Pennsylvania
|
23-2372688
|
|
(State or other jurisdiction of
|
(I.R.S. Employer Identification No.)
|
|
incorporation or organization)
|
||
375 Phillips Boulevard
|
||
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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Large accelerated filer ___
|
Accelerated filer
X
|
Non-accelerated filer ___ (Do not check if a smaller reporting company)
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Smaller reporting company ___
|
PART I
– FINANCIAL INFORMATION
|
FINANCIAL STATEMENTS
|
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
REVENUE:
|
||||||||
Commercial revenue
|
$ | 1,830,147 | $ | 1,369,137 | ||||
Developmental revenue
|
2,416,503 | 1,464,721 | ||||||
Total revenue
|
4,246,650 | 2,833,858 | ||||||
OPERATING EXPENSES:
|
||||||||
Cost of chemicals sold
|
460,786 | 170,987 | ||||||
Research and development
|
4,466,631 | 5,219,062 | ||||||
Selling, general and administrative
|
2,642,246 | 2,622,945 | ||||||
Patent costs
|
781,259 | 731,531 | ||||||
Royalty and license expense
|
120,060 | 82,931 | ||||||
Total operating expenses
|
8,470,982 | 8,827,456 | ||||||
Operating loss
|
(4,224,332 | ) | (5,993,598 | ) | ||||
INTEREST INCOME
|
75,655 | 253,400 | ||||||
INTEREST EXPENSE
|
(7,059 | ) | (2,643 | ) | ||||
GAIN ON STOCK WARRANT LIABILITY
|
713,243 | 173,242 | ||||||
LOSS BEFORE INCOME TAX BENEFIT
|
(3,442,493 | ) | (5,569,599 | ) | ||||
INCOME TAX BENEFIT
|
464,162 | — | ||||||
NET LOSS
|
$ | (2,978,331 | ) | $ | (5,569,599 | ) | ||
BASIC AND DILUTED NET LOSS PER COMMON SHARE
|
$ | (0.08 | ) | $ | (0.15 | ) | ||
WEIGHTED AVERAGE SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE
|
37,029,462 | 36,299,967 | ||||||
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$ | (2,978,331 | ) | $ | (5,569,599 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Amortization of deferred license fees and deferred revenue
|
(710,626 | ) | (663,634 | ) | ||||
Depreciation
|
513,557 | 517,472 | ||||||
Amortization of intangibles
|
423,768 | 423,768 | ||||||
Amortization of premium and discount on investments, net
|
(43,619 | ) | (144,887 | ) | ||||
Stock-based employee compensation
|
463,133 | 551,489 | ||||||
Stock-based non-employee compensation
|
40,848 | 1,998 | ||||||
Non-cash expense under a materials agreement
|
243,459 | 309,375 | ||||||
Stock-based compensation to Board of Directors and Scientific Advisory Board
|
149,703 | 71,524 | ||||||
Gain on stock warrant liability
|
(713,243 | ) | (173,242 | ) | ||||
(Increase) decrease in assets:
|
||||||||
Accounts receivable
|
944,958 | 637,086 | ||||||
Other current assets
|
38,655 | (20,988 | ) | |||||
Other assets
|
(18,281 | ) | (13,719 | ) | ||||
Increase (decrease) in liabilities:
|
||||||||
Accounts payable and accrued expenses
|
278,171 | (498,481 | ) | |||||
Deferred license fees
|
800,000 | — | ||||||
Deferred revenue
|
125,000 | 66,667 | ||||||
Net cash used in operating activities
|
(442,848 | ) | (4,505,171 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of property and equipment
|
(89,300 | ) | (95,801 | ) | ||||
Purchase of short-term investments
|
(35,224,272 | ) | (36,479,245 | ) | ||||
Proceeds from sale of short-term investments
|
20,939,983 | 19,655,000 | ||||||
Net cash used in investing activities
|
(14,373,589 | ) | (16,920,046 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from the issuance of common stock
|
62,659 | — | ||||||
Proceeds from the exercise of common stock options and warrants
|
722,682 | — | ||||||
Payment of withholding taxes related to stock-based employee compensation
|
(1,116,387 | ) | (831,877 | ) | ||||
Net cash used in financing activities
|
(331,046 | ) | (831,877 | ) | ||||
DECREASE IN CASH AND CASH EQUIVALENTS
|
(15,147,483 | ) | (22,257,094 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
22,701,126 | 28,321,581 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 7,553,643 | $ | 6,064,487 | ||||
The following non-cash activities occurred:
|
||||||||
Unrealized (loss) gain on available-for-sale securities
|
(33,511 | ) | 14,768 | |||||
Common stock issued to Board of Directors and Scientific Advisory Board that was earned in a previous period
|
314,181 | 309,802 | ||||||
Common stock issued to employees that was accrued for in a previous period, net of shares withheld for taxes
|
929,552 | 845,745 | ||||||
Common stock issued for royalties that was earned in a previous period
|
81,273 | 81,954 |
1.
|
BACKGROUND
|
2.
|
BASIS OF PRESENTATION
|
3.
