ITEM
1.
|
BUSINESS……………………………………………………………………………………………...…………………………………..............…...……
|
2
|
ITEM
1A.
|
RISK
FACTORS…………………………...…………………………………………………………...………………………………….............…...……
|
13
|
ITEM
1B.
|
UNRESOLVED
STAFF
COMMENTS…………...………………………………………………………...…………………………….............…...……
|
19
|
ITEM
2.
|
LEGAL
PROCEEDINGS….....………………………………………………………………………...…………………………………….....….............…
|
19
|
ITEM
3.
|
PROPERTIES………………………………………………………………………………………………..………………………………...……..............
|
19
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS……………....……………..………………………………...……..............
|
20
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
AND ISSUER PURCHASES OF EQUITY
SECURITIES………………………………………………..………………………………....
|
22
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
………...…………………………………………………………...…………………………………………………...
|
24
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF
OPERATIONS …………...…………………………………………………………………………………………………...……...
|
24
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK……………………………………………………...…………
|
31
|
ITEM
8
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
…........………………………………………………………………………...……
|
31
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL
DISCLOSURE………………………………………………………………………...............…………………….
|
31
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
……………….………………………………………………………………………………………..……………..
|
31
|
ITEM
9B
|
OTHER
INFORMATION……………….…………………………………………………………………………………………………………...……..
|
32
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE…………………………………………………………....……………
|
32
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
………...………………………………………………………........................................................................…...……
|
32
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
……..………………………….....................................................................……...
|
32
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR
INDEPENDENCE
…………………………………………………………………….….........................................................................……
|
32
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
…........……………….………………......................................................................……...……
|
33
|
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
………………….…………......................................................................………………
|
33
|
·
|
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;
|
·
|
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 revenues and results of
operations.
|
·
|
a
thinner profile and lighter weight;
|
·
|
higher
brightness and contrast ratios, leading to sharper picture images and
graphics;
|
·
|
wider
viewing angles;
|
·
|
faster
response times for video;
|
·
|
higher
operating efficiencies, thereby reducing energy consumption;
and
|
·
|
lower
cost manufacturing methods and
materials.
|
·
|
technology
research and development, including government contract work and
collaborative R&D with third
parties;
|
·
|
intellectual
property and technology licensing;
and
|
·
|
sales
of OLED materials for evaluation, development and commercial
manufacturing.
|
·
|
OLED Displays on Flexible
Metal Foil Substrates. We continued our work during 2007 to develop
and deliver next-generation prototype OLED displays on flexible metal foil
substrates for the U.S. Army Communications-Electronics Research
Development and Engineering Center (CERDEC), the Air Force Research
Laboratory and the U.S. Department of the Navy. For 2007, these four
government agencies provided us with $1,737,000 in funding for the program
under several government contracts and one subcontract with L-3DS. In
2007, we delivered to these various government agencies several
full-color, active-matrix OLED display prototypes on flexible metal foil
that were developed under the program. Our contractual commitments to
conduct further work under this program currently run until November
2008.
|
·
|
Infrared OLED Displays for
Night-Vision Applications. In 2007, we continued working under an
SBIR Phase II program contract from CERDEC for the development of a
flexible OLED display containing infrared-emitting OLED pixels that would
be visible through night vision goggles. We will complete work under the
contract upon delivering a prototype infrared-emitting OLED display to
CERDEC in March 2008. For 2007, we received $413,274 in funding under this
program.
|
·
|
Novel Encapsulation Technology
for Flexible OLEDs. In 2007, we continued our work under an SBIR
Phase II program contract from the U.S. Army Research Laboratory (ARL) to
develop innovative encapsulation technology for flexible
OLEDs. Using technology pioneered at Princeton University, we
have demonstrated the feasibility of a novel encapsulation process based
on plasma-enhanced chemical vapor deposition (PECVD), which is an
important element on the development roadmap for flexible OLED
displays. We received $457,264 in funding from ARL for 2007
under this contract. The program is currently scheduled to run
through September 2008.
|
·
|
OLEDs for High-Efficiency
White Lighting. Our work on behalf of the U.S. Department of Energy
(DOE) to develop technical approaches for using our proprietary PHOLED and
other OLED technologies for high-efficiency white lighting applications
continued in 2007. For the year, the DOE provided us with $1,197,810 in
funding for this work under three SBIR Phase II program contracts and two
SBIR Phase I program contracts. Two of the SBIR Phase I programs were
completed in March 2007, and the others are currently scheduled for
completion between March 2008 and August
2009.
|
·
|
OVJP Technology for Lighting
Applications. In 2007, we continued our work on behalf of the DOE
to develop our proprietary OVJP organic vapor jet printing technology for
the printing of striped OLEDs for lighting applications. Funding to us
under this DOE Solid State Lighting program totaled $696,962 for 2007. The
program is currently funded through June 2008. At the
conclusion of the program, we are expected to deliver to the DOE prototype
OLED devices, wherein the OLED materials are deposited in red, green and
blue stripes using the OVJP process and the resulting device generates
white light.
|
·
|
OLED
materials with sufficient lifetimes, brightness and color coordinates for
full-color OLED displays and general lighting
products;
|
·
|
more
robust OLED materials for use in large-scale, more demanding manufacturing
environments; and
|
·
|
scalable
and cost-effective methods and technologies for the fabrication of OLED
products.
|
·
|
stop
selling their products that incorporate or otherwise use technology that
contains our allegedly infringing intellectual
property;
|
·
|
attempt
to obtain a license to the relevant third-party intellectual property,
which may not be available on reasonable terms or at all;
or
|
·
|
attempt
to redesign their products to remove our allegedly infringing intellectual
property to avoid infringement of the third-party intellectual
property.
|
·
|
OLED
technologies might not be adopted for broad commercial
usage;
|
·
|
markets
for flat panel displays and solid-state lighting products utilizing OLED
technologies may be limited; and
|
·
|
amounts
we can charge for access to our OLED technologies and materials may not be
sufficient for us to make a profit.
|
·
|
compliance
with a wide variety of foreign laws and
regulations;
|
·
|
legal
uncertainties regarding taxes, tariffs, quotas, export controls, export
licenses and other trade barriers;
|
·
|
economic
instability in the countries of our licensees, causing delays or
reductions in orders for their products and therefore our
royalties;
|
·
|
political
instability in the countries in which our licensees operate, particularly
in South Korea relating to its disputes with North Korea and in Taiwan
relating to its disputes with
China;
|
·
|
difficulties
in collecting accounts receivable and longer accounts receivable payment
cycles; and
|
·
|
potentially
adverse tax consequences.
|
·
|
adversely
affect the voting power of the shareholders of our common
stock;
|
·
|
make
it more difficult for a third party to gain control of
us;
|
·
|
discourage
bids for our common stock at a premium;
or
|
·
|
otherwise
adversely affect the market price of our common
stock.
|
·
|
our
expenses and operating results;
|
·
|
announcements
by us or our competitors of technological developments, new product
applications or license arrangements;
and
|
·
|
other
factors affecting the flat panel display and solid-state lighting
industries in general.
