions
and
other costs associated with completion of the offering.
Working
capital increased to $74,154,235 as of June 30, 2007, from working capital
of
$37,422,740 as of December 31, 2006. Again, this increase was
mainly due to proceeds from our common stock offering in May 2007.
We
anticipate, based on our internal forecasts and assumptions relating to our
operations (including, among others, assumptions regarding our working capital
requirements, the progress of our research and development efforts, the
availability of sources of funding for our research and development work,
and
the timing and costs associated with the preparation, filing, prosecution,
maintenance, defense and enforcement of our patents and patent applications),
that we have sufficient cash, cash equivalents and short-term investments
to
meet our obligations through at least the end of 2008.
We
believe that potential additional financing sources for us include long-term
and
short-term borrowings, public and private sales of our equity and debt
securities and the receipt of cash upon the exercise of warrants and options.
It
should be noted, however, that additional funding may be required in the
future
for research, development and commercialization of our OLED technologies
and
materials, to obtain, maintain and enforce patents respecting these technologies
and materials, and for working capital and other purposes, the timing and
amount
of which are difficult to ascertain. There can be no assurance that additional
funds will be available to us when needed, on commercially reasonable terms
or
at all.
Critical
Accounting Policies
Refer
to
our Annual Report on Form 10-K for the year ended December 31, 2006 for a
discussion of our critical accounting policies. There have been no changes
in
critical accounting policies to date in 2007.
Contractual
Obligations
Refer
to
our Annual Report on Form 10-K for the year ended December 31, 2006 for a
discussion of our contractual obligations. There have been no significant
changes in contractual obligations to date in 2007.
Off-Balance
Sheet Arrangements
Refer
to
our Annual Report on Form 10-K for the year ended December 31, 2006 for a
discussion of off-balance sheet arrangements. As of June 30, 2007, we had
no
off-balance sheet arrangements.
We
do not
utilize financial instruments for trading purposes and hold no derivative
financial instruments, other financial instruments or derivative commodity
instruments that could expose us to significant market risk. Our primary
market
risk exposure with regard to financial instruments is to changes in interest
rates, which would impact interest income earned on investments.
Evaluation
of Disclosure Controls and Procedures
Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls
and
procedures as of June 30, 2007. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls
and
procedures, as of the end of the period covered by this report, are functioning
effectively to provide reasonable assurance that the information required
to be
disclosed by us in reports filed or submitted under the Securities Exchange
Act
of 1934, as amended, is (i) recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and
(ii) accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding disclosure. However, a controls system, no matter how
well
designed and operated, cannot provide absolute assurance that the objectives
of
the controls system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within
a
company have been detected.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting during the
quarter ended June 30, 2007 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
In
June 2006, Patent Interference No. 105,461 was declared by the United
States Patent and Trademark Office (the “USPTO”) between Semiconductor Energy
Laboratory Co., Ltd. (“SEL”), and Princeton and USC (the “Universities”). The
dispute concerned U.S. Patent No. 6,734,457, which had been issued to SEL.
The SEL patent claimed aspects of our phosphorescent OLED technology that
we
believe were disclosed and claimed in U.S. Application Serial No.10/913,211,
which we exclusively license from the Universities. The Universities sought
a
ruling by the USPTO that they should be granted a patent to the claimed
invention and that the SEL patent is invalid because the Universities were
first-to-invent and their invention was made prior to that of SEL. Under
our
agreement with the Universities, we were required to pay all legal costs
and
fees associated with the interference proceeding.
An
oral
hearing in the matter was held before the Board of Patent Appeals and
Interferences (the “BPAI”) of the USPTO on April 25, 2007. The following
day, the BPAI issued a decision in favor of the Universities. The BPAI decision
confirmed that the Universities were first-to-invent the subject matter of
the
interference and that the Universities’ invention is prior art to SEL’s patent.
As a result, all claims of the SEL patent were canceled. SEL has not sought
to
appeal from the BPAI decision, and we expect that the proceeding will soon
be
formally terminated.
