10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ___________

Commission File Number 1-12031

UNIVERSAL DISPLAY CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2372688
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
375 Phillips Boulevard, Ewing, New Jersey	08618
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (609) 671-0980

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    x  No    o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    x  No    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    o  No    x

As of August 2, 2016, the registrant had outstanding 46,956,623 shares of common stock.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets – June 30, 2016 and December 31, 2015	1
Consolidated Statements of Operations - Three and six months ended June 30, 2016 and 2015	2
Consolidated Statements of Comprehensive Income (Loss) – Three and six months ended June 30, 2016 and 2015	3
Consolidated Statement of Shareholders' Equity – Six months ended June 30, 2016	4
Consolidated Statements of Cash Flows – Six months ended June 30, 2016 and 2015	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	31
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	34
Item 4. Mine Safety Disclosures	34
Item 5. Other Information	34
Item 6. Exhibits	34

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

	June 30, 2016			December 31, 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	69,930		$	97,513
Short-term investments		246,281			297,981
Accounts receivable		17,984			24,729
Inventory		16,467			12,748
Deferred income taxes		10,097			12,326
Other current assets		5,561			2,387
Total current assets		366,320			447,684
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $29,736    and $27,897		22,610			22,407
ACQUIRED TECHNOLOGY, net of accumulated amortization of $60,416 and $54,837		162,469			72,015
INVESTMENTS		15,767			2,187
DEFERRED INCOME TAXES		12,293			14,945
OTHER ASSETS		543			174
TOTAL ASSETS	$	580,002		$	559,412
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,368		$	6,849
Accrued expenses		10,701			17,387
Deferred revenue		10,232			10,107
Other current liabilities		423			167
Total current liabilities		27,724			34,510
DEFERRED REVENUE		34,066			35,543
RETIREMENT PLAN BENEFIT LIABILITY		24,292			22,594
Total liabilities		86,082			92,647
COMMITMENTS AND CONTINGENCIES (Note 13)
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)		2			2
Common Stock, par value $0.01 per share, 100,000,000 shares authorized, 48,302,603    and 48,132,223 shares issued and outstanding at June 30, 2016 and December 31,    2015, respectively		483			482
Additional paid-in capital		593,170			589,885
Accumulated deficit		(49,876	)		(73,627	)
Accumulated other comprehensive loss		(9,701	)		(9,819	)
Treasury stock, at cost (1,357,863 shares at June 30, 2016 and December 31, 2015)		(40,158	)		(40,158	)
Total shareholders’ equity		493,920			466,765
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	580,002		$	559,412

The accompanying notes are an integral part of these consolidated financial statements.

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
REVENUE:
Material sales	$	22,315		$	24,324		$	46,619		$	51,142
Royalty and license fees		42,018			33,733			47,360			38,108
Technology development and support revenue		59			35			116			65
Total revenue		64,392			58,092			94,095			89,315
OPERATING EXPENSES:
Cost of material sales		5,684			39,086			10,736			47,667
Research and development		10,969			10,647			21,445			20,566
Selling, general and administrative		7,688			6,983			14,264			13,245
Patent costs and amortization of acquired technology		4,060			4,462			8,154			8,429
Royalty and license expense		1,966			1,673			2,841			2,458
Total operating expenses		30,367			62,851			57,440			92,365
Operating income (loss)		34,025			(4,759	)		36,655			(3,050	)
INTEREST INCOME		661			188			993			361
INTEREST EXPENSE		(8	)		(12	)		(15	)		(24	)
OTHER (EXPENSE) INCOME		(1,829	)		278			(1,914	)		340
INCOME (LOSS) BEFORE INCOME TAXES		32,849			(4,305	)		35,719			(2,373	)
INCOME TAX EXPENSE		(11,047	)		(7,466	)		(11,968	)		(8,084	)
NET INCOME (LOSS)	$	21,802		$	(11,771	)	$	23,751		$	(10,457	)
NET INCOME (LOSS) PER COMMON SHARE:
BASIC	$	0.46		$	(0.25	)	$	0.51		$	(0.23	)
DILUTED	$	0.46		$	(0.25	)	$	0.51		$	(0.23	)
WEIGHTED AVERAGE SHARES USED IN COMPUTING    NET INCOME (LOSS) PER COMMON SHARE:
BASIC		46,927,543			46,388,218			46,862,199			45,840,599
DILUTED		47,041,854			46,388,218			46,985,374			45,840,599

The accompanying notes are an integral part of these consolidated financial statements.

2

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
NET INCOME (LOSS)	$	21,802	$	(11,771	)	$	23,751		$	(10,457	)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gain (loss) on available-for-sale securities, net of    tax of $37, $11, $47 and $4, respectively		67		19			(84	)		4
Employee benefit plan:
Actuarial gain (loss), net of tax of $271, none, $200, and    none, respectively	479			-			(353	)		-
Amortization of prior service cost and actuarial loss for    retirement plan included in net periodic pension costs, net    of tax of $142, $157, $302 and $258, respectively		254		279			535			420
Net change for employee benefit plan		733		279			182			420
Change in cumulative foreign currency translation adjustment		20		-			20			-
TOTAL OTHER COMPREHENSIVE INCOME		820		298			118			424
COMPREHENSIVE INCOME (LOSS)	$	22,622	$	(11,473	)	$	23,869		$	(10,033	)

The accompanying notes are an integral part of these consolidated financial statements.

3

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except for share data)

	Series A Nonconvertible										Additional						Accumulated Other								Total
	Preferred Stock				Common Stock						Paid-in			Accumulated			Comprehensive			Treasury Stock					Shareholders’
	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Shares		Amount			Equity
BALANCE, DECEMBER 31, 2015		200,000	$	2		48,132,223		$	482		$	589,885		$	(73,627	)	$	(9,819	)		1,357,863	$	(40,158	)	$	466,765
Net income		—		—		—			—			—			23,751			—			—		—			23,751
Other comprehensive income		—		—		—			—			—						118			—		—			118
Exercise of common stock options		—		—		12,500			—			182			—			—			—		—			182
Issuance of common stock to    employees		—		—		216,389			2			6,441			—			—			—		—			6,443
Shares withheld for employee taxes						(90,886	)		(1	)		(4,793	)													(4,794	)
Issuance of common stock to Board    of Directors and Scientific    Advisory Board		—		—		28,046			—			1,191			—			—			—		—			1,191
Issuance of common stock to    employees under an ESPP		—		—		4,331			—			264			—			—			—		—			264
BALANCE, JUNE 30, 2016		200,000	$	2		48,302,603		$	483		$	593,170		$	(49,876	)	$	(9,701	)		1,357,863	$	(40,158	)	$	493,920

The accompanying notes are an integral part of these consolidated financial statements.

4

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Six Months Ended June 30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	23,751		$	(10,457	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred revenue		(3,601	)		(4,893	)
Depreciation		1,839			1,439
Amortization of intangibles		5,579			5,500
Inventory write-down		—			33,000
Amortization of premium and discount on investments, net		(801	)		(285	)
Stock-based compensation to employees		5,401			4,039
Stock-based compensation to Board of Directors and Scientific Advisory Board		891			659
Deferred income tax benefit		4,826			3,984
Retirement plan benefit expense		1,982			1,512
Decrease (increase) in assets:
Accounts receivable		6,745			4,697
Inventory		(3,719	)		(12,860	)
Other current assets		(3,174	)		(417	)
Other assets		(369	)		80
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		(5,625	)		826
Other current liabilities		256			(58	)
Deferred revenue		2,250			48,412
Net cash provided by operating activities		36,231			75,178
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(2,162	)		(3,146	)
Purchase of intangibles		(96,033	)		—
Purchases of investments		(325,226	)		(267,520	)
Proceeds from sale of investments		364,017			263,058
Net cash used in investing activities		(59,404	)		(7,608	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		202			171
Proceeds from the exercise of common stock options		182			1,372
Payment of withholding taxes related to stock-based compensation to employees		(4,794	)		(5,280	)
Net cash used in financing activities		(4,410	)		(3,737	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(27,583	)		63,833
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		97,513			45,418
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	69,930		$	109,251
The following non-cash activities occurred:
Unrealized loss on available-for-sale securities	$	131		$	8
Common stock issued to Board of Directors and Scientific Advisory Board that was    earned and accrued for in a previous period		300			300
Common stock issued to employees that was earned and accrued for in a previous period		1,105			967
Net change in accounts payable and accrued expenses related to purchases of property    and equipment		(120	)		(725	)

The accompanying notes are an integral part of these consolidated financial statements.

5

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BUSINESS:

Universal Display Corporation (the Company) is a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials. OLEDs are thin, lightweight and power-efficient solid-state devices that emit light, making them highly suitable for use in full-color displays and as lighting products. OLED displays are capturing a growing share of the display market. The Company believes this is because OLEDs offer potential advantages over competing display technologies with respect to power efficiency, contrast ratio, viewing angle, video response time, form factor and manufacturing cost. The Company also believes that OLED lighting products have the potential to replace many existing light sources in the future because of their high power efficiency, excellent color rendering index, low operating temperature and novel form factor. The Company's technology leadership and intellectual property position should enable it to share in the revenues from OLED displays and lighting products as they enter mainstream consumer and other markets.

The Company's primary business strategy is to (1) further develop and license its proprietary OLED technologies to manufacturers of products for display applications, such as mobile phones, televisions, tablets, wearables, portable media devices, notebook computers, personal computers, and automotive interiors, and specialty and general lighting products; and (2) develop new OLED materials and sell existing and any new materials to those product manufacturers. The Company has established a significant portfolio of proprietary OLED technologies and materials, primarily through internal research and development efforts and acquisitions of patents and patent applications, as well as maintaining its relationships with world-class partners such as Princeton University (Princeton), the University of Southern California (USC), the University of Michigan (Michigan) and PPG Industries, Inc. (PPG Industries). The Company currently owns, exclusively licenses or has the sole right to sublicense more than 4,100 patents issued and pending worldwide.

The Company sells its proprietary OLED materials to customers for evaluation and use in commercial OLED products. The Company also enters into agreements with manufacturers of OLED display and lighting products under which it grants them licenses to practice under its patents and to use the Company's proprietary know-how. At the same time, the Company works with these and other companies who are evaluating the Company's OLED technologies and materials for possible use in commercial OLED display and lighting products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2016 and results of operations for the three and six months ended June 30, 2016 and 2015, and cash flows for the six months ended June 30, 2016 and 2015. While management believes that the disclosures presented are adequate to make the information not misleading, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s latest year-end financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for the full year.

Principles of Consolidation

The consolidated financial statements include the accounts of Universal Display Corporation and its wholly owned subsidiaries, UDC, Inc., UDC Ireland Limited, Universal Display Corporation Hong Kong, Limited, Universal Display Corporation Korea, Y.H., and Universal Display Corporation Japan GK. All intercompany transactions and accounts have been eliminated.

Management’s Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates made are principally in the areas of revenue recognition for license agreements, the useful life of acquired

6

technology, the use and recoverability of inventories, income taxes including realization of deferred tax assets, stock-based compensation and retirement benefit plan liabilities. Actual results could differ from those estimates.

Inventories

Inventories consist of raw materials, work-in-process and finished goods, including inventory consigned to customers, and are stated at the lower of cost, determined on a first-in, first-out basis, or market. Inventory valuation and firm committed purchase order assessments are performed on a quarterly basis and those items that are identified to be obsolete or in excess of forecasted usage are written down to their estimated realizable value. Estimates of realizable value are based upon management’s analyses and assumptions, including, but not limited to, forecasted sales levels by product, expected product lifecycle, product development plans and future demand requirements. A 12-month rolling forecast based on factors, including, but not limited to, production cycles, anticipated product orders, marketing forecasts, backlog, and shipment activities is used in the inventory analysis. If market conditions are less favorable than forecasts or actual demand from customers is lower than estimates, additional inventory write-downs may be required. If demand is higher than expected, inventories that had previously been written down may be sold.

Certain of the Company’s customers have assumed the responsibility for maintaining the Company's inventory at their location based on the customers' demand forecast. Notwithstanding the fact that the Company builds and ships the inventory, the customer does not purchase the consigned inventory until the inventory is drawn or pulled by the customer to be used in the manufacture of the customer’s product. Though the consigned inventory may be at the customer’s physical location, it remains inventory owned by the Company until the inventory is drawn or pulled, which is the time at which the sale takes place.

Fair Value of Financial Instruments

The carrying values of accounts receivable, other current assets, and accounts payable approximate fair value in the accompanying financial statements due to the short-term nature of those instruments. The Company’s other financial instruments, which include cash equivalents and investments, are carried at fair value.

Revenue Recognition and Deferred Revenue

Material sales relate to the Company’s sale of its OLED materials for incorporation into its customers’ commercial OLED products or for their OLED development and evaluation activities. Material sales are recognized at the time title passes, which is typically at the time of shipment or at the time of delivery, depending upon the contractual agreement between the parties.

The Company receives license and royalty payments under certain commercial, development and technology evaluation agreements, some of which are non-refundable. These payments may include royalty and license fees made pursuant to license agreements and certain commercial supply agreements. Amounts received are deferred and classified as either current or non-current deferred revenue based upon current contractual remaining terms; however, based upon on-going relationships with customers, as well as future agreement extensions and other factors, amounts classified as current as of June 30, 2016 may not be recognized as revenue over the next twelve months. For arrangements with extended payment terms where the fee is not fixed and determinable, the Company recognizes revenue when the payment is due and payable. Royalty revenue and license fees included as part of commercial supply agreements are recognized when earned and the amount is fixed and determinable. If the Company used different estimates for the useful life of the licensed technology, or if fees are fixed and determinable, reported revenue during the relevant period would differ.

Technology development and support revenue is revenue earned from government contracts, development and technology evaluation agreements and commercialization assistance fees, which includes reimbursements by government entities for all or a portion of the research and development costs the Company incurs in relation to its government contracts. Revenues are recognized proportionally as research and development costs are incurred, or as defined milestones are achieved.

Currently, the Company's most significant commercial license agreement, which runs through the end of 2017, is with Samsung Display Co., Ltd. (SDC) and covers the manufacture and sale of specified OLED display products. Under this agreement, the Company is being paid a license fee, payable in semi-annual installments over the agreement term of 6.4 years. The installments, which are due in the second and fourth quarter of each year, increase on an annual basis over the term of the agreement. The agreement conveys to SDC the non-exclusive right to use certain of the Company's intellectual property assets for a limited period of time that is less than the estimated life of the assets. Ratable recognition of revenue is impacted by the agreement's extended increasing payment terms in light of the Company's limited history with similar agreements. As a result, revenue is recognized at the lesser of the proportional performance approach (ratable) and the amount of due and payable fees from SDC. Given the increasing contractual payment schedule, license fees under the agreement are recognized as revenue when they become due and payable, which is currently scheduled to be in the second and fourth quarter of each year.

7

In 2015, the Company entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display) which were effective as of January 1, 2015 and superseded the 2007 commercial supply agreement between the parties. The new agreements have a term that is set to expire by the end of 2022. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under the Company's patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The prepaid royalty amount is included in deferred revenue and a portion of this amount can be credited against total royalties due over the life of the contract. The agreements include customary provisions relating to warranties, indemnities, confidentiality, assignability and business terms. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the term of the agreements, as well as minimum royalty revenue to be generated under the patent license agreement. The Company expects to generate revenue under these agreements that are predominantly tied to LG Display’s sales of OLED licensed products. The OLED commercial supply agreement provides for the sale of materials for use by LG Display, which may include phosphorescent dopants and host materials.

The Company records taxes billed to customers and remitted to various governmental entities on a gross basis in both revenues and cost of material sales in the consolidated statements of operations. The amounts of these pass through taxes reflected in revenues and cost of material sales were $13,000 and $69,000 for the three and six months ended June 30, 2016, respectively, and $240,000 and $850,000 for the three and six months ended June 30, 2015, respectively.

Cost of Material Sales

Cost of material sales consists of labor and material costs associated with the production of materials processed at the Company's manufacturing partners and at the Company's internal manufacturing processing facility. The Company’s portion of cost of material sales also includes depreciation of manufacturing equipment, as well as, manufacturing overhead costs and inventory adjustments for excess and obsolete inventory.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued a new revenue recognition standard entitled Revenue from Contracts with Customers. The objective of the standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer. The standard is effective for annual reporting periods beginning after December 15, 2017. Earlier adoption as of the original date is optional; however, the Company will adopt the standard beginning January 1, 2018. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company is currently assessing which method it will choose for adoption, and is evaluating the impact of the adoption of this new accounting standard on its consolidated results of operations and financial position.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity that uses the first-in first-out method for inventory to report inventory cost at the lower of cost or net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2015-11 may have on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires the classification of all deferred tax assets and liabilities as noncurrent. The standard is effective for annual reporting periods beginning after December 15, 2016. The standard allows for either "prospective" adoption, meaning the standard is applied to the most current period presented in the financial statements or "full retrospective” adoption, meaning the standard is applied to all periods presented. Earlier adoption is permitted. The Company is evaluating the effect that ASU 2015-17 may have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Accounting. The objective of the standard is to simplify the accounting and related disclosures associated with employee share-based accounting. The standard is effective for annual reporting periods beginning after December 15, 2016. The ASU requires prospective adoption, meaning the standard is applied to the most current period presented in the financial statements. Earlier adoption is permitted. The Company is evaluating the effect that ASU 2016-09 may have on its consolidated financial statements and related disclosures.

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3. CASH, CASH EQUIVALENTS AND INVESTMENTS: 

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company classifies its remaining investments as available-for-sale. These securities are carried at fair market value, with unrealized gains and losses reported in shareholders’ equity. Gains or losses on securities sold are based on the specific identification method. Investments as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):

	Amortized		Unrealized					AggregateFair
Investment Classification	Cost		Gains		(Losses)			Market Value
June 30, 2016
Certificates of deposit	$	10,626	$	9	$	(2	)	$	10,633
Corporate bonds		234,222		12		(53	)		234,181
U.S. Government bonds		17,498		—		(262	)		17,236
	$	262,346	$	21	$	(317	)	$	262,050
December 31, 2015
Certificates of deposit	$	11,532	$	3	$	(14	)	$	11,521
Corporate bonds		233,848		—		(139	)		233,709
U.S. Government bonds		54,953		1		(16	)		54,938
	$	300,333	$	4	$	(169	)	$	300,168

4. INVENTORY:

Inventory consisted of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	6,538	$	6,539
Work-in-process		1,776		1,064
Finished goods		8,153		5,145
Inventory	$	16,467	$	12,748

5. FAIR VALUE MEASUREMENTS:

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2016 (in thousands):

			Fair Value Measurements, Using
	Total carrying value as of June 30, 2016		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	22,376	$	22,376	$	—	$	—
Short-term investments		246,281		246,281		—		—
Long-term investments		15,767		15,767		—		—

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2015 (in thousands):

			Fair Value Measurements, Using
	Total carrying value as of December 31, 2015		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	34,980	$	34,980	$	—	$	—
Short-term investments		297,981		297,981		—		—
Long-term investments		2,187		2,187		—		—

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Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial asset's or liability’s classification is determined based on the lowest level input that is significant to the fair value measurement.

Changes in fair value of the investments are recorded as unrealized gains and losses in other comprehensive income. If a decline in fair value of an investment is deemed to be other than temporary, the cost of the Company’s investment will be written down by the amount of the other-than-temporary impairment with a resulting charge to net income. There were no other-than-temporary impairments of investments as of June 30, 2016 or December 31, 2015.

6. RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY, UNIVERSITY OF SOUTHERN CALIFORNIA AND THE UNIVERSITY OF MICHIGAN:

The Company funded OLED technology research at Princeton University and, on a subcontractor basis, at the University of Southern California for 10 years under a Research Agreement executed with Princeton University in August 1997 (the 1997 Research Agreement). The principal investigator conducting work under the 1997 Research Agreement transferred to the University of Michigan in January 2006. Following this transfer, the 1997 Research Agreement was allowed to expire on July 31, 2007.

As a result of the transfer, the Company entered into a new Sponsored Research Agreement with the University of Southern California to sponsor OLED technology research and, on a subcontractor basis, with the University of Michigan. This new Sponsored Research Agreement (as amended, the 2006 Research Agreement) was effective as of May 1, 2006 and had an original term of three years. On May 1, 2009, the Company amended the 2006 Research Agreement to extend the term of the agreement for an additional four years. The 2006 Research Agreement superseded the 1997 Research Agreement with respect to all work being performed at the University of Southern California and the University of Michigan. Payments under the 2006 Research Agreement were made to the University of Southern California on a quarterly basis as actual expenses were incurred. The Company incurred a total of $5.0 million in research and development expense for work performed under the 2006 Research Agreement during the extended term, which ended on April 30, 2013.

Effective June 1, 2013, the Company amended the 2006 Research Agreement again to extend the term of the agreement for an additional four years. As of June 30, 2016, the Company was obligated to pay the University of Southern California up to $2.1 million for work to be actually performed during the remaining extended term, which expires April 30, 2017. From June 1, 2013 through June 30, 2016, the Company incurred $3.5 million in research and development expense for work performed under the 2006 Research Agreement.

On October 9, 1997, the Company, Princeton University and the University of Southern California entered into an Amended License Agreement (as amended, the 1997 Amended License Agreement) under which Princeton University and the University of Southern California granted the Company worldwide, exclusive license rights, with rights to sublicense, to make, have made, use, lease and/or sell products and to practice processes based on patent applications and issued patents arising out of work performed by Princeton University and the University of Southern California under the 1997 Research Agreement. Under this 1997 Amended License Agreement, the Company is required to pay Princeton University royalties for licensed products sold by the Company or its sublicensees. For licensed products sold by the Company, the Company is required to pay Princeton University 3% of the net sales price of these products. For licensed products sold by the Company’s sublicensees, the Company is required to pay Princeton 3% of the revenues received by the Company from these sublicensees. These royalty rates are subject to renegotiation for products not reasonably conceivable as arising out of the 1997 Research Agreement if Princeton University reasonably determines that the royalty rates payable with respect to these products are not fair and competitive.

The Company is obligated, under the 1997 Amended License Agreement, to pay to Princeton University minimum annual royalties. The minimum royalty payment is $100,000 per year. The Company recorded royalty expense in connection with this agreement of $2.0 million and $1.7 million for the three months ended June 30, 2016 and 2015, respectively, and $2.8 million and $2.4 million for the six months ended June 30, 2016 and 2015, respectively.

The Company also is required, under the 1997 Amended License Agreement, to use commercially reasonable efforts to bring the licensed OLED technology to market. However, this requirement is deemed satisfied if the Company invests a minimum of $800,000 per year in research, development, commercialization or patenting efforts respecting the patent rights licensed to the Company.

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In connection with entering into the 2006 Research Agreement, the Company amended the 1997 Amended License Agreement to include the University of Michigan as a party to that agreement effective as of January 1, 2006. Under this amendment, Princeton University, the University of Southern California and the University of Michigan have granted the Company a worldwide exclusive license, with rights to sublicense, to make, have made, use, lease and/or sell products and to practice processes based on patent applications and issued patents arising out of work performed under the 2006 Research Agreement. The financial terms of the 1997 Amended License Agreement were not impacted by this amendment.

7. ACQUIRED TECHNOLOGY:

Acquired technology consists of acquired license rights for patents and know-how obtained from PD-LD, Inc., Motorola, BASF SE (BASF) and Fujifilm. These intangible assets consist of the following (in thousands):

	June 30, 2016
PD-LD, Inc.	$	1,481
Motorola		15,909
BASF		96,033
Fujifilm		109,462
		222,885
Less: Accumulated amortization		(60,416	)
Acquired technology, net	$	162,469

Amortization expense related to acquired technology was $2.8 million and $2.7 million for the three months ended June 30, 2016 and 2015, respectively, and $5.6 million and $5.5 million for the six months ended June 30, 2016 and 2015, respectively. Amortization expense is included in the patent costs and amortization of acquired technology expense line item on the Consolidated Statements of Operations and is expected to be $15.9 million in 2016 and $20.6 million for each of the five subsequent fiscal years.

Motorola Patent Acquisition

In 2000, the Company entered into a royalty-bearing license agreement with Motorola whereby Motorola granted the Company perpetual license rights to what are now 74 issued U.S. patents relating to Motorola’s OLED technologies, together with foreign counterparts in various countries. These patents will all expire in the U.S. by 2018.

On March 9, 2011, the Company purchased these patents from Motorola, including all existing and future claims and causes of action for any infringement of the patents, pursuant to a Patent Purchase Agreement. The Patent Purchase Agreement effectively terminated the Company’s license agreement with Motorola, including any obligation to make royalty payments to Motorola. The technology acquired from Motorola is being amortized over a period of 7.5 years.

Fujifilm Patent Acquisition

On July 23, 2012, the Company entered into a Patent Sale Agreement with Fujifilm. Under the agreement, Fujifilm sold more than 1,200 OLED-related patents and patent applications in exchange for a cash payment of $105.0 million, plus costs incurred in connection with the purchase. The agreement contains customary representations and warranties and covenants, including respective covenants not to sue by both parties thereto. The agreement permitted the Company to assign all of its rights and obligations under the agreement to its affiliates, and the Company assigned, prior to the consummation of the transactions contemplated by the agreement, its rights and obligations to UDC Ireland Limited (UDC Ireland), a wholly-owned subsidiary of the Company formed under the laws of the Republic of Ireland. The transactions contemplated by the agreement were consummated on July 26, 2012. The Company recorded the $105.0 million plus $4.5 million of purchase costs as acquired technology, which is being amortized over a period of 10 years.

