This prospectus supplement relates to an effective registration statement under
the Securities Act of 1933, but it is not complete and may be changed. This
prospectus supplement is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 5, 2004)
SUBJECT TO COMPLETION, DATED MAY 17, 2007
SHARES
UNIVERSAL DISPLAY CORPORATION
COMMON STOCK
We are offering up to shares of our common stock. We will receive all of
the net proceeds from the sale of such common stock.
Our common stock is traded on the NASDAQ Global Market under the symbol "PANL"
and on the Philadelphia Stock Exchange under the symbol "PNL." The last reported
sale price of our common stock on the NASDAQ Global Market on May , 2007 was
$ per share.
OUR BUSINESS AND AN INVESTMENT IN OUR COMMON STOCK INVOLVE SIGNIFICANT RISKS.
THESE RISKS ARE DESCRIBED UNDER THE CAPTION "RISK FACTOR" BEGINNING ON PAGE 4 OF
THIS PROSPECTUS SUPPLEMENT, IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2006 AND IN OUR QUARTERLY REPORT ON FORM 10-Q FOR THE THREE-MONTH
PERIOD ENDED MARCH 31, 2007, EACH INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or accompanying prospectus.
Any representation to the contrary is a criminal offense.
PER SHARE TOTAL
---------- ----------------
Public offering price................................................. $ $
Underwriting discounts and commission................................. $ $
Proceeds, before expenses, to us ..................................... $ $
The underwriters expect to deliver the shares to purchasers on or about May ,
2007.
----------------------
NEEDHAM & COMPANY, LLC
The date of this prospectus supplement is May , 2007
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
----------------------- ----
ABOUT THIS PROSPECTUS SUPPLEMENT...................... S-3
CORPORATE INFORMATION ................................ S-4
RISK FACTORS.......................................... S-4
USE OF PROCEEDS....................................... S-5
DILUTION.............................................. S-5
UNDERWRITING.......................................... S-6
LEGAL MATTERS......................................... S-8
EXPERTS............................................... S-8
WHERE YOU CAN FIND MORE INFORMATION................... S-8
--------------------------
The purpose of this prospectus supplement is to provide supplemental
information regarding Universal Display Corporation in connection with the
offering. You should read this prospectus supplement, the accompanying
prospectus and the documents we incorporate by reference herein, carefully
before you invest. These documents contain important information you should
consider when making your investment decision. This prospectus supplement may
add, update or change information contained in the accompanying prospectus.
You should rely only on information contained in this prospectus
supplement, the accompanying prospectus and the documents we incorporate by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with information that is different. We are
offering the common stock only in jurisdictions where such offers are permitted.
The information contained in this prospectus supplement and the accompanying
prospectus is accurate only as of their respective dates, regardless of the time
of delivery of this prospectus supplement and the accompanying prospectus.
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our common
stock in two separate documents: (a) the accompanying prospectus, which provides
general information, some of which may not apply to this offering; and (b) this
prospectus supplement, which describes the specific details regarding this
offering. Generally, when we refer to this "prospectus," we are referring to
both documents combined. Additional information is incorporated by reference in
this prospectus. See "Where You Can Find More Information."
If information in this prospectus supplement is inconsistent with the
accompanying prospectus, you should rely on this prospectus supplement.
This prospectus supplement, the accompanying prospectus and the documents
incorporated by reference contain some "forward-looking statements" and
information relating to us that is based on the beliefs of our management, as
well as assumptions made by, and the information currently available to, our
management. Among other things, these statements include, but are not limited
to, the statements in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference regarding:
- the outcomes of our ongoing and future research and development
activities, and those of others, relating to organic light emitting
diode (OLED) technologies and materials;
- our ability to access future OLED technology developments of our
academic and commercial research partners;
- the potential commercial applications of and future demand for our
OLED technologies and materials, and of OLED products in general;
- our ability to form and continue strategic relationships with
manufacturers of OLED products;
- successful commercialization of products incorporating our OLED
technologies and materials by OLED manufacturers, and their
continued willingness to utilize our OLED technologies and
materials;
- the comparative advantages and disadvantages of our OLED
technologies and materials versus competing technologies and
materials currently on the market;
- the nature and potential advantages of any competing technologies
that may be developed in the future;
- our ability to compete against third parties with resources greater
than ours;
- our ability to maintain and improve our competitive position
following the expiration of our fundamental OLED patents;
- the adequacy of protections afforded to us by the patents that we
own or license and the cost to us of maintaining and enforcing those
patents;
- our ability to obtain, expand and maintain patent protection in the
future, and to protect our unpatentable intellectual property;
- our exposure to and ability to withstand third-party claims and
challenges to our patents and other intellectual property rights;
S-3
- the payments that we expect to receive under our existing contracts
with OLED manufacturers and the terms of contracts that we expect to
enter into with OLED manufacturers in the future;
- our future capital requirements and our ability to obtain additional
financing if and when needed; and
- our future OLED technology licensing and OLED material sales
revenues and results of operations.
In addition, when used in these documents, the words "estimate,"
"project," "believe," "anticipate," "intend," "expect" and similar expressions
are intended to identify forward-looking statements. These statements reflect
our current views with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in these forward-looking statements, including those risks
discussed in this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus supplement, the
accompanying prospectus or the documents incorporated by reference, as the case
may be. Except for special circumstances in which a duty to update arises when
prior disclosure becomes materially misleading in light of subsequent events, we
do not intend to update any of these forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
CORPORATE INFORMATION
Our corporation was organized under the laws of the Commonwealth of
Pennsylvania in April 1985. Our current business was commenced in June 1994 by a
New Jersey corporation that has since changed its name to UDC, Inc. UDC, Inc.
now functions as an operating subsidiary of ours and has overlapping officers
and directors. Our principal executive offices are located at 375 Phillips
Boulevard, Ewing, New Jersey 08618 and our telephone number is (609) 671-0980.
Our website is located at www.universaldisplay.com. The information contained on
our website is not a part of this prospectus supplement or the accompanying
prospectus.
RISK FACTOR
Before purchasing our common stock, you should carefully consider the risk
described below in this section and the risks described in the documents
incorporated by reference in this prospectus supplement and the accompanying
prospectus, specifically in the annual report on Form 10-K for the year ended
December 31, 2006 and the quarterly report on Form 10-Q for the three-month
period ended March 31, 2007. The risks set forth below and in the documents
incorporated by reference replace and supersede in their entirety the risks set
forth beginning on page 4 of the accompanying prospectus.
RISK RELATING TO THIS OFFERING
Our management will have broad discretion with respect to the use of proceeds of
this offering.
We have not identified specific uses for the proceeds of this offering.
You will be relying on the judgment of our management regarding the application
of the proceeds of this offering. The results and effectiveness of the use of
proceeds are uncertain.
S-4
USE OF PROCEEDS
We expect the net proceeds from this offering to be up to approximately
$ million after deducting certain fees due to Needham & Company, LLC, and our
estimated offering expenses, as described in "Underwriting." The net proceeds
from this offering will be used for working capital and general corporate
purposes, including funding for our research and development efforts,
investments and acquisitions relating to complementary businesses, technologies
and intellectual property, and prosecution and defense of our intellectual
property rights. Pending such uses, we intend to invest any excess proceeds in
investment grade, interest-bearing securities.