Notice
of Opposition to European Patent No. 0946958
On
December 8, 2006, Cambridge Display Technology, Ltd. (“CDT”) filed a Notice
of Opposition to European Patent No. 0946958 (the “EP ‘958 patent”). The EP
‘958 patent, which issued on March 8, 2006, is a European counterpart patent
to
U.S. patents 5,844,363, 6,602,540 and 6,888,306, and to pending U.S. patent
application 10/966,417, filed on October 15, 2004. These patents and patent
applications relate to our flexible OLED technology. They are exclusively
licensed to us by Princeton, and under the license agreement we are required
to
pay all legal costs and fees associated with this proceeding.
The
European Patent Office (the “EPO”) set a date of May 12, 2007 for us to
file a response to the facts and arguments presented by CDT in its Notice
of
Opposition. We filed this response in a timely manner and are now awaiting
a
reply from CDT. Since we are still in the early stages of this proceeding,
we
cannot make any prediction as to the probable outcome of this opposition.
However, based on our preliminary analysis of the evidence presented, we
believe
there is a substantial likelihood that the patent being challenged will be
declared valid, and that all or a significant portion of its claims will
be
upheld.
Notices
of Opposition to European Patent No. 1449238
On
March 8, 2007, Sumation Company Limited (“Sumation”), a joint venture
between Sumitomo Chemical Company and CDT, filed a first Notice of Opposition
to
European Patent No. 1449238 (the “EP ‘238 patent”). The EP ‘238 patent,
which issued on November 2, 2006, is a European counterpart patent, in
part, to U.S. patents 6,830,828, 6,902,830 and 7,001,536, and to pending
U.S.
patent application 11/233,605, filed on September 22, 2005. These patents
and patent application relate to our PHOLED technology. They are exclusively
licensed to us by Princeton, and under the license agreement we are required
to
pay all legal costs and fees associated with this proceeding.
Two
other
parties also filed oppositions to the EP ‘238 patent just prior to the August 2,
2007 filing deadline. On July 24, 2007, Merck Patent GmbH, of
Darmstadt, Germany, filed a second Notice of Opposition to the EP ‘238 patent,
and on July 27, 2007, BASF Aktiengesellschaft, of Mannheim, Germany, filed
a
third Notice of Opposition to the EP ‘238 patent.
The
next
step is for the EPO to set a due date for us to file our responses to the
oppositions. We anticipate that this due date will be in late 2007 or early
2008. We are in the process of reviewing each Notice of Opposition and preparing
our response to each. There appears to be considerable overlap in the prior
art
evidence relied upon in each Opposition. It is our understanding that the
three
Oppositions will likely be combined by the EPO and then handled in a single
proceeding. At this time, we cannot make any prediction as to the
probable outcome of these oppositions to the EP ‘238 patent. However, based on
our preliminary analysis of the evidence presented, we believe there is a
substantial likelihood that the patent being challenged will be declared
valid,
and that all or a significant portion of its claims will be upheld.
ITEM
1A. RISK FACTORS
There
have been no material changes to the risk factors previously discussed in
Part
I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2006, as supplemented by our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2007.
During
the quarter ended June 30, 2007, we issued an aggregate of 233,268 unregistered
shares of our common stock. Of this amount, 39,625 shares were issued to
PPG in
return for services provided by PPG under our OLED Material Supply and Service
Agreement. The remaining 193,643 shares were issued upon the exercise of
outstanding warrants. The warrants had a weighted average exercise price
of
$9.92 per share. All of the shares were issued in reliance on the exemption
from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended.
None.
(a)
We
held our 2007 Annual Meeting of Shareholders on June 21, 2007.
(b)
Per
Instruction 3 to Item 4 of Form 10-Q, no response is required.
(c)
The
number of votes represented at the annual meeting, in person or by proxy,
was
26,602,859. In determining this number, abstentions and shares held by brokers
who have notified us that they lack voting authority with respect to any
matter
(referred to herein as “broker non-votes”) were deemed present. The matters
voted upon at the annual meeting and the results of the vote on each such
matter
are set forth below:
1.