BASF Patent Acquisition

On June 28, 2016, UDC Ireland entered into and consummated an IP Transfer Agreement with BASF. Under the IP Transfer Agreement, BASF sold to UDC Ireland all of its rights, title and interest to certain of its owned and co-owned intellectual property rights relating to the composition of, development, manufacture and use of OLED materials, including OLED lighting and display stack technology, as well as, certain tangible assets. The intellectual property includes knowhow and more than 500 issued and pending patents in the area of phosphorescent materials and technologies. These assets were acquired in exchange for a cash payment of €86.8 million ($95.8 million). In addition, UDC Ireland also took on certain rights and obligations under three joint research and development agreements to which BASF was a party. The IP Transfer Agreement also contains customary representations, warranties

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and covenants of the parties. UDC Ireland recorded the payment of €86.8 million ($95.8 million) and acquisition costs incurred of $261,000 as acquired technology which is being amortized over a period of 10 years.

8. EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS:

On September 22, 2011, the Company entered into an Amended and Restated OLED Materials Supply and Service Agreement with PPG Industries (the New OLED Materials Agreement), which replaced the original OLED Materials Agreement with PPG Industries effective as of October 1, 2011. The term of the New OLED Materials Agreement ran through December 31, 2015 and shall be automatically renewed for additional one year terms, unless terminated by the Company by providing prior notice of one year or terminated by PPG by providing prior notice of two years. The agreement was automatically renewed through December 31, 2017. The New OLED Materials Agreement contains provisions that are substantially similar to those of the original OLED Materials Agreement. Under the New OLED Materials Agreement, PPG Industries continues to assist the Company in developing its proprietary OLED materials and supplying the Company with those materials for evaluation purposes and for resale to its customers.

Under the New OLED Materials Agreement, the Company compensates PPG Industries on a cost-plus basis for the services provided during each calendar quarter. The Company is required to pay for some of these services in all cash. Up to 50% of the remaining services are payable, at the Company’s sole discretion, in cash or shares of the Company’s common stock, with the balance payable in cash. The actual number of shares of common stock issuable to PPG Industries is determined based on the average closing price for the Company’s common stock during a specified number of days prior to the end of each calendar half-year period ending on March 31 and September 30. If, however, this average closing price is less than $20.00, the Company is required to compensate PPG Industries in cash. No shares were issued for services to PPG for the three or six months ended June 30, 2016 or 2015.

The Company is also to reimburse PPG Industries for raw materials used for research and development. The Company records the purchases of these raw materials as a current asset until such materials are used for research and development efforts.

The Company recorded research and development expense of $1.0 million and $1.5 million for the three months ended June 30, 2016 and 2015, respectively, and $1.9 million and $3.0 million for the six months ended June 30, 2016 and 2015, respectively, in relation to the cash portion of the reimbursement of expenses and work performed by PPG Industries, excluding amounts paid for commercial chemicals.

9. SHAREHOLDERS’ EQUITY:

Common and Preferred Stock

The Company is authorized to issue 100 million shares of $0.01 par value common stock and 5 million shares of $0.01 par value preferred stock. Each share of the Company’s common stock entitles the holder to one vote on all matters to be voted upon by the shareholders. As of June 30, 2016, the Company had issued 48,302,603 shares of common stock and 200,000 shares of preferred stock.

Scientific Advisory Board and Employee Awards

During the first quarters of 2016 and 2015, the Company granted a total of 27,967 and 35,205 shares, respectively, of fully vested common stock to employees and non-employee members of the Scientific Advisory Board for services performed in 2015 and 2014, respectively. The fair value of the shares issued was $1.1 million and $967,000, respectively, for shares issued to employees and $300,000 for both quarters for shares issued to members of the Scientific Advisory Board, which amounts were accrued at December 31, 2015 and 2014, respectively. In connection with the issuance of these grants, 8,106 and 9,565 shares, with fair values of $410,000 and $346,000, were withheld in satisfaction of employee tax withholding obligations in 2016 and 2015, respectively.

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10. ACCUMULATED OTHER COMPREHENSIVE LOSS: 

Amounts related to the changes in accumulated other comprehensive loss were as follows (in thousands):

	Unrealized gain (loss) on available-for-sale-securities			Net unrealized gain (loss) on retirement plan (2)			Change in cumulative foreign currency translation adjustment		Total			Affected line items in the consolidated statements of operations
Balance December 31, 2015, net of tax	$	(111	)	$	(9,708	)	$	—	$	(9,819	)
Other comprehensive gain (loss) before reclassification		(84	)		—			20		(64	)
Actuarial gain (loss)		—			(353	)		—		(353	)
Reclassification to net income (1)		—			535			—		535		Selling, general and administrative, research and development, and cost of material sales
Change during period		(84	)		182			20		118
Balance June 30, 2016, net of tax	$	(195	)	$	(9,526	)	$	20	$	(9,701	)

	Unrealized gain (loss) on available-for-sale-securities			Net unrealized gain (loss) on retirement plan (2)			Change in cumulative foreign currency translation adjustment		Total			Affected line items in the consolidated statements of operations
Balance December 31 2014, net of tax	$	(28	)	$	(4,354	)	$	—	$	(4,382	)
Other comprehensive gain (loss) before reclassification		4			—			—		4
Actuarial gain (loss)		—			—			—		—
Reclassification to net income (1)		—			420			—		420		Selling, general and administrative, and research and development
Change during period		4			420			—		424
Balance June 30 2015, net of tax	$	(24	)	$	(3,934	)	$	—	$	(3,958	)

(1) The Company reclassified amortization of prior service cost and actuarial loss for its retirement plan from accumulated other comprehensive loss to net income (loss) of $535,000  and $420,000 for the six months ended June 30, 2016 and 2015, respectively.

(2) Refer to Note 12: Supplemental Executive Retirement Plan.

11. STOCK-BASED COMPENSATION:

The Company recognizes in the statements of operations the grant-date fair value of equity based awards, such as shares issued under employee stock purchase plans, restricted stock awards, restricted stock units and performance unit awards issued to employees and directors.

The grant-date fair value of stock awards is based on the closing price of the stock on the date of grant. The fair value of share-based awards is recognized as compensation expense on a straight-line basis over the requisite service period, net of forfeitures. The Company issues new shares upon the respective grant, exercise or vesting of share-based payment awards, as applicable.

Performance unit awards are subject to either a performance-based or market-based vesting requirement. For performance-based vesting, the grant-date fair value of the award, based on fair value of the Company's common stock, is recognized over the service period based on an assessment of the likelihood that the applicable performance goals will be achieved, and compensation expense is periodically adjusted based on actual and expected performance. Compensation expense for performance unit awards with market-based vesting is calculated based on the estimated fair value as of the grant date utilizing a Monte Carlo simulation model and is recognized over the service period on a straight-line basis.

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Equity Compensation Plan

In 1995, the Board of Directors of the Company adopted a stock option plan, which was amended and restated in 2003 and is now called the Equity Compensation Plan. The Equity Compensation Plan provides for the granting of incentive and nonqualified stock options, shares of common stock, stock appreciation rights and performance units to employees, directors and consultants of the Company. Stock options are exercisable over periods determined by the Compensation Committee, but for no longer than 10 years from the grant date. Through June 30, 2016, the Company’s shareholders have approved increases in the number of shares reserved for issuance under the Equity Compensation Plan to 10,500,000, and have extended the term of the plan through 2024. As of June 30, 2016, there were 2,712,886 shares that remained available to be granted under the Equity Compensation Plan.

Stock Awards

Restricted Stock Awards and Units

The Company has issued restricted stock awards and units to employees and non-employee members of the Scientific Advisory Board with vesting terms of one to six years. The fair value is equal to the market price of the Company’s common stock on the date of grant for awards granted to employees and equal to the market price at the end of the reporting period for unvested non-employee awards or upon the date of vesting for vested non-employee awards. Expense for restricted stock awards and units is amortized ratably over the vesting period for the awards issued to employees and using a graded vesting method for the awards issued to non-employee members of the Scientific Advisory Board.

During the six months ended June 30, 2016, the Company granted 41,543 shares of restricted stock awards and restricted stock units to employees and non-employee members of the Scientific Advisory Board, which had a total fair value of $2.1 million on the respective dates of grant, and will vest over three to five years from the date of grant, provided that the grantee is still an employee of the Company or is still providing services to the Company on the applicable vesting date.

For the three months ended June 30, 2016 and 2015, the Company recorded, as compensation charges related to all restricted stock awards and units, selling, general and administrative expense of $1.6 million for both periods, research and development expense of $403,000 and $495,000, respectively, and cost of material sales of $94,000 and none, respectively. For the six months ended June 30, 2016 and 2015, the Company recorded, as compensation charges related to all restricted stock awards and units, selling, general and administrative expense of $3.3 million and $2.5 million, respectively, research and development expense of $975,000 and $892,000, respectively, and cost of material sales of $258,000 and none, respectively.

In connection with the vesting of restricted stock awards and units during the six months ended June 30, 2016 and 2015, 82,780 and 97,856 shares, with aggregate fair values of $4.4 million and $4.2  million, respectively, were withheld in satisfaction of tax withholding obligations.

For the three months ended June 30, 2016 and 2015, the Company recorded as compensation charges related to all restricted stock units to non-employee members of the Scientific Advisory Board, research and development expense of $121,000 and $85,000, respectively. For the six months ended June 30, 2016 and 2015, the Company recorded as compensation charges related to all restricted stock units to non-employee members of the Scientific Advisory Board, research and development expense of $164,000  and $274,000, respectively.

Board of Directors Compensation

The Company has granted restricted stock units to non-employee members of the Board of Directors with quarterly vesting over a period of approximately one year. The fair value is equal to the market price of the Company's common stock on the date of grant. The restricted stock units are issued and expense is recognized ratably over the vesting period. For the three months ended June 30, 2016 and 2015, the Company recorded compensation charges for services performed, related to all restricted stock units granted to non-employee members of the Board of Directors, selling, general and administrative expense of $365,000 and $208,000, respectively. For the six months ended June 30, 2016 and 2015, the Company recorded compensation charges for services performed, related to all restricted stock units granted to non-employee members of the Board of Directors, selling, general and administrative expense of $730,000 and $385,000, respectively. In connection with the vesting of the restricted stock, the Company issued 15,000 and 14,167 shares, during the six months ended June 30, 2016 and 2015, respectively, to non-employee members of the Board of Directors.

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Performance Unit Awards

During the six months ended June 30, 2016, the Company granted 25,045 performance units, of which 12,520 are subject to a performance-based vesting requirement and 12,525 are subject to a market-based vesting requirement and will vest over the terms described below. Total fair value of the performance unit awards granted was $1.5 million on the date of grant.

Each performance unit award is subject to both a performance-vesting requirement (either performance-based or market-based) and a service-vesting requirement.

The performance-based vesting requirement is tied to the Company's cumulative revenue growth compared to the cumulative revenue growth of companies comprising the Nasdaq Electronics Components Index, as measured over a specific performance period. The market-based vesting requirement is tied to the Company's total shareholder return relative to the total shareholder return of companies comprising the Nasdaq Electronics Components Index, as measured over a specific performance period.

The maximum number of performance units that may vest based on performance is two times the shares granted. Further, if the Company's total shareholder return is negative, the performance units may not vest at all.

For the three months ended June 30, 2016 and 2015, the Company recorded general and administrative expense of $278,000 and $175,000, respectively, research and development expense of $77,000 and $45,000, respectively, and cost of material sales of $28,000 and none, respectively, related to performance units. For the six months ended June 30, 2016 and 2015, the Company recorded general and administrative expense of $555,000 and $504,000, respectively, research and development expense of $154,000 and $142,000, and cost of material sales of $57,000 and none, respectively, related to performance units.

In connection with the vesting of performance units during the six months ended June 30, 2016 and 2015, none and 16,071 shares with an aggregate fair value of none and  $752,000, respectively, were withheld in satisfaction of tax withholding obligations.

Employee Stock Purchase Plan

On April 7, 2009, the Board of Directors of the Company adopted an Employee Stock Purchase Plan (ESPP). The ESPP was approved by the Company’s shareholders and became effective on June 25, 2009. The Company has reserved 1,000,000 shares of common stock for issuance under the ESPP. Unless sooner terminated by the Board of Directors, the ESPP will expire when all reserved shares have been issued.

Eligible employees may elect to contribute to the ESPP through payroll deductions during consecutive three-month purchase periods. Each employee who elects to participate will be deemed to have been granted an option to purchase shares of the Company’s common stock on the first day of the purchase period. Unless the employee opts out during the purchase period, the option will automatically be exercised on the last day of the period, which is the purchase date, based on the employee’s accumulated contributions to the ESPP. The purchase price will equal 85% of the lesser of the closing price per share of common stock on the first day of the period or the last business day of the period.

Employees may allocate up to 10% of their base compensation to purchase shares of common stock under the ESPP; however, each employee may purchase no more than 12,500 shares on a given purchase date, and no employee may purchase more than $25,000 of common stock under the ESPP during a given calendar year.

During the six months ended June 30, 2016 and 2015, the Company issued 4,331 and 5,819 shares, respectively, of its common stock under the ESPP, resulting in proceeds of $201,000 and $171,000, respectively.

For the three months ended June 30, 2016 and 2015, the Company recorded charges of $10,000 for both periods to selling, general and administrative expense, $18,000 and $13,000, respectively, to research and development expense, and $4,000 and none, to cost of material sales, respectively, related to the ESPP equal to the amount of the discount and the value of the look-back feature.

For the six months ended June 30, 2016 and 2015, the Company recorded charges of $20,000 and $21,000, respectively, to selling, general and administrative expense, $35,000 and $26,000, respectively, to research and development expense, and $8,000 and none, to cost of material sales, related to the ESPP equal to the amount of the discount and the value of the look-back feature.

12. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN:

On March 18, 2010, the Compensation Committee and the Board of Directors of the Company approved and adopted the Universal Display Corporation Supplemental Executive Retirement Plan (SERP), effective as of April 1, 2010. On March 3, 2015, the

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Compensation Committee and the Board of Directors amended the SERP to include salary and bonus as part of the plan. Prior to this amendment, the SERP benefit did not take into account any bonuses. This change increased the liability related to the SERP. The purpose of the SERP, which is unfunded, is to provide certain of the Company’s key employees with supplemental retirement benefits following a cessation of their employment and to encourage their continued employment with the Company. As of June 30, 2016 there were six participants in the SERP.

The Company records amounts relating to the SERP based on calculations that incorporate various actuarial and other assumptions, including discount rates, rate of compensation increases, retirement dates and life expectancies. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits.

The components of net periodic pension cost were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Service cost	$	350	$	319	$	708	$	548
Interest cost		207		166		437		286
Amortization of prior service cost		393		436		830		678
Amortization of loss		4		—		7		—
Total net periodic benefit cost	$	954	$	921	$	1,982	$	1,512

13. COMMITMENTS AND CONTINGENCIES:

Commitments

Under the 2006 Research Agreement with USC, the Company is obligated to make certain payments to USC based on work performed by USC under that agreement, and by Michigan under its subcontractor agreement with USC. See Note 6 for further explanation.

Under the terms of the 1997 Amended License Agreement, the Company is required to make minimum royalty payments to Princeton. See Note 6 for further explanation.

The Company has agreements with seven executive officers which provide for certain cash and other benefits upon termination of employment of the officer in connection with a change in control of the Company. If the executive’s employment is terminated in connection with the change in control, the executive is entitled to a lump-sum cash payment equal to two times the sum of the average annual base salary and bonus of the officer and immediate vesting of all stock options and other equity awards that may be outstanding at the date of the change in control, among other items.

In order to manage manufacturing lead times and help ensure adequate material supply, the Company entered into a New OLED Materials Agreement (see note 8) that will allow PPG Industries to procure and produce inventory based upon criteria as defined by the Company. These purchase commitments consist of firm, noncancelable and unconditional commitments. In certain instances, this agreement allows the Company the option to reschedule and adjust the Company’s requirements based on its business needs prior to firm orders being placed. As of June 30, 2016 and December 31, 2015, the Company had purchase commitments for inventory of $6.2 million and $9.0 million, respectively.

Patent Related Challenges and Oppositions

Each major jurisdiction in the world that issues patents provides both third parties and applicants an opportunity to seek a further review of an issued patent. The process for requesting and considering such reviews is specific to the jurisdiction that issued the patent in question, and generally does not provide for claims of monetary damages or a review of specific claims of infringement. The conclusions made by the reviewing administrative bodies tend to be appealable and generally are limited in scope and applicability to the specific claims and jurisdiction in question.

The Company believes that opposition proceedings are frequently commenced in the ordinary course of business by third parties who may believe that one or more claims in a patent do not comply with the technical or legal requirements of the specific jurisdiction in which the patent was issued. The Company views these proceedings as reflective of its goal of obtaining the broadest legally permissible patent coverage permitted in each jurisdiction. Once a proceeding is initiated, as a general matter, the issued patent continues to be presumed valid until the jurisdiction’s applicable administrative body issues a final non-appealable decision. Depending on the jurisdiction, the outcome of these proceedings could include affirmation, denial or modification of some or all of the

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originally issued claims. The Company believes that as OLED technology becomes more established and its patent portfolio increases in size, so will the number of these proceedings.

Below are summaries of certain active proceedings that have been commenced against issued patents that are either exclusively licensed to the Company or which are now assigned to the Company. The Company does not believe that the confirmation, loss or modification of the Company’s rights in any individual claim or set of claims that are the subject of the following legal proceedings would have a material impact on the Company’s materials sales or licensing business or on the Company’s consolidated financial statements, including its consolidated statements of income, as a whole. However, as noted within the descriptions, some of the following proceedings involve issued patents that relate to the Company’s fundamental phosphorescent OLED technologies and the Company intends to vigorously defend against claims that, in the Company’s opinion, seek to restrict or reduce the scope of the originally issued claim, which may require the expenditure of significant amounts of the Company’s resources. In certain circumstances, when permitted, the Company may also utilize the proceedings to request modification of the claims to better distinguish the patented invention from any newly identified prior art and/or improve the claim scope of the patent relative to commercially important categories of the invention. The entries marked with an "*" relate to the Company’s UniversalPHOLED phosphorescent OLED technology, some of which may be commercialized by the Company.

Opposition to European Patent No. 1394870*

On April 20, 2010, Merck Patent GmbH; BASF Schweitz AG of Basel, Switzerland; Osram GmbH of Munich, Germany; Siemens Aktiengesellschaft of Munich, Germany; and Koninklijke Philips Electronics N.V., of Eindhoven, The Netherlands filed Notices of Opposition to European Patent No.1394870 (the EP '870 patent). The EP '870 patent, which was issued on July 22, 2009, is a European counterpart patent, in part, to U.S. patents 6,303,238; 6,579,632; 6,872,477; 7,279,235; 7,279,237; 7,488,542; 7,563,519; and 7,901,795; and to pending U.S. patent application 13/035,051, filed on February 25, 2011 (hereinafter the “U.S. '238 Patent Family”). They are exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

An Oral Hearing was held before an EPO panel of first instance in Munich, Germany, on April 8-9, 2014. The panel rejected the original claims and amended the claims to comply with EPO requirements by more narrowly defining the scope of the claims. The '870 patent, in its amended form, was held by the panel to comply with the EPO requirements.

The Company believes the EPO's decision relating to the broad original claims is erroneous and has appealed the ruling to reinstate a broader set of claims. This patent, as originally granted by the EPO, is deemed valid during the pendency of the appeals process.

At this time, based on the Company’s current knowledge, the Company believes that the patent being challenged should be declared valid and that all or a significant portion of the Company’s claims should be upheld. However, the Company cannot make any assurances of this result.

Invalidation Trial in Japan for Japan Patent No. 4511024*

On June 16, 2011, the Company learned that a Request for an Invalidation Trial was filed in Japan by Semiconductor Energy Laboratory, Co., Ltd. for its Japanese Patent No. JP-4511024 (the JP '024 patent), which issued on May 14, 2010. The JP '024 patent is a counterpart patent, in part, to the U.S. '238 Patent Family, which relate to the EP '870 patent, which is subject to one of the above-noted European oppositions and which relates to the Company’s UniversalPHOLED phosphorescent OLED technology. They are exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

On May 10, 2012, the Company learned that the JPO issued a decision upholding the validity of certain claimed inventions in the JP '024 Patent but invalidating the broadest claims in the patent. The Company appealed the JPO’s decision to the Japanese IP High Court. On October 31, 2013, the Japanese IP High Court ruled that the prior art references relied on by the JPO did not support the JPO’s findings, reversed the JPO’s decision with respect to the previously invalidated broad claims in the JP ‘024 patent and remanded the matter back to the JPO for further consideration consistent with its decision. The JPO subsequently issued a decision upholding the validity of certain claimed inventions in the JP '024 Patent but invalidating the broadest claims in the patent. The Company appealed the decision to reinstate a broader set of claims but the IP High Court declined to reinstate the broader set of claims. The Company appealed the IP High Court's decision to the Japanese Supreme Court for reconsideration of the legal basis of the IP High Court's decision. This patent, as originally granted by the JPO, is deemed valid during the pendency of the appeals process.

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Although the Company cannot provide any assurances as to the possible outcome of future appellate proceedings which the Company may elect to pursue, if any, the patent is expected to be maintained at least with respect to the narrower set of claims which were not the subject of the IP High Court's invalidation ruling.

Opposition to European Patent No. 1390962

On November 16, 2011, Osram AG and BASF SE each filed a Notice of Opposition to European Patent No. 1390962 (EP '962 patent), which relates to the Company’s white phosphorescent OLED technology. The EP '962 patent, which was issued on February 16, 2011, is a European counterpart patent to U.S. patents 7,009,338 and 7,285,907. They are exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

The EPO combined the oppositions into a single opposition proceeding, and a hearing on this matter was held in December 2015, wherein the EPO Opposition Division revoked the patent claims for alleged insufficiencies under EPC Article 83. The Company believes the EPO's decision relating to the original claims is erroneous, and has appealed the decision. The patent, as originally granted, is deemed valid during the pendency of the appeals process.

At this time, based on its current knowledge, the Company believes that the patent being challenged should be declared valid, and that all or a significant portion of the Company's claims should be upheld. However, the Company cannot make any assurances of this result.

Opposition to European Patent No. 1933395*

On February 24 and 27, 2012, Sumitomo, Merck Patent GmbH and BASF SE filed oppositions to the Company's European Patent No. 1933395 (the EP '395 patent). The EP ‘395 patent is a counterpart to the EP ‘637 patent, and, in part, to U.S. Patents 7,001,536, 6,902,830, and 6,830,828, and to JP patents 4358168 and 4357781. This patent is exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

At an Oral Hearing on October 14, 2013, the EPO panel issued a decision that affirmed the basic invention and broad patent coverage in the EP '395 patent, but narrowed the scope of the original claims.

On February 26, 2014, the Company appealed the ruling to reinstate a broader set of claims. The patent, as originally granted by the EPO, is deemed to be valid during the pendency of an appeals process. Two of the three opponents also filed their own appeals of the ruling. In January 2015, Sumitomo withdrew its opposition of the '395 patent, and the EPO accepted the withdrawal notice. The appeal proceedings were held in the second quarter of 2016. As a result of the proceedings, the board concluded the oral proceedings and proposed to reinstate a broader set of claims pending the resolution of a remaining question of the applicable law, a question that the board has deferred to the Enlarged Board of Appeals for review. The originally-granted claims remain in force during the pendency of this process.

In addition to the above proceedings and now-concluded proceedings which have been referenced in prior filings, from time to time, the Company may have other proceedings that are pending which relate to patents the Company acquired as part of the Fujifilm patent or BASF OLED Patent acquisitions or which relate to technologies that are not currently widely utilized in the marketplace.

14. CONCENTRATION OF RISK:

Included in technology development and support revenue in the accompanying statement of operations is $59,000 and $31,000 for the three months ended June 30, 2016 and 2015, respectively, and $116,000 and $43,000 for the six months ended June 30, 2016 and 2015, respectively, of revenue which was derived from contracts with United States government agencies. Revenues derived from contracts with United States government agencies represented less than 1% of the consolidated revenue for all periods presented.

Revenues and accounts receivable from the Company's largest customers were as follows (in thousands):

	% of Revenues for the three months ended June 30,				% of Revenues for the six months ended June 30,				Accounts Receivable as of
Customer	2016		2015		2016		2015		June 30, 2016
A		76%		74%		64%		63%	$	6,298
B		18%		18%		29%		21%	$	9,055
C		3%		1%		4%		1%	$	2,309

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Revenues from outside of North America represented approximately 99%  of the consolidated revenue for both the three months ended June 30, 2016 and 2015, and approximately 99% of the consolidated revenue for both the six months ended June 30, 2016 and 2015. Revenues by geographic area are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Country	2016		2015		2016		2015
South Korea		61,196		53,822		87,142		76,033
China		1,812		291		3,569		680
Japan		800		2,886		2,104		10,656
Other non-U.S. locations		405		576		1,018		1,204
Total non-U.S. locations	$	64,213	$	57,575	$	93,833	$	88,573
United States		179		517		262		742
Total revenue	$	64,392	$	58,092	$	94,095	$	89,315

The Company attributes revenue to different geographic areas on the basis of the location of the customer.