|
·
|
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, as
amended; or
|
·
|
we
issue additional shares of our common stock that might be or become freely
salable, including shares that would be issued upon conversion of our
preferred stock or the exercise of outstanding warrants and
options.
|
Name
|
Age
|
Position
|
Sherwin
I. Seligsohn
|
72
|
Founder
and Chairman of the Board of Directors
|
Steven
V. Abramson
|
56
|
President,
Chief Executive Officer and Director
|
Sidney
D. Rosenblatt
|
60
|
Executive
Vice President, Chief Financial Officer, Treasurer, Secretary and
Director
|
Julia
J. Brown
|
46
|
Vice
President and Chief Technical Officer
|
Janice
K. Mahon
|
50
|
Vice
President of Technology Commercialization and General Manager of Material
Supply Business
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
High
Close
|
Low
Close
|
|
--------------
|
--------------
|
|
2007
|
||
Fourth
Quarter
|
$ 21.88
|
$ 15.67
|
Third
Quarter
|
18.44
|
13.80
|
Second
Quarter
|
17.70
|
14.59
|
First
Quarter
|
15.80
|
12.03
|
2006
|
||
Fourth
Quarter
|
$ 15.15
|
$ 10.59
|
Third
Quarter
|
13.66
|
10.02
|
Second
Quarter
|
16.08
|
12.25
|
First
Quarter
|
15.25
|
10.94
|
Period
|
Total Number
of Shares
Purchased
|
Average
Price Paid
per Share
|
Total
Number
of
Shares Purchased
as
Part of Publicly
Announced
Program
|
Approximate
Dollar Value
of Shares that
May
Yet Be
Purchased Under
the Program
|
||||
October
1 – October 31
|
--
|
--
|
--
|
--
|
||||
November
1 – November 30
|
--
|
--
|
--
|
--
|
||||
December
1 – December 31
|
22,000
|
$17.72
|
22,000
|
--
|
||||
Total
|
22,000
|
$17.72
|
22,000
|
--
|
Cumulative
Total Return
|
||||||
12/02
|
12/03
|
12/04
|
12/05
|
12/06
|
12/07
|
|
UNIVERSAL
DISPLAY CORP.
|
$
100.00
|
$
173.89
|
$
114.07
|
$
133.21
|
$
190.24
|
$
261.98
|
RUSSELL
2000
|
100.00
|
147.25
|
174.24
|
182.18
|
215.64
|
212.26
|
NASDAQ
ELECTRONIC COMPONENTS
|
100.00
|
196.18
|
153.08
|
166.42
|
155.47
|
180.19
|
Year
Ended December 31,
|
||||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
Operating
Results:
|
||||||||||||||||||||
Total
revenue
|
$
|
11,305,907
|
$
|
11,921,292
|
$
|
10,147,995
|
$
|
7,006,913
|
$
|
6,593,193
|
||||||||||
Research
and development expense
|
20,909,262
|
19,562,004
|
18,798,024
|
16,226,517
|
17,447,243
|
|||||||||||||||
General
and administrative expense
|
9,569,381
|
8,902,462
|
7,704,931
|
7,052,047
|
5,766,761
|
|||||||||||||||
Interest
income
|
3,599,229
|
2,168,933
|
1,419,858
|
795,620
|
162,356
|
|||||||||||||||
Income
tax benefit
|
804,980
|
544,567
|
424,207
|
612,966
|
—
|
|||||||||||||||
Net
loss
|
(15,975,841
|
)
|
(15,186,804
|
)
|
(15,801,612
|
)
|
(15,776,574
|
)
|
(17,353,205
|
)
|
||||||||||
Net
loss attributable to common shareholders
|
(15,975,841
|
)
|
(15,186,804
|
)
|
(15,801,612
|
)
|
(15,906,198
|
)
|
(18,387,507
|
)
|
||||||||||
Net
loss per share, basic and diluted
|
(0.47
|
)
|
(0.49
|
)
|
(0.56
|
)
|
(0.59
|
)
|
(0.82
|
)
|
||||||||||
Balance
Sheet Data:
|
||||||||||||||||||||
Total
assets
|
$
|
105,000,071
|
$
|
72,331,536
|
$
|
73,819,417
|
$
|
73,892,163
|
$
|
46,201,646
|
||||||||||
Current
liabilities
|
12,790,531
|
14,382,673
|
11,974,854
|
7,404,278
|
4,194,776
|
|||||||||||||||
Capital
lease obligations
|
—
|
—
|
—
|
—
|
3,886
|
|||||||||||||||
Long-term
debt
|
—
|
—
|
—
|
4,200,000
|
—
|
|||||||||||||||
Shareholders’
equity
|
89,215,957
|
54,382,363
|
57,616,463
|
59,187,885
|
38,906,870
|
|||||||||||||||
Other
Financial Data:
|
||||||||||||||||||||
Working
capital
|
$
|
73,979,638
|
$
|
37,422,740
|
$
|
38,347,913
|
$
|
40,630,913
|
$
|
23,679,705
|
||||||||||
Capital
expenditures
|
1,225,857
|
2,349,033
|
5,656,905
|
7,418,053
|
957,328
|
|||||||||||||||
Weighted
average shares used in computing basic and diluted net loss per common
share
|
33,759,581
|
30,855,297
|
28,462,925
|
26,791,158
|
22,428,219
|
|||||||||||||||
Shares
of common stock outstanding, end of period
|
35,563,201
|
31,385,408
|
29,545,471
|
27,903,385
|
24,196,765
|
Certain
prior year amounts have been reclassified to conform to current year
presentation.
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
·
|
the
timing of our receipt of license fees and royalties, as well as fees for
future technology development and
evaluation;
|
·
|
the
timing and volume of sales of our OLED materials for both commercial usage
and evaluation purposes;
|
·
|
the
timing and magnitude of expenditures we may incur in connection with our
ongoing research and development activities;
and
|
·
|
the
timing and financial consequences of our formation of new business
relationships and alliances.
|
·
|
a
decrease in revenues of $615,385;
and
|
·
|
an
increase in operating expenses of
$1,866,356.
|
·
|
a
decrease in development chemical revenue of
$606,997;
|
·
|
a
decrease in royalty and license revenue of $1,571,808
and
|
·
|
a
decrease in technology development revenue of
$938,976.
|
·
|
an
increase in contract research revenue of $778,790;
and
|
·
|
an
increase in commercial chemical revenue of
$1,723,606.
|
·
|
an
increase of $1,916,862 attributable to higher operating costs associated
with our Ewing facility;
|
·
|
in
2006, we received a refund from Princeton University for unspent research
and development funds of $1,011,358. No such refund was received in
2007
|
·
|
an
increase of $724,254 in personnel costs due mainly to increased salaries;
and
|
·
|
an
increase of $242,281 relating to the recognition of expenses for stock
issuances to non-employee members of our Scientific Advisory Board, and
for the vesting of shares of restricted stock previously issued to these
individuals.
|
·
|
an
increase of $465,243 in personnel costs due to salary increases;
and
|
·
|
an
increase of $153,493 attributable to higher operating costs associated
with our Ewing facility.