DILUTION
Our net tangible book value as of March 31, 2007 was approximately
$47,266,847 or approximately $1.48 per share of common stock. Net tangible book
value per share is determined by dividing our net tangible book value, which
consists of tangible assets less total liabilities, by the number of shares of
common stock outstanding on that date. Without taking into account any other
changes in the net tangible book value after March 31, 2007, other than to give
effect to our receipt of the estimated net proceeds from the sale of the assumed
maximum number of shares issuable in this offering (3,000,000 shares) at an
assumed offering price of $15.60 per share, which was the closing price per
share of our common stock on the NASDAQ Global Market on May 16, 2007, less the
fees due to Needham & Company, LLC and our estimated offering expenses, our pro
forma net tangible book value as of March 31, 2007, after giving effect to the
items above would have been approximately $91,108,847, or $2.61 per share. This
represents an immediate increase in the net tangible book value of $1.13 per
share to existing shareholders and an immediate dilution of $12.99 per share to
new investors. The following table illustrates this per share dilution:
Public offering price per share................................................. 15.60
Net tangible book value per share before the offering....................... 1.48
Increase per share attributable to the offering............................. 1.13
----
Pro forma net tangible book value per share after the offering.................. 2.61
-----
Pro forma dilution per share to new investors .................................. 12.99
==== =====
This table is based on the number of outstanding shares as of May 16,
2007, and does not include the following:
- 3,526,295 shares of common stock issuable upon exercise of outstanding
stock options as of May 16, 2007 at a weighted average exercise price of
$9.59 per share; and
- 2,854,535 shares of common stock issuable upon exercise of outstanding
warrants as of May 16, 2007 at a weighted average exercise price of
$13.50 per share.
S-5
UNDERWRITING
Needham & Company, LLC is acting as sole bookrunning manager of the
offering. Subject to the terms and conditions stated in the underwriting
agreement, Needham & Company, LLC has agreed to purchase, and we have agreed to
sell to that underwriter, the number of shares set forth opposite its name.
NUMBER OF
UNDERWRITER SHARES
----------- ---------
Needham & Company, LLC
Total
The underwriting agreement provides that the obligations of the
underwriter to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The underwriter is
obligated to purchase all the shares if it purchases any of the shares.
The underwriter proposes to offer some of the shares directly to the
public at the public offering price set forth on the cover page of this
prospectus supplement. If all of the shares are not sold at the initial offering
price, the underwriter may change the public offering price and the other
selling terms. The underwriter may compensate certain investment banks not
involved in this offering for corporate finance advice previously provided to
the company. Such funds will come from commissions paid by the company to the
underwriter as set forth in the table below.
We and our executive officers and directors and certain shareholders have
agreed that, for a period of 90 days from the date of the underwriting
agreement, we and they will not, without the prior written consent of Needham &
Company, LLC, dispose of or hedge any shares of our common stock or any
securities convertible into or exchangeable for our common stock, subject to
certain exceptions. The exceptions permit our executive officers and directors
to transfer shares of common stock as bona fide gifts and as approved by Needham
& Company, LLC. Needham & Company, LLC in its sole discretion may release any of
the securities subject to these lock-up agreements at any time without notice.
The common stock is quoted on the Nasdaq Global Market under the symbol
"PANL."
The following table shows the per share and total underwriting discounts
and commissions we will pay to the underwriter:
PER SHARE TOTAL
Paid by Universal Display $
TOTAL $
In connection with the offering, the underwriter may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, syndicate covering transactions and stabilizing transactions. Short sales
involve syndicate sales of common stock in excess of the number of shares to be
purchased by the underwriter in the offering, which creates a syndicate short
position. The underwriter must close out any short sale by purchasing shares in
the open market. Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been completed in order to
cover syndicate short positions. Stabilizing transactions consist of bids for or
purchases of shares in the open market while the offering is in progress.
S-6
The underwriter also may impose a penalty bid. Penalty bids permit the
underwriter to reclaim a selling concession from a syndicate member when the
underwriter repurchases shares originally sold by that syndicate member in order
to cover syndicate short positions or make stabilizing purchases.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these transactions. The underwriter may
conduct these transactions on the Nasdaq Global Market or in the
over-the-counter market, or otherwise. If the underwriter commences any of these
transactions, it may discontinue them at any time.
In addition, in connection with this offering, the underwriter may engage
in passive market making transactions in the common stock on the Nasdaq Global
Market, prior to the pricing and completion of the offering. Passive market
making consists of displaying bids on the Nasdaq Global Market no higher than
the bid prices of independent market makers and making purchases at prices no
higher than those independent bids and effected in response to order flow. Net
purchases by a passive market maker on each day are limited to a specified
percentage of the passive market maker's average daily trading volume in the
common stock during a specified period and must be discontinued when that limit
is reached. Passive market making may cause the price of the common stock to be
higher than the price that otherwise would exist in the open market in the
absence of those transactions. If the underwriter commences passive market
making transactions, it may discontinue them at any time.
We estimate that the total expenses of the offering, excluding the
underwriting discount and commissions, will be approximately $150,000.
The underwriter has performed investment banking and advisory services for
us from time to time for which it has received customary fees and expenses. The
underwriter may, from time to time, engage in transactions with and perform
services for us in the ordinary course of its business.
This prospectus supplement and the accompanying prospectus in electronic
format may be made available on the websites maintained by the underwriter. The
underwriter may sell a number of shares to its online brokerage account holders.
In addition, shares may be sold by the underwriter to securities dealers who
resell shares to online brokerage account holders.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933 and liabilities resulting
from any breach by us of the underwriting agreement, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon by our counsel, Morgan, Lewis & Bockius LLP, Philadelphia,
PA. Choate, Hall & Stewart LLP, Boston, MA is acting as counsel for the
underwriters in connection with various legal matters relating to the shares of
common stock offered hereby.
EXPERTS
The consolidated financial statements of Universal Display Corporation and
subsidiary as of December 31, 2006 and 2005, and for each of the years in the
three-year period ended December 31, 2006, and management's assessment of the
effectiveness of internal control over financial reporting as of December 31,
2006, and the effectiveness of internal control over financial reporting as of
December 31, 2006 have been incorporated by reference herein in reliance upon
the reports of KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. The audit report dated March 14, 2007 refers to the
adoption of Statement of Financial Accounting Standards No. 123R, Share-Based
Payment, effective January 1, 2006.
S-7
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. Therefore, we file reports, proxy statements
and other information with the SEC. You can read and copy all of our filings at
the SEC's public reference facilities in Washington, D.C., New York, New York
and Chicago, Illinois. You may obtain information on the operation of the SEC's
public reference facilities by calling the SEC at 1-800-SEC-0300. You can also
read and copy all of our filings at the offices of the NASDAQ Global Market,
1735 K Street N.W., Washington, D.C. 20006. You may also obtain our SEC filings
from the SEC's website on the Internet that is located at http://www.sec.gov.
We "incorporate by reference" the information we file with the SEC, which
means that we can disclose important information to you by referring you to
another document we file with the SEC. The information incorporated by reference
is an important part of this prospectus supplement and the accompanying
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the
date of this prospectus supplement but before the end of any offering made under
this prospectus supplement and the accompanying prospectus:
- our annual report on Form 10-K for the fiscal year ended December 31,
2006;
- our quarterly report on Form 10-Q for the quarter ended March 31,
2007;
- our current report on Form 8-K filed with the SEC on April 24, 2007;
and
- the description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on August 6, 1996.
You should read the information relating to us in this prospectus
supplement and the accompanying prospectus together with the information in the
documents incorporated by reference.
Any statement contained in a document incorporated by reference herein,
unless otherwise indicated therein, speaks as of the date of the document.
Statements contained in this prospectus supplement and the accompanying
prospectus may modify or replace statements contained in the documents
incorporated by reference. In addition, some of the statements contained in one
or more of the documents incorporated by reference may be modified or replaced
by statements contained in a document incorporated by reference that is filed
thereafter.
You may request a copy of any or all of these filings, at no cost, by
writing or telephoning us at Universal Display Corporation, 375 Phillips
Boulevard, Ewing, New Jersey 08618, Attention: Investor Relations, Telephone:
(609) 671-0980.
S-8
PROSPECTUS
$75,325,524
[Universal Display Corporation Logo]
Common Stock
Preferred Stock
Warrants
Depositary Shares
We may offer up to $75,325,524 of our common stock, preferred stock, warrants to
purchase our common stock and preferred stock and depositary shares. Our common
stock is quoted on the Nasdaq National Market under the symbol "PANL", and is
also traded on the Philadelphia Stock Exchange under the symbol "PNL."
We may offer these securities at prices and on terms to be set forth in one or
more supplements to this prospectus. These securities may be offered directly,
through agents on our behalf or through underwriters or dealers.