Long-lived assets (net), by geographic area are as follows (in thousands):

	June 30, 2016		December 31, 2015
United States	$	22,440	$	22,187
Other		170		220
Total long-lived assets	$	22,610	$	22,407

Substantially all chemical materials were purchased from one supplier. See Note 8.

15. INCOME TAXES:

The Company is subject to income taxes in both United States and foreign jurisdictions. The effective income tax rate was 33.6% and 33.5%, respectively, for the three and six months ended June 30, 2016. For the three and six months ended June 30, 2016, income tax expense of $11.0 million and $12.0 million, respectively, was recorded primarily related to foreign tax withheld on royalty and license fees paid to the Company and federal income taxes.

The effective income tax rate was (173.4) % and (340.7) %, respectively, for the three and six months ended June 30, 2015. The Company’s effective tax rate rose significantly due to an inventory write-down primarily related to UDC Ireland, which resulted in a loss for the full year 2015. Due to continued losses at UDC Ireland no tax benefit was recorded. For the three and six months ended June 30, 2015, an income tax expense of $7.5 million and $8.1 million, respectively, was recorded primarily related to foreign tax withheld on royalty and license fees paid to the Company and federal income taxes.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. At this time there is no evidence to release the valuation allowances that relate to UDC Ireland, foreign tax credits and New Jersey research and development credits.

16. NET INCOME (LOSS) PER COMMON SHARE:

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share ("ASC 260"), which requires earnings per share for each class of stock to be calculated using the two-class method. The two-class method is an allocation of income between the holders of common stock and the Company's participating security holders. Under the two-class method, income for the reporting period is allocated between common shareholders and other security holders based on their respective participation rights in undistributed income. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method.

Basic net income per common share is computed by dividing net income allocated to common shareholders by the weighted-average number of shares of common stock outstanding for the period excluding unvested restricted stock units and performance

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units. Net income allocated to the holders of the Company's unvested restricted stock awards is calculated based on the shareholders proportionate share of weighted average shares of common stock outstanding on an if-converted basis. The effect of using the two-class method is immaterial to the consolidated financial statements and does not change the reported earnings per share figures and as such is not presented.

For purposes of determining diluted net income per common share, basic net income per share is further adjusted to include the effect of potential dilutive common shares outstanding, including stock options, restricted stock units and performance units, and the impact of shares to be issued under the ESPP.

The following table is a reconciliation of net income (loss) and the shares used in calculating basic and diluted net income (loss) per common share for the three and six months ended June 30, 2016 and 2015 (in thousands, except share and per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Numerator:
Net income (loss)	$	21,802	$	(11,771	)	$	23,751	$	(10,457	)
Denominator:
Weighted average common shares outstanding – Basic		46,927,543		46,388,218			46,862,199		45,840,599
Effect of dilutive shares:
Common stock equivalents arising from stock options    and ESPP		4,051		—			6,914		—
Restricted stock awards and units and performance    units		110,260		—			116,261		—
Weighted average common shares outstanding – Diluted		47,041,854		46,388,218			46,985,374		45,840,599
Net income (loss) per common share:
Basic	$	0.46	$	(0.25	)	$	0.51	$	(0.23	)
Diluted	$	0.46	$	(0.25	)	$	0.51	$	(0.23	)

For the three months ended June 30, 2016 and 2015, the combined effects of unvested restricted stock awards, restricted stock units, performance unit awards and stock options of none and 947,442, respectively, were excluded from the calculation of diluted EPS as their impact would have been antidilutive. For the six months ended June 30, 2016 and 2015, the combined effects of unvested restricted stock awards, restricted stock units, performance units and stock options of 99 and 947,442, respectively, and the impact of shares to be issued under the ESPP, which was minor, were excluded from the calculation of diluted EPS as their impact would have been antidilutive.

17. SUBSEQUENT EVENTS:

On June 23, 2016 the Company announced that it had entered into an agreement to acquire Adesis, Inc. (Adesis). Adesis was a privately held contract research organization (CRO) with 43 employees specializing in organic and organometallic synthetic research, development, and commercialization. Adesis is a technology vendor to companies in the pharmaceutical, fine chemical, biomaterials, and catalyst industries, and has worked with the Company over the last few years to help advance and accelerate a number of the Company’s product offerings. The transaction closed on July 11, 2016. Under the terms of the agreement, the Company’s subsidiary, UDC, Inc. acquired all outstanding shares of Adesis in a merger for approximately $33.0 million in cash. The acquisition was funded through use of existing cash and investments.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes above.

CAUTIONARY STATEMENT

CONCERNING FORWARD-LOOKING STATEMENTS

This discussion and analysis contains some “forward-looking statements.” Forward-looking statements concern possible or assumed future results of operations, including descriptions of our business strategies and customer relationships. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate in these circumstances.

As you read and consider this discussion and analysis, you should not place undue reliance on any forward-looking statements. You should understand that these statements involve substantial risk and uncertainty and are not guarantees of future performance or results. They depend on many factors that are discussed further in the section entitled (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2015, as supplemented by disclosures, if any, in Item 1A of Part II below. Changes or developments in any of these areas could affect our financial results or results of operations and could cause actual results to differ materially from those contemplated in the forward-looking statements.

All forward-looking statements speak only as of the date of this report or the documents incorporated by reference, as the case may be. We do not undertake any duty to update any of these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

OVERVIEW

We are a leader in the research, development and commercialization of organic light emitting diode, or OLED, technologies and materials for use in displays for wearables, mobile phones, televisions, tablets, portable media devices, laptop computers, personal computers and automotive interiors, as well as solid-state lighting applications. Since 1994, we have been exclusively engaged, and expect to continue to be primarily engaged, in funding and performing research and development activities relating to OLED technologies and materials, and commercializing these technologies and materials. We derive our revenue from the following:

· sales of OLED materials for evaluation, development and commercial manufacturing;

· intellectual property and technology licensing; and

· technology development and support, including government contract work and support provided to third parties for commercialization of their OLED products.

Material sales relate to our sale of OLED materials for incorporation into our customers’ commercial OLED products or for their OLED development and evaluation activities. Material sales are recognized at the time title passes, which is typically at time of shipment or at time of delivery depending upon the contractual agreement between the parties.

We receive license and royalty payments under certain commercial, development and technology evaluation agreements, some of which are non-refundable advances. These payments may include royalty and license fees made pursuant to license agreements and also license fees included as part of certain commercial supply agreements. For arrangements with extended payment terms where the fee is not fixed or determinable, we recognize revenue when the payment is due and payable. Royalty revenue and license fees included as part of commercial supply agreements are recognized when earned and the amount is fixed and determinable.

Currently, our most significant commercial license agreement, which runs through the end of 2017, is with SDC and covers the manufacture and sale of specified OLED display products. Under this agreement, we are being paid a license fee, payable in semi-annual installments over the agreement term of 6.4 years. The installments, which are due in the second and fourth quarter of each year, increase on an annual basis over the term of the agreement. The agreement conveys to SDC the non-exclusive right to use certain of our intellectual property assets for a limited period of time that is less than the estimated life of the assets. Ratable recognition of revenue is impacted by the agreement's extended increasing payment terms in light of our limited history with similar agreements. As a result, revenue is recognized at the lesser of the proportional performance approach (ratable) and the amount of due and payable fees

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from SDC. Given the increasing contractual payment schedule, license fees under the agreement are recognized as revenue when they become due and payable, which is currently scheduled to be in the second and fourth quarter of each year.

At the same time we entered into the current patent license agreement with SDC, we also entered into a new supplemental material purchase agreement with SDC. Under the current supplemental material purchase agreement, SDC agrees to purchase from us a minimum dollar amount of phosphorescent emitter materials for use in the manufacture of licensed products. This minimum purchase commitment is subject to SDC’s requirements for phosphorescent emitter materials and our ability to meet these requirements over the term of the supplemental agreement. The minimum purchase amounts increase on an annual basis over the term of the supplemental agreement. These amounts were determined through negotiation based on a number of factors, including, without limitation, estimates of SDC’s OLED business growth as a percentage of published OLED market forecasts and SDC’s projected minimum usage of red and green phosphorescent emitter materials over the term of the agreement.

In 2015, we entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display), which were effective as of January 1, 2015 and superseded the existing 2007 commercial supply agreement between the parties. The new agreements have a term that is set to expire by the end of 2022. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under the Company's patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The agreements include customary provisions relating to warranties, indemnities, confidentiality, assignability and business terms. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the life of the agreements as well as minimum royalty revenue to be generated under the patent license agreement. The Company expects to generate revenue under these agreements that are predominantly tied to LG Display's sales of OLED licensed products. The OLED commercial supply agreement provides for the sales of materials for use by LG Display, which may include phosphorescent dopants and host materials.

In the second quarter of 2016, we entered into and consummated the transactions contemplated by an IP Transfer Agreement with BASF SE (BASF). Under the IP Transfer Agreement, BASF sold to us certain of its rights, title and interest to its owned and co-owned intellectual property rights relating to the composition, development, manufacture and use of OLED materials, including OLED lighting and display stack technology, as well as, certain tangible assets. The intellectual property includes knowhow and more than 500 issued and pending patents in the area of phosphorescent materials and technologies.

Technology development and support revenue is revenue earned from government contracts, development and technology evaluation agreements and commercialization assistance fees, which includes reimbursements by government entities for all or a portion of the research and development costs we incur in relation to our government contracts. Revenues are recognized proportionally as research and development costs are incurred, or as defined milestones are achieved.

While we have made significant progress over the past few years developing and commercializing our family of OLED technologies (including our PHOLED, TOLED, FOLED technologies) and materials, and have generated net income over the past four years, we incurred significant losses prior to this period resulting in an accumulated deficit of $49.9 million as of June 30, 2016.

We anticipate fluctuations in our annual and quarterly results of operations due to uncertainty regarding, among other factors:

· the timing, cost and volume of sales of our OLED materials;

· the timing of our receipt of license fees and royalties, as well as fees for future technology development and evaluation;

· the timing and magnitude of expenditures we may incur in connection with our ongoing research and development and patent-related activities; and

· the timing and financial consequences of our formation of new business relationships and alliances.

2015 inventory write-down

As previously discussed, during the six months ended June 30, 2015, the Company experienced a faster-than-anticipated decline in host material sales, which we believe was a result of our customer's selling new products that did not include our host materials. Based on our sales forecast, we anticipated significantly lower sales of our existing host material. As such, a write-down in net realizable value of our inventory was required.

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The following table sets forth non-GAAP measures that reflect the amount of the inventory write-down, with reconciliations to the most directly comparable GAAP measures:

(unaudited, in thousands, except share and per share data)	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Cost of commercial material sales reconciliation
Cost of commercial material sales	$	3,187		$	38,585		$	8,179		$	47,086
Cost of commercial material sales adjustments:
Inventory write-down		—			33,000			—			33,000
Adjusted cost of commercial material sales	$	3,187		$	5,585		$	8,179		$	14,086
Cost of commercial material sales as a % of commercial material sales		15	%		177	%		19	%		99	%
Adjusted cost of commercial material sales as a % of commercial material sales		15	%		26	%		19	%		30	%
Operating income (loss) reconciliation
Operating income (loss)	$	34,025		$	(4,759	)	$	36,655		$	(3,050	)
Operating income (loss) adjustments:
Inventory write-down		—			33,000			—			33,000
Adjusted operating income	$	34,025		$	28,241		$	36,655		$	29,950
Operating income (loss) as a % of total revenue		53	%		(8	)%		39	%		(3	)%
Adjusted operating income as a % of total revenue		53	%		49	%		39	%		34	%
Net income (loss) reconciliation
Net income (loss)	$	21,802		$	(11,771	)	$	23,751		$	(10,457	)
Net income (loss) per share:
Basic	$	0.46		$	(0.25	)	$	0.51		$	(0.23	)
Diluted	$	0.46		$	(0.25	)	$	0.51		$	(0.23	)
Net income (loss) adjustments:
Inventory write-down		—			33,000			—			33,000
Income tax effect of inventory write-down*		—			(1,860	)		—			(1,860	)
Adjusted net income	$	21,802		$	19,369		$	23,751		$	20,683
Net income (loss) as a % of total revenue		34	%		(20	)%		25	%		(12	)%
Adjusted net income as a % of total revenue		34	%		33	%		25	%		23	%
Adjusted net income per share:
Basic **	$	0.46		$	0.42		$	0.51		$	0.45
Diluted ***	$	0.46		$	0.41		$	0.51		$	0.45
Weighted average shares used in computing net income (loss) per share and adjusted net income per share:
Basic		46,927,543			46,388,218			46,862,199			45,840,599
Diluted		47,041,854			46,388,218			46,985,374			45,840,599

* Adjusted net income assumes an effective tax rate of 32.5% based on excluding the impact of the inventory write down.

** Adjusted net income per common share, basic, is derived from dividing adjusted net income by the number of weighted average shares used in computing basic net income per common share.

*** Adjusted net income per common share, diluted, for the three and six months ended June 30, 2015 is derived from dividing non-GAAP adjusted net income by the weighted average shares of 46,691,525 and 46,421,612, respectively.

Non-GAAP Measures

To supplement our selected financial data presented in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP measures. These non-GAAP measures include adjusted operating income, adjusted cost of commercial material sales, adjusted net income, adjusted net income per common share, basic and adjusted net income per common share, diluted.

Each of these non-GAAP measures excludes the effect of the 2015 write-down of primarily existing host materials that were not included in our customer’s new products. We have provided these non-GAAP measures, which we believe more accurately reflect the

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operating performance of our ongoing business, to enhance investors' overall understanding of our current financial performance and period-to-period comparisons. The presentation of non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2016 and 2015

We had operating income of $34.0 million for the three months ended June 30, 2016, compared to an operating loss of $4.8 million for the three months ended June 30, 2015. The increase in operating income was primarily due to the following:

· a decrease in operating expenses of $32.5 million, which included a $33.0 million write-down of inventory recorded in the three months ended June 30, 2015; and

· an increase in revenue of $6.3 million, which reflected an increase in royalty and license fees, partially offset by a decrease in material sales.

We had net income of $21.8 million or $0.46 per basic and diluted share for the three months ended June 30, 2016, compared to a net loss of $11.8 million or $0.25 per basic and diluted share for the three months ended June 30, 2015. The increase in net income was primarily due to an increase in operating income of $38.8 million resulting from the $33.0 million write-down of inventory recorded in the three months ended June 30, 2015. Absent the inventory write-down and the associated $1.9 million reduction of income tax expense, we had adjusted net income of $19.4 million (or $0.42 per share, basic and $0.41 per share, diluted) for the three months ended June 30, 2015.

Revenue

The following table details our revenues for the three months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				(Decrease) Increase
	2016		2015		$			%
REVENUE:
Material sales	$	22,315	$	24,324	$	(2,009	)		(8	)%
Royalty and license fees		42,018		33,733		8,285			25	%
Technology development and support revenue		59		35		24			69	%
Total revenue	$	64,392	$	58,092	$	6,300			11	%

Total revenue for the three months ended June 30, 2016 increased by $6.3 million compared to the three months ended June 30, 2015. The increase in revenue was the result of an increase in royalty and license fee revenue partially offset by a decrease in commercial material sales.

Material sales

The following table details our revenues derived from material sales for the three months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				(Decrease)
	2016		2015		$			%
Material Sales:
Commercial material sales	$	20,726	$	21,788	$	(1,062	)		(5	)%
Developmental material sales		1,589		2,536		(947	)		(37	)%
Total material sales	$	22,315	$	24,324	$	(2,009	)		(8	)%

Commercial material sales for the three months ended June 30, 2016 decreased by $1.1 million compared to the three months ended June 30, 2015, primarily due to lower host material sales of $2.0 million.

Developmental material sales for the three months ended June 30, 2016 decreased by $0.9 million compared to the three months ended June 30, 2015. The decrease in our development material sales was primarily due to a decrease in the number of grams sold.

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Material sales included sales of both phosphorescent emitter and host materials which were comprised of the following for the three months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				Increase (Decrease)
	2016		2015		$			%
Material Sales:
Phosphorescent emitter sales	$	22,158	$	22,152	$	6			0	%
Host material sales		157		2,172		(2,015	)		(93	)%
Total material sales	$	22,315	$	24,324	$	(2,009	)		(8	)%

Phosphorescent emitter sales for the three months ended June 30, 2016 increased slightly compared to the three months ended June 30, 2015.

Host material sales for the three months ended June 30, 2016 decreased by $2.0 million compared to the three months ended June 30, 2015. In 2014, sales of our host material began to decline due to what we believe was a result of our customer's selling new products that did not include our host material. Based on our current sales forecast, we anticipate that sales of existing host material will continue to be minimal. Our customers are not required to purchase our host materials in order to utilize our phosphorescent emitter materials and the host material sales business continues to be more competitive than the phosphorescent emitter material sales business. 

Royalty and license fees

Royalty and license fees were as follows for the three months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				Increase
	2016		2015		$		%
Royalty and license fees	$	42,018	$	33,733	$	8,285		25	%

Royalty and license fees for the three months ended June 30, 2016 increased by $8.3 million compared to the three months ended June 30, 2015. The increase was mainly related to the receipt and recognition of $37.5 million of royalty and license fee payments under our patent and license agreement with SDC, compared to $30.0 million in the prior period.

Technology development and support revenue

Technology development and support revenue were as follows for the three months ended June 30, 2016 and 2015 (in thousands):

	Three Months Ended June 30,				Increase
	2016		2015		$		%
Technology development and support revenue	$	59	$	35	$	24		69	%

Technology development and support revenue is revenue earned from U.S. government contracts and development and technology evaluation agreements and commercialization assistance fees.

Technology development and support revenue for the three months ended June 30, 2016 increased by $24,000 compared to the three months ended June 30, 2015.

Cost of material sales

Cost of commercial material sales for the three months ended June 30, 2016 and 2015 were as follows (in thousands):

	Three Months Ended June 30,
	2016			2015
Commercial material sales	$	20,726		$	21,788
Cost of commercial material sales		3,187			38,565
% of commercial material sales		15	%		177	%

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Cost of commercial material sales for the three months ended June 30, 2016 decreased by $35.4 million compared to the three months ended June 30, 2015. The decrease in the cost of our commercial material sales in 2016 was due to an inventory write-down of $33.0 million in the prior year, as well as a decline in our commercial material sales. During the three months ended June 30, 2015, the Company experienced a faster-than-anticipated decline in host material sales and based on sales forecasts, we anticipated significantly lower sales of our existing host material. As such, a write-down in net realizable value of our inventory was required. Without the write-down and commensurate with the decline in material sales revenue, the adjusted cost of commercial material sales would have been $5.6 million and the adjusted cost of commercial material sales as a percentage of commercial material sales would have been 26% for the three months ended June 30, 2015 as compared to $3.2 million and 15%, respectively, for the three months ended June 30, 2016. The decrease in the adjusted cost of commercial material sales was due to the decrease in host sales, which have less favorable margins than our emitter materials.

Commercial materials are materials that have been validated by us for use in commercial OLED products. Cost of commercial material sales includes the cost of producing materials that have been classified as commercial, shipping costs for such materials, and inventory write-downs, but excludes the cost of producing certain early development materials which are included in research and development expense. Depending on the amounts, timing and stage of materials being classified as commercial, we expect the cost of materials sales to fluctuate from quarter to quarter.

Research and development

Research and development expenses increased to $11.0 million for the three months ended June 30, 2016, as compared to $10.6 million for the three months ended June 30, 2015.

Selling, general and administrative

Selling, general and administrative expenses increased to $7.7 million for the three months ended June 30, 2016, as compared to $7.0 million for the three months ended June 30, 2015. The increase in selling, general and administrative expenses was primarily due to higher employee-related costs.

Patent costs and amortization of acquired technology

Patent costs and amortization of acquired technology decreased to $4.1 million for the three months ended June 30, 2016, as compared to $4.5 million for the three months ended June 30, 2015. The decrease relates to the timing of expenses related to prosecution, maintenance and opposition of our patent portfolio.

Royalty and license expense

Royalty and license expense increased to $2.0 million for the three months ended June 30, 2016, as compared to $1.7 million for the three months ended June 30, 2015. The increase was due to increased royalties incurred under our amended license agreement with Princeton, USC, and Michigan, resulting from higher royalty and license fees. See Note 6 in Notes to Consolidated Financial Statements for further discussion.

Other (Expense) Income

Other expense was $1.8 million for the three months ended June 30, 2016, compared to other income of $278,000 for the three months ended June 30, 2015 and consisted primarily of net exchange losses and gains on foreign currency transactions. Other expense for 2016 primarily consisted of exchange losses on foreign currency associated with the BASF OLED patent acquisitions.

Income taxes

Income tax expense of $11.0 million and $7.5 million for the three months ended June 30, 2016 and 2015, respectively, was recorded primarily related to foreign taxes on royalty and license fees paid to the Company and federal income taxes. The effective income tax rate was 33.6% and (173.4)% for the three months ended June 30, 2016, and 2015 respectively. The Company's effective tax rate was significantly higher in 2015 due to an inventory write-down primarily related to UDC Ireland Limited on which no tax benefit was recorded due to previous losses. For the three months ended June 30, 2015, absent the inventory write-down, income tax expense would have been $9.4 million and the effective income tax rate would have been 32.5%.

26

Comparison of the Six Months Ended June 30, 2016 to 2015

We had operating income of $36.7 million for the six months ended June 30, 2016, as compared to an operating loss of $3.1 million for the six months ended June 30, 2015. The increase in operating income was primarily due to the following:

· a decrease in operating expenses of $34.9 million, which includes a $33.0 million write-down of inventory in the six months ended June 30, 2015; and

· an increase in revenue of $4.8 million, which reflects an increase in royalty and license fees of $9.3 million, partially offset by a decrease in material sales of $4.5 million.

We had net income of $23.7 million (or $0.51 per basic and diluted share) for the six months ended June 30, 2016, compared to net loss of $10.5 million (or $0.23 per basic and diluted share) for the six months ended June 30, 2015. The increase in net income was primarily due to:

· an increase in operating income of $39.7 million, primarily due to a $33.0 million write-down of inventory in the six months ended June 30, 2015; partially offset by

· an increase in income tax expense of $3.9 million.

Absent the inventory write-down and the associated $1.9 million reduction of income tax expense, we had adjusted net income of $20.7 million (or $0.45 per share, basic and diluted) for the six months ended June 30, 2015.

Revenue

The following table details our revenues for the six months ended June 30, 2016 and 2015 (in thousands):

	Six Months Ended June 30,				(Decrease) Increase
	2016		2015		$			%
REVENUE:
Material sales	$	46,619	$	51,142	$	(4,523	)		(9	)%
Royalty and license fees		47,360		38,108		9,252			24	%
Technology development and support revenue		116		65		51			78	%
Total revenue	$	94,095	$	89,315	$	4,780			5	%

Total revenue for the six months ended June 30, 2016 increased by $4.8 million compared to the six months ended June 30, 2015. The increase in revenue was the result of an increase in royalty and license fee revenue, partially offset by a decrease in material sales.

Material sales

The following table details our revenues derived from material sales for the six months ended June 30, 2016 and 2015 (in thousands):

	Six Months Ended June 30,				(Decrease) Increase
	2016		2015		$			%
Material Sales:
Commercial material sales	$	42,840	$	47,418	$	(4,578	)		(10	)%
Developmental material sales		3,779		3,724		55			1	%
Total material sales	$	46,619	$	51,142	$	(4,523	)		(9	)%

Commercial material sales for the six months ended June 30, 2016 decreased by $4.6 million compared to the six months ended June 30, 2015, primarily due to lower host sales of $7.0 million.

Developmental material sales for the six months ended June 30, 2016 increased by $55,000 compared to the six months ended June 30, 2015.

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Material sales included sales of both phosphorescent emitter and host materials which were comprised of the following for the six months ended June 30, 2016 and 2015 (in thousands):

	Six Months Ended June 30,				Increase (Decrease)
	2016		2015		$			%
Material Sales:
Phosphorescent emitter sales	$	46,021	$	43,547	$	2,474			6	%
Host material sales		598		7,595		(6,997	)		(92	)%
Total material sales	$	46,619	$	51,142	$	(4,523	)		(9	)%

Phosphorescent emitter sales for the six months ended June 30, 2016 increased by $2.5 million compared to the six months ended June 30, 2015.

Host material sales for the six months ended June 30, 2016 decreased by $7.0 million compared to the six months ended June 30, 2015. In 2014, sales of our host material began to decline due to what we believe was a result of our customer's selling new products that did not include our host material. Based on our current sales forecast, we anticipate that sales of existing host material will remain minimal. Our customers are not required to purchase our host materials in order to utilize our phosphorescent emitter materials, and the host material sales business continues to be more competitive than the phosphorescent emitter material sales business. 