Election of Directors. The result of the vote tabulated at the meeting
for the election of seven directors is set forth as follows, opposite their
respective names:
Name
|
|
Number
of Votes
FOR
|
|
Number
of Votes
WITHHELD
|
|
Percentage
FOR of
Total
Votes Cast*
|
Steven
V.
Abramson
|
|
26,168,344
|
|
434,515
|
|
98.4
|
Leonard
Becker
|
|
26,521,535
|
|
81,324
|
|
99.7
|
Elizabeth
H.
Gemmill
|
|
26,527,393
|
|
75,466
|
|
99.7
|
C.
Keith
Hartley
|
|
26,532,664
|
|
70,195
|
|
99.7
|
Lawrence
Lacerte
|
|
26,537,531
|
|
65,328
|
|
99.8
|
Sidney
D.
Rosenblatt
|
|
23,973,420
|
|
2,629,439
|
|
90.1
|
Sherwin
I.
Seligsohn
|
|
24,275,830
|
|
2,327,029
|
|
91.3
|
*
Broker
non-votes are not considered votes “cast” with respect to the election of
directors.
2.
Proposal to Ratify the Appointment of KPMG LLP as the Company’s Independent
Registered Public Accounting Firm for 2007. The result of the vote tabulated
at the meeting for the ratification and approval of this proposal was as
follows:
Number
of Votes FOR
|
|
Number
of Votes
AGAINST
|
|
Number
of
ABSTENTIONS
|
|
Percentage
FOR of
Total
Votes Cast*
|
26,536,423
|
|
46,719
|
|
19,717
|
|
99.8
|
*
Abstentions and broker non-votes are not considered votes “cast” with respect to
this proposal.
(d)
Not
applicable.
None.
The
following is a list of the exhibits filed as part of this report. Where so
indicated by footnote, exhibits that were previously filed are incorporated
by
reference. For exhibits incorporated by reference, the location of the exhibit
in the previous filing is indicated parenthetically, together with a reference
to the filing indicated by footnote.
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10.1+*
|
|
Commercial
Supply Agreement between the registrant and Chi Mei EL Corporation,
entered into on April 24, 2007.
|
|
|
10.2+*
|
|
Commercial
Supply Agreement between the registrant and LG.Philips LCD Co.,
Ltd.,
entered into on May 23, 2007.
|
|
|
31.1*
|
|
Certifications
of Sherwin I. Seligsohn, Chief Executive Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)
|
|
|
|
31.2*
|
|
Certifications
of Sidney D. Rosenblatt, Chief Financial Officer, as required by
Rule 13a-14(a) or Rule 15d-14(a)
|
|
|
32.1**
|
|
Certifications
of Sherwin I. Seligsohn, Chief Executive Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350.
(This exhibit shall not be deemed “filed” for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, or otherwise
subject
to the liability of that section. Further, this exhibit shall not
be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of
1934, as amended.)
|
|
|
|
32.2**
|
|
Certifications
of Sidney D. Rosenblatt, Chief Financial Officer, as required by
Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350.
(This exhibit shall not be deemed “filed” for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, or otherwise
subject
to the liability of that section. Further, this exhibit shall not
be
deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of
1934, as amended.)
|
|
|
|
+
|
|
Confidential
treatment has been requested as to certain portions of this exhibit
pursuant to Rule 24b-2 under the Securities Act of 1934, as
amended.
|
*
|
|
Filed
herewith.
|
**
|
|
Furnished
herewith.
|
|
Note:
Any of the exhibits listed in the foregoing index not included
with this
report may be obtained, without charge, by writing to Mr. Sidney D.
Rosenblatt, Corporate Secretary, Universal Display Corporation,
375
Phillips Boulevard, Ewing, New Jersey
08618.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized:
UNIVERSAL
DISPLAY CORPORATION
Date: August
9,
2007 By: /s/ Sidney D.
Rosenblatt
Sidney
D. Rosenblatt
Executive
Vice President and Chief
Financial Officer