|
·
|
increased
revenues of $1,773,297; and
|
·
|
an
increase of $2,203,209 in operating
expenses.
|
·
|
an
increase in commercial chemical revenue of
$1,844,676;
|
·
|
an
increase in royalty and license revenue of $2,166,624;
and
|
·
|
an
increase in technology development revenue of
$440,909.
|
·
|
a
decrease in contract research revenue of $832,078;
and
|
·
|
a
decrease in development chemical revenue of
$1,846,834.
|
·
|
an
increase of $1,661,326 in personnel costs;
and
|
·
|
an
increase of $1,464,059 attributable to higher operating costs associated
with the expansion of our Ewing
facility.
|
·
|
a
refund from Princeton University for unspent research and development
funds of $1,011,358;
|
·
|
a
decrease of $528,966 in amounts payable to PPG Industries due to the
hiring of certain PPG employees as employees of ours;
and
|
·
|
a
decrease of $563,203 relating to the recognition of expense for stock
issuances to non-employee members of our Scientific Advisory
Board.
|
·
|
an
increase of $559,359 in personnel costs due to salary increases and the
recognition of stock-based compensation expenses under
SFAS No. 123(R); and
|
·
|
an
increase of $631,422 attributable to higher operating costs associated
with the expansion of our Ewing
facility.
|
Payments
due by period
|
||||||||||||||||||||
Contractual
Obligations
|
Total
|
Less
than 1 year
|
1-3
years
|
3-5
years
|
More
than 5 years
|
|||||||||||||||
Sponsored
research obligation
|
3,923,258 | 2,942,444 | 980,814 | — | — | |||||||||||||||
Minimum
royalty obligation
|
500,000 | 100,000 | 200,000 | 200,000 |
$100,000/year(1)
|
|||||||||||||||
Total
(2)
|
$ | 4,423,258 | $ | 3,042,444 | $ | 1,180,814 | $ | 200,000 |
$100,000/year(1)
|
(1)
|
Under
our Amended License Agreement with Princeton University, the University of
Southern California and the University of Michigan, we are obligated to
pay minimum royalties of $100,000 per year until such time as the
agreement is no longer in effect. The agreement has no scheduled
expiration date.
|
(2)
|
See
Note 12 to the Consolidated Financial Statements for discussion of
obligations upon termination of employment of executive officers as a
result of a change in control of the
Company.
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
ITEM
9B.
|
OTHER
INFORMATION
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
(1)
|
Financial
Statements:
|
Management’s
Report on Internal Control Over Financial
Reporting…………………………………..……………………………………………………………………..
|
F-2
|
|
Report
of Independent Registered Public Accounting
Firm…………………………………………………..…………………………….…………………………………..
|
F-3
|
|
Report
of Independent Registered Public Accounting
Firm…………………………………………….…………………………………………..…………………………..
|
F-4
|
|
Consolidated
Balance
Sheets…………………………………..……………………………………………………………......……………………………..…………………..
|
F-5
|
|
Consolidated
Statements of
Operations…………………………………..………………………………………………………………………....……………………..……..
|
F-6
|
|
Consolidated
Statements of Shareholders’ Equity and Comprehensive
Loss…………………………..………………………………………......…………….…………..
|
F-7
|
|
Consolidated
Statements of Cash
Flows…………………………………..…………………………….……………………………………...…………………….…………..
|
F-9
|
|
Notes
to Consolidated Financial
Statements…………………………………..………………………...………………………………………...……………………………..
|
F-10
|
3.1
|
Amended
and Restated Articles of Incorporation of the registrant(1)
|
3.2
|
Amendment
to Amended and Restated Articles of Incorporation of the registrant(2)
|
3.3
|
Bylaws
of the registrant(1)
|
10.1#
|
Warrant
Agreement between the registrant and Steven V. Abramson, dated as of
April 2, 1998(3)
|
10.2#
|
Warrant
Agreement between the registrant and Sidney D. Rosenblatt, dated as of
April 2, 1998(3)
|
10.3#
|
Warrant
Agreement between the registrant and Julia J. Brown, dated as of
April 18, 2000(4)
|
10.4#
|
Amendment
No. 1 to Warrant Agreement between the registrant and Julia J. Brown,
dated as of April 18, 2000(1)
|
10.5#
|
Change
in Control Agreement between the registrant and Sherwin I. Seligsohn,
dated as of April 28, 2003(5)
|
10.6#
|
Change
in Control Agreement between the registrant and Steven V. Abramson, dated
as of April 28, 2003(5)
|
10.7#
|
Change
in Control Agreement between the registrant and Sidney D. Rosenblatt,
dated as of April 28, 2003(5)
|
10.8#
|
Change
in Control Agreement between the registrant and Julia J. Brown, dated as
of April 28, 2003(5)
|
10.9#
|
Non-Competition
and Non-Solicitation Agreement between the registrant and Sherwin I.
Seligsohn, dated as of February 23, 2007(6)
|
10.10#
|
Non-Competition
and Non-Solicitation Agreement between the registrant and Steven V.
Abramson, dated as of January 26, 2007(6)
|
10.11#
|
Non-Competition
and Non-Solicitation Agreement between the registrant and Sidney D.
Rosenblatt, dated as of February 7, 2007(6)
|
10.12#
|
Non-Competition
and Non-Solicitation Agreement between the registrant and Julia J. Brown,
dated as of February 5, 2007(6)
|
10.13#
|
Executive
Performance Compensation Program, dated as of April 20, 2004(3)
|
10.14
|
Equity
Compensation Plan, dated as of June 29, 2006(7)
|
10.15
|
1997
Research Agreement between the registrant and The Trustees of Princeton
University, dated as of August 1, 1997(8)
|
10.16
|
Amendment
#1 to the 1997 Research Agreement between the registrant and the Trustees
of Princeton University, dated as of November 14, 2000(9)
|
10.17
|
Amendment
#2 to the 1997 Research Agreement between the registrant and the Trustees
of Princeton University, dated as of April 11, 2002(9)
|
10.18
|
Sponsored
Research Agreement between the registrant and the University of Southern
California, dated as of May 1, 2006(10)
|
10.19
|
1997
Amended License Agreement among the registrant, The Trustees of Princeton
University and the University of Southern California, dated as of
October 9, 1997(8)
|
10.20
|
Amendment
#1 to the Amended License Agreement among the registrant, the Trustees of
Princeton University and the University of Southern California, dated as
of August 7, 2003(9)
|
10.21
|
Amendment
#2 to the Amended License Agreement among the registrant, the Trustees of
Princeton University, the University of Southern California and the
Regents of the University of Michigan, dated as of January 1,
2006(10)
|
10.22
|
Termination,
Amendment and License Agreement by and among the registrant, PD-LD, Inc.,
Dr. Vladimir S. Ban, and The Trustees of Princeton University, dated as of
July 19, 2000(11)
|
10.23
|
Letter
of Clarification of UDC/GPEC Research and License Arrangements between the
registrant and Global Photonic Energy Corporation, dated as of
June 4, 2004(6)
|
10.24+
|
License
Agreement between the registrant and Motorola, Inc., dated as of
September 29, 2000(11)
|
10.25+
|
OLED
Materials Supply and Service Agreement between the registrant and PPG
Industries, Inc., dated as of July 29, 2005(12)
|
10.26+
|
OLED
Patent License Agreement between the registrant and Samsung SDI Co., Ltd.,
dated as of April 19, 2005(13)
|
10.27+
|
OLED
Supplemental License Agreement between the registrant and Samsung SDI Co.,
Ltd., dated as of April 19, 2005(13)
|
10.28+
|
Commercial
Supply Agreement between the registrant and AU Optronics Corporation,
dated as of January 1, 2006(14)
|
10.29+
|
Settlement
and License Agreement between the registrant and Seiko Epson Corporation,
dated as of July 31, 2006(15)
|
10.30+
|
Commercial
Supply Agreement between the registrant and Chi Mei EL Corporation, dated
as of April 5, 2007(16)
|
10.31+
|
Commercial
Supply Agreement between the registrant and LG.Philips LCD Co., Ltd. (now
known as LG Display), dated as of May 23, 2007(16)
|
21*
|
Subsidiaries
of the registrant
|
23.1*
|
Consent
of KPMG LLP
|
31.1*
|
Certifications
of Steven V. Abramson, Chief Executive Officer, as required by Rule
13a-14(a) or Rule 15d-14(a)
|
31.2*
|
Certifications
of Sidney D. Rosenblatt, Chief Financial Officer, as required by Rule
13a-14(a) or Rule 15d-14(a)
|
32.1**
|
Certifications
of Steven V. Abramson, Chief Executive Officer, as required by Rule
13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section
1350. (This exhibit shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liability of that section. Further,
this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.)