An investment in our securities involves significant risks. You should carefully
consider the risk factors beginning on page 4 of this prospectus before
investing in our securities.
The securities described in this prospectus have not been approved by the
Securities and Exchange Commission or any state securities commission, nor have
they determined if this prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
-------------------------------------
The date of this prospectus is February 5, 2004
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain some
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995 and information relating to us that is based on the beliefs
of our management, as well as assumptions made by, and the information currently
available to, our management. Among other things, these statements include, but
are not limited to, the statements in this prospectus and the documents
incorporated by reference regarding:
o the outcomes of our ongoing and future Organic Light Emitting Device
("OLED") technology research and development activities;
o our ability to access future OLED technology developments of our academic
and commercial research partners;
o our ability to form and continue strategic relationships with
manufacturers of OLEDs and OLED-containing products;
o the protections afforded to us by the patents that we own or license;
o the anticipated success of our OLED technologies, materials and
manufacturing equipment commercialization strategies;
o the potential commercial applications of our OLED technologies and
materials, and of OLED-containing products in general;
o future demand for our OLED technologies and materials;
o the comparative advantages and disadvantages of our OLED technologies and
materials versus competing technologies and materials currently on the
market;
o the nature and potential advantages of any competing technologies that
may be developed in the future;
o the payments that we expect to receive in the future under our existing
contracts;
o our future capital requirements;
o the amount and type of securities that we will issue in the future to our
business partners and others; and
o our future OLED technology licensing and OLED material sales revenues and
results of operations.
In addition, when used in these documents, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions involving
potential future developments are intended to identify forward-looking
statements. These statements reflect our current views with respect to future
events and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in these forward-looking
statements, including those risks discussed in this prospectus and the documents
incorporated by reference.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus or the documents
incorporated by reference, as the case may be. Except for special circumstances
in which a duty to update arises when prior disclosure becomes materially
misleading in light of subsequent events, we do not intend to update any of
these forward-looking statements to reflect events or circumstances after the
date of this prospectus or to reflect the occurrence of unanticipated events.
2
ABOUT THIS PROSPECTUS
This prospectus describes certain securities of Universal Display
Corporation, a Pennsylvania corporation. We sometimes refer to Universal Display
Corporation, together with its wholly owned subsidiary, UDC, Inc., using the
words "we," "our" or "us," or as the "Company." This prospectus is part of a
registration statement that we filed with the SEC utilizing a "shelf"
registration process, which allows us to offer and sell any combination of the
securities described in this prospectus in one or more offerings. Using this
prospectus, we may offer up to $75,325,524 worth of securities.
This prospectus contains a general description of the securities we may
offer. We will describe the specific terms of these securities, as necessary, in
supplements that we attach to this prospectus for each offering. Each supplement
will also contain specific information about the terms of the offering it
describes. The supplements may also add, update or change information contained
in this prospectus. In addition, as we describe below in the section entitled
"Where You Can Find More Information," we have filed and plan to continue to
file other documents with the SEC that contain information about us. Before you
decide whether to invest in our securities, you should read this prospectus, the
supplement that further describes the offering of those securities and the
information we otherwise file with the SEC.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information we file at the SEC's public
reference rooms located at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov."
This prospectus is part of our "shelf" registration statement. We have filed
the registration statement with the SEC under the Securities Act of 1933 to
register the securities that we may offer by this prospectus and any
supplements. Not all of the information in the registration statement appears in
this prospectus, or will appear in any supplement. For more detail, you can read
the entire registration statement, and all of the exhibits filed with it, at the
SEC's offices or website as described above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about us, our
business and our finances.
The documents that we are incorporating by reference are:
o Our Annual Report on Form 10-K for the year ended December 31, 2002;
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 2003;
o Our Current Report on Form 8-K filed with the SEC on August 25, 2003; and
o The description of our common stock that is contained in our Registration
Statement on Form 8-A filed with the SEC on August 6, 1996.
Any documents which we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus but before the end of any
offering of securities made under this prospectus will also be considered to be
incorporated by reference.
3
If you request, either orally or in writing, we will provide you with a copy
of any or all documents which are incorporated by reference. We will provide
such documents to you free of charge, but will not include any exhibits, unless
those exhibits are incorporated by reference into the document. You should
address written requests for documents to Sidney D. Rosenblatt, Executive Vice
President, Chief Financial Officer, Treasurer and Secretary, Universal Display
Corporation, 375 Phillips Boulevard, Ewing, New Jersey 08618.
RISK FACTORS
An investment in our securities involves a high degree of risk. In addition
to the other information contained in this prospectus, you should carefully
consider the following risk factors before making an investment decision
concerning our securities. You should not purchase our securities if you cannot
afford the loss of your entire investment.
Risks Relating to Our Business
We do not expect to be profitable in the foreseeable future, and may never be
profitable.
Since inception, we have generated limited revenues while incurring
significant losses. We expect to incur losses for the foreseeable future and
until such time, if ever, as we are able to achieve sufficient levels of revenue
from the commercial exploitation of our OLED technologies and materials to
support our operations. You should note, however, that:
o OLED technologies may never become commercially viable;
o markets for flat panel displays utilizing OLED technologies may be
limited; and
o we may never generate sufficient revenues from the commercial exploitation
of our OLED technologies and materials to become profitable.
Even if we find commercially viable applications for our OLED technologies
and materials, we may never recover our research and development costs.
If we do not receive additional financing in the future, we might not be able to
continue the research, development and commercialization of our OLED
technologies and materials.
Our capital requirements have been and will continue to be significant.
Substantial additional funds will be required in the future for research,
development and commercialization of our OLED technologies and materials, to
obtain and maintain patents and other intellectual property rights in these
technologies and materials, and for working capital and other purposes, the
timing and amount of which are difficult to ascertain. Our cash on hand may not
be sufficient to meet all of our future obligations. When we need additional
funds, such funds may not be available when needed, on commercially reasonable
terms or at all. If we cannot obtain more money when needed, our business might
fail. Additionally, if we attempt to raise money in an offering of shares of our
common stock, preferred stock, warrants or depositary shares, or if we engage in
acquisitions involving the issuance of additional shares of our common stock,
preferred stock, warrants or depositary shares, the issuance of these shares
will dilute our then-existing shareholders.
If our OLED technologies and materials are not feasible for broad-based
product applications, we may never generate revenues sufficient to support
ongoing operations.
Before OLED manufacturers will agree to utilize our OLED technologies and
materials for wide-scale commercial production, it is likely that we must first
demonstrate to the satisfaction of these manufacturers that our OLED
technologies and materials are feasible for broad-based product applications.
This, in turn, will require substantial advances in our research and development
efforts in a number of areas, including:
o device reliability;
o the development of long-lived OLED materials for full color OLED
displays; and
o issues related to scalability and cost effective fabrication technologies
for product applications.
4
Our efforts may never demonstrate the feasibility of our OLED technologies
and materials for broad-based product applications, particularly full color,
large area, high resolution and high information content flat panel displays
such as those used in televisions.
Our research and development efforts remain subject to all of the risks
associated with the development of new products based on emerging and innovative
technologies, including, without limitation, unanticipated technical or other
problems and the possible insufficiency of funds for completing development of
these products. Technical problems may result in delays and cause us to incur
additional expenses that would increase our losses. If we cannot complete
research and development of our OLED technologies and materials successfully, or
if we experience delays in completing research and development of our OLED
technologies and materials for use in potential applications, particularly after
the occurrence of significant expenditures, our business may fail.
Even if our OLED technologies are technically feasible, they may not be adopted
by manufacturers of OLEDs and OLED-containing products.