Royalty and license fees

Royalty and license fees were as follows for the six months ended June 30, 2016 and 2015 (in thousands):

	Six Months Ended June 30,				Increase
	2016		2015		$		%
Royalty and license fees	$	47,360	$	38,108	$	9,252		24	%

Royalty and license fees for the six months ended June 30, 2016 increased by $9.3 million compared to the six months ended June 30, 2015. The increase was primarily related to the receipt and recognition of $37.5 million of royalty and license fee payments under our patent and license agreement with SDC, compared to $30.0 million in six months ended June 30, 2015.

Technology development and support revenue

Technology development and support revenue for the six months ended June 30, 2016 and 2015 were as follows (in thousands):

	Six Months Ended June 30,				Increase
	2016		2015		$		%
Technology development and support revenue	$	116	$	65	$	51		78	%

Technology development and support revenue is revenue earned from U.S. government contracts and development and technology evaluation agreements and commercialization assistance fees.

Technology development and support revenue for the six months ended June 30, 2016 increased by $51,000 compared to the six months ended June 30, 2015.

Cost of material sales

Cost of commercial material sales were as follows for the six months ended June 30, 2016 and 2015 (in thousands):

	Six Months Ended June 30,
	2016			2015
Commercial material sales	$	42,840		$	47,418
Cost of commercial material sales		8,179			47,086
% of commercial material sales		19	%		99	%

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Cost of commercial material sales for the six months ended June 30, 2016 decreased by $38.9 million compared to the six months ended June 30, 2015. The decrease in the cost of our commercial material sales was primarily due to an inventory write-down of $33.0 million recorded in the six months ended June 30, 2015, and a decrease in commercial material sales.

During the three months ended June 30, 2015, the Company experienced a faster-than-anticipated decline in host material sales and based on current sales forecast, we anticipate significantly lower sales of our existing host material. As such, a write-down in net realizable value of our inventory was required. Without the write-down and commensurate with the decline in material sales revenue, the adjusted cost of commercial material sales would have been $14.1 million for the six months ended June 30, 2015, and the adjusted cost of commercial material sales as a percentage of commercial material sales would have been 30% for the six months ended June 30, 2015. The decrease in the adjusted cost of commercial material sales as a percentage of commercial material sales was due to the decrease in host sales, which have less favorable margins than our emitter materials.

Commercial materials are materials that have been validated by us for use in commercial OLED products. Cost of commercial material sales includes the cost of producing materials that have been classified as commercial, shipping costs for such materials, and inventory write-downs, but excludes the cost of producing certain early development materials which are included in research and development expense. Depending on the amounts, timing and stage of materials being classified as commercial, we expect the cost of materials sales to fluctuate from quarter to quarter.

Research and development

Research and development expenses increased to $21.4 million for the six months ended June 30, 2016, as compared to $20.6 million for the six months ended June 30, 2015.

Selling, general and administrative

Selling, general and administrative expenses increased to $14.3 million for the six months ended June 30, 2016, as compared to $13.2 million for the six months ended June 30, 2015. The increase in selling, general and administrative expenses was primarily due to higher employee-related costs.

Patent costs and amortization of acquired technology

Patent costs and amortization of acquired technology decreased to $8.2 million for the six months ended June 30, 2016, as compared to $8.4 million for the six months ended June 30, 2015. The decrease relates to the timing of expenses related to prosecution, maintenance and opposition of our patent portfolio.

Royalty and license expense

Royalty and license expense increased to $2.8 million for the six months ended June 30, 2016, as compared to $2.4 million for the six months ended June 30, 2015. The increase was mainly due to increased royalties incurred under our amended license agreement with Princeton, USC, and Michigan, resulting from higher qualifying material sales and increased royalty and license fees. See Note 6 in Notes to Consolidated Financial Statements for further discussion.

Other (Expense) Income

Other expense was $1.9 million for the three months ended June 30, 2016, as compared to other income of $340,000 for the three months ended June 30, 2015 and consisted primarily of net exchange losses and gains on foreign currency transactions. Other expense for 2016 primarily consisted of exchange losses on foreign currency associated with the BASF OLED patent acquisitions.

Income taxes

Income tax expense of $12.0 million and $8.1 million was recorded for the six months ended June 30, 2016 and 2015, respectively, primarily related to foreign taxes withheld on royalty and license fees paid to the Company and federal income taxes. The effective income tax rate was 33.5% and (340.7)% for the six months ended June 30, 2016 and 2015, respectively. The Company's effective tax rate was significantly higher in 2015 due to an inventory write-down primarily related to UDC Ireland on which no tax benefit was recorded due to previous losses. For the six months ended June 30, 2015, absent the inventory write-down, income tax expense would have been $10.0 million and the effective income tax rate would have been 32.5%.

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Liquidity and Capital Resources

Our principle sources of liquidity are our cash and cash equivalents and our short-term investments. As of June 30, 2016, we had cash and cash equivalents of $69.9 million and short-term investments of $246.3 million, for a total of $316.2 million. This compares to cash and cash equivalents of $97.5 million and short-term investments of $298.0 million, for a total of $395.5 million, as of December 31, 2015. The decrease in total cash and cash equivalents and short-term investments of $79.3 million was primarily due to the $96.0 million BASF OLED patent acquisitions, partially offset by cash provided by operating activities related to proceeds received from deferred revenue arrangements and material sales.

Cash provided by operating activities was $36.2 million for the six months ended June 30, 2016, compared to cash provided by operating activities of $75.2 million for the six months ended June 30, 2015. The decrease in cash provided by operating activities was primarily due to the receipt of $2.3 million of prepaid royalty and license fees in the six months ended June 30, 2016, as compared to $48.4 million in the six months ended June 30, 2015, partially offset by a lower reduction in inventory balances.

Cash used in investing activities was $59.4 million for the six months ended June 30, 2016, as compared to $7.6 million for the six months ended June 30, 2015. The increase in cash used in investing activities was due to the addition of intangible assets of $96.0 million partially offset by the timing of maturities and purchases of investments resulting in net sales of $38.8 million for the six months ended June 30, 2016, as compared to net purchases of $4.5 million for the six months ended June 30, 2015.

Cash used in financing activities was $4.4 million for the six months ended June 30, 2016, as compared to $3.7 million for the six months ended June 30, 2015. The increase in cash used in financing activities for the six months ended June 30, 2016, as compared to the six months ended June 30, 2015 was primarily due to a decrease in the proceeds from the exercise of common stock options of $1.1 million, partially offset by a decrease in the payment of withholding taxes related to employee stock-based compensation of $0.5 million.

Working capital was $338.6 million as of June 30, 2016, compared to $413.2 million as of December 31, 2015. The decrease in working capital was primarily due to the cash used to purchase IP assets, an increase in inventory, a reduction in accounts payable and accrued expenses, partially offset by a decrease in accounts receivable.

We anticipate, based on our internal forecasts and assumptions relating to our operations (including, among others, assumptions regarding our working capital requirements, the progress of our research and development efforts, the availability of sources of funding for our research and development work, and the timing and costs associated with the preparation, filing, prosecution, maintenance, defense and enforcement of our patents and patent applications), that we have sufficient cash, cash equivalents and short-term investments to meet our obligations for at least the next twelve months.

We believe that potential additional financing sources for us include long-term and short-term borrowings, public and private sales of our equity and debt securities and the receipt of cash upon the exercise of outstanding stock options. It should be noted, however, that additional funding may be required in the future for research, development and commercialization of our OLED technologies and materials, to obtain, maintain and enforce patents respecting these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. There can be no assurance that additional funds will be available to us when needed, on commercially reasonable terms or at all, particularly in the current economic environment.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses, and other financial information. Actual results may differ significantly from our estimates under other assumptions and conditions.

We believe that our accounting policies related to revenue recognition and deferred revenue, the valuation of certain investments, the valuation and recoverability of acquired technology and inventories, stock-based compensation, income taxes and our Supplemental Executive Retirement Plan, are our “critical accounting policies” as contemplated by the SEC.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2015, for additional discussion of our critical accounting policies.

Contractual Obligations

Refer to our Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of our contractual obligations.

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Off-Balance Sheet Arrangements

As of June 30, 2016, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in assets transferred to unconsolidated entities (or similar arrangements serving as credit, liquidity or market risk support to unconsolidated entities for any such assets), or obligations (including contingent obligations) arising out of variable interests in unconsolidated entities providing financing, liquidity, market risk or credit risk support to us, or that engage in leasing, hedging or research and development services with us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not utilize financial instruments for trading purposes and hold no derivative financial instruments, other financial instruments or derivative commodity instruments that could expose us to significant market risk other than our investments disclosed in “Fair Value Measurements” in Note 5 to the Consolidated Financial Statements included herein. We generally invest in investment grade financial instruments to reduce our exposure related to investments. Our primary market risk exposure with regard to such financial instruments is to changes in interest rates, which would impact interest income earned on investments. However, based upon the conservative nature of our investment portfolio and current experience, we do not believe a decrease in investment yields would have a material negative effect on our interest income.

Substantially all our revenue is derived from outside of North America. All revenue is primarily denominated in U.S. dollars and therefore we bear no significant foreign exchange risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2016. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, are effective to provide reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. However, a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Patent Related Challenges and Oppositions

Each major jurisdiction in the world that issues patents provides both third parties and applicants an opportunity to seek a further review of an issued patent. The process for requesting and considering such reviews is specific to the jurisdiction that issued the patent in question, and generally does not provide for claims of monetary damages or a review of specific claims of infringement. The conclusions made by the reviewing administrative bodies tend to be appealable and generally are limited in scope and applicability to the specific claims and jurisdiction in question.

We believe that opposition proceedings are frequently commenced in the ordinary course of business by third parties who may believe that one or more claims in a patent do not comply with the technical or legal requirements of the specific jurisdiction in which the patent was issued. We view these proceedings as reflective of our goal of obtaining the broadest legally permissible patent coverage permitted in each jurisdiction. Once a proceeding is initiated, as a general matter, the issued patent continues to be presumed valid until the jurisdiction’s applicable administrative body issues a final non-appealable decision. Depending on the jurisdiction, the outcome of these proceedings could include affirmation, denial or modification of some or all of the originally issued claims. We

31

believe that as OLED technology becomes more established and as our patent portfolio increases in size, so will the number of these proceedings.

Below are summaries of certain active proceedings that have been commenced against issued patents that are either exclusively licensed to us or which are now assigned to us. We do not believe that the confirmation, loss or modification of our rights in any individual claim or set of claims that are the subject of the following legal proceedings would have a material impact on our materials sales or licensing business or on our consolidated financial statements, including our consolidated statements of income, as a whole. However, as noted within the descriptions, some of the following proceedings involve issued patents that relate to our fundamental phosphorescent OLED technologies and we intend to vigorously defend against claims that, in our opinion, seek to restrict or reduce the scope of the originally issued claim, which may require the expenditure of significant amounts of our resources. In certain circumstances, when permitted, we may also utilize the proceedings to request modification of the claims to better distinguish the patented invention from any newly identified prior art and/or improve the claim scope of the patent relative to commercially important categories of the invention. The entries marked with an "*" relate to our UniversalPHOLED phosphorescent OLED technology, some of which may be commercialized by us.

Opposition to European Patent No. 1394870*

On April 20, 2010, Merck Patent GmbH; BASF Schweitz AG of Basel, Switzerland; Osram GmbH of Munich, Germany; Siemens Aktiengesellschaft of Munich, Germany; and Koninklijke Philips Electronics N.V., of Eindhoven, The Netherlands filed Notices of Opposition to European Patent No.1394870 (the EP '870 patent). The EP '870 patent, which was issued on July 22, 2009, is a European counterpart patent, in part, to U.S. patents 6,303,238; 6,579,632; 6,872,477; 7,279,235; 7,279,237; 7,488,542; 7,563,519; and 7,901,795; and to pending U.S. patent application 13/035,051, filed on February 25, 2011 (hereinafter the “U.S. '238 Patent Family”). They are exclusively licensed to us by Princeton, and we are required to pay all legal costs and fees associated with this proceeding.

An Oral Hearing was held before an EPO panel of first instance in Munich, Germany, on April 8-9, 2014. After the completion of the hearing, the panel decided that the broad claims originally issued did not satisfy EPO requirements and amended the claims to more narrowly define the scope of the claims. The '870 patent, in its amended form, was held by the panel to comply with the EPO requirements.

We believe the EPO's decision relating to the broad original claims is erroneous and have appealed the ruling to reinstate a broader set of claims. This patent, as originally granted by the EPO, is deemed valid during the pendency of the appeals process.

At this time, based on our current knowledge, we believe that the patent being challenged should be declared valid and that all or a significant portion of our claims should be upheld. However, we cannot make any assurances of this result.

Invalidation Trial in Japan for Japan Patent No. 4511024*

On June 16, 2011, we learned that a Request for an Invalidation Trial was filed in Japan by Semiconductor Energy Laboratory, Co., Ltd. for our Japanese Patent No. JP-4511024 (the JP '024 patent), which issued on May 14, 2010. The JP '024 patent is a counterpart patent, in part, to the U.S. '238 Patent Family, which relate to the EP '870 patent, which is subject to one of the above-noted European oppositions and which relates to our UniversalPHOLED phosphorescent OLED technology. They are exclusively licensed to us by Princeton, and we are required to pay all legal costs and fees associated with this proceeding.

On May 10, 2012, we learned that the JPO issued a decision upholding the validity of certain claimed inventions in the JP '024 Patent but invalidating the broadest claims in the patent. We appealed the JPO’s decision to the Japanese IP High Court. On October 31, 2013, the Japanese IP High Court ruled that the prior art references relied on by the JPO did not support the JPO’s findings, reversed the JPO’s decision with respect to the previously invalidated broad claims in the JP ‘024 patent and remanded the matter back to the JPO for further consideration consistent with its decision. The JPO subsequently issued a decision upholding the validity of certain claimed inventions in the JP '024 Patent but invalidating the broadest claims in the patent. We appealed the decision to reinstate a broader set of claims but the IP High Court declined to reinstate the broader claims. We have appealed the IP High Court ruling to the Japanese Supreme Court for reconsideration of the legal basis of the IP High Court's decision. This patent, as originally granted by the JPO, is deemed valid during the pendency of the appeals process.

Although we cannot provide any assurances as to the possible outcome of future appellate proceedings which we may elect to pursue, if any, the patent is expected to be maintained at least with respect to the narrower set of claims which were not the subject of the IP High Court's invalidation ruling.

32

Opposition to European Patent No. 1390962

On November 16, 2011, Osram AG and BASF SE each filed a Notice of Opposition to European Patent No. 1390962 (EP '962 patent), which relates to our white phosphorescent OLED technology. The EP '962 patent, which was issued on February 16, 2011, is a European counterpart patent to U.S. patents 7,009,338 and 7,285,907. They are exclusively licensed to us by Princeton, and we are required to pay all legal costs and fees associated with this proceeding.

The EPO combined the oppositions into a single opposition proceeding, and a hearing was held in December 2015, wherein the EPO Opposition Division revoked the patent claims for alleged insufficiencies under EPC Article 83.  We believe the EPO's decision relating to the original claims is erroneous, and we have appealed the decision. This patent, as originally granted, is deemed valid during the pendency of the appeals process.

At this time, based on our current knowledge, we believe that the patent being challenged should be declared valid, and that all or a significant portion of our claims should be upheld. However, we cannot make any assurances of this result.

Opposition to European Patent No. 1933395*

On February 24 and 27, 2012, Sumitomo, Merck Patent GmbH and BASF SE filed oppositions to our European Patent No. 1933395 (the EP '395 patent). The EP ‘395 patent is a counterpart patent to the EP ‘637 patent, and, in part, to the U.S. Patents 7,001,536, 6,902,830 and 6,830,828 and to JP patents 4358168 and 4357781. This patent is exclusively licensed to us by Princeton, and we are required to pay all legal costs and fees associated with this proceeding.

At an Oral Hearing on October 14, 2013, the EPO panel issued a decision that affirmed the basic invention and broad patent coverage in the EP '395 patent, but narrowed the scope of the original claims.

On February 26, 2014, we appealed the ruling to reinstate a broader set of claims. The patent, as originally granted by the EPO, is deemed to be valid during the pendency of the appeals process. Two of the three opponents also filed their own appeals of the ruling. In January 2015, Sumitomo withdrew its opposition of the '395 patent, and the EPO accepted the withdrawal notice. The appeal proceedings were held in the second quarter of 2016. As a result of the proceedings, the board concluded the oral proceedings and proposed to reinstate a broader set of claims pending the resolution of a remaining question of the applicable law, a question that the board has deferred to the Enlarged Board of Appeals for review. The originally-granted claims remain in force during the pendency of this process.

In addition to the above proceedings, from time to time, we may have other proceedings that are pending which relate to patents we acquired as part of the Fujifilm patent and BASF OLED patent acquisitions or which relate to technologies that are not currently widely utilized in the marketplace.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 Share Repurchases

During the quarter ended June 30, 2016, we acquired 6,012 shares of common stock through transactions related to the vesting of restricted share awards previously granted to our employees. Upon vesting, the employees turned in shares of common stock in amounts sufficient to pay the minimum statutory tax withholding at rates required by the relevant tax authorities.

The following table provides information relating to the shares we received and repurchased during the second quarter of 2016 (dollar amounts in thousands, other than per share amounts):

Period	Total Number of Shares Purchased		Weighted Average Price Paid per Share
April 1 - April 30		5,725	$	57.72
May 1 - May 31		96		58.99
June 1 - June 30		191		68.76
Total		6,012

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following is a list of the exhibits filed as part of this report. Where so indicated by footnote, exhibits that were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated parenthetically, together with a reference to the filing indicated by footnote.

Exhibit Number	Description
10.1*#	IP Transfer Agreement, dated June 28, 2016 by and between UDC Ireland Limited and BASF SE
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.)
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

Explanation of footnotes to listing of exhibits:

*	Filed herewith.
**	Furnished herewith.
#	Confidential treatment has been requested as to certain portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:

	UNIVERSAL DISPLAY CORPORATION
Date: August 4, 2016	By:  /s/ Sidney D. Rosenblatt
	Sidney D. Rosenblatt
	Executive Vice President, Chief Financial Officer,
	Treasurer and Secretary

35

EX-10.1

Exhibit 10.1

Note:  Throughout this document, certain confidential material contained herein has been omitted and has been separately filed with the Commission.  Each omission has been marked with an [***].

IP TRANSFER AGREEMENT

regarding the

sale and purchase of the

OLED Intellectual Property Rights

of BASF

by and between

1.BASF SE, Carl-Bosch-Strasse 38, 67056 Ludwigshafen/Rhine, Germany

- hereinafter referred to as "Seller" -

2.UDC Ireland Limited, Blanchardstown Corporate Park 2, Ballycoolin,

Dublin 15, Republic of Ireland

- hereinafter referred to as "Purchaser"-

- Seller and Purchaser hereinafter also referred to individually as a "Party" and collectively as "Parties" -

TABLE OF CONTENTS

A.	DEFINITIONS		4
B.	SALE, PURCHASE AND ASSIGNMENT, PURCHASE PRICE		6
	1.	Sold Assets	6
	2.	R&D Agreements	6
	3.	Purchase Price	8
C.	SIGNING DATE AND CLOSING		8
	4.	Signing Date and Closing	8
D.	GUARANTEES, REMEDIES, INDEMNITIES AND COVENANTS		10
	5.	Seller’s Guarantees	10
	6.	Guarantees of Purchasers	11
	7.	Remedies	12
	8.	Invention Act Indemnities; Indemnities for Excluded Assets and Excluded Liabilities	13
	9.	Seller’s Covenants	14
	10.	Expiration of Claims / Limitation of Claims	15
	11.	License Back	16
E.	MISCELLANEOUS		16
	12.	Restriction of Announcement and Confidentiality	16
	13.	Information, Records and Assistance Post-Closing	17
	14.	Notices	17
	15.	Miscellaneous	18
F.	LIST OF ANNEXES AND DISCLOSURE SCHEDULES		19

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RECITALS

(A) WHEREAS, Seller is, among other activities, itself and through certain Affiliates, engaged in the research in the field of the OLED Technology (as defined below) and has developed patent rights and related materials in relation thereto.

(B) WHEREAS, Seller, after a strategic review of its business portfolio, has concluded that it wishes to sell and transfer the IP Rights (as defined below) in connection with the OLED Technology to Purchaser upon the terms and conditions of this Agreement (as defined below).

(C) WHEREAS, Purchaser wishes to purchase and acquire the Sold Assets (as defined below) from Seller upon the terms and conditions of this Agreement.

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NOW, THEREFORE, the Parties agree as follows:

A. Definitions

"Affiliates" shall mean any company or other entity directly or indirectly controlled by Seller or Purchaser where "control" shall mean ownership of at least fifty percent (50%) of the share capital or voting rights;

"Agreement" shall mean this IP Transfer Agreement including all exhibits and schedules and any amendments made from time to time;

“Alternative Transfer” shall have the meaning as defined in Section 4.5;

“Assumed Liabilities” shall have the meaning as defined in Section 2.6;

“BASF Knowledge Persons” shall have the meaning as defined in Section 5.3;

“Best Knowledge of Seller” shall have the meaning as defined in Section 5.3;

“Business Days” shall be the banking days prevailing in Ludwigshafen/Rhine, Germany, excluding, for the avoidance of doubt, Saturdays;

“BMBF” shall have the meaning as defined in Section 4.4;

“[***]” shall have the meaning as defined in Section 4.4.3;

“Closing” shall have the meaning as defined in Section 4.1.2;

“Closing Date” shall be the date of the Closing;

“Closing Events” shall have the meaning as defined in Section 4.3;

“Confidential Information” shall have the meaning as defined in Section 12.2;

“Co-Owned IP Rights” shall have the meaning as defined in Section 1.2(ii);

“[***]” shall have the meaning as defined in Section 4.4.3:

“Deductible” shall have the meaning as defined in Section 10.3;

“De Minimis Claims” shall have the meaning as defined in Section 10.3;

“Due Date List” shall have the meaning as defined in Section 9.1.2

“Excluded Assets” shall have the meaning as defined in Section 1.3;

“Excluded Liabilities” shall have the meaning as defined in Section 2.1;

“Exclusively Owned IP Rights” shall have the meaning as defined in Section 1.2 (i);

“[***](s)” shall have the meaning as defined in Section 4.4;

“Final Resolution” means a resolution pursuant to a written settlement agreement, consent decree or other final non-appealable judgment of a court of competent jurisdiction;

“FRAND” shall have the meaning as defined in Section 5.1.8;

“Fundamental Reps” shall have the meaning as defined in Section 10.1.1;

“Funded IP Rights” shall have the meaning as defined in Section 4.4;

"Governmental Entity" shall mean any federal, state, local or foreign governmental or regulatory (including stock exchange) authority, agency, court, court commission or arbitral authority;

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“[***] IP” shall have the meaning as defined in Section 1.3;

“IP Co-Owner” shall have the meaning as defined in Section 4.5;

“IP Files” shall have the meaning as defined in Section 9.2;

“IP Rights” shall have the meaning as defined in Section 1.2(ii);

“Joint Development Agreement” shall have the meaning as defined in Section 2.7;

“Know-How Packages” shall have the meaning as defined in Section 1.2(iii);

“Knowledge of Seller” shall have the meaning as defined in Section 5.3;

“Liability Cap” shall have the meaning as defined in Section 10.4;

“Losses” shall have the meaning as defined in Section 7.1;

“Non Assignable Co-Owned IP Rights” shall have the meaning as defined in Section 4.5;

“Non Covered Third Party Claim” shall have the meaning as defined in Section 9.3;

“Non-Transfer Event” shall have the meaning as defined in Section 4.5;

“OLED Technology” shall mean the composition of, development, manufacture and use of OLED materials, including, but not limited to, OLED lighting and display stacks;

“Parties” shall mean the Seller and the Purchaser;

“Purchaser” shall mean UDC Ireland Limited, Blanchardstown Corporate Park 2, Ballycoolin, Dublin 15, Republic of Ireland;

“Purchaser Claim” shall have the meaning as defined in Section 7.2;

“Purchase Price” shall have the meaning as defined in Section 3.1;

“Purchase Price Allocation” shall have the meaning as defined in Section 3.1;

“R&D Agreements” shall have the meaning as defined in Section 1.2.(iv);

“RAND” shall have the meaning as defined in Section 5.1.8;

“Records” shall have the meaning as defined in Section 13.1;

“Replacement Agreements” shall have the meaning as defined in Section 2.1;

“Sales Tax” shall have the meaning as defined in Section 3.2;

“Seller” shall mean BASF SE, a company organized, existing and doing business under and by virtue of the laws of Germany and the European Union with its office and principal place of business located at [***];

“Seller’s Account” shall have the meaning as defined in Section 3.4;

“Seller’s Guarantees” shall have the meaning as defined in Section 5.1;

“Signing Date” shall have the meaning as defined in Section 4.1.1;

“Sold Assets” shall have the meaning as defined in Section 1.2;

“Third Party” shall mean any person not being a party to this Agreement and not an Affiliate of a person who is a party to this Agreement;

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“Third Party Claim” shall have the meaning as defined in Section 7.5;

“Third Party Claim Support” shall have the meaning as defined in Section 9.3; and

“Time Limitations” shall have the meaning as defined in Section 10.1.