|
32.2**
|
Certifications
of Sidney D. Rosenblatt, Chief Financial Officer, as required by Rule
13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section
1350. (This exhibit shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liability of that section. Further,
this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.)
|
|
+
|
Confidential
treatment has been accorded to certain portions of this exhibit pursuant
to Rule 406 under the Securities Act of 1933, as amended, or Rule 24b-2
under the Securities Exchange Act of 1934, as
amended.
|
(1)
|
Filed
as an Exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2003, filed with the SEC on March 1,
2004.
|
(2)
|
Filed
as an Exhibit to a Current Report on Form 8-K, filed with the SEC on
December 21, 2007.
|
(3)
|
Filed
as an Exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2004, filed with the SEC on March 14,
2001.
|
(4)
|
Filed
as an Exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2000, filed with the SEC on March 29,
2001.
|
(5)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003, filed with the SEC on May 13,
2003.
|
(6)
|
Filed
as an Exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2006, filed with the SEC on March 15,
2007.
|
(7)
|
Filed
as an Exhibit to the Definitive Proxy Statement for the 2006 Annual
Meeting of Shareholders, filed with the SEC on April 27,
2006.
|
(8)
|
Filed
as an Exhibit to the Annual Report on Form 10K-SB for the year ended
December 31, 1997, filed with the SEC on March 31,
1998.
|
(9)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003, filed with the SEC on November 10,
2003.
|
(10)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006, filed with the SEC on August 9,
2006.
|
(11)
|
Filed
as an Exhibit to the amended Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, filed with the SEC on November 20,
2001.
|
(12)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005, filed with the SEC on November 7,
2005.
|
(13)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005, filed with the SEC on August 9,
2005.
|
(14)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2006, filed with the SEC on May 10,
2006.
|
(15)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006, filed with the SEC on November 6,
2006.
|
(16)
|
Filed
as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ended
June 30, 2007, filed with the SEC on August 9,
2007.
|
Name
|
Title
|
Date
|
/s/
Sherwin I. Seligsohn
Sherwin I.
Seligsohn
|
Founder
and Chairman of the Board of Directors
|
March
13, 2008
|
/s/ Steven V.
Abramson
Steven
V. Abramson
|
President,
Chief Executive Officer and Director
|
March
13, 2008
|
/s/ Sidney D.
Rosenblatt
Sidney
D. Rosenblatt
|
Executive
Vice President, Chief Financial Officer, Treasurer, Secretary and
Director
|
March
13, 2008
|
/s/ Leonard
Becker
Leonard
Becker
|
Director
|
March
13, 2008
|
/s/ Elizabeth H.
Gemmill
Elizabeth
H. Gemmill
|
Director
|
March
13, 2008
|
/s/ C. Keith
Hartley
C.
Keith Hartley
|
Director
|
March
13, 2008
|
/s/
Lawrence Lacerte
Lawrence
Lacerte
|
Director
|
March
13, 2008
|
Consolidated
Financial Statements:
|
||||
Management’s
Report on Internal Control Over Financial Reporting
|
F-2
|
|||
Report
of Independent Registered Public Accounting Firm
|
F-3
|
|||
Report
of Independent Registered Public Accounting Firm
|
F-4
|
|||
Consolidated
Balance Sheets
|
F-5
|
|||
Consolidated
Statements of Operations
|
F-6
|
|||
Consolidated
Statements of Shareholders’ Equity and Comprehensive Loss
|
F-7
|
|||
Consolidated
Statements of Cash Flows
|
F-9
|
|||
Notes
to Consolidated Financial Statements
|
F-10
|
Steven
V. Abramson
President
and Chief Executive Officer
|
Sidney
D. Rosenblatt
Executive
Vice President and Chief Financial
Officer
|
December 31,
|
||||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$
|
33,870,696
|
$
|
31,097,533
|
||||
Short-term
investments
|
49,788,961
|
17,957,752
|
||||||
Accounts
receivable
|
2,395,416
|
2,113,263
|
||||||
Inventory
|
41,165
|
30,598
|
||||||
Other
current assets
|
673,931
|
606,267
|
||||||
Total
current assets
|
86,770,169
|
51,805,413
|
||||||
PROPERTY
AND EQUIPMENT, net
|
13,525,714
|
14,074,093
|
||||||
ACQUIRED
TECHNOLOGY, net
|
4,624,416
|
6,319,488
|
||||||
INVESTMENTS
|
—
|
42,770
|
||||||
OTHER
ASSETS
|
79,772
|
89,772
|
||||||
$
|
105,000,071
|
$
|
72,331,536
|
|||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$
|
861,428
|
$
|
1,808,869
|
||||
Accrued
expenses
|
4,578,147
|
5,245,536
|
||||||
Deferred
license fees
|
7,178,268
|
7,178,268
|
||||||
Deferred
revenue
|
172,688
|
150,000
|
||||||
Total
current liabilities
|
12,790,531
|
14,382,673
|
||||||
DEFERRED
LICENSE FEES
|
2,454,900
|
2,966,500
|
||||||
DEFERRED
REVENUE
|
538,683
|
600,000
|
||||||
Total
liabilities
|
15,784,114
|
17,949,173
|
||||||
SHAREHOLDERS’
EQUITY:
|
||||||||
Preferred
Stock, par value $0.01 per share, 5,000,000 shares authorized,
200,000 shares of Series A Nonconvertible Preferred Stock issued