The potential size, timing and viability of market opportunities targeted by
us are uncertain at this time. Market acceptance of our OLED technologies will
depend, in part, upon these technologies providing benefits comparable to CRT
and LCD technologies (the current standard display technologies) at an
appropriate cost, and the adoption of these technologies by consumers, neither
of which have been achieved. Also, there may be a number of additional
technologies that OLED manufacturers need to utilize in order to bring OLED-
containing products to the market. Many potential licensees of our OLED
technologies manufacture flat panel displays utilizing competing technologies,
and may, therefore, be reluctant to redesign their products or manufacturing
processes to incorporate our OLED technologies. Moreover, even if our OLED
technologies are a viable alternative to competing technologies, if additional
technologies are required to bring OLED-containing products to the market and
potential licensees are unable to obtain access to these technologies, they may
not utilize our OLED technologies.
The flat panel display industry has historically experienced significant
downturns, which may adversely affect the demand for and pricing of our OLED
technologies and materials.
The flat panel display industry has experienced significant, periodic
downturns, often in connection with, or in anticipation of, declines in general
economic conditions. These downturns have been characterized by lower product
demand, production overcapacity and erosion of average selling prices.
Industry-wide fluctuations and downturns could harm our business.
If our research partners fail to make advances in their research, or if they
terminate their relationships with us, we might not succeed in commercializing
our OLED technologies and materials.
Research and development of commercially viable applications for our OLED
technologies and materials depend substantially on the success of the sponsored
research conducted by our research partners. We cannot be certain that our
research partners will make additional advances in the research and development
of these technologies and materials. Moreover, although we fund OLED technology
research, the scope of and technical aspects of this research and the resources
and efforts directed to this research are in large part subject to the control
of our research partners.
Our most significant research and development relationships are with
Princeton University and the University of Southern California (USC). Our
Research Agreement with Princeton University expires in July 2007 and both this
agreement and our Amended License Agreement with Princeton University and USC
(the agreement under which we license our key OLED technology patents) can be
terminated for various reasons. For example, the Research Agreement provides
that if Dr. Stephen Forrest, the principal investigator for our research program
with Princeton University, is unavailable to continue to serve in this capacity,
because he is no longer associated with Princeton University or for any other
reason, and a successor acceptable to both us and Princeton University is not
available, Princeton University has the right to terminate the Research
Agreement without impacting the Amended License Agreement. The termination of
the Research Agreement
5
or the Amended License Agreement would materially and adversely affect our
ability to research, develop and commercialize our OLED technologies and
materials.
If we cannot form or maintain strategic relationships with companies that
manufacture OLEDs and OLED-containing products, our commercialization strategy
will fail.
Our strategic plan depends upon the development and maintenance of strategic
licensing and material supply relationships with high-volume manufacturers of
OLEDs and OLED-containing products. We have entered into only two such
relationships, one with Dupont Displays, Inc. and one with Tohoku Pioneer
Corporation. All of our other relationships with manufacturers of OLEDs and
OLED-containing products are currently limited to research, development and
pre-commercial evaluation and qualification of our OLED technologies and
materials. Our ability to enter into additional strategic licensing and supply
relationships, or to maintain our existing relationships, may require us to make
financial or other commitments. We might not be able, for financial or other
reasons, to enter into or continue these relationships on commercially
acceptable terms, or at all. Failure to do so would have a material adverse
effect on us.
Our prospects also will be significantly affected by our ability to sell our
proprietary OLED materials to manufacturers of OLEDs. Our current Supply
Agreement with PPG Industries, Inc. provides us with a source for these OLED
materials and with exclusive rights to sell them to OLED manufacturers, but this
agreement expires at the end of 2007. Our inability to continue obtaining these
OLED materials from PPG Industries, Inc. or another source would have a material
adverse effect on our sales of OLED materials and our ability to perform and
support our customers' performance of OLED technology research.
If we cannot obtain appropriate patent and other intellectual property rights
protection for our OLED technologies and materials, our business will suffer.
The value of our OLED technologies and materials is dependent on our ability
to secure and maintain appropriate patent and other intellectual property rights
protection. Although we own or license many patents respecting our OLED
technologies and materials that have already issued, there can be no assurance
that additional patents applied for will be obtained, or that any of these
patents, once issued, will afford commercially significant protection for our
OLED technologies and materials, or will be found valid if challenged. Moreover,
we have not obtained patent protection for some of our OLED technologies and
materials in all foreign countries in which OLEDs might be manufactured or sold.
In any event, the patent laws of other countries may differ from those of the
United States as to the patentability of our OLED technologies and materials and
the degree of protection afforded.
If our OLED technologies or materials are found to infringe the rights of
others, we may not be able to commercially license or sell them.
Other companies and institutions may independently develop OLED technologies
and materials that are equivalent or superior to ours, and may obtain patent or
similar rights with respect to these technologies. There are a number of other
companies and organizations that have been issued patents and are filing
additional patent applications relating to OLED technologies and materials,
including Eastman Kodak Company, Fuji Photo Film Co., Canon, Inc., Pioneer
Corporation, Semiconductor Energy Laboratories Co. and Mitsubishi Chemical
Corporation, all of whom have patent rights related to OLED technologies and
materials. There can be no assurance that the utilization of our OLED
technologies or the sale of our OLED materials, including technologies and
materials developed by or licensed from Princeton University, the University of
Southern California, PPG Industries, Inc. or Motorola, Inc., will not infringe
on the patent rights of others. In this event, we or our partners may be
required to obtain licenses, pay damages, modify our products or methods of
operation, or be prohibited from making, using, selling or offering to sell some
or all OLEDs, OLED materials and OLED-containing products. We also might not
have the financial or other resources necessary to enforce or defend a patent
infringement action, and the licensors of our licensed patents might not enforce
or defend such an action in a timely manner. If our OLED materials or products
incorporating our OLED technologies are found to infringe on the patent or other
intellectual property rights of others, it could have a material adverse effect
on us by limiting our ability to sell our OLED materials or license our OLED
technologies to manufacturers of OLEDs and OLED- containing products.
6
The U.S. Government has rights to our OLED technologies that might prevent us
from realizing the benefits of these technologies.
The U.S. Government, through various government agencies, has provided and
continues to provide funding to us, Princeton University and the University of
Southern California for research activities related to certain aspects of our
OLED technologies. Because we have been provided with this funding, the
government has rights to these OLED technologies that could restrict our ability
to market them to the government for military and other applications, or to
third parties for commercial applications. Moreover, if the government
determines that we have not taken effective steps to achieve practical
application of these OLED technologies in any field of use in a reasonable time,
the government could require us to grant licenses to other parties in this field
of use. Any of these occurrences would limit our ability to obtain the full
benefits of our OLED technologies.
There are numerous potential alternatives to OLEDs for flat panel displays,
which may limit our ability to commercialize our OLED technologies and
materials.
The flat panel display market is currently, and will likely continue to be
for some time, dominated by products utilizing LCD technology. Numerous
companies are making substantial investments in, and conducting research to
improve characteristics of, LCD technology. Several other flat panel display
technologies have been, or are being, developed, including technologies for the
production of field emission, inorganic electroluminescence, gas plasma and
vacuum fluorescent displays. Advances in LCD technology or any of these
developing technologies may overcome their current limitations and permit them
to become the leading technologies for flat panel displays, either of which
could limit the potential market for flat panel displays utilizing our OLED
technologies and materials. This, in turn, would cause manufacturers of OLEDs
and OLED-containing products to avoid entering into commercial relationships
with us or to terminate their existing relationships with us.
Because many of our competitors have better name-recognition and greater
financial, technical, marketing and research capabilities, we may never be able
to compete successfully in the flat panel display industry.
The flat panel display industry is characterized by intense competition.
Substantially all of our competitors have better name recognition and greater
financial, technical, marketing, personnel and research capabilities than us.
Our competitors may succeed in developing technologies and applications that are
more cost-effective or have fewer display limitations than our OLED
technologies. We may never be able to compete successfully or develop commercial
applications for our OLED technologies.
If we cannot keep our key employees or hire other talented persons as we grow,
our business might not succeed.
Our performance is substantially dependent on the continued services of
senior management and other key personnel, and our ability to offer competitive
salaries and benefits to our employees. We do not have employment agreements
with any of our management or key personnel. Additionally, competition for
highly skilled technical, managerial and other personnel is intense. We might
not be able to attract, hire, train, retain and motivate the highly skilled
managers and employees we need to be successful. If we fail to attract and
retain the necessary technical and managerial personnel, our business will
suffer and might fail.