B. SALE, PURCHASE AND ASSIGNMENT, PURCHASE PRICE

1. Sold Assets

1.1 Seller, upon the terms and conditions of this Agreement, hereby sells, assigns and transfers all Sold Assets (as defined in Section 1.2 below) to Purchaser with in rem effect (mit dinglicher Wirkung) as of the Signing Date (as defined in Section 4.1.1 below). Purchaser hereby purchases the Sold Assets from Seller and hereby undertakes to accept the transfer of the Sold Assets from Seller.

1.2 The term “Sold Assets” as used in this Agreement shall mean and include the following items:  

(i) all patents and patent applications (if any) as listed in Annex 1.2 A attached hereto (hereinafter the “Exclusively Owned IP Rights”);

(ii) the respective co-ownership title (Bruchteilseigentum) of Seller regarding all patents and patent applications (if any) as listed in Annex 1.2 B attached hereto (hereinafter the “Co-Owned IP Rights”; the Exclusively Owned IP Rights and the Co-Owned IP Rights hereinafter collectively the“IP Rights”);

(iii) all trade secrets, inventions, know-how, formulae, processes, procedures, internal research protocols, extracts of internal lab journals, records of inventions, test data and the like relating to the IP Rights (hereinafter the “Know-How Packages”) as listed in Annex 1.2 C attached hereto; and

(iv) certain individual and limited rights and the corresponding obligations under three (3) written joint R&D agreements, the term of which already expired but certain rights and obligations will continue even after the expiration of the given term, known as “[***]”, “[***]” and “[***]” agreements (hereinafter the “R&D Agreements”) with respect to certain Co-Owned IP Rights to which the Seller or any of its Affiliates is a party, a list of such R&D Agreements and copies thereof are attached hereto as Annex 1.2 D.

1.3 Notwithstanding anything contained in this Agreement to the contrary, the Sold Assets shall only include those items specifically described and listed in Section 1.2 and the corresponding annexes and shall not include any other assets owned, used or held for use by Seller or its Affiliates, including but not limited to, any intellectual property rights jointly generated in the Joint Development Agreement and previously owned by Seller and [***] (hereinafter the “[***] IP”) as listed in Annex 1.3 and transferred and sold prior to the Signing Date by Seller to [***] (hereinafter the “Excluded Assets”).

2. R&D Agreements

2.1 Seller and Purchaser, upon the terms and conditions of this Agreement, hereby agree to reach out to the other parties of the R&D Agreements and to enter with them into Replacement Agreements that are materially identical to the versions attached as Annex 2.1 (hereinafter referred to as the “Replacement Agreements”). Seller shall retain and be responsible for paying, performing and discharging when due, any liability or obligation arising under any R&D Agreement with respect to (i) a breach or default under any R&D Agreement committed on or prior to the Closing Date or the signing of the Replacement Agreements (whichever is earlier), and (ii) any obligation required by the terms of any R&D Agreement to be performed on or prior to the Closing Date or the signing of the Replacement Agreements (whichever is earlier) (such liabilities and obligations hereinafter collectively the “Excluded Liabilities”). Purchaser shall be responsible for paying, performing and discharging when due, any liability or obligation arising under any R&D Agreement following the transfer of the respective R&D Agreements with respect to (i) a breach or default under any R&D Agreement committed after the Closing Date or the signing of the Replacement Agreements (whichever is earlier) and which are not the direct result of actions undertaken by Seller and (ii) any obligation required by the terms of any R&D Agreement to be performed by Purchaser and the Assignee after the Closing Date or the signing of the Replacement Agreements (whichever is earlier).

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2.2 To effect the entering into the Replacement Agreements, Seller will contact the respective parties to the R&D Agreements and seek the required consents having the effect that Seller is replaced by Purchaser as party to each of the R&D Agreements with commercial effect (mit wirtschaftlicher Wirkung) as of the Closing Date. Seller shall use its reasonable best efforts to obtain such consents as soon as practical. Moreover, Seller shall use its reasonable best efforts (with Purchaser’s reasonable assistance) to persuade the other parties to the R&D Agreements to agree to the Replacement Agreements. For purposes of this Section 2.2, "reasonable best efforts" shall not include any requirement of Seller to expend money in excess of US[***] commence or participate in any litigation or offer or grant any material accommodation (financial or otherwise) to any third Party to the R&D Agreements.  

2.3 Seller is not required to take any action to effect the assignment of certain individual rights under the R&D Agreements and the assumption of certain individual obligations under the R&D Agreements if an attempted direct or indirect assignment thereof, without the consent of a Third Party, would constitute a breach, default, violation or other contravention of the rights of such Third Party, would be ineffective with respect to any party to the respective R&D Agreement, or would in any way adversely affect the rights of Seller or, upon transfer, of Purchaser under the respective R&D Agreement.

2.4 Until (i) the Replacement Agreements by which Purchaser replaces Seller as party to each R&D Agreement with commercial effect (mit wirtschaftlicher Wirkung) as of the Closing Date have been concluded or (ii) in case that no such agreements will be reached with all relevant parties to the R&D Agreements, the Parties will treat each other internally as if all parties to the R&D Agreements had agreed to replace Seller by Purchaser as party to each of the R&D Agreements with commercial effect (mit wirtschaftlicher Wirkung) as of the Closing Date. To achieve this purpose, Seller could, e.g., hold the respective benefits under such R&D Agreement for which such consent or approval has not been obtained in trust for Purchaser (but only to the extent that holding such benefit in trust without first having obtained the consent or approval of the other contracting party does not constitute a breach of, or result in a default under the respective R&D Agreement) and use its reasonable best efforts to continue to comply with the remaining obligations under the respective R&D Agreement. All benefits derived under any such R&D Agreement after the Closing Date shall be for the benefit of Purchaser, and Seller shall take or cause to be taken all action that Purchaser may reasonably require to provide Purchaser with the benefit thereof.

2.5 Purchaser undertakes to assist Seller to the extent required or appropriate to enable Seller to obtain the necessary consents to replace Seller by Purchaser as party to the R&D Agreements or, respectively, to put Seller in a position that enables Seller to provide Purchaser with the benefits under the respective R&D Agreements. By way of example, Purchaser is, in particular, prepared to grant Seller a license back under any Co-Owned IP Rights following the transfer to Purchaser that enables Seller to grant the other parties to the R&D Agreements a sublicense under the Co-Owned IP Rights even after their transfer to Purchaser. It is, however, understood that Purchaser will only license back such Co-Owned IP Rights if another party to the R&D Agreement applying to such Co-Owned IP Right has a right to request such license under such R&D Agreement. To the extent that such sub-license is royalty-bearing, Seller will pass on any such royalties obtained to Purchaser without undue delay, provided nothing herein shall obligate, or be construed to obligate Purchaser to grant any rights in any other intellectual property owned or controlled by Purchaser beyond the Co-owned IP Rights.

2.6 Upon the terms and subject to the conditions of this Agreement, Purchaser shall, unless otherwise explicitly agreed upon herein, irrevocably assume, effective as of the Closing Date, and from and after the Closing Date, Purchaser shall pay, perform and discharge when due all obligations, liabilities and commitments of Seller arising after the Closing Date for acts not undertaken by Seller, relating to any of the Sold Assets, in particular, but not limited to, the R&D Agreements provided they have been assigned to Purchaser or to the extent otherwise benefiting Purchaser (collectively hereinafter the "Assumed Liabilities") and indemnify and hold Seller harmless from and against any and all cost suffered or incurred by Seller as a result of any failure by Purchaser to carry out, perform and discharge those obligations and liabilities. Seller shall indemnify Purchaser and hold Purchaser harmless for any liabilities arising from Seller’s breach of any obligations relating to the Sold Assets which occurred prior to the Closing Date or which survive the Closing Date, such as obligations to confidentiality under the R&D Agreements.

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2.7 Without limiting the generality of the foregoing, it is furthermore explicitly agreed and understood that Purchaser shall assume effective as of the Signing Date the obligation of Seller to conduct good faith discussions with [***] in relation with any potential request by [***] to obtain a license regarding certain of the transferred IP Rights which have a priority date before September 4, 2012 and which is necessary to exercise the results of the joint development work created under the Joint Development Agreement between Seller and [***] (hereinafter the “Joint Development Agreement”); an excerpt of the relevant provisions of this Joint Development Agreement is attached hereto as Annex 2.7. 

3. Purchase Price

3.1 The Purchase Price for the Sold Assets sold and transferred hereunder to be paid by Purchaser shall be a fixed amount of EUR 86,750,000.00 (in words: Euro eighty-six million seven hundred fifty thousand) (hereinafter the “Purchase Price”). The Purchase Price shall be allocated to the different Sold Assets as set forth in Annex 3.1 (hereinafter the “Purchase Price Allocation Schedule”).

3.2 The Purchase Price shall be exclusive of Value Added Tax (Umsatzsteuer) or any other indirect tax due on the transaction contemplated by this Agreement (hereinafter collectively “Sales Tax”). Seller will invoice Purchaser all payments due under this Agreement in accordance with all applicable laws. To the extent the Purchase Price is subject to Sales Tax, the appropriate amount of such Sales Tax will be shown as a separate item on the invoice unless the Sales Tax is subject to the reverse charge procedure. In any event, Purchaser will pay and bear such amount of Sales Tax. Where legally possible, Seller will apply a tax exemption of zero percent (0%) rate or any other tax facility applicable in the relevant country. All payments due to Seller under this Agreement shall be made without deduction of any taxes, levies or other dues payable.

3.3 On the Signing Date, Purchaser shall pay to Seller, free of costs and charges, in immediately available funds (with value date as of the Signing Date), by wire transfer into Seller´s Account (as defined in Section 3.4 below) the Purchase Price and any applicable Sales Tax.

3.4 All payments owed by Purchaser to Seller under this Agreement shall be paid by Purchaser by wire transfer to Seller's bank account kept with [***] (hereinafter "Seller’s Account").

C. SIGNING DATE AND CLOSING

4. Signing Date and Closing

4.1 Signing Date and Closing shall have the following meaning in this Agreement:

4.1.1 "Signing Date" shall be the day on which this Agreement has been duly executed by authorized representatives of the Parties and the Closing (as defined below) takes place.

4.1.2 "Closing" shall mean the closing (Erfüllen) of this Agreement, in particular the taking place of all Closing Events (as defined in Section 4.3 below). The signing of this Agreement and the Closing shall take place simultaneously.

4.2 Without delay, but not later than two (2) Business Days after the Closing Date, the Purchaser and the Seller shall send the mutually signed Replacement Agreements to the respective contract parties of the R&D Agreements and the IP Co-Owners (as defined in Section 4.5 below) in order (i) to obtain their acknowledgement of the transfer of the Co-Owned IP Rights and (ii) to seek their consent to Purchaser replacing Seller in the respective R&D Agreements in accordance with the terms of the Replacement Agreements. The Parties shall keep each other informed in a timely fashion of all developments with respect to the intended replacement of Seller by Purchaser in the R&D Agreements and shall actively cooperate with each other to obtain such replacement as soon as possible.

4.3 On the Closing Date, the following actions and events (hereinafter the "Closing Events") shall take place at the offices of Seller or at such place as agreed between the Parties:

4.3.1 Payment of the Purchase Price in immediately available funds into Sellers' Account;

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4.3.2 Execution of patent assignment agreements as attached hereto as Annex 4.3.2 (it being explicitly agreed and understood that such patent assignment agreements shall be executed to perform the legal transfer and the assignment of the IP Rights, but shall not constitute or create any further rights or claims of the Purchaser against Seller other than those set forth under this Agreement);  

4.3.3 Transfer of the Know-How Packages in accordance with the principles set forth in Annex 4.3.3;

4.3.4 Transfer of the BASF IP Files in accordance with Section 9.2.; and

4.3.5 Transfer of the Due Date List pursuant to Section 9.1.2.

4.4 Purchaser acknowledges that Seller obtained public funding from the German Federal Ministry of Education and Research (hereinafter the "BMBF") for the activities carried out under the R&D Agreements that resulted in the IP Rights marked in Annex 1.2.A and Annex 1.2.B respectively (hereinafter the “Funded IP Rights”). This funding was subject to certain Terms and Conditions issued by the BMBF, including the [***].

4.4.1 The Parties agree that Seller either met the conditions of the applicable [***] with which Seller had agreed to comply (i.e., the grant approvals (Zuwendungsbescheid) for the Projects [***]or the [***] became inapplicable because [***]. For the purpose of complying with the requirement of § [***] of the Terms and Conditions of the BMBF (Nebenbestimmungen), Purchaser for itself and for its successor in title shall irrevocably assume, effective as of the Closing Date, all obligations set forth in the Terms and Conditions of the BMBF (Nebenbestimmungen) applicable to the publicly funded R&D activities in relation to [***] and will be solely liable as of the Closing Date for the consequences of any noncompliance or violation of these terms and conditions committed by Purchaser or its Affiliates or attributable to Purchaser or any of its Affiliates.

4.4.2 The Parties undertake to mutually inform the BMBF as soon as practically possible (but in no event later than one (1) week after the Closing Date) in written form of the transfer of the Funded IP Rights pursuant to this Agreement and provide reasonable information (to the extent required) about such transaction.  [***]

4.4.3 [***]

4.4.4 For the avoidance of doubt, any additional financial burden for Purchaser which may be imposed by the BMBF as the result of the [***] that exceeds [***] shall be exclusively borne by Seller. For the sake of clarity, the Parties also agree that Seller shall remain liable vis-à-vis the BMBF regarding any potential liability regarding the grant approvals for the Funded IP Rights that relates to the time prior to the Closing Date. Moreover, the Parties agree that the liability of Seller resulting from this Section 4.4 is excluded from the De Minimis threshold provided for in Section 10.3 and the Liability Cap provided for in Section 10.4. [***]

4.5 Seller will use its reasonable best efforts to transfer its respective co-ownership title (Bruchteilseigentum) and all rights to the Co-Owned IP Rights listed in Annex 1.2 B to Purchaser as of the Closing Date. To the extent necessary, Seller will seek the consent or approval of the other Co-Owner(s) of the Co-Owned IP Rights (hereinafter the “IP Co-Owner”) to effect such transfer and the recordal of Purchaser as co-owner in the relevant registers. To the extent that after the Closing Date, one or more of the IP Co-Owner(s) challenges and objects in writing the valid legal transfer of the Co-Owned IP Rights from Seller to Purchaser and provided further that a Final Resolution does not result in the valid transfer of one or more of the Co-Owned IP Rights to Purchaser (hereinafter the “Non Assignable Co-Owned IP Rights”) and Seller is still the legal owner of such Non Assignable Co-Owned IP Rights (hereinafter the “Non-Transfer Event”) then Seller will (i) hold the title as well as the benefit of any such Non Assignable Co-Owned IP Rights in trust for Purchaser, whereby all benefits (including, but not limited to, financial and legal benefits) derived under any such Non Assignable Co-Owned IP Rights after the Closing Date shall be exclusively for the benefit of Purchaser, and Seller shall take or cause to be taken all action that Purchaser may reasonably require to provide Purchaser with the benefit thereof; and (ii) Seller shall, to the extent legally possible and to the extent that there are no negative tax consequences, grant Purchaser an exclusive and royalty free license with respect to such Non Assignable Co-Owned IP Rights and, if an exclusive license cannot be granted, to grant Purchaser a non-exclusive license or such right that comes closest to an exclusive license that can be legally granted to Purchaser (hereinafter the “Alternative Transfer”).

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4.6 Notwithstanding any of Seller´s representations, warranties or covenants hereunder, it is explicitly agreed and understood by Purchaser that its sole and exclusive remedy for any damages of any nature whatsoever incurred by Purchaser arising out of, resulting from, by reason of, or incurred in connection with the inability of Seller to transfer the Non Assignable Co-Owned IP Rights shall be limited solely to the Alternative Transfer. Under no circumstances shall Purchaser be entitled to withdraw (zurücktreten) from this Agreement or to require the winding up of the transaction contemplated hereunder or thereunder, and (i) any claims for breach of pre-contractual obligations (culpa in contrahendo, including but not limited to claims arising under Sections 241 (2), 311 (2) (3) of the German Civil Code (BGB) or ancillary obligations (Nebenpflichten), including but not limited to claims arising under Section 280 of the German Civil Code (BGB), (ii) any claims based on frustration of contract pursuant to Section 313 of the German Civil Code (BGB) (Störung der Geschäftsgrundlage), (iii) all remedies of Purchasers for defects of the purchase object under Sections 437 through 441 of the German Civil Code (BGB), and (iv) any and all other statutory rights and remedies, if any, are hereby expressly excluded and waived (verzichtet) by Purchaser, except claims based on willful deceit (arglistige Täuschung). 

4.7 Each Party to this Agreement covenants and agrees that it will at all times after the Signing Date, at the expense of the requesting Party, promptly execute and deliver all such documents, including, without limitation, all such additional conveyances, transfers, consents and other assurances and do all such other acts and things as the requesting Party, acting reasonably, may from time to time request be executed or done in order to better evidence or perfect or effectuate any provision of this Agreement or of any agreement or other document executed pursuant to this Agreement (including, but not limited to, the transfer and assignment of the IP Rights) or any of the respective obligations intended to be created hereby or thereby. For the avoidance of doubt, the recording fees relating to the transfer and assignment of the IP Rights shall be paid by the Purchaser.

D. GUARANTEES, REMEDIES, INDEMNITIES AND COVENANTS

5. Seller’s Guarantees

5.1 Seller hereby guarantees, subject where applicable to the limitations contained in this Agreement, in particular, but not limited to, the remedies set out in Section 7 below, the Time Limitations (as defined in Section 10.1 below), the exclusion of De Minimis Claims (as defined in Section 10.3 below), the Deductible (as defined in Section 10.3 below) and the Liability Cap (as defined in Section 10.4 below) by way of an independent guarantee pursuant to Section 311 (1) of the German Civil Code (BGB) that the statements set forth herein are true and correct as of the Signing Date (hereinafter collectively "Seller’s Guarantees"):

5.1.1 Enforceability, No Conflict. This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceable under German law against Seller in accordance with its terms. Seller has as of the Signing Date the absolute and unrestricted corporate power, authority, and capacity to execute this Agreement and to perform its obligations under this Agreement and all actions in connection with this Agreement have been duly authorized and approved by all necessary corporate action of Seller. Neither the execution of this Agreement nor the consummation or performance of any of the transactions contemplated thereby will violate the certificate of incorporation or by-laws of the Seller.

5.1.2 Existence of Seller´s Authority. Seller is duly incorporated and validly existing as of the Signing Date under the laws of Germany. Seller has all requisite corporate power and authority to own and transfer the respective Sold Assets.

5.1.3 Bankruptcy or Judicial Composition Proceedings. As of the Signing Date, no bankruptcy or judicial composition proceedings concerning Seller has been applied for and, to the Knowledge of Seller (as defined in Section 5.3 below), no circumstances exist which would require the application for any bankruptcy or judicial composition proceedings.

5.1.4 Registration Fees. Except as disclosed in Schedule 5.1.4, as of the Signing Date, all required filings and fees related to the IP Rights have been timely filed with and paid to the relevant Governmental Entities and authorized registrars, and all IP Rights are otherwise in good standing.

5.1.5 Title. Seller is the sole beneficial owner of the Exclusively Owned IP Rights (as listed in Annex 1.2 A and Annex 5.1.5) and one of the legitimate co-owners (Bruchteilseigentümer) of the Co-Owned IP Rights (as listed in Annex 1.2 B), and otherwise absolutely entitled to each of the Sold Assets and the proceeds of the sale of them. All IP Rights owned by Seller (including such for which addi

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tional information is provided in Annex 5.1.5) are, entirely or in part, neither challenged in court nor in a dispute resolution nor arbitration procedure by any Third Party and can be transferred as part of the Sold Assets in a manner so that Purchaser upon the terms and conditions of this Agreement shall acquire full title to or can lawfully use the IP Rights as from the date of Closing. Annex 1.2 A and Annex 1.2 B each contain to the Knowledge of Seller, a true and complete list of the IP Rights.  

5.1.6 Proceedings Relating to IP Rights. Except as disclosed in Schedule 5.1.6, all IP Rights owned by Seller entirely or in part are neither subject to any pending nor, to the Knowledge of Seller, credibly threatened invalidations trials at court nor any dispute resolution or arbitration procedure by any Third Party, including claims or proceedings initiated or threatened by individual inventors who are or have been employed by the Seller or one of its Affiliates, in particular, but not limited to, under the German Act on Employee Inventions (Gesetz über Arbeitnehmererfindungen).

5.1.7 Encumbrances. The IP Rights are not charged with any security rights (Sicherungsrechte) of Third Parties including the transfer for security purposes (Sicherungsübereignungen).

5.1.8 Frand. To the Knowledge of Seller, none of the IP Rights is subject to an obligation to license royalty free, or to any fair, reasonable, and non-discriminatory (hereinafter “FRAND”) or reasonable and non-discriminatory (hereinafter “RAND”) conditions.

5.1.9 Compliance with R&D Agreements. Except as disclosed in Schedule 5.1.9, Seller and, to the Knowledge of Seller, each other party to the R&D Agreements, has complied with its obligations under the R&D Agreements.

5.1.10 License. As of the Signing Date, the Seller did not license any of the Exclusively Owned IP Rights to Third Parties or any of its Affiliates.

5.1.11 Litigation. There is no action, suit, investigation or proceeding pending against, or, to the Knowledge of Seller, credibly threatened in writing against or affecting Seller before any court or arbitrator or governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transaction contemplated hereunder.

5.1.12 Finders' Fees. Except for the broker(s) named in Schedule 5.1.12, all fees and commissions to which are payable solely by the Seller, the Seller has no obligation or liability to pay any fees or commissions to any broker, finder or agent with respect to the transaction contemplated hereby for which Purchaser or any Affiliate of Purchaser could become wholly or partly liable.

5.1.13 Accuracy of Certain Information. To the Best Knowledge of Seller, the information and matters referred to in Section 7.3.3 are accurate in all material respects and do not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.

5.2 All Schedules referred to in Section 5.1 are collectively referred to as the "Disclosure Schedules". Seller does not give or assume any guarantees other than those set forth in Section 5.1 above, and none of Seller´s Guarantees shall be construed as a guarantee or representation with respect to the quality of the Sold Assets within the meaning of Sections 276 (1), 443 of the German Civil Code (BGB) (Garantie für die Beschaffenheit der Sache).

5.3 For the purposes of this Agreement, "Knowledge of Seller" shall mean only the current and actual knowledge (positives Wissen) as of the Signing Date of the representatives and employees of Seller as identified in Schedule 5.3 (hereinafter the “BASF Knowledge Persons”). In case any of Seller’s guarantees is subject to best knowledge, best knowledge shall have the meaning of actual and current knowledge (positives Wissen) of the relevant BASF Knowledge Persons as well as the knowledge that each such person would have reasonably obtained as of the Signing Date after making due and appropriate inquiry with respect to the correctness of the statement in question made (fahrlässige Unkenntnis) (hereinafter “Best Knowledge of Seller”).

6. Guarantees of Purchasers

6.1 Purchaser hereby guarantees by way of an independent guarantee pursuant to Section 311 (1) of the German Civil Code (BGB) that the statements set forth herein are true and correct as of the Signing Date or as of any other date explicitly referred to below:

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6.2 Enforceability, No Conflict. Purchaser is a company duly incorporated and validly existing under the laws of the Republic of Ireland. This Agreement constitutes the legal, valid and binding obligation of Purchaser, and is enforceable against Purchaser in accordance with its terms. Purchaser has as of the Signing Date the absolute and unrestricted corporate power, authority, and capacity to execute this and to perform its obligations under this Agreement, which actions have been duly authorized and approved by all necessary corporate actions of Purchaser. Neither the execution of this Agreement nor the consummation or performance of any of the transactions contemplated thereby will violate the certificate of incorporation or by-laws of Purchaser or violate any applicable law, rule, regulation, judgment, injunction, order or decree in any jurisdiction concerned under this Agreement. 

6.3 Litigation. There is no action, suit, investigation or proceeding pending against, or, to the knowledge of Purchaser as of the Signing Date, threatened against or affecting Purchaser before any court or arbitrator or governmental body, agency or official which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transaction contemplated hereunder.

6.4 Finders' Fees. Purchaser has no obligation or liability to pay any fees or commissions to any broker, finder or agent with respect to the transaction contemplated hereby for which Seller or any Affiliate of Seller could become wholly or partly liable.

7. Remedies

7.1 In the event of any breach or non-fulfillment by Seller of any of Seller’s Guarantees or Seller´s covenants contained in this Agreement, Seller shall be liable to put Purchaser into the same position that it would have been in if Seller´s Guarantees or covenants contained in this Agreement had been correct or had not been breached (Naturalrestitution), or, at the election of Seller, to pay damages for non-performance. For purposes of determining the liability of Seller, only the actual direct losses, expenses or damages incurred by the Purchaser (including without limitation reasonable and properly documented legal fees), excluding any indirect or consequential damages (Folgeschäden) or lost profits (entgangener Gewinn), shall be taken into account (hereinafter "Losses"). Every payment of damages under this Section 7 shall be treated as a reduction of the Purchase Price.