and outstanding (liquidation value of $7.50 per share or
$1,500,000)
|
2,000
|
2,000
|
||||||
Common
Stock, par value $0.01 per share, 50,000,000 shares authorized,
35,563,201 and 31,385,408 shares issued and outstanding at
December 31, 2007 and 2006, respectively
|
355,632
|
313,854
|
||||||
Additional
paid-in-capital
|
250,240,994
|
199,505,981
|
||||||
Unrealized
loss on available for sale securities
|
(50,202
|
)
|
(82,846
|
)
|
||||
Accumulated
deficit
|
(161,332,467
|
)
|
(145,356,626
|
)
|
||||
Total
shareholders’ equity
|
89,215,957
|
54,382,363
|
||||||
$
|
105,000,071
|
$
|
72,331,536
|
|||||
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
REVENUE:
|
||||||||||||
Contract
research revenue
|
$
|
4,600,693
|
$
|
3,821,903
|
$
|
4,653,981
|
||||||
Development
chemical revenue
|
1,049,854
|
1,656,851
|
3,503,685
|
|||||||||
Commercial
chemical revenue
|
3,599,677
|
1,876,071
|
31,395
|
|||||||||
Royalty
and license revenue
|
828,371
|
2,400,179
|
233,555
|
|||||||||
Technology
development revenue
|
1,227,312
|
2,166,288
|
1,725,379
|
|||||||||
Total
revenue
|
11,305,907
|
11,921,292
|
10,147,995
|
|||||||||
OPERATING
EXPENSES:
|
||||||||||||
Cost
of chemicals sold
|
893,276
|
659,507
|
495,147
|
|||||||||
Research
and development
|
20,909,262
|
19,562,004
|
18,798,024
|
|||||||||
General
and administrative
|
9,569,381
|
8,902,462
|
7,704,931
|
|||||||||
Royalty
and license expense
|
305,846
|
687,436
|
610,098
|
|||||||||
Total
operating expenses
|
31,677,765
|
29,811,409
|
27,608,200
|
|||||||||
Operating
loss
|
(20,371,858
|
)
|
(17,890,117
|
)
|
(17,460,205
|
)
|
||||||
INTEREST
INCOME
|
3,599,229
|
2,168,933
|
1,419,858
|
|||||||||
INTEREST
EXPENSE
|
(8,192
|
)
|
(10,187
|
)
|
(185,472
|
)
|
||||||
LOSS
BEFORE INCOME TAX BENEFIT
|
(16,780,821
|
)
|
(15,731,371
|
)
|
(16,225,819
|
)
|
||||||
INCOME
TAX BENEFIT
|
804,980
|
544,567
|
424,207
|
|||||||||
NET
LOSS
|
(15,975,841
|
)
|
(15,186,804
|
)
|
(15,801,612
|
)
|
||||||
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
$
|
(0.47
|
)
|
$
|
(0.49
|
)
|
$
|
(0.56
|
)
|
|||
WEIGHTED
AVERAGE SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER
COMMON SHARE
|
33,759,581
|
30,855,297
|
28,462,925
|
|||||||||
Series A
|
|||||||||||||||
Nonconvertible
|
Additional
|
||||||||||||||
Preferred
Stock
|
Common
Stock
|
Paid-in
|
|||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
|||||||||||
BALANCE,
DECEMBER 31, 2004
|
200,000
|
$
|
2,000
|
27,903,385
|
$
|
279,034
|
$
|
173,372,344
|
|||||||
Exercise
of common stock options and warrants
|
—
|
—
|
1,029,710
|
10,297
|
8,413,361
|
||||||||||
Stock-based
employee compensation
|
—
|
—
|
88,270
|
883
|
725,532
|
||||||||||
Stock-based
non-employee compensation
|
—
|
—
|
—
|
—
|
(4,225
|
)
|
|||||||||
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
|
—
|
—
|
48,000
|
480
|
725,524
|
||||||||||
Issuance
of common stock, options and warrants in connection with the development
agreements
|
—
|
—
|
476,106
|
4,761
|
4,376,871
|
||||||||||
Amortization
of deferred compensation
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Unrealized
loss on available-for-sale securities
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Comprehensive
loss
|
—
|
—
|
—
|
—
|
—
|
||||||||||
BALANCE,
DECEMBER 31, 2005
|
200,000
|
2,000
|
29,545,471
|
295,455
|
187,609,407
|
||||||||||
Exercise
of common stock options and warrants
|
—
|
—
|
1,432,655
|
14,326
|
6,267,442
|
||||||||||
Stock-based
employee compensation
|
—
|
—
|
123,922
|
1,239
|
1,720,481
|
||||||||||
Stock-based
non-employee compensation
|
—
|
—
|
—
|
—
|
105,011
|
||||||||||
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
|
—
|
—
|
73,766
|
738
|
837,062
|
||||||||||
Issuance
of common stock, options and warrants in connection with the development
agreements
|
—
|
—
|
209,594
|
2,096
|
2,966,578
|
||||||||||
Unrealized
gain on available-for-sale securities
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Comprehensive
loss
|
—
|
—
|
—
|
—
|
—
|
||||||||||
BALANCE,
DECEMBER 31, 2006
|
200,000
|
2,000
|
31,385,408
|
313,854
|
199,505,981
|
||||||||||
Issuance
of common stock through a public offering, net of expenses of
$2,599,977
|
—
|
—
|
2,800,000
|
28,000
|
37,972,023
|
||||||||||
Exercise
of common stock options and warrants
|
—
|
—
|
1,169,648
|
11,696
|
8,528,247
|
||||||||||
Stock-based
employee compensation
|
—
|
—
|
70,238
|
703
|
2,049,554
|
||||||||||
Stock-based
non-employee compensation
|
—
|
—
|
—
|
—
|
23,336
|
||||||||||
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
|
—
|
—
|
37,796
|
378
|
714,364
|
||||||||||
Issuance
of common stock and options in connection with the development
and license agreements
|
—
|
—
|
100,111
|
1,001
|
1,447,489
|
||||||||||
Unrealized
gain on available-for-sale securities
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
||||||||||
Comprehensive
loss
|
—
|
—
|
—
|
—
|
—
|
||||||||||
BALANCE,
DECEMBER 31, 2007
|
200,000