We can issue shares of preferred stock that can adversely affect your rights as
a shareholder of our common stock.
Our Articles of Incorporation authorize us to issue up to 5,000,000 shares of
preferred stock with designations, rights and preferences determined from
time-to-time by our Board of Directors. Accordingly, the Board of Directors is
empowered, without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights superior to those of
shareholders of our common stock. For example, an issuance of shares of
preferred stock could:
o adversely affect the voting power of the shareholders of our common
stock;
7
o make it more difficult for a third party to gain control of us;
o discourage bids for our common stock at a premium; or
o otherwise adversely affect the market price of our common stock.
Our Board of Directors has designated and issued two series of preferred
stock that are currently outstanding: (a) 200,000 shares of Series A
nonconvertible preferred stock, all of which are held by an entity controlled by
members of the family of Sherwin Seligsohn, our Chairman of the Board and Chief
Executive Officer, and (b) 300,000 shares of Series B convertible preferred
stock that is held by Motorola. The Series B convertible preferred stock is
convertible into shares of common stock in accordance with our Articles of
Incorporation. As of January 15, 2004, the Series B convertible preferred stock
is convertible into 343,916 shares of our common stock. We may issue additional
shares of authorized preferred stock at any time in the future.
The market price of our common stock might be highly volatile.
The market price of our common stock might be highly volatile, as has been
the case with the securities of many other companies, particularly other small
and emerging-growth companies. The following table sets forth the high and low
bid quotation of our common stock as reported by the Nasdaq National Market for
the periods indicated.
High Close Low Close
---------- ---------
2001
First Quarter ........................................ $14.13 $ 7.03
Second Quarter ....................................... 20.00 7.88
Third Quarter ........................................ 16.32 6.61
Fourth Quarter ....................................... 9.88 6.55
2002
First Quarter ........................................ $11.78 $ 8.17
Second Quarter ....................................... 11.80 8.30
Third Quarter ........................................ 8.30 4.95
Fourth Quarter ....................................... 11.60 5.76
2003
First Quarter ........................................ $ 8.70 $ 6.33
Second Quarter ....................................... 10.80 8.22
Third Quarter ........................................ 10.74 8.17
Fourth Quarter ....................................... 15.45 10.30
Factors such as the following may have a significant impact on the market
price of our common stock in the future:
o our expenses and operating results;
o announcements by us or our competitors of technological developments, new
product applications or license arrangements; and
o other factors affecting the flat panel display and related industries in
general.
The issuance of other publicly traded shares of our common stock could drive
down the price of our stock.
The price of our common stock can be expected to decrease if:
o other shares of our common stock that are currently subject to restriction
on sale become freely salable, whether through an effective registration
statement or based on Rule 144 under the Securities Act of 1933; or
8
o we issue additional shares of common stock that might be or become freely
salable, including shares that would be issued upon conversion of our
Series B convertible preferred stock.
If the price of our common stock goes down, we may have to issue more shares
than are presently anticipated to be issued under the terms of our Development
and License Agreement with PPG Industries, Inc.
Under the Development and License Agreement between us and PPG Industries, we
are required to issue to PPG Industries shares of our common stock for services
rendered by it. If, at the time of issuance, the price of our common stock has
declined materially since the date of the Development and License Agreement, we
may be required to issue to PPG Industries more shares of our common stock than
were initially anticipated. This increase in the number of shares available for
public sale could cause people to sell our common stock, including in short
sales, which could drive down the price of our common stock, thus reducing its
value and perhaps hindering our ability to raise additional funds in the future.
In addition, such an increase in the number of outstanding shares of our common
stock would further dilute existing holders of this stock.
Our executive officers and directors own a large percentage of our common stock
and could exert significant influence over matters requiring shareholder
approval, including takeover attempts.
Our executive officers and directors, and their respective affiliates,
beneficially own as of January 15, 2004, approximately 11.0% of the outstanding
shares of our common stock. Moreover, Pine Ridge Financial Inc. and First
Investors Holding Co., Inc., as successor to Strong River Investments, Inc.,
assigned to our management their rights to vote the shares of our common stock
issued to them upon conversion of warrants issued to them in an August 2001
private placement transaction, of which warrants to purchase 744,452 shares
remain outstanding as of January 15, 2004. Accordingly, these shareholders and
members of management may, as a practical matter, be able to exert significant
influence over matters requiring approval by our shareholders, including the
election of directors and the approval of mergers or other business
combinations. This concentration could also have the effect of delaying or
preventing a change in control of us.
Our past use of Arthur Andersen LLP as our independent auditor limits the
ability of shareholders to seek potential recoveries from them related to their
work.
On July 30, 2002, we announced that we had appointed KPMG LLP to replace
Arthur Andersen LLP (Arthur Andersen) as our independent public auditor. Our
consolidated financial statements as of and for each of the years ended December
31, 1999 through 2001 were audited by Arthur Andersen. After reasonable efforts,
we were unable to obtain Arthur Andersen's consent to the incorporation by
reference into the registration statement of which this prospectus supplement is
a part of its report with respect to our financial statements. Under these
circumstances, Rule 437a under the Securities Act of 1933 allowed us to file the
registration statement without a written consent from Arthur Andersen.
The absence of this consent may limit recovery by investors in an offering
made using this prospectus on certain claims. In particular, and without
limitation, investors will not be able to assert claims against Arthur Andersen
under Section 11 of the Securities Act of 1933. In addition, the ability of
Arthur Andersen to satisfy any claims (including claims arising from Arthur
Andersen's provision of auditing and other services to us) will be limited as a
practical matter due to events regarding Arthur Andersen. This means that if an
investor in an offering made using this prospectus were to assert a claim under
Section 11 of the Securities Act relating to its investment, that investor would
not be able to seek damages from Arthur Andersen. Thus, as compared to a
hypothetical investor in an offering by another company whose inclusion of
financial statements in its annual report was consented to by that company's
independent auditor, an investor in an offering made using this prospectus would
have fewer alternatives in seeking damages relating to its investment.
9
OUR COMPANY
Universal Display Corporation is engaged in the research, development and
commercialization of organic light emitting device, or OLED, technologies for
use in flat panel displays, lasers and light generating devices. We expect the
initial market for our technologies to be in the electronic flat panel display
industry. This industry includes such products as:
o cellular phone displays;
o portable personal digital assistants and Internet access-type devices;
o laptop computers; and
o television and computer monitors.
Our executive offices are located at 375 Phillips Boulevard, Ewing, New
Jersey 08618. Our phone number is (609) 671-0980. Our web site can be found at
www.universaldisplay.com.
SECURITIES OFFERED BY THIS PROSPECTUS
Using this prospectus, we may offer from time to time, in one or more series,
together or separately, at prices and on terms to be determined at the time of
offering:
o shares of common stock, $0.01 par value;
o shares of preferred stock, $0.01 par value;
o warrants to purchase shares of common stock or preferred stock; and
o depositary shares.
The shares of preferred stock may, at our option, be issued in the form of
depositary shares evidenced by depositary receipts, and may be convertible into
or exchangeable for shares of our common stock or other securities issued by us.
USE OF PROCEEDS
Unless otherwise provided in the applicable prospectus supplement
accompanying this prospectus, the net proceeds, if any, from the sale of the
securities offered hereby will be used for general corporate purposes, including
the acquisition or development of properties, assets, entities or technologies,
and the repayment of indebtedness. As of the date of this prospectus, we have
not identified as probable any specific material proposed uses of these
proceeds. If, as of the date of any prospectus supplement, we have identified
any such uses, we will describe them in the prospectus supplement. The amount of
securities offered from time to time pursuant to this prospectus and any
prospectus supplement, and the precise amount of the net proceeds we will
receive from the sale of such securities, as well as the timing of receipt of
those proceeds, will depend upon our funding requirements. If we elect at the
time of an issuance of securities to make different or more specific uses of the
proceeds than as set forth herein, we will describe those uses in the applicable
prospectus supplement.