7.2 In the event of any breach or non-fulfilment by Seller of any of Seller´s Guarantees or Seller’s covenants contained in this Agreement (hereinafter "Purchaser Claim"), Purchaser will give Seller written notice of such breach or non-fulfilment, with such notice stating the nature thereof and the amount involved, to the extent that such amount has been determined at the time when such notice is given promptly after discovery of such breach or non-fulfilment. Without prejudice to the validity of the Purchaser Claim or alleged claim in question, Purchaser shall allow Seller and its accountants and their professional advisors to investigate the matter or circumstance alleged to have given rise to such Purchaser Claim, and whether and to what extent any amount is payable in respect of such Purchaser Claim and, for such purpose, Purchaser shall give, subject to it being paid its reasonable out-of-pocket costs and expenses, such information and assistance, including access to Purchaser´s premises and personnel and including the right to examine and copy or photograph documents and records, as Seller or its accountants or professional advisors may reasonably request. This provision shall also apply in cases of court or arbitration proceedings being pending between the Parties.

7.3 Seller shall not be liable for, and Purchaser shall not be entitled to bring, any Purchaser Claim or any other claim under or in connection with this Agreement if and to the extent that:

7.3.1 the full amount of the Purchaser Claim is actually recovered by the Purchaser or any of its Affiliates, including, without limitation, under any insurance policies in force on the Signing Date, it being understood that Purchaser shall use its commercially reasonable best efforts to recover under insurance policies or indemnity, contribution or similar agreements for any losses prior to seeking indemnification under this Agreement;

7.3.2 the Purchaser Claim results from a failure of Purchaser or any of its Affiliates to mitigate damages pursuant to Section 254 of the German Civil Code (BGB);

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7.3.3 the Purchaser Claim was known by Purchaser as of the Signing Date or could have been known by Purchaser by applying the usual care in its own matters (Sorgfalt in eigenen Angelegenheiten). By way of illustration, for all information in relation to the IP Rights that is contained in publicly available sources, it is assumed that such information could have been known to Purchaser. Without limiting the generality of the foregoing, Purchaser shall be deemed to have knowledge of all matters disclosed  

(i) in the Information Memorandum prepared by [***] dated November 19, 2015;

(ii) the answers to information requests of Purchaser;

(iii) the documents and information made available in the electronic data room prior to signing which have been stored on two (2) DVD`s and delivered on the Signing Date to the Seller and Purchaser, respectively (attached hereto as Annex 7.3.3).

7.3.4 the procedures set forth in Sections 7.2 or 7.4 were not observed by Purchaser unless Seller was not materially prejudiced by the non-compliance with such procedures.

7.4 Seller shall not be liable for any Purchaser Claim if and to the extent Purchaser or any of its Affiliates has caused (mitverursacht) such Purchaser Claim after the Signing Date. When calculating the amount of the liability of Seller under this Agreement, all advantages in connection with the relevant matter shall be taken into account (Vorteilsausgleich) and Seller shall not be liable under this Agreement in respect of any Purchaser Claim for any Losses suffered by Purchaser or any of its Affiliates to the extent of any corresponding savings by or net benefit to Purchaser or any of its Affiliates arising therefrom.

7.5 If, with respect to matters that may give rise to a Purchaser Claim, (i) an order of any Governmental Entity is issued or threatened to be issued against Purchaser, or (ii) Purchaser is sued or threatened to be sued by a Third Party, including, without limitation, any Governmental Entity ((i) through (ii) hereinafter "Third Party Claim"), Purchaser shall give Seller written notice of such Third Party Claim without undue delay. Further, the following procedures shall apply:

7.5.1 Purchaser shall provide Seller with all reasonable information and assistance, including access to all records to which Purchaser or any Affiliate of Purchaser has access to and which are reasonably required in order to determine the extent to which any such Third Party Claims are justified. If Seller so elects at any time, Seller shall be entitled to assume control of such administrative or judicial proceeding, audit or assessment or the defense of such claim employing its own counsel at its sole costs, expense and risk. As long as Seller is defending a claim, Purchaser shall provide or cause to be provided to Seller any information reasonably requested by Seller relating to such Third Party Claim, and Purchaser shall otherwise cooperate with and support Seller and its representatives in good faith in order to contest effectively such claim. Seller shall inform Purchaser of all developments and events relating to such claim and Purchaser shall be entitled, at its expense, to employ own counsel and to attend, but not to participate in or to control, all conferences, meetings and proceedings relating to such claim. After having given written notice to Purchaser of its election to assume control of defense of any such claim, Seller shall, however, not be liable to Purchaser for any legal expenses subsequently incurred by Purchaser in connection with the defense as long as Seller assumes and conducts such defense in a timely and diligent matter.

7.5.2 If Seller does not assume control of a defense of a specific Third Party Claim, Purchaser shall have full control of such defense and such proceedings, with Seller to be liable for all reasonable and properly documented legal expenses of Purchaser. Seller shall be entitled, at its sole expense, to employ its own counsel and to attend, but not to participate in or to control, all conferences, meetings and proceedings relating to such claim.

8. Invention Act Indemnities; Indemnities for Excluded Assets and Excluded Liabilities.

8.1 Seller shall indemnify, defend and hold fully harmless Purchaser from and against any and all claims, payment requests and other Losses to the extent arising or resulting from any claims of current or former employees of Seller or its Affiliates (as the case may be) under the applicable employee´s invention act, including without limitation the German Act on Employee Inventions (Gesetz über Arbeitnehmererfindungen) and any other payments due to any Third Party triggered or caused by the sale of the IP Rights to Purchaser. Every payment of damages under this Section 8 shall be treated as an adjustment of the Purchase Price.

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8.2 Seller shall indemnify, defend and hold fully harmless Purchaser from and against any and all Losses incurred or sustained by, or imposed upon the Purchaser, based upon, arising out of, with respect to or by reason of: 

8.2.1 any Excluded Assets or any Excluded Liabilities; or

8.2.2 any claim of any Third Party based upon, resulting from or arising out of the business, operations, properties, assets or obligations of the Seller (other than the Sold Assets or Assumed Liabilities).

9. Seller’s Covenants

9.1 Maintenance of IP Rights Registration

9.1.1 Until the Closing Date, Seller shall pay all fees that are required to duly maintain the proper registration status of the IP Rights and use all reasonable efforts to maintain and preserve intact the status of the IP Rights consistent with past practice. After the Closing Date, Purchaser shall be fully responsible and liable for any costs which arise in connection with the maintenance and assignment of the IP Rights.

9.1.2 Prior to the Closing Date, Seller will take all actions to ensure that until and within further two (2) months from the Closing Date no due dates for actions expire, the successful performance of which is necessary to maintain any IP Right, including National Phase entry of any PCT applications into US, EP, KR, CN and JP. As of the Closing Date until the transfer of the IP Rights to Purchaser, but no later than two (2) months after the Closing Date, Seller shall pay incoming invoices and debits and Purchaser is required to reimburse Seller such costs that Seller advances for Purchaser. Seller will, on the Closing Date, provide Purchaser furthermore with a documentation of all due dates until December 31, 2016 of which Seller is aware at the Closing Date relating to the IP Rights in line with Seller’s current practice as listed in Annex 9.1.2 (hereinafter the “Due Date List”). Such documentation shall be according to Sellers internal quality standards for the handling of its IP Rights.

9.1.3 Purchaser is responsible for the recordal of the change in legal ownership of the IP Rights in the relevant public registers and Seller hereby authorizes Purchaser to take all actions and to make all declarations on Seller’s behalf that are necessary or reasonable under the applicable laws of the relevant jurisdictions to effect the transfer of the IP Rights and the recordal of the change of legal ownership. Purchaser bears its own costs in connection with such recordal of the change of legal ownership of the IP Rights, in particular all fees necessary to effect the recordal or registrations of the IP Rights. Seller will fully and timely cooperate with Purchaser to effect such recordal or registration, provide all the necessary documents, and bears its own costs in connection with such recordal of the change of legal ownership of the IP Rights. Seller will fully and timely cooperate with Purchaser to effect such recordal or registration and provide all available documents that are necessary or reasonable to effect such recordal or registration(including, but not limited to, to use its reasonable efforts to obtain the consents of its current inventors). For the avoidance of doubt, any costs incurred by Seller or its Affiliates (as the case may be) in connection with such support and cooperation, shall be exclusively borne by Seller. The provisions set forth in Section 9.1.1 remain unaffected hereby.

9.1.4 Seller declares its consent to the recordal of the change of ownership in the registers. Seller will assist Purchaser to effect the recordal of Purchaser as new owner of the IP Rights in the relevant registers and will take all actions that Purchaser may reasonably request against reimbursement of Seller’s reasonable out of pocket expenses. Such actions do, in particular, encompass the delivery of a deed of assignment in such form as required in the relevant jurisdictions (e.g., confirmatory assignments) to perfect the transfer of ownership of the IP Rights. Seller will furthermore deliver to Purchaser all documentation as may be necessary or required to effect the recordation of the ownership change in the relevant registers to the extent that such information is not contained in the IP Files relating to the IP Rights that Seller will transfer to Purchaser.

9.1.5 Seller herby authorizes Purchaser to take all actions that are necessary to maintain the IP Rights to the extent necessary prior to the recordal of the change of ownership in the relevant registers.

9.2 Transfer of Files. Immediately on or after the Closing Date, but in any case within ten (10) Business Days after the Closing Date, Seller will (i) transfer to Purchaser all electronic files relating to the IP Rights prepared by the Global Intellectual Property Department of Seller (hereinafter the “IP Files”) and (ii) inform all outside counsels about the transfer of the IP Rights and instruct them to

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act from the Closing Date onwards according to Purchasers instructions. As of the Closing Date, representation for the IP Rights handled internally by the Global Intellectual Property Department of Seller shall be taken over by the law firm(s) of choice of Purchaser. 

9.3 Support against Non Covered Third Party Claims. If a Third Party starts after the Signing Date any claim or action against the validity or existence of any of the transferred IP Rights for which no indemnity pursuant to Section 7 of this Agreement may be sought (hereinafter the “Non Covered Third Party Claim”), Purchaser shall promptly give written notice thereof to Seller. Such notice shall specify in as much detail as possible the issue for such Non Covered Third Party Claim and shall include a copy of any relevant correspondence so far exchanged in this matter. Seller shall provide or cause to be provided to Purchaser any information and assistance reasonably requested by Purchaser relating to such Non Covered Third Party Claim, and Seller shall otherwise cooperate with and support Purchaser and its representatives in good faith in order to contest effectively such claim (hereinafter the “Third Party Claim Support”) subject to reimbursement by Purchaser of all reasonable costs associated or incurred in connection with such support by Seller (including, but not limited to, travel costs and adequate representation allowances for Seller´s employees). Purchaser shall inform Seller of all material developments and events relating to such claim and Seller shall be entitled to attend, but not to participate in or to control, all conferences, meetings and proceedings relating to such claim. It is explicitly agreed and understood that any Third Party Claim Support shall only be provided for a period of [***] following the date the patent being the subject matter of the Non Covered Third Party Claim has been officially granted by the respective Governmental Entity, however, at the latest until the end of [***].

10. Expiration of Claims / Limitation of Claims

10.1 All claims of Purchaser arising under Section 5.1 of this Agreement shall be time-barred [***] after the Signing Date. Exempted therefrom are:

10.1.1 all claims of Purchaser for a breach of the representations and warranties in Sections arising under Section 5.1.1 to Section 5.1.5, Section 5.1.7, Section 5.1.10 and Section 5.1.13 (hereinafter collectively the “Fundamentals Reps”) which shall survive a period of [***] years as of the Signing Date;

10.1.2 all claims of Purchaser arising as a result of wilful or intentional breach of Seller´s obligations under this Agreement which shall be time-barred in accordance with the statutory rules in Sections 195, 199 German Civil Code (BGB) as well as any possible claim pursuant to Section 4.4;

10.1.3 all obligations of Seller arising under the covenants set forth in Section 2.5 and Section 4.5 respectively, which shall be binding and applicable upon Seller until the property rights (Schutzrechte) of the respective Co-Owned IP Rights have expired pursuant to the applicable laws (hereinafter collectively "Time Limitations").

10.2 The expiry period for any claims of Purchaser under this Agreement shall be tolled (gehemmt) pursuant to Section 209 German Civil Code (BGB) by any timely demand for fulfillment pursuant to Section 7.2 above, provided that Purchaser commence judicial proceedings within three (3) months after the expiry of the relevant Time Limitations. Section 203 German Civil Code (BGB) shall not apply, unless the Parties agree in writing that the expiry period shall be tolled on the basis of pending settlement negotiations.

10.3 No liability shall attach to Seller under or in connection with this Agreement where the individual claim is less than EUR 100,000.00 (in words: one hundred thousand Euros) (hereinafter "De Minimis Claims") and until the aggregate amount of claims (excluding the De Minimis Claims) is more than EUR [***] ((Freibetrag) (hereinafter "Deductible"). If the aggregate liability of Seller under this Agreement is greater than [***], Seller´s liability shall be the excess above [***]. This Section 10.3 shall not apply to any claims of Purchaser which arise as a result of willful or intentional behavior of Seller (Vorsatz) and any possible claim under Section 4.4.

10.4 The aggregate liability of Seller under this Agreement shall not exceed [***] of the Purchase Price (hereinafter "Liability Cap"). The Liability Cap shall not apply to claims for indemnifications arising from a breach of the Fundamental Reps where the aggregate amount of all Losses for which Seller shall be liable shall not exceed the Purchase Price. In addition, the Liability Cap shall not apply to claims being the result of willful or intentional behavior of Seller (Vorsatz) and any possible claim under Section 4.4.

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10.5 The Parties are in agreement that the remedies that Purchaser or any of Purchaser´s Affiliates may have against Seller, or Seller may have against Purchaser for breach of obligations set forth in or in connection with this Agreement are solely governed by this Agreement, and the remedies provided for by this Agreement shall be the exclusive remedies available to the Parties in connection with this Agreement. Apart from the rights of Purchaser under Section 4.5, Section 5 and Section 7 through Section 8 above, any right of Purchaser (i) to withdraw (zurücktreten) from this Agreement or to require the winding up of the transaction contemplated hereunder or thereunder, (ii) any claims for breach of pre-contractual obligations (culpa in contrahendo, including but not limited to claims arising under Sections 241 (2), 311 (2) (3) of the German Civil Code (BGB)) or ancillary obligations (Nebenpflichten), including but not limited to claims arising under Section 280 of the German Civil Code (BGB), (iii) any claims based on frustration of contract pursuant to Section 313 of the German Civil Code (BGB) (Störung der Geschäftsgrundlage), (iv) all remedies of Purchasers for defects of the purchase object under Sections 437 through 441 of the German Civil Code (BGB), and (v) any and all other statutory rights and remedies, if any, are hereby expressly excluded and waived (verzichtet) by Purchaser, except claims based on willful deceit (arglistige Täuschung). 

11. License Back

At any time following the Closing Date, but in no case later than [***] following the Closing Date, Seller may request Purchaser in writing to enter (or, as the case may be, to cause its Affiliates to enter) into good faith negotiations with Purchaser or its Affiliates with the aim to conclude a non-exclusive, non sublicenseable license agreement with regards to the IP Rights (including, but not limited to the Know-How Packages) for use by Seller and its Affiliates in the research, development, production, manufacture and sale of products other than for the manufacture of OLED material. Any such license agreement shall be subject to commercial conditions reasonable and customary in the relevant industry and be subject to Purchaser´s legal ability to grant such licenses, while avoiding negative tax consequences.

E. MISCELLANEOUS

12. Restriction of Announcement and Confidentiality

12.1 Each of the Parties undertakes that prior to the Signing Date it will not make, and will not cause any of its Affiliates to make, an announcement in connection with this Agreement unless (i) required by applicable law or regulations of any Governmental Entity, or (ii) the other Parties hereto have given their respective consent to such announcement, including the form of such announcement, which consents may not be unreasonably withheld or delayed and may be subject to conditions. If and to the extent any announcement or disclosure of information regarding the subject matter of this Agreement is to be made under applicable mandatory laws or any applicable stock exchange rules, the Party concerned shall, to the extent permissible under applicable law or regulations of any Governmental Entity, not disclose any such information without first informing the other Party thereof. The Parties shall, as of the Signing Date or at the latest within ten (10) Business Days thereafter, make a coordinated public announcement pertaining to the matters of this Agreement in the scope, content and form mutually agreed and set out in Annex 12.1 hereto.

12.2 The Parties understand and agree that all Confidential Information (as defined below) shall be treated as strictly confidential. "Confidential Information" shall mean the information created, transferred, recorded or employed as part of, or otherwise resulting from the activities undertaken pursuant to this Agreement which constitutes the confidential, proprietary or trade secret information of the disclosing Party (including, with respect to the Purchaser after the Signing Date, such information that is included in the Sold Assets). Such information may be of, but not limited to, a business, organizational, technical, financial, tax, marketing, operational, regulatory or sales nature and shall include, without limitation, any and all source codes and information relating to services, methods of operation, price lists, customer lists, technology, designs, specifications or other proprietary information of the business or affairs of a Party or its Affiliates.

12.3 The receiving Party shall use the same degree of care as it uses with regard to its own Confidential Information to prevent disclosure, use or publication of the disclosing Party’s Confidential Information. Confidential Information of the disclosing Party shall be held confidential by the receiving Party above, unless the receiving Party is able to prove that the Confidential Information is or has been:

12.3.1 obtained legally and freely from a Third Party without restriction;

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12.3.2 independently developed by the receiving Party at a prior time or in a separate and distinct manner without benefit of any of the Confidential Information of the disclosing Party, and documented to be as such; 

12.3.3 made available by the disclosing Party for general release independent of the receiving Party;

12.3.4 made public as required by applicable law or regulations, proceedings of any Governmental Entity; or

12.3.5 within the public domain or later becomes part of the public domain as a result of acts by someone other than the receiving Party and through no fault or wrongful act of the receiving Party.

12.4 A receiving Party may disclose Confidential Information of a disclosing Party to directors, officers, and employees of the receiving Party or agents of the receiving Party including their respective brokers, lenders or insurance carriers who have specifically agreed in writing to non-disclosure of the terms and conditions hereof and who have a need to know such information in connection with the transactions contemplated by this Agreement. Any disclosure hereof required by legal process pursuant to this Section 12 shall only be made after providing the disclosing Party with notice thereof, in order to permit the disclosing Party to seek an appropriate protective order or exemption. Violation by a Party or its agents of the foregoing provisions shall entitle the disclosing Party, at its option, to obtain injunctive relief without a showing of irreparable harm or injury and without bond. The provisions of this Section 12 will be effective for a period of two (2) years after the Signing Date.

13. Information, Records and Assistance Post-Closing

13.1 For a period of two (2) years following the Signing Date, Purchaser and Seller shall provide (and upon reasonable request procure that its respective Affiliates provide) the other with reasonable access to (and the right, at the cost of the Party making the request, to take copies of) the books and all other records held by Purchaser or its Affiliates and Seller or its Affiliates, respectively, after the Signing Date to the extent that such books, accounts, customer lists and records relate exclusively to the IP Rights and to the period up to the Signing Date (hereinafter "Records"). The foregoing obligation is subject to:

13.1.1 the provisions of Section 12 above (Confidentiality);

13.1.2 the person seeking access providing reasonable justification that the same is required;

13.1.3 access being given only during working hours at a time acceptable to the holder of the relevant Records;

13.1.4 the requested information not already being the subject of the Know-How Packages or the IP Files; and

13.1.5 any restrictions on access imposed by law or the terms of any agreement.

13.2 For a period of seven (7) years following the Signing Date, neither Purchaser nor Seller shall dispose of or destroy (and each shall procure that its respective Affiliates do not dispose of or destroy) any of the Records without first giving the other at least two (2) months' notice of its intention to do so and giving the other a reasonable opportunity to remove and retain any of them (at the other Party's expense).

14. Notices

All notices and other communications hereunder shall be made in writing and shall be delivered or sent by registered mail or courier to the addresses below or to such other addresses which may be specified by a Party to the other Party in the future in writing:

If to Seller:

[***]

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If to Purchaser:

[***]

With copy to:

[***]

15. Miscellaneous

15.1 All expenses, costs, fees and charges in connection with the transactions contemplated by this Agreement including, without limitation, legal services, shall be borne by the Party commissioning the respective costs, fees and charges. Purchaser shall bear any sales, transfer or stamp taxes or similar charges, payable by reason of the transactions contemplated by this Agreement in excess of the Sales Tax Amount. For the avoidance of doubt, each Party will be responsible for its own corporate income taxes.

15.2 All Annexes and Disclosure Schedules to this Agreement constitute an integral part of this Agreement.

15.3 This Agreement and the Annexes and Disclosure Schedules referred to under Section 15.2 above comprise the entire agreement between the Parties concerning the subject matter hereof and supersede and replace all oral and written declarations of intention made by the Parties in connection with the contractual negotiations. Changes or amendments to this Agreement (including this Section 15.3) must be made in writing by the Parties or in any other legally required form, if so required.

15.4 No Party shall be entitled to assign any rights or claims under this Agreement without the written consent of the other Party.

15.5 This Agreement shall not grant any rights to, and is not intended to operate for, the benefit of third parties unless otherwise explicitly provided for herein. Wherever under this Agreement any party other than Purchaser is to be indemnified by Seller, such other party is not entitled to bring any claims for indemnification against Seller (kein echter Vertrag zugunsten Dritter).

15.6 In this Agreement the headings are inserted for convenience only and shall not affect the interpretation of this Agreement; where a German term has been inserted in quotation marks and/or italics, it alone (and not the English term to which it relates) shall be authoritative for the purpose of the interpretation of the relevant English term in this Agreement.

15.7 No Party, except as provided otherwise herein, shall be entitled (i) to set-off (aufrechnen) any rights and claims it may have against any rights or claims any other Party may have under this Agreement, or (ii) to refuse to perform any obligation it may have under this Agreement on the grounds that it has a right of retention (Zurückbehaltungsrecht), unless the rights or claims of the relevant Party claiming a right of set-off (Aufrechnung) or retention (Zurückbehaltung) have been acknowledged (anerkannt) in writing by the relevant other Party or have been confirmed by final decision of a competent court (Gericht) or arbitration court (Schiedsgericht).

15.8 This Agreement shall be governed by, and be construed in accordance with, the laws of the Federal Republic of Germany, without regard to principles of conflicts of laws and without regard to the UN Convention on the Sale of Goods. All disputes resulting from, concerning the validity of or in connection with this Agreement shall be finally settled in accordance with the Arbitration Rules of the Deutsche Institution für Schiedsgerichtsbarkeit e.V. (German Institution of Arbitration). Arbitration shall be held in English in Frankfurt/Main, Germany before a panel of three (3) arbiters, pursuant to these Arbitration Rules after the parties have made at least one good-faith effort to resolve the issue(s) by mutual agreement.

15.9 In the event that one or more provisions of this Agreement shall, or shall be deemed to, be invalid or unenforceable, the validity and enforceability of the other provisions of this Agreement shall not be affected thereby. In such case, the Parties hereto agree to recognize and give effect to such valid and enforceable provision or provisions, which correspond as closely as possible with the commercial intent of the Parties. The same shall apply in the event that the Agreement contains any gaps (Vertragslücken).