|
$
|
2,000
|
35,563,201
|
$
|
355,632
|
$
|
250,240,994
|
|||||||
Unrealized
Loss on
|
|
|||||||||||||||
Deferred
|
Available
-for-
|
Accumulated
|
|
|||||||||||||
Compensation
|
Sale
Securities
|
Deficit
|
Total
Equity
|
|||||||||||||
BALANCE,
DECEMBER 31, 2004
|
$ | (17,446 | ) | $ | (79,837 | ) | $ | (114,368,210 | ) | $ | 59,187,885 |
|
||||
Exercise
of common stock options and warrants
|
— | — | — | 8,423,658 | ||||||||||||
Stock-based
employee compensation
|
— | — | — | 726,415 | ||||||||||||
Stock-based
non-employee compensation
|
— | — | — | (4,225 |
)
|
|||||||||||
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
|
— | — | — | 726,004 | ||||||||||||
Issuance
of common stock, options and warrants in connection with
the development agreements
|
— | — | — | 4,381,632 | ||||||||||||
Amortization
of deferred compensation
|
17,446 | — | — | 17,446 | ||||||||||||
Unrealized
loss on available-for-sale securities
|
— | (40,740 | ) | — | (40,740 | ) | ||||||||||
Net
loss
|
— | — | (15,801,612 | ) | (15,801,612 | ) | ||||||||||
Comprehensive
loss
|
— | — | — | (15,842,352 | ) | |||||||||||
BALANCE,
DECEMBER 31, 2005
|
— | (120,577 | ) | (130,169,822 | ) | 57,616,463 | ||||||||||
Exercise
of common stock options and warrants
|
— | — | — | 6,281,768 | ||||||||||||
Stock-based
employee compensation
|
— | — | — | 1,721,720 | ||||||||||||
Stock-based
non-employee compensation
|
— | — | — | 105,011 | ||||||||||||
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
|
— | — | — | 837,800 | ||||||||||||
Issuance
of common stock, options and warrants in connection with
the development agreements
|
— | — | — | 2,968,674 | ||||||||||||
Unrealized
gain on available-for-sale securities
|
— | 37,731 | — | 37,731 | ||||||||||||
Net
loss
|
— | — | (15,186,804 | ) | (15,186,804 | ) | ||||||||||
Comprehensive
loss
|
— | — | — | (15,149,073 | ) | |||||||||||
BALANCE,
DECEMBER 31, 2006
|
— | (82,846 | ) | (145,356,626 | ) | 54,382,363 | ||||||||||
Issuance
of common stock through a public offering, net of
expenses
of $2,599,977
|
— | — | — | 38,000,023 | ||||||||||||
Exercise
of common stock options and warrants
|
— | — | — | 8,539,943 | ||||||||||||
Stock-based
employee compensation
|
— | — | — | 2,050,257 | ||||||||||||
Stock-based
non-employee compensation
|
— | — | — | 23,336 | ||||||||||||
Issuance
of common stock to Board of Directors and Scientific Advisory
Board
|
— | — | — | 714,742 | ||||||||||||
Issuance
of common stock and options in connection with the development
and license agreements
|
— | — | — | 1,448,490 | ||||||||||||
Unrealized
gain on available-for-sale securities
|
— | 32,644 | — | 32,644 | ||||||||||||
Net
loss
|
— | — | (15,975,841 | ) | (15,975,841 | ) | ||||||||||
Comprehensive
loss
|
— | — | — | (15,943,197 | ) | |||||||||||
BALANCE,
DECEMBER 31, 2007
|
$ | — | $ | (50,202 | ) | $ | (161,332,467 | ) | $ | 89,215,957 | ||||||
|
||||||||||||
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
loss
|
$
|
(15,975,841
|
)
|
$
|
(15,186,804
|
)
|
$
|
(15,801,612
|
)
|
|||
Non-cash
charges to statement of operations:
|
||||||||||||
Depreciation
|
1,774,236
|
1,828,551
|
1,654,826
|
|||||||||
Amortization
of intangibles
|
1,695,072
|
1,695,072
|
1,695,072
|
|||||||||
Amortization
of premium and discount on investments
|
(311,613
|
)
|
(158,182
|
)
|
(112,747
|
)
|
||||||
Stock-based
employee compensation
|
2,733,909
|
2,442,149
|
1,373,196
|
|||||||||
Stock-based
non-employee compensation
|
23,336
|
105,011
|
(4,225
|
)
|
||||||||
Non-cash
expense under a Development Agreement
|
926,582
|
2,968,074
|
3,908,666
|
|||||||||
Stock-based
compensation to Board of Directors and Scientific Advisory
Board
|
754,711
|
509,600
|
1,314,202
|
|||||||||
(Increase)
decrease in assets:
|
||||||||||||
Accounts
receivable
|
(282,153
|
)
|
(169,164
|
)
|
644,180
|
|||||||
Inventory
|
(10,567
|
)
|
5,833
|
(16,490
|
)
|
|||||||
Other
current assets
|
(67,664
|
)
|
(108,521
|
)
|
(259,819
|
)
|
||||||
Other
assets
|
10,000
|
10,000
|
5,586
|
|||||||||
Increase
(decrease) in liabilities:
|
||||||||||||
Accounts
payable and accrued expenses
|
(1,816,543
|
)
|
244,976
|
1,252,285
|
||||||||
Deferred
license fees
|
(511,600
|
)
|
3,188,401
|
2,089,700
|
||||||||
Deferred
revenue
|
(38,629
|
)
|
(2,078,788
|
)
|
1,912,121
|
|||||||
Net
cash used in operating activities
|
(11,096,764
|
)
|
(4,703,792
|
)
|
(345,059
|
)
|
||||||
Purchases
of property and equipment
|
(1,225,857
|
)
|
(2,349,033
|
)
|
(5,656,905
|
)
|
||||||
Purchases
of investments
|
(61,336,182
|
)
|
(24,374,659
|
)
|
(22,791,027
|
)
|
||||||
Proceeds
from sale of investments
|
29,892,000
|
25,589,000
|
32,393,001
|
|||||||||
Net
cash (used in) provided by investing activities
|
(32,670,039
|
)
|
(1,134,692
|
)
|
3,945,069
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Net
proceeds from issuance of common stock
|
38,000,023
|
—
|
—
|
|||||||||
Repayment
of loan
|
—
|
—
|
(4,500,000
|
)
|
||||||||
Restricted