10
CERTAIN RATIOS
The ratios of our earnings to combined fixed charges and preferred stock
dividends for the nine months ended September 30, 2003 and the years ended
December 31, 2002, 2001, 2000, 1999 and 1998 are not meaningful because we did
not have earnings during any of those periods. The dollar amount of the
deficiency in each of such periods was $11,619,623, $31,019,201, $16,356,100,
$9,529,046, $5,125,006 and $2,793,842, respectively.
For the purpose of computing the amount of our combined fixed charges and
preferred stock dividends, fixed charges consist of interest costs, whether
expensed or capitalized, and amortization of debt discounts. Preferred stock
dividends consist of deemed dividends relating to beneficial conversion features
of certain of the outstanding series of preferred stock.
DESCRIPTION OF PREFERRED STOCK
General
The rights, preferences, privileges and restrictions of the shares of
preferred stock in respect of which this prospectus is delivered, if any, shall
be described in the prospectus supplement relating to those shares of preferred
stock. Among the terms of the preferred stock which may be specified in the
related prospectus supplement are the following:
o the annual dividend rate, if any, or the means by which the dividend rate
may be calculated, including the possibility that the dividend rate may
bear an inverse relationship to some index or standard;
o the date or dates from which dividends shall accrue, the date or dates on
which dividends shall be paid and whether dividends shall be cumulative;
o the price at which and the terms and conditions on which the series of
preferred stock described in the prospectus supplement may be redeemed,
including the period of time during which the shares may be redeemed, any
premium to be paid over and above the par value of the preferred stock, and
whether and to what extent accumulated dividends on the preferred stock
will be paid upon the redemption of the shares;
o the liquidation preference, if any, over and above the par value of the
shares of preferred stock and whether and to what extent the holders of
those shares shall be entitled to accumulated dividends in the event of the
voluntary or involuntary liquidation, dissolution or winding-up of our
affairs;
o whether the preferred stock shall be subject to the operation of a
retirement or sinking fund and, if so, a description of the operation of
the retirement or sinking fund;
o the terms and conditions, if any, on which the preferred stock may be
convertible into, or exchangeable for, shares of any other class or classes
of our equity interests, including the price or rate of conversion or
exchange and the method for effecting the conversion or exchange;
o a description of the voting rights, if any, of the preferred stock; and
o other preferences, rights, qualifications or restrictions or material terms
of the preferred stock.
The description of the foregoing provisions of the preferred stock as set
forth in the applicable prospectus supplement is only a summary, is not complete
and is subject to, and is qualified in its entirety by, reference to the
definitive Articles of Amendment to our Articles of Incorporation relating to
that series of preferred stock. In connection with any offering of preferred
stock, the Articles of Amendment will be filed with the SEC as an exhibit to, or
incorporated by reference in, the registration statement of which this
prospectus is a part.
11
Rank
Unless otherwise specified in the applicable prospectus supplement, each
series of preferred stock will, with respect to dividend rights and rights upon
the liquidation, dissolution or winding up of our company or affairs, rank:
o senior to all classes or series of common stock, and to all equity
securities ranking junior to that series of preferred stock;
o on a parity with all equity securities issued by us, the terms of which
specifically provide that those equity securities rank on a parity with
that series of preferred stock; and
o junior to all equity securities issued by us, the terms of which
specifically provide that those equity securities rank senior to that
series of preferred stock.
For these purposes, the term "equity securities" does not include convertible
debt securities.
Dividends
Holders of the preferred stock of each series will be entitled to receive,
when, as and if declared by our Board of Directors, out of our assets legally
available for payment, cash dividends, or dividends in kind or in other property
if expressly permitted and described in the applicable prospectus supplement, at
the rates and on the dates as will be set forth in the applicable prospectus
supplement. Each dividend shall be payable to holders of record as they appear
in our shareholder records at the close of business on the record date(s) as
shall be fixed by the Board of Directors.
Dividends on any series of preferred stock may be cumulative or non-
cumulative, as provided in the applicable prospectus supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If the Board of Directors fails to declare a
dividend payable on a dividend payment date on any series of preferred stock for
which dividends are non-cumulative, then the holders of that series of preferred
stock will have no right to receive a dividend in respect of the dividend period
ending on that dividend payment date, and we will have no obligation to pay the
dividend accrued for that period, whether or not dividends on the series are
declared payable on any future dividend payment date.
Unless otherwise specified in the applicable prospectus supplement, if any
shares of preferred stock of any series are outstanding, no full dividends shall
be declared, paid or set apart for payment on any of our capital shares of any
other series ranking, as to dividends, on a parity with or junior to the
preferred stock of that series for any period unless (i) if the series of
preferred stock has a cumulative dividend, full cumulative dividends on the
preferred stock of that series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
payment for all past dividend periods and the then-current dividend period; or
(ii) if the series of preferred stock does not have a cumulative dividend, full
dividends on the preferred stock of that series for the then-current dividend
period have been or contemporaneously are declared and paid, or declared and a
sum sufficient for the payment thereof is set apart for payment. When dividends
are not paid in full (or a sum sufficient for such full payment is not so set
apart) upon preferred stock of any series, as well as on the shares of any other
series of preferred stock ranking on a parity as to dividends with the preferred
stock of that series, all dividends declared upon preferred stock of that series
and any other series of preferred stock ranking on a parity therewith shall be
declared pro rata so that the amount of dividends declared per share of
preferred stock of that series and the other series of preferred stock shall in
all cases bear to each other the same ratio that accrued dividends per share on
the preferred stock of that series (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such shares of
preferred stock do not have a cumulative dividend) and the other series of
preferred stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
preferred stock of any series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if the
series of preferred stock has a cumulative dividend, full cumulative dividends
on the shares of preferred stock of that series have been or contemporaneously
are declared and paid, or declared and a sum sufficient for the payment thereof
set apart
12
for payment, for all past dividend periods and the then-current dividend period;
and (ii) if the series of preferred stock does not have a cumulative dividend,
full dividends on the shares of preferred stock of that series for the
then-current dividend period have been or contemporaneously are declared and
paid, or declared and a sum sufficient for the payment thereof is set apart for
payment, no dividends (other than in shares of common stock or other capital
stock ranking junior to the shares of preferred stock of such series as to
dividends and upon liquidation) shall be declared, paid or set aside for payment
or other distribution upon the shares of common stock, or any other of our
capital shares ranking junior to or on a parity with the preferred stock of that
series as to dividends or upon liquidation, nor shall any shares of common
stock, or any other of our capital shares ranking junior to or on a parity with
the preferred stock of that series as to dividends or upon liquidation, be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to, or made available for, a sinking fund for the redemption of any such
shares) by us, except by conversion into or exchange for other of our capital
shares ranking junior to the shares of preferred stock of that series as to
dividends and upon liquidation.
Redemption
If so provided in the applicable prospectus supplement, the preferred stock
will be subject to mandatory redemption or redemption at our option, in whole or
in part, in each case upon the terms, at the times and at the redemption prices
set forth in the applicable prospectus supplement.
The prospectus supplement relating to a series of shares of preferred stock
that is subject to mandatory redemption will specify the number of those shares
of preferred stock that shall be redeemed by us in each year commencing after a
date to be specified, at a redemption price per share to be specified, together
with an amount equal to all accrued and unpaid dividends thereon (which shall
not, if such shares of preferred stock do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in cash
or other property, as specified in the applicable prospectus supplement. If the
redemption price for shares of preferred stock of any series is payable only
from the net proceeds of the issuance of our capital shares, the terms of those
shares of preferred stock may provide that, if no such capital shares shall have
been issued or to the extent the net proceeds from any issuance are insufficient
to pay in full the aggregate redemption price then due, the shares of preferred
stock shall automatically and mandatorily be converted into the applicable
capital shares pursuant to conversion provisions specified in the applicable
prospectus supplement.