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Frankfurt, June 28, 2016	Frankfurt, June 28, 2016
BASF SE	UDC Ireland Limited

F. List of Annexes and Disclosure Schedules

Annex 1.2 A Exclusively Owned IP Rights

Annex 1.2 B Co-Owned IP Rights

Annex 1.2 C [***]

Annex 1.2 D [***]

Annex 1.3 [***]

Annex 2.1 [***]

Annex 2.7 [***]

Annex 3.1 [***]

Annex 4.3.2 [***]

Annex 4.3.3 [***]

Annex 4.4 [***]

Annex 5.1.5 [***]

Annex 7.3.3 [***]

Annex 9.1.2 [***]

Annex 12.1 Coordinated Public Announcement

Schedule 5.1.4 [***]

Schedule 5.1.6 [***]

Schedule 5.1.9 [***]

Schedule 5.1.12 [***]

Schedule 5.3 [***]

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FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	CN		30.05.2003	03813119.6	1659931A	17.06.2009	ZL200303813119.6
	EP		30.05.2003	10181289.9	2315502
	EP		30.05.2003	03732510.7	1520450
	EP		30.05.2003	10181324.4	2265092
	JP		30.05.2003	04/512463	05/529172	03.02.2012	4916661
	KR		30.05.2003	04/7019671	2005/0016499	17.02.2011	1017229
	US		30.05.2003	10/517411	2005/175856	02.06.2009	7541096
	CN		21.10.2003	200380102532.6	1708485A	06.01.2010	ZL200380102532.6
	DE		21.10.2003	60318876.1		23.01.2008	1556360
	GB		21.10.2003			23.01.2008	1556360
	JP		21.10.2003	05/501808	18-510732	06.04.2012	4963357
	KR		21.10.2003	05/7007687		31.03.2011	1027635
	US		21.10.2003	10/531780	2006/041126	06.09.2011	8012602
	US		21.10.2003	13/654550	2013/079517
	EP		20.06.2005	05761012.3	1893718
	JP		20.06.2005	07/518583	20-504342	25.05.2012	5000496
	KR		20.06.2005	07/7002145		30.05.2013	1272490
	US		20.06.2005	12/794948	2010/244014	20.12.2011	8080667
	US		20.06.2005	11/629573	2008-0015355	26.10.2010	7820828
	CN		14.12.2005	200580044163.9	101087863A	20.06.2012	ZL200580044163.9
	DE		14.12.2005	602005014391.2		06.05.2009	1841834
	EP		14.12.2005	09153071.7	2080796
	FR		14.12.2005			06.05.2009	1841834
	GB		14.12.2005			06.05.2009	1841834
	IT		14.12.2005			06.05.2009	1841834
	JP		14.12.2005	07/547457	20-525366	05.10.2012	5100395
	KR		14.12.2005	07/7016762		24.05.2013	1269497
	US		14.12.2005	11/793513	2011/114922	23.07.2013	8492749
	US		14.12.2005	13/915745	2013/292660	21.04.2015	9012899
	CN		08.03.2006	200680008314.X	101142275A	11.07.2012	ZL200680008314.X
	DE		08.03.2006	602006009775.1		14.10.2009	1858976
	FR		08.03.2006			14.10.2009	1858976
	GB		08.03.2006			14.10.2009	1858976
	IT		08.03.2006			14.10.2009	1858976
	JP		08.03.2006	08/501273	20-538221	16.05.2014	5541859

Page 1 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	KR		08.03.2006	07/7023560		21.03.2013	1248047
	US		08.03.2006	11/886138	2009/105447	21.05.2013	8445630
	CN		19.04.2006	200680014737.2	101171239A	14.08.2013	ZL200680014737.2
	EP		19.04.2006	06743343.3	1874740
	JP		19.04.2006	08/508194	20-539192	22.11.2012	5138582
	KR		19.04.2006	07/7027653		27.05.2014	1402633
	US		19.04.2006	11/919105	2009/066231	8/18/2015	9113536
	CN		22.05.2006	200680019047.6	101184822A	26.11.2014	ZL200680019047.6
	CN		22.05.2006	201210028344.4		11/25/2015	102603688
	DE		22.05.2006	602006011734.5-08		13.01.2010	1885818
	EP		22.05.2006	06777232.7	1885818	13.01.2010	1885818
	FR		22.05.2006			13.01.2010	1885818
	GB		22.05.2006			13.01.2010	1885818
	IT		22.05.2006			13.01.2010	1885818
	JP		22.05.2006	08/514060	20-545729	12.10.2012	5107237
	KR		22.05.2006	07/7030813		19.12.2013	1345104
	KR		22.05.2006	13/7016703		25.07.2014	1425423
	US		22.05.2006	14/252870	2014/217335	03.02.2015	8946984
	US		22.05.2006	13/164016	2011/248217	27.05.2014	8735610
	US		22.05.2006	11/921050	2009/131673	02.08.2011	7989644
	CN		18.12.2006	200680049386.9	101346451A	18.09.2013	ZL200680049386.9
	EP		18.12.2006	06841398.8	1966343
	JP		18.12.2006	08/547942	21-522228	05.04.2013	5234965
	KR		18.12.2006	08/7018462		21.10.2014	1455121
	US		18.12.2006	12/086646	2009/062560	19.04.2011	7928242
	DE		31.01.2007	602007011396.2-08		22.12.2010	1981929
	FR		31.01.2007			22.12.2010	1981929
	GB		31.01.2007			22.12.2010	1981929
	IT		31.01.2007			22.12.2010	1981929
	JP		31.01.2007	08/553724	21-526111	06.06.2014	5553993
	KR		31.01.2007	08/7022091		21.02.2014	1368183
	US		31.01.2007	12/223139	2010/249349	20.03.2012	8138303
	CN		04.07.2007	200780026594.1	101490125A	14.11.2012	ZL200780026594.1
	EP		04.07.2007	07765779.9	2041200
	JP		04.07.2007	09/519898		20.12.2013	5438511
	KR		04.07.2007	09/7003077		08.08.2014	1430420
	US		04.07.2007	12/309090	2009/309068	17.07.2012	8221906

Page 2 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	CN		04.09.2007	201210472550.4
	CN		04.09.2007	200780034161.0	101516856A	02.01.2013	ZL200780034161.0
	DE		04.09.2007			3/30/2016	2081912
	FR		04.09.2007			3/30/2016	2081912
	GB		04.09.2007			3/30/2016	2081912
	IT		04.09.2007			3/30/2016	2081912
	JP		04.09.2007	09/527780		03.04.2015	5722541
	KR		04.09.2007	09/7007684		22.06.2015	101556098
	US		04.09.2007	12/310737	2010/039024
	CN		04.02.2008	200880005175.4
	DE		04.02.2008	602008026747.4		14.08.2013	2139907
	FR		04.02.2008			14.08.2013	2139907
	GB		04.02.2008			14.08.2013	2139907
	IT		04.02.2008			14.08.2013	2139907
	JP		04.02.2008	09/549393		05.09.2014	5606075
	KR		04.02.2008	09/7019035		23.04.2015	1516441
	US		04.02.2008	12/526069	2010/044688	3/15/2016	9284278
	CN		13.02.2008	200880006073.4		25.12.2013	ZL200880006073.4
	DE		13.02.2008	602008004738.5-08		26.01.2011	2112994
	FR		13.02.2008			26.01.2011	2112994
	GB		13.02.2008			26.01.2011	2112994
	IT		13.02.2008			26.01.2011	2112994
	JP		13.02.2008	09/550691		23.05.2014	5546255
	KR		13.02.2008	09/7019823		24.04.2015	101532798
	US		13.02.2008	12/527437	2010/108994	6/7/2016	9362510
	CN		19.03.2008	201110410539.0		22.04.2015	ZL201110410539.0
	CN		19.03.2008	200880010286.4		12.11.2014	ZL200880010286.4
	DE		19.03.2008			8/12/2015	2125752
	GB		19.03.2008			8/12/2015	2125752
	FR		19.03.2008			8/12/2015	2125752
	IT		19.03.2008			8/12/2015	2125752
	JP		19.03.2008	10/500220		20.06.2014	5562228
	JP		19.03.2008	14/021687
	KR		19.03.2008	09/7022536		19.01.2015	1486096
	US		19.03.2008	12/531885	2010/109514
	CN		13.06.2008	200880021501.0
	EP		13.06.2008	08760985.5	2170911

Page 3 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	KR		13.06.2008	10/7001416	2010-524458	20.05.2015
	US		13.06.2008	12/663769	2010/252820	14.05.2013	8440826
	CN		10.09.2008	200880108109.X		29.04.2015	ZL200880108109.X
	DE		10.09.2008	602008014651.0		04.04.2012	2193112
	FR		10.09.2008			04.04.2012	2193112
	GB		10.09.2008			04.04.2012	2193112
	IT		10.09.2008			04.04.2012	2193112
	JP		10.09.2008	10/525302		26.12.2014	5669580
	KR		10.09.2008	10/7008467	2010-070357
	US		10.09.2008	12/678382	2010/277060	14.01.2014	8628862
	CN		02.02.2009	200980105003.9
	CN		02.02.2009	201610223584.8
	EP		02.02.2009	09711248.6	2252624
	JP		02.02.2009	10/546285		13.03.2015	5709528
	KR		02.02.2009	10/7020242	2010-123716
	KR		02.02.2009	15/7021565
	US		02.02.2009	12/864877	2011/089407	25.06.2013	8471248
	CN		19.05.2009	200980120467.7		06.05.2015	ZL200980120467.7
	EP		19.05.2009	09757394.3	2297272
	JP		19.05.2009	11/512063		10.04.2015	5726069
	KR		19.05.2009	10/7027589
	US		19.05.2009	12/994887	2011/086454	01.04.2014	8685541
	CN		23.06.2009	200980127590.1		24.09.2014	ZL200980127590.1
	CN		23.06.2009	201310652689.1
	DE		23.06.2009	602009009117.4		15.08.2012	2313472
	FR		23.06.2009			15.08.2012	2313472
	GB		23.06.2009			15.08.2012	2313472
	IT		23.06.2009			15.08.2012	2313472
	JP		23.06.2009	11/517842		09.05.2014	5535208
	JP		23.06.2009	13/260460
	KR		23.06.2009	11/7003646	2011-031389
	US		23.06.2009	13/003614	2011/186821	05.06.2012	8193528
	CN		22.09.2009	200980148001.8		19.08.2015	ZL200980148001.8
	JP		22.09.2009	11/529503
	KR		22.09.2009	11/7009946
	US		22.09.2009	13/121695	2011/177630	27.05.2014	8734963
	CN		11.06.2010	201080036475.6		24.09.2014	ZL201080036475.6

Page 4 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	DE		11.06.2010	602010015387.8		23.04.2014	2443213
	FR		11.06.2010			23.04.2014	2443213
	GB		11.06.2010			23.04.2014	2443213
	IT		11.06.2010			23.04.2014	2443213
	JP		11.06.2010	12/515438		08.08.2014	5591328
	KR		11.06.2010	12/7001305	2012-052936
	US		11.06.2010	13/378878	2012/168731	12.05.2015	9028979
	DE		07.02.2003	50307111.0-08		25.04.2007	1345477
	FR		07.02.2003			25.04.2007	1345477
	GB		07.02.2003			25.04.2007	1345477
	IT		07.02.2003			25.04.2007	1345477
	US		04.03.2003	11/077199	2005/159582	15.06.2010	7737236
	US		04.03.2003	10/377788	030181617	01.11.2005	6960637
	CNT1		18.08.2004	200910171989.1		27.11.2013	ZL200910171989.1
	CN		18.08.2004	200480030649.2		23.12.2009	Z1200480030649.2
	EP		18.08.2004	04764255.8	1658349
	JP		18.08.2004	06/523602		31.07.2009	4351702
	KR		18.08.2004	06/7003352		21.09.2012	1186706
	UST4		18.08.2004	14/540838	2015/073152	5/15/2015	9024308
	US3		18.08.2004	12/905112	2011/049501	23.12.2014	8916853
	US2		18.08.2004	12/904290	2011/049500	19.02.2013	8377740
	US		18.08.2004	10/568344	2006/258043	07.12.2010	7846763
	US1		18.08.2004	12/901610	2011/049499
	CN		09.09.2004	200480029854.7		16.06.2010	ZL200480029854.7
	DE		09.09.2004	502004010460.6-08		02.12.2009	1663919
	FR		09.09.2004			02.12.2009	1663919
	GB		09.09.2004			02.12.2009	1663919
	IT		09.09.2004			02.12.2009	1663919
	JP		09.09.2004	06/525768		05.03.2010	4469852
	KR		09.09.2004	06/7006916		22.05.2012	1151122
	US		09.09.2004	10/571557	2007/063189	10.02.2009	7488856
	CN		28.09.2004	200480032309.3		26.05.2010	ZL200480032309.3
	DE		28.09.2004	502004006863.4-08		16.04.2008	1673322
	FR		28.09.2004			16.04.2008	1673322
	GB		28.09.2004			16.04.2008	1673322
	IT		28.09.2004			16.04.2008	1673322
	JP		28.09.2004	06/530032		14.05.2010	4510825

Page 5 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	KR		28.09.2004	06/7008313		14.06.2012	1158593
	US		28.09.2004	10/573803	2007/069198	15.03.2011	7906225
	DE		14.03.2005	502005008623.6		02.12.2009	1740673
	FR		14.03.2005			02.12.2009	1740673
	GB		14.03.2005			02.12.2009	1740673
	IT		14.03.2005			02.12.2009	1740673
	JP		14.03.2005	07/504304		24.10.2008	4204632
	KR		14.03.2005	06/7021782		21.11.2013	1333942
	US		14.03.2005	10/594132	2007/188078	06.07.2010	7750556
	DE		20.09.2005	502005011136.2-08		16.03.2011	1794211
	FR		20.09.2005			16.03.2011	1794211
	GB		20.09.2005			16.03.2011	1794211
	IT		20.09.2005			16.03.2011	1794211
	JP		20.09.2005	07/532818		29.06.2012	5026976
	KR		20.09.2005	07/7008810		23.07.2013	1290841
	US		20.09.2005	11/575554	2008/199731	28.12.2010	7858208
	CN		25.11.2005	200580047178.0		25.01.2012	ZL200580047178.0
	DE		25.11.2005	502005014464.3		30.07.2014	1817806
	FR		25.11.2005			30.07.2014	1817806
	GB		25.11.2005			30.07.2014	1817806
	IT		25.11.2005			30.07.2014	1817806
	JP		25.11.2005	07/541853		24.06.2011	4768746
	KR		25.11.2005	07/7014386		20.01.2014	1359770
	US		25.11.2005	11/720274	2010/308714	04.10.2011	8029919
	CN		23.11.2005	200580040471.4		09.05.2012	ZL200580040471.4
	DE		23.11.2005	502005007675.3-08		08.07.2009	1819717
	FR		23.11.2005			08.07.2009	1819717
	GB		23.11.2005			08.07.2009	1819717
	IT		23.11.2005			08.07.2009	1819717
	JP		23.11.2005	07/541832		25.05.2012	5001851
	KR		23.11.2005	07/7014428		23.07.2013	1290967
	US		23.11.2005	14/314753	2014/309428
	CN		03.04.2006	200680023394.6		06.06.2012	ZL200680023394.6
	DE		03.04.2006	502006006249.6-08		24.02.2010	1877518
	FR		03.04.2006			24.02.2010	1877518
	GB		03.04.2006			24.02.2010	1877518
	IT		03.04.2006			24.02.2010	1877518

Page 6 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	JP		03.04.2006	08/508187		22.06.2012	5021626
	KR		03.04.2006	07/7027609		05.08.2013	1295394
	US		03.04.2006	11/912998	2008/213623	20.03.2012	8137822
	DE		13.06.2006	502006004749.7-08		02.09.2009	1899359
	FR		13.06.2006			02.09.2009	1899359
	GB		13.06.2006			02.09.2009	1899359
	IT		13.06.2006			02.09.2009	1899359
	US		13.06.2006	11/916455	2008/200686	28.09.2010	7803948
	DE		09.01.2007	502007009998.8		06.06.2012	1993728
	DE		09.01.2007	502007011939.3		19.06.2013	2338593
	FR		09.01.2007			19.06.2013	2338593
	FR		09.01.2007			06.06.2012	1993728
	GB		09.01.2007			06.06.2012	1993728
	GB		09.01.2007			19.06.2013	2338593
	IT		09.01.2007	26878BE/2012		06.06.2012	1993728
	IT		09.01.2007			19.06.2013	2338593
	JP		09.01.2007	08/552765		15.02.2013	5199887
	US		09.01.2007	13/778262	2013/178621	04.11.2014	8877937
	US		09.01.2007	12/162863	2009/018330	02.04.2013	8410280
	DE		03.04.2007	502007010543.0		12.09.2012	2007781
	FR		03.04.2007			12.09.2012	2007781
	GB		03.04.2007			12.09.2012	2007781
	IT		03.04.2007			12.09.2012	2007781
	US		03.04.2007	12/295999	2009/054657	26.02.2013	8383828
	CN		03.04.2007	200780020631.8		15.05.2013	ZL200780020631.8
	DE		03.04.2007	502007009524.9		21.03.2012	2007779
	FR		03.04.2007			21.03.2012	2007779
	GB		03.04.2007			21.03.2012	2007779
	IT		03.04.2007			21.03.2012	2007779
	JP		03.04.2007	09/503568		23.08.2013	5345519
	KR		03.04.2007	08/7026664		12.08.2014	1431844
	US		03.04.2007	12/296112	2009/096367
	DE		25.06.2007	502007002122.9-08		25.11.2009	2044169
	FR		25.06.2007			25.11.2009	2044169
	GB		25.06.2007			25.11.2009	2044169
	IT		25.06.2007			25.11.2009	2044169
	JP		25.06.2007	09/517158		09.11.2012	5127828

Page 7 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	KR		25.06.2007	09/7001788		08.08.2014	1430774
	US		25.06.2007	12/306533	2009/326237	21.08.2012	8247574
	EP		25.06.2007	07765609.8	2035526
	US		25.06.2007	12/306791	2011/034699	27.01.2015	8940904
	CN		13.09.2007	200780042972.5		30.05.2012	Z L200780042972.5
	EP		13.09.2007	07803464.2	2082447
	KR		13.09.2007	09/7006991		26.09.2011	1069302
	US		13.09.2007	12/441909	2009/278119	14.08.2012	8241764
	CN		04.04.2008	200880018693.X		22.05.2013	ZL200880018693.X
	DE		04.04.2008	502008004682.8		31.08.2011	2134807
	FR		04.04.2008			31.08.2011	2134807
	GB		04.04.2008			31.08.2011	2134807
	IT		04.04.2008			31.08.2011	2134807
	[***]		[***]	[***]
	JP		04.04.2008	13/238049		10/9/2015	5818864
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		04.04.2008	13/863407	2013/231489
	US		04.04.2008	12/594429	2010127215	04.06.2013	8455112
	CN		21.04.2008	200880022144.X		22.01.2014	ZL200B80022144.X
	DE		21.04.2008	502008002309.7-08		12.01.2011	2150556
	FR		21.04.2008			12.01.2011	2150556
	GB		21.04.2008			12.01.2011	2150556
	IT		21.04.2008			12.01.2011	2150556
	JP		21.04.2008	10/504652		09.01.2015	5677836
	KR		21.04.2008	09/7024738		06.03.2015	1502187
	US		21.04.2008	12/597651	2010/187980	02.08.2011	7989091
	CN		26.06.2008	200880023458.1		16.07.2014	ZL200880023458.1
	EP		26.06.2008	08774381.1	2173834
	JP		26.06.2008	10/513923		9/11/2015	5804703
	KR		26.06.2008	10/7002733		10/1/2015	101558623
	US		26.06.2008	12/667765	2011/031477	15.04.2014	8697255
	CN		25.06.2008	200880104631.0	101878552	15.07.2015	ZL200880104631.0
	EP		25.06.2008	08774297.9	2165377
	JP		25.06.2008	10/513911		09.01.2015	5675349
	KR		25.06.2008	10/7002592		12/8/2015	1577465
	US		25.06.2008	12/667619	2010/219403	12.02.2013	8373159

Page 8 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	DE		26.09.2008	502008009029.0		02.01.2013	2195868
	FR		26.09.2008			02.01.2013	2195868
	GB		26.09.2008			02.01.2013	2195868
	IT		26.09.2008	21393BE/2013		02.01.2013	2195868
	JP		26.09.2008	10/527422		06.06.2014	5553758
	KR		26.09.2008	10/7009710		12/8/2015	1577468
	US		26.09.2008	12/681023	2010/219406	26.02.2013	8384068
	CN		17.10.2008	200880120186.7		08.04.2015	ZL200880120186.7
	DE		17.10.2008	502008007018.4		18.04.2012	2205615
	FR		17.10.2008			18.04.2012	2205615
	GB		17.10.2008			18.04.2012	2205615
	IT		17.10.2008			18.04.2012	2205615
	JP		17.10.2008	10/529402		19.09.2014	5615178
	[***]		[***]	[***]
	US		17.10.2008	12/738104	2010/264405	04.09.2012	8258297
	CN		17.10.2008	200880120200.3	101896494	08.04.2015	ZL200880120200.3
	DE		17.10.2008	502008004477.9		10.08.2011	2203461
	FR		17.10.2008			10.08.2011	2203461
	GB		17.10.2008			10.08.2011	2203461
	IT		17.10.2008	29267/BE/2011		10.08.2011	2203461
	[***]		[***]	[***]
	US		17.10.2008	12/738467	2010/213834	20.05.2014	8728632
	DE		09.06.2009	502009004429.1		15.08.2012	2288671
	FR		09.06.2009			15.08.2012	2288671
	GB		09.06.2009			15.08.2012	2288671
	IT		09.06.2009			15.08.2012	2288671
	[***]		[***]	[***]
	US		09.06.2009	12/997378	2011/098473	19.02.2013	8377332
	EP		09.06.2009	09761714.6	2297800
	[***]		[***]	[***]
	US		09.06.2009	12/997000	2011/087026	02.04.2013	8410270
	US		09.06.2009	13/768356	2013/158268	26.11.2013	8592586
	CN		13.10.2010	201080056465.9		11/25/2015	ZL201080056465.9
	EP		13.10.2010	10773002.0	2488540
	JP		13.10.2010	12/533617		10/23/2015	5826281
	[***]		[***]	[***]
	US		13.10.2010	13/501492	2012/199823	8/18/2015	9108998

Page 9 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	CN		13.12.2010	201080063772.X		11/25/2015	102762582
	DE		13.12.2010	502010008167.4		29.10.2014	2513125
	ES		13.12.2010			29.10.2014	2513125
	FR		13.12.2010			29.10.2014	2513125
	GB		13.12.2010			29.10.2014	2513125
	IT		13.12.2010			29.10.2014	2513125
	[***]		[***]	[***]
	[***]		[***]	[***]
	NL		13.12.2010			29.10.2014	2513125
	PL		13.12.2010			29.10.2014	2513125
	US		13.12.2010	13/516117	2013/032766
	[***]		[***]	[***]
	DE		15.04.2011	602011014208.9		25.02.2015	2558476
	FR		15.04.2011			25.02.2015	2558476
	GB		15.04.2011			25.02.2015	2558476
	IT		15.04.2011			25.02.2015	2558476
	JP		15.04.2011	13/504383		4/24/2016	5734411
	[***]		[***]	[***]
	US		15.04.2011	13/087954	2011/253988	08.04.2014	8691401
	[***]		[***]	[***]
	EP		16.06.2011	11795282.0	2582770
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		16.06.2011	13/162244	2011/309346	9/22/2015	9142792
	CN		16.06.2011	201180030023.1		4/13/2016	Z L201180030023.1
	DE		16.06.2011	602011011538.3		19.11.2014	2582769
	FR		16.06.2011			19.11.2014	2582769
	GB		16.06.2011			19.11.2014	2582769
	IT		16.06.2011			19.11.2014	2582769
	[***]		[***]	[***]
	KR		16.06.2011	13/7001305	2013-036048
	US		14.06.2011	13/159957	2011/309343	12/1/2015	9203037
	CN		16.06.2011	201180030022.7		1/6/2016	102947415
	DE		16.06.2011	602011007982.4		25.06.2014	2582768
	FR		16.06.2011			25.06.2014	2582768
	GB		16.06.2011			25.06.2014	2582768
	IT		16.06.2011			25.06.2014	2582768

Page 10 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	[***]		[***]	[***]
	KR		16.06.2011	13/7001306	2013-120445
	US		14.06.2011	13/160052	2011/309344
	[***]		[***]	[***]
	EP		07.07.2011	11803227.5	2590967
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		08.07.2011	13/179061	2012/007063	30.06.2015	9067919
	[***]		[***]	[***]
	DE		04.10.2011	602011008784.3		30.07.2014	2625171
	FR		04.10.2011			30.07.2014	2625171
	GB		04.10.2011			30.07.2014	2625171
	IT		04.10.2011			30.07.2014	2625171
	JP		04.10.2011	13/532158
	[***]		[***]	[***]	[***]
	US		04.10.2011	13/252482	2012-095222	14.07.2015	9079872
	CN		07.12.2011	201180059544.X		3/30/2016	ZL201180059544.X
	DE		07.12.2011	602011011389.5		12.11.2014	2651904
	FR		07.12.2011			12.11.2014	2651904
	GB		07.12.2011			12.11.2014	2651904
	IT		07.12.2011			12.11.2014	2651904
	[***]		[***]	[***]
	KR		07.12.2011	13/7018293	2013-130777
	US		09.12.2011	13/315687	2012/149904	29.01.2013	8362246
	CN		12.06.2012	201280039588.0
	EP		12.06.2012	12800656.6	2721043
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		12.06.2012	13/494563	2012/319050
	[***]		[***]	[***]
	DE		22.03.2012			18.05.2016	2688889
	FR		22.03.2012			18.05.2016	2688889
	GB		22.03.2012			18.05.2016	2688889
	IT		22.03.2012			18.05.2016	2688889
	EP		22.03.2012	15198668.4	3034508
	[***]		[***]	[***]