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CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
|
Amortized
|
Unrealized
|
Aggregate Fair
|
||||||||||||||
Investment Classification
|
Cost
|
Gains
|
(Losses)
|
Market Value
|
||||||||||||
March 31, 2010 –
|
||||||||||||||||
Certificates of deposit
|
$ | 9,342,981 | $ | 2,545 | $ | (8,200 | ) | $ | 9,337,326 | |||||||
Corporate Bonds
|
18,960,240 | 3,584 | (2,916 | ) | 18,960,908 | |||||||||||
U.S. Government bonds
|
27,172,125 | — | (3,007 | ) | 27,169,118 | |||||||||||
$ | 55,475,346 | $ | 6,129 | $ | (14,123 | ) | $ | 55,467,352 | ||||||||
December 31, 2009 –
|
||||||||||||||||
Certificates of deposit
|
$ | 8,688,457 | $ | 1,633 | $ | (7,245 | ) | $ | 8,682,845 | |||||||
U.S. Government bonds
|
32,458,981 | 31,140 | (11 | ) | 32,490,110 | |||||||||||
$ | 41,147,438 | $ | 32,773 | $ | (7,256 | ) | $ | 41,172,955 |
Fair Value Measurements, Using
|
||||||||||||||||
Total carrying value as of March 31, 2010
|
Quoted prices in active markets (Level 1)
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Significant other observable inputs
(Level 2)
|
Significant unobservable inputs
(Level 3)
|
|||||||||||||
Investments
|
$ | 55,467,352 | $ | 55,467,352 | $ | — | $ | — | ||||||||
Stock warrant liability
|
3,006,922 | — | — | 3,006,922 |
Fair Value Measurements, Using
|
||||||||||||||||
Total carrying value as of December 31, 2009
|
Quoted prices in active markets (Level 1)
|
Significant other observable inputs
(Level 2)
|
Significant unobservable inputs
(Level 3)
|
|||||||||||||
Investments
|
$ | 41,172,955 | $ | 41,172,955 | $ | — | $ | — | ||||||||
Stock warrant liability
|
3,720,165 | — | — | 3,720,165 |
2010
|
2009
|
|||||||
Fair value of stock warrant liability, beginning of period
|
$ | 3,720,165 | $ | — | ||||
Cumulative effect of reclassification of stock warrant liability under Accounting Standards Codification (“ASC”) 815
|
— | 2,689,110 | ||||||
Unrealized gain for period
|
(713,243 | ) | (173,242 | ) | ||||
Fair value of stock warrant liability, end of period
|
$ | 3,006,922 | $ | 2,515,868 |
2010
|
2009
|
|||
Contractual life (years)
|
1.4
|
0.9-2.4
|
||
Expected volatility
|
74.1%
|
68.8-89.5%
|
||
Risk-free interest rate
|
0.7%
|
0.6-0.8%
|
||
Annual dividend yield
|
—
|
—
|
5.
|
RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON, USC AND MICHIGAN
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6.
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EQUITY AND CASH COMPENSATION UNDER THE PPG INDUSTRIES AGREEMENTS
|
7.
|
SHAREHOLDERS’ EQUITY
|
Series A
|
Unrealized
|
|||||||||||||||||||||||||||||||
Nonconvertible
|
Additional
|
(Loss) Gain on
|
Total
|
|||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-In
|
Available-for-
|
Accumulated
|
Shareholders’
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Sale Securities
|
Deficit
|
Equity
|
|||||||||||||||||||||||||
BALANCE, JANUARY 1, 2010
|
200,000 | $ | 2,000 | 36,818,440 | $ | 368,184 | $ | 256,340,530 | $ | 25,517 | $ | (197,108,705 | ) | $ | 59,627,526 | |||||||||||||||||
Exercise of common stock options and warrants (A)
|
— | — | 75,750 | 758 | 721,924 | — | — | 722,682 | ||||||||||||||||||||||||
Stock-based employee compensation, net of shares withheld for taxes (B)
|
— | — | 637,978 | 6,379 | 854,077 | — | — | 860,456 | ||||||||||||||||||||||||
Stock-based non-employee compensation
|
— | — | 195 | 2 | 40,846 | — | — | 40,848 | ||||||||||||||||||||||||
Issuance of common stock to Board of Directors and Scientific Advisory Board (C)
|
— | — | 44,670 | 447 | 463,437 | — | — | 463,884 | ||||||||||||||||||||||||
Issuance of common stock in connection with materials and license agreements (D)
|
— | — | 10,163 | 102 | 116,517 | — | — | 116,619 | ||||||||||||||||||||||||
Issuance of common stock under an Employee Stock Purchase Plan
|
— | — | 6,263 | 63 | 62,596 | — | — | 62,659 | ||||||||||||||||||||||||
Net loss
|
— | — | — | — | — | — | (2,978,331 | ) | (2,978,331 | ) | ||||||||||||||||||||||
Unrealized loss on available-for-sale securities
|
— | — | — | — | — | (33,511 | ) | — | (33,511 | ) | ||||||||||||||||||||||
Comprehensive loss
|
(3,011,842 | ) | ||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2010
|
200,000 | $ | 2,000 | 37,593,459 | $ | 375,935 | $ | 258,599,927 | $ | (7,994 | ) | (200,087,036 | ) | $ | 58,882,832 | |||||||||||||||||
(A)
|
During the three months ended March 31, 2010, the Company issued 75,750 shares of common stock upon the exercise of common stock options and warrants, resulting in cash proceeds of $722,682.