cash
|
—
|
—
|
4,200,000
|
|||||||||
Proceeds
from the exercise of common stock options and warrants
|
8,539,943
|
6,281,768
|
8,423,658
|
|||||||||
Net
cash provided by financing activities
|
46,539,966
|
6,281,768
|
8,123,658
|
|||||||||
INCREASE
IN CASH AND CASH EQUIVALENTS
|
2,773,163
|
443,284
|
11,723,668
|
|||||||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
31,097,533
|
30,654,249
|
18,930,581
|
|||||||||
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
$
|
33,870,696
|
$
|
31,097,533
|
$
|
30,654,249
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||||||
Cash
paid for interest
|
$
|
—
|
$
|
—
|
$
|
181,686
|
||||||
Market
Value
|
||||||||||||||||
Investment
Classification
|
Cost
|
Gains
|
(Losses)
|
Aggregate
Fair
|
||||||||||||
December 31,
2007-
|
||||||||||||||||
Corporate
bonds
|
$
|
25,486,974
|
$
|
—
|
$
|
(22,154
|
)
|
$
|
25,464,820
|
|||||||
Certificates
of deposit
|
14,073,000
|
—
|
(29,108
|
)
|
14,043,892
|
|||||||||||
US
Government bonds
|
9,779,189
|
1,351
|
(291
|
)
|
9,780,249
|
|||||||||||
Municipal
bonds
|
500,000
|
—
|
—
|
500,000
|
||||||||||||
$
|
49,839,163
|
$
|
1,351
|
$
|
(51,553
|
)
|
$
|
49,788,961
|
||||||||
December 31,
2006-
|
||||||||||||||||
Certificates
of deposit
|
$
|
11,243,000
|
$
|
—
|
$
|
(79,070
|
)
|
$
|
11,163,930
|
|||||||
US
Government bonds
|
6,840,368
|
668
|
(4,444
|
)
|
6,836,592
|
|||||||||||
$
|
18,083,368
|
$
|
668
|
$
|
(83,514
|
)
|
$
|
18,000,522
|
||||||||
|
Year
Ended December 31,
|
|||||||||||
2007
|
2006
|
2005
|
||||||||||
Development
and operations in the Company’s facility
|
$
|
13,169,527
|
$
|
11,891,852
|
$
|
8,967,285
|
||||||
Patent
application and prosecution expenses
|
1,932,161
|
1,799,819
|
2,158,598
|
|||||||||
Patent
maintenance and defense expenses
|
616,592
|
611,512
|
171,135
|
|||||||||
Costs
incurred to Princeton University and USC under the 2006 and 1997 Research
Agreements (Note 3), net of refunded amounts from Princeton
University
|
812,221
|
(551,220
|
)
|
598,796
|
||||||||
PPG
Development and License Agreement (Note 7)
|
2,181,408
|
3,854,969
|
4,383,935
|
|||||||||
Amortization
of intangibles
|
1,695,072
|
1,695,072
|
1,695,072
|
|||||||||
Scientific
Advisory Board compensation
|
502,281
|
260,000
|
823,203
|
|||||||||
$
|
20,909,262
|
$
|
19,562,004
|
$
|
18,798,024
|
|||||||
|
||||||||||||
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Unrealized
gain (loss) on available-for-sale securities
|
$
|
32,644
|
$
|
37,731
|
$
|
(40,740
|
)
|
|||||
Common
stock issued in connection with Development and License Agreements that
were earned in a previous period
|
521,908
|
22,515
|
495,481
|
|||||||||
Common
stock issued to Board of Directors and Scientific Advisory Board that were
earned in a previous period
|
260,000
|
588,200
|
390,720
|
|||||||||
Common
stock issued to employees that were earned in a previous
period
|
944,115
|
838,854
|
726,414
|
Year
Ended
|
||||
December 31,
|
||||
2005
|
||||
Net
loss, as reported
|
$
|
(15,801,612
|
)
|
|
Add
stock-based employee compensation expense included in reported net
loss
|
1,851,296
|
|||
Deduct
total stock-based employee compensation expense determined under
fair-value-based method for all awards
|
(8,459,041
|
)
|
||
Pro
forma net loss
|
$
|
(22,409,357
|
)
|
|
Basic
and diluted net loss per share:
|
||||
As
reported
|
$
|
(0.56
|
)
|
|
Pro
forma
|
$
|
(0.79
|
)
|
3.
|
RESEARCH
AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY, UNIVERSITY OF SOUTHERN
CALIFORNIA AND THE UNIVERSITY OF
MICHIGAN:
|
4.
|
PROPERTY
AND EQUIPMENT:
|
December 31,
|
||||||||
2007
|
2006
|
|||||||
Land
|
$
|
820,000
|
$
|
820,000
|
||||
Building
and improvements
|
11,126,189
|
11,087,331
|
||||||
Office
and lab equipment
|
11,502,305
|
11,286,548
|
||||||
Furniture
and fixtures
|
285,573
|
285,573
|
||||||
Construction-in-progress
|
1,784,344
|
827,123
|
||||||
25,518,411
|
24,306,575
|
|||||||
Less:
Accumulated depreciation
|
(11,992,697
|
)
|
(10,232,482
|
)
|
||||
Property
and equipment, net
|
$
|
13,525,714
|
$
|
14,074,093
|
||||
5.
|
ACQUIRED
TECHNOLOGY:
|
December 31,
|
||||||||
2007
|
2006
|
|||||||
PD-LD,
Inc.
|
$
|
1,481,250
|
$
|
1,481,250
|
||||
Motorola,
Inc.
|
15,469,468
|
15,469,468
|
||||||
16,950,718
|
16,950,718
|
|||||||
Less:
Accumulated amortization
|
(12,326,302
|
)
|
(10,631,230
|
)
|
||||
Acquired
technology, net
|
$
|
4,624,416
|
$
|
6,319,488
|
||||
December 31,
|
||||||||
2007
|
2006
|
|||||||
Compensation
|
$
|
3,087,650
|
$
|
2,876,897
|
||||
Minimum
royalties
|
295,846
|
1,177,436
|
||||||
Consulting
|
299,969
|
260,000
|
||||||
Professional
fees
|
432,719
|
324,288
|
||||||
Subcontracts
|
90,113
|
153,104
|
||||||
Research
and development agreements
|
308,497
|
200,658
|
||||||
Other
|
63,353
|
253,153
|
||||||
$
|
4,578,147
|
$
|
5,245,536
|
|||||
7.
|
EQUITY
AND CASH COMPENSATION UNDER THE PPG
AGREEMENTS:
|
8.
|
SERIES A
NONCONVERTIBLE PREFERRED STOCK:
|
9.
|
SHAREHOLDERS’
EQUITY:
|
10.