Notwithstanding the foregoing, unless (i) if the series of preferred stock
has a cumulative dividend, full cumulative dividends on all shares of preferred
stock of any series shall have been or contemporaneously are declared and paid,
or declared and a sum sufficient for the payment thereof is set apart for
payment, for all past dividend periods and the then-current dividend period; and
(ii) if the series of preferred stock does not have a cumulative dividend, full
dividends of the shares of preferred stock of any series for the then-current
dividend period have been or contemporaneously are declared and paid, or
declared and a sum sufficient for the payment thereof is set apart for payment,
no shares of preferred stock of any series shall be redeemed unless all
outstanding shares of preferred stock of that series are simultaneously
redeemed. The foregoing, however, shall not prevent the purchase or acquisition
of shares of preferred stock of such series pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of preferred
stock of such series. In addition, unless (i) if the series of preferred stock
has a cumulative dividend, full cumulative dividends on all outstanding shares
of any series of preferred stock shall have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof is
set apart for payment, for all past dividends periods and the then-current
dividend period; and (ii) if the series of preferred stock does not have a
cumulative dividend, full dividends on the shares of preferred stock of any
series for the then-current dividend period have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof is
set apart for payment, we shall not purchase or otherwise acquire, directly or
indirectly, any shares of preferred stock of that series, except by conversion
into or exchange for other of our capital shares ranking junior to the shares of
preferred stock of such series as to dividends and upon liquidation. The
foregoing, however, shall not prevent the purchase or acquisition of shares of
preferred stock of that series pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding shares of preferred stock of such
series.
13
If fewer than all of the outstanding shares of preferred stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by us
and those shares may be redeemed pro rata from the holders of record of those
shares in proportion to the number of those shares held or for which redemption
is requested by such holder (with adjustments to avoid redemption of fractional
shares), or by lot in a manner determined by us.
Notice of redemption will be mailed at least 30 days, but not more than 60
days, before the redemption date to each holder of record of shares of preferred
stock of any series to be redeemed at the address shown on our share transfer
books. Each notice shall state:
o the redemption date;
o the number and series of shares of preferred stock to be redeemed;
o the place or places where the shares of preferred stock are to be
surrendered for payment of the redemption price;
o that dividends on the shares to be redeemed will cease to accrue on the
redemption date; and
o the date upon which the holder's conversion rights, if any, as to such
shares shall terminate.
If fewer than all of the shares of preferred stock of any series are to be
redeemed, the notice mailed to each holder of shares of that series shall also
specify the number of shares of preferred stock to be redeemed from that holder.
If notice of redemption of any shares of preferred stock has been given and if
the funds necessary for redemption have been set aside by us, from and after the
redemption date dividends will cease to accrue on those shares of preferred
stock, and all rights of the holders of those shares will terminate, except the
right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of
our affairs, then, before any distribution or payment shall be made to the
holders of any shares of our common stock or any other class or series of our
capital shares ranking junior to the shares of preferred stock in the
distribution of assets upon any liquidation, dissolution or winding up of our
company or affairs, the holders of shares of each series of preferred stock
shall be entitled to receive, out of our assets legally available for
distribution to shareholders, liquidating distributions in the amount of the
liquidation preference per share (as set forth in the applicable prospectus
supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such shares of preferred stock do not have a
cumulative dividend). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of shares of preferred
stock will have no right or claim to any of our remaining assets. In the event
that, upon any such voluntary or involuntary liquidation, dissolution or winding
up of our company or affairs, our available assets are insufficient to pay the
amount of the liquidating distributions on all outstanding shares of preferred
stock and the corresponding amounts payable on all shares of other classes or
series of our capital shares ranking on a parity with the shares of preferred
stock in the distribution of assets, then the holders of the shares of preferred
stock and all other such classes or series of capital shares shall share ratably
in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
shares of preferred stock, our remaining assets shall be distributed among the
holders of any other classes or series of capital shares ranking junior to the
shares of preferred stock upon liquidation, dissolution or winding up of our
company or affairs, according to their respective rights and preferences and in
each case according to their respective number of shares. For these purposes,
our consolidation or merger with or into any other corporation, trust or entity,
or the sale, lease or conveyance of all or substantially all of our property or
business, shall not be deemed to constitute a liquidation, dissolution or
winding up of our company or affairs.
14
Voting Rights
Holders of shares of preferred stock will not have any voting rights except
as indicated in the applicable prospectus supplement.
Conversion Rights
The terms and conditions, if any, upon which shares of any series of shares
of preferred stock are convertible into shares of our common stock will be set
forth in the applicable prospectus supplement relating to that series. These
terms will include the number of shares of common stock into which the shares of
preferred stock are convertible, the conversion price or manner of calculation
thereof, the conversion period, provisions as to whether conversion will be at
the option of the holders of the shares of preferred stock or us, the events
requiring an adjustment of the conversion price and provisions affecting the
conversion in the event of the redemption of that series of shares of preferred
stock.
Shareholder Liability
As discussed above under "Description of Preferred Stock - General,"
applicable Pennsylvania law provides that no shareholder, including holders of
shares of preferred stock, shall be personally liable for our acts and
obligations and that our funds and property shall be the only recourse for such
acts or obligations.
Registrar and Transfer Agent
The Registrar and Transfer Agent for the preferred stock will be set forth in
the applicable prospectus supplement.
Depositary Shares
We may, at our option, elect to offer fractional shares of preferred stock,
rather than full shares of preferred stock. In the event such option is
exercised, we will issue receipts for depositary shares, each of which will
represent a fraction (to be set forth in the prospectus supplement relating to
the shares of preferred stock) of a share of such shares of preferred stock.
The shares of preferred stock represented by depositary shares will be
deposited under a deposit agreement between us and a bank or trust company
selected by us having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000. Subject to the terms of
the deposit agreement, each owner of a depositary share will be entitled, in
proportion to the applicable fraction of a preferred share represented by the
depositary share, to all the rights and preferences of the preferred share,
represented thereby (including dividend, voting, redemption, conversion and
liquidation rights).
The above description of the depositary shares is only a summary, is not
complete and is subject to, and is qualified in its entirety by, the description
in the applicable prospectus supplement and the provisions of the deposit
agreement, which will contain the form of depositary receipt. A copy of the
deposit agreement will be filed with the SEC as an exhibit to or incorporated by
reference in the registration statement of which this prospectus is a part.
DESCRIPTION OF WARRANTS
We may issue separately, or together with any common stock or preferred stock
offered by any prospectus supplement, warrants for the purchase of other shares
of common stock or preferred stock ("Warrants"). The Warrants may be issued
under warrant agreements (each, a "Warrant Agreement") to be entered into
between us and a bank or trust company, as warrant agent (the "Warrant Agent"),
or may be represented by certificates evidencing the Warrants (the "Warrant
Certificates"), all as set forth in the prospectus supplement relating to the
particular series of Warrants. The following summaries of certain provisions of
the Warrants do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of any related Warrant
Agreement and Warrant Certificate, respectively, including the definitions
therein of certain terms. Wherever defined terms of the Warrant Agreement are
15
summarized herein or in a prospectus supplement, it is intended that such
defined terms shall be incorporated herein or therein by reference. In
connection with any offering of Warrants, any such Warrant Agreement or a form
of any such Warrant Certificate will be filed with the SEC as an exhibit to or
incorporated by reference in the registration statement.
General
The prospectus supplement relating to the particular series of Warrants
offered thereby will describe the terms of the offered Warrants, any related
Warrant Agreements and Warrant Certificates, including the following, to the
extent applicable:
o if the Warrants are offered for separate consideration, the offering
price and the currency for which Warrants may be purchased;
o the number of shares of common stock purchasable upon exercise of common
stock warrants and the price at which such number of shares of common stock
may be purchased upon such exercise;
o the date, if any, on and after which the offered warrants and the related
shares of common stock will be separately transferable;
o the date on which the right to exercise the offered Warrants shall commence
and the date on which such right shall expire;
o a discussion of the specific U.S. federal income tax, accounting and
other considerations applicable to the Warrants, or to any securities
purchasable upon the exercise of the Warrants;
o whether the offered Warrants represented by Warrant Certificates will be
issued in registered or bearer form, and if registered, where they may be
transferred and registered;
o any applicable anti-dilution provisions;
o any applicable redemption or call provisions;
o any applicable book-entry provisions; and
o any other terms of the offered Warrants.