|
(B)
|
Includes $1,513,710 (106,825 shares) that was accrued for in a previous period and charged to expense when earned, but issued in 2010, less shares withheld for taxes in the amount of $584,158 (41,225 shares).
|
(C)
|
Includes $314,181 (38,910 shares) that was earned in a previous period and charged to expense when earned, but issued in 2010.
|
(D)
|
The Company was required to pay Motorola royalties of $162,558 for the year ended December 31, 2009. In March 2010, the Company issued to Motorola 7,200 shares of the Company’s common stock, valued at $81,273, and paid Motorola $81,285 in cash to satisfy this royalty obligation.
|
8.
|
STOCK-BASED COMPENSATION
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
10.
|
CONCENTRATION OF RISK
|
11.
|
INCOME TAXES
|
12.
|
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
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 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.
|
·
|
an increase in revenue of $1,412,792; and
|
·
|
a decrease in operating expenses of $356,474.
|
·
|
an increase in gain on stock warrant liability of $540,001;
|
·
|
an income tax benefit of $464,162; and
|
·
|
a decrease in total operating loss of $1,769,266.
|
·
|
an increase of $287,698 in royalty revenue, which mainly represented royalties received under our patent license agreement with Samsung SMD Co., Ltd. (“Samsung SMD”);
|
·
|
an increase of $106,760 in license fees, principally due to a license agreement we entered into with Showa Denko K.K. in December 2009 and license fees received in connection with increased sales of our materials to a customer; and
|
·
|
an increase of $42,235 in commercial chemical revenue.
|
·
|
an increase of $745,822 in development chemical revenue, mainly due to increased purchases of development chemicals by a customer; and
|
·
|
an increase of $236,316 in contract research revenue, principally to the timing of work performed and costs incurred in connection with existing government contracts, as well as an overall increase in value of our government contracts.
|
·
|
decreased costs of $941,820 incurred under our agreement with PPG Industries; and
|
·
|
decreased costs of $91,649 under our sponsored research agreements; partially offset by
|
·
|
increased employee costs of $215,596 and an overall increase in other operating costs of $65,442.
|
·
|
a decrease in net loss of $2,064,384, which amount excludes the impact of non-cash items;
|
·
|
the receipt of $925,000 in cash payments during the three months ended March 31, 2010 for license rights and as advanced payments under a government contract, compared to $66,667 in corresponding cash payments received during the three months ended March 31, 2009;
|
·
|
the impact of the timing of payment of accounts payable and accrued expenses of $776,653; and
|
·
|
the impact of the timing of receipt of accounts receivable of $307,872.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
CONTROLS AND PROCEDURES
|
PART II
– OTHER INFORMATION
|
LEGAL PROCEEDINGS
|
RISK FACTORS
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
Total Number of Shares Purchased
|
Weighted Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Program
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
|
||||||||||||
January 1 – January 31
|
— | $ | — | n/a | -- | |||||||||||
February 1 – February 28
|
201 | 10.99 | n/a | -- | ||||||||||||
March 1 – March 31
|
601 | 11.67 | n/a | -- | ||||||||||||
Total
|
802 | $ | 11.50 | n/a | -- |
DEFAULTS UPON SENIOR SECURITIES
|
REMOVED AND RESERVED
|
OTHER INFORMATION
|
EXHIBITS
|
Exhibit
|
|||
Number
|
Description
|
||
10.1*
|
Amendment No. 3 to the Commercial Supply Agreement between the registrant and LG Display Co., Ltd., dated as of March 10, 2010
|
||
10.2*
+
|
Universal Display Corporation Supplemental Executive Retirement Plan+
|
||
10.3*
+
|
Universal Display Corporation Equity Retention Agreement with Steven V. Abramson+
|
||
10.4*
+
|
Universal Display Corporation Equity Retention Agreement with Sidney D. Rosenblatt+
|
||
31.1*
|
Certifications of Steven V. Abramson, 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 Steven V. Abramson, 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.)