|
STOCK-BASED
COMPENSATION:
|
Weighted
|
||||||||
Average
|
||||||||
Exercise
|
||||||||
Options
|
Price
|
|||||||
Outstanding
at January 1, 2007
|
3,743,592
|
$
|
9.51
|
|||||
Granted
|
11,750
|
16.32
|
||||||
Exercised
|
(506,742
|
)
|
7.79
|
|||||
Forfeited
|
(20,000
|
)
|
13.85
|
|||||
Cancelled
|
(2,500
|
)
|
24.38
|
|||||
Outstanding
at December 31, 2007
|
3,226,100
|
9.77
|
||||||
Vested
and expected to vest
|
3,219,587
|
9.76
|
||||||
Exercisable
at December 31, 2007
|
3,174,100
|
9.72
|
||||||
2007
|
2006
|
2005
|
||||
Dividend
yield rate
|
0%
|
0%
|
0%
|
|||
Expected
volatility
|
48.1
- 52.5%
|
73.4
- 79.9%
|
80.0
- 86.3%
|
|||
Risk-free
interest rates
|
3.8
- 4.8%
|
4.6
- 5.0%
|
3.8
- 4.5%
|
|||
Expected
life
|
5
years
|
7 Years
|
7 Years
|
Weighted
|
||||||||
Average
|
||||||||
Grant
Date
|
||||||||
Options
|
Fair
Value
|
|||||||
Unvested
options at January 1, 2007
|
135,000
|
$
|
9.73
|
|||||
Granted
|
11,750
|
8.65
|
||||||
Vested
|
(74,750
|
)
|
9.16
|
|||||
Forfeited
|
(20,000
|
)
|
7.70
|
|||||
Unvested
options at December 31, 2007
|
52,000
|
$
|
9.82
|
|||||
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||||||||||
Number
of
|
Weighted-
|
Number
of
|
Weighted-
|
|||||||||||||||||||||||||||||||
Options
|
Average
|
Weighted-
|
Options
|
Average
|
Weighted-
|
|||||||||||||||||||||||||||||
Outstanding
|
Remaining
|
Average
|
Aggregate
|
Outstanding
|
Remaining
|
Average
|
Aggregate
|
|||||||||||||||||||||||||||
at
December 31,
|
Contractual
|
Exercise
|
Intrinsic
|
at
December 31,
|
Contractual
|
Exercise
|
Intrinsic
|
|||||||||||||||||||||||||||
Exercise
Price
|
2007
|
Life
(Years)
|
Price
|
Value
(A)
|
2007
|
Life
(Years)
|
Price
|
Value
(A)
|
||||||||||||||||||||||||||
$
|
3.75 -5.45
|
704,249
|
3.01
|
$
|
4.75
|
$
|
11,208,406
|
704,249
|
3.01
|
$
|
4.75
|
$
|
11,208,406
|
|||||||||||||||||||||
5.46
– 8.14
|
460,115
|
6.40
|
7.99
|
5,834,543
|
460,115
|
6.40
|
7.99
|
5,834,543
|
||||||||||||||||||||||||||
8.15
– 12.04
|
1,397,528
|
5.17
|
9.71
|
15,319,201
|
1,377,528
|
5.14
|
9.71
|
15,099,721
|
||||||||||||||||||||||||||
12.05
– 17.64
|
548,208
|
6.12
|
15.38
|
2,900,144
|
516,208
|
6.01
|
15.41
|
2,713,534
|
||||||||||||||||||||||||||
17.65
– 24.38
|
116,000
|
2.32
|
21.47
|
137,160
|
116,000
|
2.32
|
21.47
|
137,160
|
||||||||||||||||||||||||||
$
|
3.75
– 24.38
|
3,226,100
|
4.93
|
$
|
9.77
|
$
|
35,399,454
|
3,174,100
|
4.89
|
$
|
9.72
|
$
|
34,993,364
|
|||||||||||||||||||||
(A)
|
The
difference between the stock option’s exercise price and the closing price
of the common stock at December 31,
2007.
|
Number of
Shares
|
Weighted-
Average
Grant-Date
Fair
Value
|
|||||||
Unvested,
January 1, 2007
|
15,000 | 12.48 | ||||||
Granted
|
116,394 | 14.59 | ||||||
Vested
|
(5,000 | ) | 12.48 | |||||
Cancelled
|
(2,368 | ) | 13.68 | |||||
Unvested,
December 31, 2007
|
124,026 | $ | 14.44 | |||||
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
U.S. Army
|
$
|
2,150,274
|
$
|
1,796,338
|
$
|
897,887
|
||||||
Army
Research Laboratory (ARL)
|
457,264
|
239,357
|
865,445
|
|||||||||
Department
of Energy (DoE)
|
1,993,155
|
1,786,208
|
2,409,442
|
|||||||||
Air
Force Research Laboratory (AFRL)
|
—
|
—
|
481,207
|
|||||||||
$
|
4,600,693
|
$
|
3,821,903
|
$
|
4,653,981
|
|||||||
12.
|
COMMITMENTS
AND CONTINGENCIES:
|
13.
|
CONCENTRATION
OF RISK
|
14.
|
INCOME
TAXES:
|
December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Current
|
$
|
(804,980
|
)
|
$
|
(544,567
|
)
|
$
|
(424,207
|
)
|
|||
Deferred
|
(6,907,000
|
)
|
(8,092,992
|
)
|
(6,601,124
|
)
|
||||||
(7,711,980
|
)
|
(8,637,559
|
)
|
(7,025,331
|
)
|
|||||||
Increase
in valuation allowance
|
6,907,000
|
8,092,992
|
6,601,124
|
|||||||||
$
|
(804,980
|
)
|
$
|
(544,567
|
)
|
$
|
(424,207
|
)
|
||||
Related
Tax
|
Deferred
Tax
|
Expiration
|
||||||||||
Deduction
|
Asset
|
Date
|
||||||||||
Loss
carry forwards:
|
||||||||||||
Federal
net operating loss
|
$
|
120,738,000
|
$
|
41,051,000
|
2011
to 2027
|
|||||||
State
net operating loss
|
87,924,000
|
5,219,000
|
2010
to 2027
|
|||||||||
Total
loss carry forwards
|
$
|
208,662,000
|
$
|
46,270,000
|
||||||||
Tax
credit carry forwards:
|
||||||||||||
Research
tax credit
|
n/a
|
3,259,000
|
2018
to 2027
|
|||||||||
State
tax credits
|
n/a
|
1,004,000
|
2014
to 2022
|
|||||||||
Total
credit carry forwards
|
n/a
|
$
|
4,263,000
|
|||||||||
December 31,
|
||||||||
2007
|
2006
|
|||||||
Gross
deferred tax assets:
|
||||||||
Net
operating loss carry forwards
|
$
|
46,270,000
|
$
|
36,459,000
|
||||
Capitalized
start-up costs
|
1,961,000
|
3,923,000
|
||||||
Capitalized
technology license
|
3,318,000
|
3,092,000
|
||||||
Stock
options and warrants
|
589,000
|
2,603,000
|
||||||
Accruals
and reserves
|
332,000
|
286,000
|
||||||
Deferred
revenue
|
4,132,000
|
4,351,000
|
||||||
Other
|
466,000
|
430,000
|
||||||
Tax
credit carry forward
|
4,263,000
|
3,280,000
|
||||||
61,331,000
|
54,424,000
|
|||||||
Valuation
allowance
|
(61,331,000
|
)
|
(54,424,000
|
)
|
||||
Net
deferred tax asset
|
$
|
—
|
$
|
—
|
||||
15.
|
DEFINED
CONTRIBUTION PLAN:
|
16.
|
QUARTERLY
SUPPLEMENTAL FINANCIAL DATA
(UNAUDITED):
|
Three
Months Ended
|
||||||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
Total
|
||||||||||||||||
Revenue
|
$
|
3,014,630
|
$
|
2,315,170
|
$
|
3,077,281
|
$
|
2,898,826
|
$
|
11,305,907
|
||||||||||
Net
loss
|
(4,583,801
|
)
|
(5,175,371
|
)
|
(2,960,565
|
)
|
(3,256,104
|
)
|
(15,975,841
|
)
|
||||||||||
Basic
and diluted loss per share
|
(0.15
|
)
|
(0.16
|
)
|
(0.08
|
)
|
(0.08
|
)
|
(0.47
|
)
|
Three
Months Ended
|
||||||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
Total
|
||||||||||||||||
Revenue
|
$
|
3,271,406
|
$
|
3,009,316
|
$
|
3,096,288
|
$
|
2,544,282
|
$
|
11,921,292
|
||||||||||
Net
loss
|
(3,522,040
|
)
|
(4,312,651
|
)
|
(2,943,287
|
)
|
(4,408,826
|
)
|
(15,186,804
|
)
|
||||||||||
Basic
and diluted loss per share
|
(0.12
|
)
|
(0.14
|
)
|
(0.09
|
)
|
(0.14
|
)
|
(0.49
|
)
|