Warrant Certificates will be exchangeable on the terms specified in the
related prospectus supplement for new Warrant Certificates of different
denominations and Warrants may be exercised, as applicable, at our corporate
offices, the corporate trust office of the Warrant Agent or any other office
indicated in the prospectus supplement relating thereto. Prior to the exercise
of their Warrants, holders of Warrants will not have any of the rights of
holders of the shares of common stock purchasable upon such exercise, including
the right to receive payments of dividends or distributions of any kind, if any,
on the shares of common stock or preferred stock purchasable upon exercise or to
exercise any applicable right to vote such shares.
Exercise of Warrants
Each Warrant will entitle the holder thereof to purchase such number of
shares of common stock or preferred stock at such exercise price as shall in
each case be set forth in, or be determinable from, the prospectus supplement
relating to such Warrant, by payment of such exercise price in full in the
currency and in the manner specified in such prospectus supplement. Warrants may
be exercised at any time up to the close of business on their expiration date(s)
(or any later date to which we may extend such expiration date(s)); unexercised
Warrants will become null and void.
Upon receipt at the corporate trust office of the Warrant Agent or any other
office indicated in the related prospectus supplement of (a) payment of the
exercise price and (b) the Warrant Certificate properly completed and duly
executed, we will, as soon as practicable, forward the shares of common stock or
preferred stock purchasable upon such exercise to the holder of such Warrant. If
less than all of the Warrants represented by such Warrant Certificate are
exercised, a new Warrant Certificate will be issued for the remaining number of
Warrants.
16
PLAN OF DISTRIBUTION
We may sell the securities being offered hereby: (a) directly to purchasers;
(b) through agents; (c) through underwriters; (d) through dealers; or (e)
through a combination of any such methods of sale.
The distribution of the securities may be effected from time to time in one
or more transactions:
o at a fixed price or at final prices, which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to such prevailing market prices; or
o at negotiated prices.
Offers to purchase securities may be solicited directly by us, or by agents
designated by us, from time to time. Any such agent, which may be deemed to be
an underwriter as that term is defined in the Securities Act of 1933, as amended
(the "Securities Act"), involved in the offer or sale of the securities in
respect of which this prospectus is delivered will be named, and any commissions
payable by us to such agent will be set forth, in the applicable prospectus
supplement.
If an underwriter is, or underwriters are, utilized in the offer and sale of
securities in respect of which this prospectus and the accompanying prospectus
supplement are delivered, we will execute an underwriting agreement with such
underwriter(s) for the sale to it or them and the name(s) of the underwriter(s)
and the terms of the transaction, including any underwriting discounts and other
items constituting compensation of the underwriters and dealers, if any, will be
set forth in such prospectus supplement, which will be used by the
underwriter(s) to make resales of the securities in respect of which this
prospectus and such prospectus supplement are delivered to the public. The
securities will be acquired by the underwriters for their own accounts and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If a dealer is utilized in the sale of the securities in respect of which
this prospectus is delivered, we will sell such securities to the dealer, as
principal. The dealer may then resell such securities to the public at varying
prices to be determined by such dealer at the time of resale. The name of the
dealer and the terms of the transaction will be identified in the applicable
prospectus supplement.
If an agent is used in an offering of securities being offered by this
prospectus, the agent will be named, and the terms of the agency will be
described, in the applicable prospectus supplement relating to the offering.
Unless otherwise indicated in the prospectus supplement, an agent will act on a
best efforts basis for the period of its appointment.
If indicated in the applicable prospectus supplement, we will authorize
underwriters or their other agents to solicit offers by certain institutional
investors to purchase securities from us pursuant to contracts providing for
payment and delivery at a future date. Institutional investors with which these
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others. In all cases, these purchasers must be approved by us. The obligations
of any purchaser under any of these contracts will not be subject to any
conditions except that (a) the purchase of the securities must not at the time
of delivery be prohibited under the laws of any jurisdiction to which that
purchaser is subject, and (b) if the securities are also being sold to
underwriters, we must have sold to these underwriters the securities not subject
to delayed delivery. Underwriters and other agents will not have any
responsibility in respect of the validity or performance of these contracts.
Certain of the underwriters, dealers or agents utilized by us in any offering
hereby may be customers of, including borrowers from, engage in transactions
with, and perform services for us or one or more of our affiliates in the
ordinary course of business. Underwriters, dealers, agents and other persons may
be entitled, under agreements which may be entered into with us, to
indemnification against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended.
17
Until the distribution of the securities is completed, rules of the SEC may
limit the ability of the underwriters and certain selling group members, if any,
to bid for and purchase the securities. As an exception to these rules, the
representatives of the underwriters, if any, are permitted to engage in certain
transactions that stabilize the price of the securities. Such transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the securities.
If underwriters create a short position in the securities in connection with
the offering thereof (in other words, if they sell more securities than are set
forth on the cover page of the applicable prospectus supplement), the
representatives of such underwriters may reduce that short position by
purchasing securities in the open market. Any such representatives also may
elect to reduce any short position by exercising all or part of any over-
allotment option described in the applicable prospectus supplement.
Any such representatives also may impose a penalty bid on certain
underwriters and selling group members. This means that if the representatives
purchase securities in the open market to reduce the underwriters' short
position or to stabilize the price of the securities, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering thereof.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the offering.
Neither we nor any of the underwriters, if any, makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the securities. In addition, neither we
nor any of the underwriters, if any, makes any representation that the
representatives of the underwriters, if any, will engage in such transactions or
that such transactions, once commenced, will not be discontinued without notice.
The anticipated date of delivery of the securities offered by this prospectus
will be described in the applicable prospectus supplement relating to the
offering. The securities offered by this prospectus may or may not be listed on
a national securities exchange or a foreign securities exchange. We cannot give
any assurances that there will be a market for any of the securities offered by
this prospectus and any prospectus supplement.
We estimate that the total expenses we will incur in offering the securities
to which this prospectus relates, excluding underwriting discounts and
commissions, if any, will be approximately $400,000.
LEGAL MATTERS
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the
validity of the securities.
18
EXPERTS
The consolidated financial statements of Universal Display Corporation and
subsidiary (a development stage company) as of December 31, 2002, and for the
year ended December 31, 2002, and for the period from June 17, 1994 (inception)
through December 31, 2002, have been incorporated by reference herein in
reliance upon the report of KPMG LLP, independent accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The consolidated financial statements of Universal Display Corporation and
subsidiary (a development stage company) as of December 31, 2001 and for each of
the years in the two-year period ended December 31, 2001, and for the period
from June 17, 1994 (inception) through December 31, 2002 to the extent related
to the period from June 17, 1994 (inception) through December 31, 2001, were
audited by Arthur Andersen LLP. Those other auditors have ceased operations.
Those other auditors expressed an unqualified opinion on those consolidated
financial statements in their report dated March 5, 2002. KPMG LLP's opinion on
the statements of operations, shareholders' equity (deficit) and cash flows,
insofar as it relates to the amounts included for the period from June 17, 1994
(inception) through December 31, 2001, is based solely on the report of the
other auditors.
There is no effective remedy against Arthur Andersen LLP in connection with a
material misstatement or omission in the financial statements audited by them,
particularly in the event that Arthur Andersen ceases to exist as an entity or
becomes insolvent as a result of the conviction or other proceedings against it.
For more information concerning Arthur Andersen LLP, see "Risk Factors" in this
Prospectus.
19
===============================================================================
SHARES
UNIVERSAL DISPLAY CORPORATION
COMMON STOCK
---------------------
PROSPECTUS SUPPLEMENT
---------------------
NEEDHAM & COMPANY, LLC
MAY , 2007
===============================================================================