|
*
|
Filed herewith.
|
|
**
|
Furnished herewith.
|
|
+
|
Compensatory plan or arrangement.
|
|
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.
|
Date: May 10, 2010
|
By:
/s/ Sidney D. Rosenblatt
|
Sidney D. Rosenblatt
|
|
Executive Vice President and Chief Financial Officer
|
LG DISPLAY CO., LTD.
|
UNIVERSAL DISPLAY CORPORATION
|
|||
By:
|
/s/ Byung Chul Ahn
|
By:
|
/s/ Steven V. Abramson
|
|
Name:
|
Byung Chul Ahn
|
Name:
|
Steven V. Abramson
|
|
Title:
|
Vice President
|
Title:
|
President
|
|
Date:
|
Feb 19, 2010
|
Date:
|
March 10, 2010
|
UNIVERSAL DISPLAY CORPORATION
|
|
By:
|
/s/ Sidney D. Rosenblatt
|
Name:
|
Sidney Rosenblatt
|
Title:
|
CFO
|
Name of Participant
|
Classification
|
Date of Hire
|
Steven V. Abramson
|
50% class
|
May 13, 1996
|
Sidney D. Rosenblatt
|
50% class
|
June 1, 1995
|
Julia J. Brown
|
50% class
|
June 22, 1998
|
Janice K. Mahon
|
50% class
|
January 2, 1997
|
Michael Hack
|
50% class
|
October 11, 1999
|
1.
|
Full SERP Benefit.
|
2.
|
Normal Retirement Benefit.
|
3.
|
Prorated SERP Benefit and Vesting
|
4.
|
Disability.
|
5.
|
Payment of SERP Benefit.
|
6.
|
Change in Control.
|
7.
|
Forfeiture.
|
8.
|
Calculation Methodology.
|
9.
|
Section 409A.
|
1.
|
Full SERP Benefit.
|
2.
|
Normal Retirement Benefit.
|
3.
|
Prorated Benefit and Vesting.
|
4.
|
Death Benefits.
|
5.
|
Incorporation of Exhibit A.
|
·
|
Devote substantial time and attention to promotion and development of the Company at a time that is important for the future success of the Company;
|
·
|
Maintain a significant long-term ownership interest in the Company;
|
·
|
Continue in employment in order to ensure continuity of leadership and vision for the Company; and thereby
|
·
|
Increase shareholder value.
|
Vesting Date
|
Vested Shares
|
|
First Anniversary of Date of Grant
|
50,000
|
|
Second Anniversary of Date of Grant
|
50,000
|
|
Third Anniversary of Date of Grant
|
50,000
|
|
Fourth Anniversary of Date of Grant
|
50,000
|
|
Fifth Anniversary of Date of Grant
|
50,000
|
UNIVERSAL DISPLAY CORPORATION
|
|
By:
|
/s/ Sidney D. Rosenblatt
|
Name:
|
Sidney Rosenblatt
|
Title:
|
CFO
|
Date:
|
4/1/10
|
/s/ Steven V. Abramson
|
Grantee
|
4/1/10
|
Date
|
·
|
Devote substantial time and attention to promotion and development of the Company at a time that is important for the future success of the Company;
|
·
|
Maintain a significant long-term ownership interest in the Company;
|
·
|
Continue in employment in order to ensure continuity of leadership and vision for the Company; and thereby
|
·
|
Increase shareholder value.
|
Vesting Date
|
Vested Shares
|
|
First Anniversary of Date of Grant
|
50,000
|
|
Second Anniversary of Date of Grant
|
50,000
|
|
Third Anniversary of Date of Grant
|
50,000
|
|
Fourth Anniversary of Date of Grant
|
50,000
|
|
Fifth Anniversary of Date of Grant
|
50,000
|
UNIVERSAL DISPLAY CORPORATION
|
|
By:
|
/s/ Steven V. Abramson
|
Name:
|
Steven V. Abramson
|
Title:
|
President
|
Date:
|
4/1/10
|
/s/
Sidney Rosenblatt
|
Grantee
|
4/1/10
|
Date
|
Date: May 10, 2010
|
By:
/s/ Steven V. Abramson
|
Steven V. Abramson
|
|
President and Chief Executive Officer
|
Date: May 10, 2010
|
By:
/s/ Sidney D. Rosenblatt
|
Sidney D. Rosenblatt
|
|
Executive Vice President and Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: May 10, 2010
|
By:
/s/ Steven V. Abramson
|
Steven V. Abramson
|
|
President and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: May 10, 2010
|
By:
/s/ Sidney D. Rosenblatt
|
Sidney D. Rosenblatt
|
|
Executive Vice President and Chief Financial Officer
|