Page 11 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		20.03.2012	13/424892	2012/241681
	[***]		[***]	[***]
	DE		07.11.2012			2/3/2016	2776443
	FR		07.11.2012			2/3/2016	2776443
	GB		07.11.2012			2/3/2016	2776443
	IT		07.11.2012			2/3/2016	2776443
	[***]		[***]	[***]
	KR		07.11.2012	14/7015153	2014-097299
	[***]		[***]	[***]
	US		07.11.2012	14/352861	2014/252280
	CN		09.01.2013	201380005027.3	104039802
	EP		09.01.2013	13700525.2	2802594
	[***]		[***]	[***]
	KR		09.01.2013	14/7022145	2014-117508
	[***]		[***]	[***]
	US		09.01.2013	14/371064	2015/005497
	[***]		[***]	[***]
	EP		06.11.2013	13786274.4	EP2917950
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		06.11.2013	14/440637	2015318501
	CN		17.07.2013	201380037906.4	104470937
	EP		17.07.2013	13737608.3	2875039
	[***]		[***]	[***]
	KR		17.07.2013	15/7003985	2015-036640
	US		17.07.2013	14/412097	2015-171350
	[***]		[***]	[***]
	EP		06.08.2013	13828031.8	2882766
	[***]		[***]	[***]
	KR		06.08.2013	15/7005665	2015-041032
	US		06.08.2013	14/416103	2015-243912
	CN		08.07.2013	201380034671.3	104395316
	EP		08.07.2013	13739168.6	2872512
	[***]		[***]	[***]

Page 12 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	KR		08.07.2013	15/7003120	2015-036402
	[***]		[***]	[***]
	US		08.07.2013	14/413736	2015-207083
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	KR		18.09.2013	15/7009777	2015 056829
	TW		18.09.2013	102133988	201412747
	US		18.09.2013	14/427134	2015-243907
	[***]		[***]	[***]
	EP		17.03.2014	14712243.6	2976795
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		17.03.2014	14/778400	2016/141521
	[***]		[***]	[***]
	EP		19.03.2014	14711506.7	2976793
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	CN		28.04.2014	201480019239.1	105518013
	EP		28.04.2014	14719783.4	3016960
	[***]		[***]	[***]
	KR		28.04.2014	15/7032407	2016/027087
	[***]		[***]	[***]
	CN		02.07.2014	201480048191.7	105518013
	EP		02.07.2014	14734488.1	3016960
	[***]		[***]	[***]
	KR		02.07.2014	16/7002495	2016/027087
	[***]		[***]	[***]
	TW		02.07.2014	103122869	2015/12202
	CN		29.07.2014	2014/80043364	105431442
	EP		29.07.2014	14744361.8	3027629
	[***]		[***]	[***]

Page 13 of 14

FINAL Annex 1.2A – Exclusively Owned IP Rights Status as of Jun-22-2016

[***]	Country	[***]	Filling Date	Filling No.	Publication No.	Grant Date	Patent No.	[***]	[***]
	KR		29.07.2014	2016/7002342	2016/034921
	[***]		[***]	[***]
	TW		31.07.2014	103126281	2015/09922
	[***]		[***]	[***]
	EP		7/31/2014	14745141.3	3027630
	[***]		[***]	[***]
	KR		7/31/2014	2016/7004845	2016/035043
	[***]		[***]	[***]
	[***]		[***]	[***]
	WO		3/26/2015	PCT/EP2015/056491	2015/150203
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	TW		19.12.2014	103144654	2015/37801
	[***]		[***]	[***]
	WO		30.03.2015	PCT/EP2015/056892	2015/150324
	[***]		[***]	[***]
	WO		11.05.2015	PCT/EP2015/060305	2015/176981
	WO		18.11.2015	PCT/EP2015/076940	2016/079169
	WO		25.09.2015	PCT/EP2015/072053	2016/046350
	TW		07.08.2015	104125837	201619174
	WO		07.08.2015	PCT/EP2015/068240	2016/020516
	WO		16.09.2015	PCT/EP2015/071164	2016/046034
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]
	[***]		[***]	[***]

Page 14 of 14

FINAL Annex.1.2B Co-Owned IP rights Status as of Jun-22-2016

[***]	Country	[***]	Filing Date	Filing No.	Publication No.	Grant Date	Patent No.	[***]	[***]	[***]
	CN		17.06.2009	200980128381.9		15.05.2013	ZL200980128381.9
	DE		17.06.2009	502009007839.0		21.08.2013	2301091
	FR		17.06.2009			21.08.2013	2301091
	GB		17.06.2009			21.08.2013	2301091
	JP		17.06.2009	11/514028		7/24/2015	5780956
	[***]		[***]	[***]
	US		17.06.2009	13/000261	2011/172423	14.10.2014	8859110
	CN		14.12.2009	200980157855.2		03.12.2014	ZL200980157855.2
	EP		14.12.2009	09795397.0	2393819
	JP		14.12.2009	11/544828		9/18/2015	5808252
	[***]		[***]	[***]
	US		14.12.2009	13/143651	2012/012821
	CN		07.10.2009	200980147883.6	102246328
	EP		07.10.2009	09783815.5	2340579
	JP		07.10.2009	11/530480		12.12.2014	5661635
	[***]		[***]	[***]
	US		07.10.2009	13/123173	2011/198578	31.12.2013	8618533
	CN		28.10.2010	201080059461.6		12/9/2015	ZL201080059461.6
	DE		28.10.2010	502010010522.0		10/21/2015	2493906
	FR		28.10.2010			10/21/2015	2493906
	GB		28.10.2010			10/21/2015	2493906
	IT		28.10.2010			10/21/2015	2493906
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		28.10.2010	13/504725	2012/205645
	[***]		[***]	[***]
	EP		05.04.2011	11765150.5	2556075
	[***]		[***]	[***]
	[***]		[***]	[***]
	US		05.04.2011	13/080091	2011/266528	28.01.2014	8637857

Page 1 of 1

FINALAnnex 12.1 - Coordinated public announcement

Annex 12.1 is comprised of two coordinated public announcements with titles as indicated below:

· “Universal Display Corporation Acquires BASF’s OLED Intellectual Property Assets”

· “Universal Display Corporation erwirbt das OLED- Patentporfolio der BASF”

Universal Display Contact:	BASF SE Contact:
Darice Liu	Birgit Lau
investor@oled.com	birgit.lau@basf.com
media@oled.com	+49 621 60-20732
609-671-0980 x570

Universal Display Corporation Acquires
BASF’s OLED Intellectual Property Assets

Ewing, New Jersey & Ludwigshafen, Germany – June 29, 2016 -Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED^® technology and materials, announced yesterday that through its wholly-owned subsidiary UDC Ireland Limited, it has acquired the OLED Intellectual Property (IP) assets of BASF SE (XETRA: BAS), the world’s leading chemical company. Representing 15 years of research and development, the assets include over 500 issued and pending patents around the world, in 86 patent families. Largely consisting of phosphorescent materials and technologies, BASF’s OLED portfolio has an average lifetime of 10 years. The purchase price for the acquisition is approximately €87 million.

“We are pleased to enhance our extensive key patents in phosphorescent materials with BASF’s complementary OLED IP portfolio,” said Steven V. Abramson, President and Chief Executive Officer of Universal Display. “One of our key objectives is to develop and deliver an all-phosphorescent emissive stack. We believe that this acquisition will help further these research efforts, principally in the development of commercial blue emissive systems. As a leading player in the OLED ecosystem with 20+ years of know-how and experience in emissive materials and technologies, we believe that we are best positioned to incorporate and leverage BASF’s IP assets into our existing broad and robust portfolio of 3,600+ issued and pending pa

tents worldwide. We expect this acquisition to strengthen our commercial development pipeline of new and next-generation OLED systems and bring additional value to our customers and shareholders.”

BASF ceased its OLED research activities at the end of 2015 after a careful strategic examination. With the sale of the OLED IP assets, the withdrawal is finalized. “We are pleased that UDC will take forward the development and marketing of our OLED materials and technologies. We believe our IP and know-how fits perfectly into UDC’s patent portfolio and competencies and that UDC will be able to generate the most value for the OLED industry out of these combined phosphorescent technologies,” said Felix Goerth, Director Organic Electronics at BASF New Business GmbH.

Since its inception in 1994, Universal Display has invested close to $400 million in research and development to advance the company from a start-up to a leading player in the global OLED ecosystem. The Company continues to invest heavily in a number of strategic programs and is working with customers on developmental and commercial phosphorescent materials and OLED technologies. Universal Display continues to make progress on new and next-generation red, green, yellow and blue emitters and hosts, as well as expanding its core competencies of phosphorescent OLEDs (PHOLED) and other OLED technologies including OLED manufacturing processes and equipment. UDC expects the acquisition of BASF’s IP assets to further fortify its expansive global OLED intellectual property framework.

About BASF

At BASF, we create chemistry for a sustainable future. We combine economic success with environmental protection and social responsibility. The approximately 112,000 employees in the BASF Group work on contributing to the success of our customers in nearly all sectors and almost every country in the world. Our portfolio is organized into five segments: Chemicals, Performance Products, Functional Materials & Solutions, Agricultural Solutions and Oil & Gas. BASF generated sales of more than €70 billion in 2015. BASF

shares are traded on the stock exchanges in Frankfurt (BAS), London (BFA) and Zurich (AN). Further information at www.basf.com.

About Universal Display Corporation

Universal Display Corporation (Nasdaq: OLED) is a leader in developing and delivering state-of-the-art, organic light emitting diode (OLED) technologies, materials and services to the display and lighting industries.  Founded in 1994, the Company currently owns or has exclusive, co-exclusive or sole license rights with respect to more than 4,100 issued and pending patents worldwide.  Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED^® phosphorescent OLED technology that can enable the development of low power and eco-friendly displays and white lighting.  The Company also develops and offers high-quality, state-of-the-art UniversalPHOLED materials that are recognized as key ingredients in the fabrication of OLEDs with peak performance.  In addition, Universal Display delivers innovative and customized solutions to its clients and partners through technology transfer, collaborative technology development and on-site training.

Based in Ewing, New Jersey, with international offices in Ireland, South Korea, Hong Kong, Japan and Taiwan, Universal Display works and partners with a network of world-class organizations, including Princeton University, the University of Southern California, the University of Michigan, and PPG Industries, Inc.  The Company has also established relationships with companies such as AU Optronics Corporation, BOE Technology, DuPont Displays, Inc., Innolux Corporation, Kaneka Corporation, Konica Minolta Technology Center, Inc., LG Display Co., Ltd., Lumiotec, Inc., OLEDWorks LLC, OSRAM, Pioneer Corporation, Samsung Display Co., Ltd., Sumitomo Chemical Company, Ltd. and Tohoku Pioneer Corporation. To learn more about Universal Display, please visit http://www.oled.com.

Universal Display Corporation and the Universal Display logo are trademarks or registered trademarks of Universal Display Corporation.  All other company, brand or product names may be trademarks or registered trademarks.

# # #

All statements in this document that are not historical, such as those relating to Universal Display Corporation’s technologies and potential applications of those technologies, the Company’s expected results as well as the growth of the OLED market and the Company’s opportunities in that market, are forward-looking financial statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements in this document, as they reflect Universal Display Corporation’s 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. These risks and uncertainties are discussed in greater detail in Universal Display Corporation’s periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, in particular, the section entitled “Risk Factors” in Universal Display Corporation’s annual report on Form 10-K for the year ended December 31, 2015. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

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(OLED-C)

Universal Display Contact:	BASF SE:
Darice Liu	Birgit Lau
investor@oled.com	birgit.lau@basf.com
media@oled.com	+49 621 60-20732
609-671-0980 x570

Universal Display Corporation erwirbt das
OLED-Patentportfolio der BASF

Ewing, New Jersey, USA und Ludwigshafen, Deutschland: 29.06.2016

Universal Display Corporation (NASDAQ: OLED), gab gestern (28.6.2016) bekannt, dass sie über ihre hundertprozentige Tochtergesellschaft UDC Ireland Limited das OLED-Patentportfolio der BASF SE, dem weltweit führenden Chemieunternehmen, erworben hat. UDC ermöglicht mit ihrer UniversalPHOLED^®-Technologie und –Materialen energieeffiziente Bildschirme und Beleuchtung. Nach 15 Jahren Forschung und Entwicklung, umfasst das OLED-Patentportfolio der BASF mehr als 500 angemeldete und erteilte Patente in 86 Patentfamilien weltweit. Das hauptsächlich aus Technologien für phosphoreszente Materialien bestehende Portfolio hat eine durchschnittliche Restlaufzeit von 10 Jahren. Der Kaufpreis beträgt ca. 87 Millionen €.

„Wir freuen uns, dass wir unsere umfangreichen Schlüsselpatente für phosphoreszente Materialien durch das komplementäre OLED-Patentportfolio der BASF ergänzen können“, sagt Steven V. Abramson, President und Chief Executive Officer von Universal Display. „Eines unserer wichtigsten Ziele ist die Entwicklung und Vermarktung eines vollphosphoreszenten Emitter-Systems. Wir glauben, dass der Erwerb uns bei diesen Forschungsbemühungen, insbesondere bei der Entwicklung von marktreifen blauen Emittern, helfen wird. Als ein führendes Unternehmen im OLED-Geschäft mit mehr als 20 Jahren Erfahrung und Wissen bei emittierenden Materialien und Technologie glauben wir, dass wir sehr gut positioniert sind, um die BASF-

Patente in unser umfangreiches Portfolio aus mehr als 3,600 erteilten und angemeldeten Patenten weltweit zu integrieren und nutzbar zu machen. Wir erwarten, dass dieser Erwerb unsere kommerzielle Entwicklungspipeline für die nächsten Generationen von OLED-Systemen stärkt und zusätzlichen Wert für unsere Kunden und Aktionäre schafft.“

BASF hat nach sorgfältiger strategischer Prüfung ihre Forschungsaktivitäten im Bereich OLED Ende 2015 eingestellt. Mit dem Verkauf des OLED-Patentportfolios ist der Rückzug aus dem Arbeitsgebiet abgeschlossen. „Wir freuen uns, dass nun Universal Display Corporation die Entwicklung und Vermarktung unserer OLED-Materialien und -Technologien voranbringen wird. Wir glauben, dass unsere Patente und unser Know-how perfekt zu dem Patentportfolio und den Kompetenzen von UDC passen. UDC sollte aus dieser kombinierten Phosphoreszenz-Technologie den größten Wert für die OLED-Industrie generieren können”, erklärt Felix Goerth, Director Organic Electronics bei der BASF New Business GmbH.

Seit ihrer Gründung im Jahr 1994 hat Universal Display fast 400 Millionen US$ in die Forschung und Entwicklung investiert, um das Unternehmen von einem Start-up zu einem führenden Unternehmen im weltweiten OLED-Geschäft zu entwickeln. Das Unternehmen investiert weiterhin stark in eine Reihe von strategischen Programmen und arbeitet zusammen mit Kunden an der Entwicklung und Vermarktung von phosphoreszierenden Materialien und OLED-Technologien. Darüber hinaus verzeichnet Universal Display Fortschritte bei neuen roten, grünen, gelben und blauen Emittern und Matrixmaterialien der nächsten Generation, sowie bei der Erweiterung ihrer Kernkompetenzen hinsichtlich phosphoreszenten OLEDs (PHOLED) und anderer OLED-Technologien. Das gilt auch für OLED-Herstellprozesse und Ausrüstung. UDC erwartet, dass der Erwerb des BASF-Patentportfolios ihr umfassendes globales Patentportfolio weiter verstärkt.

Über BASF

BASF steht für Chemie, die verbindet – für eine nachhaltige Zukunft. Wir verbinden wirtschaftlichen Erfolg mit dem Schutz der Umwelt und gesellschaftlicher Verantwortung. Rund 112.000 Mitarbeiter arbeiten in der

BASF-Gruppe daran, zum Erfolg unserer Kunden aus nahezu allen Branchen und in fast allen Ländern der Welt beizutragen. Unser Portfolio haben wir in den Segmenten Chemicals, Performance Products, Functional Materials & Solutions, Agricultural Solutions und Oil & Gas zusammengefasst. BASF erzielte 2015 weltweit einen Umsatz von mehr als 70 Milliarden €. BASF ist börsennotiert in Frankfurt (BAS), London (BFA) und Zürich (AN). Weitere Informationen unter www.basf.com.

About Universal Display Corporation

Universal Display Corporation (Nasdaq: OLED) ist ein führendes Unternehmen in der Entwicklung von Technologien nach dem modernsten Stand der Technik. Darunter Materialien und Services für organische Leuchtioden (OLED) für die Display- und Beleuchtungsindustrie. Das Unternehmen wurde 1994 gegründet und besitzt Eigentums- sowie Lizenzrechte (exklusiv und teilexklusiv) an mehr als 4,100 erteilten oder angemeldeten Patenten weltweit. Universal Display lizensiert ihre firmeneigenen Technologien, einschließlich ihrer bahnbrechenden hoch-effizienten UniversalPHOLED® phosphoreszente OLED-Technologie zur Ermöglichung von energiesparenden und umweltfreundlichen Displays und Beleuchtungslösungen. Das Unternehmen entwickelt weltweit anerkannte UniversalPHOLED®-Materialien nach dem neusten Stand der Technik, die als Schlüsselmaterialien bei der Herstellung von OLEDs mit Spitzenleistungen angeboten werden. Zusätzlich ermöglicht Universal Display innovative, maßgeschneiderte Lösungen für ihre Kunden und Partner durch Technologietransfer, gemeinschaftliche Technologie-Entwicklung und Vor-Ort-Schulung.

Weitere Informationen unter: http://www.oled.com.

EX-31.1

Exhibit 31.1

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a)/15d-14(a)

I, Steven V. Abramson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Universal Display Corporation (the “registrant”) for the quarter ended June 30, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 4, 2016	By:	/s/ Steven V. Abramson
			Steven V. Abramson
			President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a)/15d-14(a)

I, Sidney D. Rosenblatt, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Universal Display Corporation (the “registrant”) for the quarter ended June 30, 2016;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 4, 2016	By:	/s/ Sidney D. Rosenblatt
			Sidney D. Rosenblatt
			Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS REQUIRED BY

RULE 13a-14(b)/15d-14(b) AND 18 U.S.C. SECTION 1350

In connection with the quarterly report of Universal Display Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven V. Abramson, President and Chief Executive Officer of the Company, hereby certify, based on my knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 4, 2016	By:	/s/ Steven V. Abramson
			Steven V. Abramson
			President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATIONS REQUIRED BY

RULE 13a-14(b)/15d-14(b) AND 18 U.S.C. SECTION 1350

In connection with the quarterly report of Universal Display Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of the Company, hereby certify, based on my knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 4, 2016	By:	/s/ Sidney D. Rosenblatt
			Sidney D. Rosenblatt
			Executive Vice President and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 02, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	UNIVERSAL DISPLAY CORP \PA\
Entity Central Index Key	0001005284
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		46,956,623

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash and cash equivalents	$ 69,930	$ 97,513
Short-term investments	246,281	297,981
Accounts receivable	17,984	24,729
Inventory	16,467	12,748
Deferred income taxes	10,097	12,326
Other current assets	5,561	2,387
Total current assets	366,320	447,684
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $29,736 and $27,897	22,610	22,407
ACQUIRED TECHNOLOGY, net of accumulated amortization of $60,416 and $54,837	162,469	72,015
INVESTMENTS	15,767	2,187
DEFERRED INCOME TAXES	12,293	14,945
OTHER ASSETS	543	174
TOTAL ASSETS	580,002	559,412
CURRENT LIABILITIES:
Accounts payable	6,368	6,849
Accrued expenses	10,701	17,387
Deferred revenue	10,232	10,107
Other current liabilities	423	167
Total current liabilities	27,724	34,510
DEFERRED REVENUE	34,066	35,543
RETIREMENT PLAN BENEFIT LIABILITY	24,292	22,594
Total liabilities	86,082	92,647
COMMITMENTS AND CONTINGENCIES (Note 13)
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)	2	2
Common Stock, par value $0.01 per share, 100,000,000 shares authorized, 48,302,603 and 48,132,223 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively	483	482
Additional paid-in capital	593,170	589,885
Accumulated deficit	(49,876)	(73,627)
Accumulated other comprehensive loss	(9,701)	(9,819)
Treasury stock, at cost (1,357,863 shares at June 30, 2016 and December 31, 2015)	(40,158)	(40,158)
Total shareholders’ equity	493,920	466,765
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 580,002	$ 559,412

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 29,736,000	$ 27,897,000
Finite-Lived Intangible Assets, Accumulated Amortization	$ 60,416,000	$ 54,837,000
Shareholders' Equity
Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred Stock, shares authorized ( in shares)	5,000,000	5,000,000
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares authorized (in shares)	100,000,000	100,000,000
Common Stock, shares issued (in shares)	48,302,603	48,132,223
Common Stock, shares outstanding (in shares)	48,302,603	48,132,223
Treasury Stock
Treasury stock, at cost	1,357,863	1,357,863
Series A Nonconvertible Preferred Stock [Member]
Shareholders' Equity A Nonconvertible Preferred Stock
Preferred Stock, shares issued (in shares)	200,000	200,000
Preferred Stock, shares outstanding (in shares)	200,000	200,000
Preferred Stock, liquidation value per share (in dollars per share)	$ 7.50	$ 7.50
Preferred Stock, liquidation value	$ 1,500,000	$ 1,500,000

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
REVENUE:
Material sales	$ 22,315	$ 24,324	$ 46,619	$ 51,142
Royalty and license fees	42,018	33,733	47,360	38,108
Technology development and support revenue	59	35	116	65
Total revenue	64,392	58,092	94,095	89,315
OPERATING EXPENSES:
Cost of material sales	5,684	39,086	10,736	47,667
Research and development	10,969	10,647	21,445	20,566
Selling, general and administrative	7,688	6,983	14,264	13,245
Patent costs and amortization of acquired technology	4,060	4,462	8,154	8,429
Royalty and license expense	1,966	1,673	2,841	2,458
Total operating expenses	30,367	62,851	57,440	92,365
Operating income (loss)	34,025	(4,759)	36,655	(3,050)
INTEREST INCOME	661	188	993	361
INTEREST EXPENSE	(8)	(12)	(15)	(24)
OTHER (EXPENSE) INCOME	(1,829)	278	(1,914)	340
INCOME (LOSS) BEFORE INCOME TAXES	32,849	(4,305)	35,719	(2,373)
INCOME TAX EXPENSE	(11,047)	(7,466)	(11,968)	(8,084)
NET INCOME (LOSS)	$ 21,802	$ (11,771)	$ 23,751	$ (10,457)
NET INCOME (LOSS) PER COMMON SHARE:
Basic (in dollars per share)	$ 0.46	$ (0.25)	$ 0.51	$ (0.23)
Diluted (in dollars per share)	$ 0.46	$ (0.25)	$ 0.51	$ (0.23)
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON SHARE:
Weighted average common shares outstanding - Basic (in shares)	46,927,543	46,388,218	46,862,199	45,840,599
Weighted average common shares outstanding - Diluted (in shares)	47,041,854	46,388,218	46,985,374	45,840,599

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
NET INCOME (LOSS)	$ 21,802	$ (11,771)	$ 23,751	$ (10,457)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gain (loss) on available-for-sale securities, net of tax of $37, $11, $47 and $4, respectively	67	19	(84)	4
Employee benefit plan:
Actuarial gain (loss), net of tax of $271, none, $200, and none, respectively	479		(353)
Amortization of prior service cost and actuarial loss for retirement plan included in net periodic pension costs, net of tax of $142, $157, $302 and $258, respectively	254	279	535	420
Net change for employee benefit plan	733	279	182	420
Change in cumulative foreign currency translation adjustment	20		20
TOTAL OTHER COMPREHENSIVE INCOME	820	298	118	424
COMPREHENSIVE INCOME (LOSS)	$ 22,622	$ (11,473)	$ 23,869	$ (10,033)

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Unrealized gain (loss) on available-for-sale securities, tax	$ 37	$ 11	$ 47	$ 4
Actuarial gain (loss), tax	271	0	200	0
Amortization of prior service cost and actuarial loss for retirement plan included in net periodic pension costs, tax	$ 142	$ 157	$ 302	$ 258

XML

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Series A Nonconvertible Preferred Stock [Member] Preferred Stock [Member]
BALANCE (in shares) at Dec. 31, 2015		48,132,223				1,357,863	200,000
BALANCE at Dec. 31, 2015	$ 466,765	$ 482	$ 589,885	$ (73,627)	$ (9,819)	$ (40,158)	$ 2
Net income (loss)	23,751			23,751
Other comprehensive income	118				118
Exercise of common stock options (in shares)		12,500
Exercise of common stock options	182		182
Issuance of common stock to employees (in shares)		216,389
Issuance of common stock to employees	6,443	$ 2	6,441
Shares withheld for employee taxes (in shares)		(90,886)
Shares withheld for employee taxes	(4,794)	$ (1)	(4,793)
Issuance of common stock to Board of Directors and Scientific Advisory Board (in shares)		28,046
Issuance of common stock to Board of Directors and Scientific Advisory Board	1,191		1,191
Issuance of common stock to employees under an ESPP (in shares)		4,331
Issuance of common stock to employees under an ESPP	264		264
BALANCE (in shares) at Jun. 30, 2016		48,302,603				1,357,863	200,000
BALANCE at Jun. 30, 2016	$ 493,920	$ 483	$ 593,170	$ (49,876)	$ (9,701)	$ (40,158)	$ 2

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 23,751	$ (10,457)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of deferred revenue	(3,601)	(4,893)
Depreciation	1,839	1,439
Amortization of intangibles	5,579	5,500
Inventory write-down		33,000
Amortization of premium and discount on investments, net	(801)	(285)
Stock-based compensation to employees	5,401	4,039
Stock-based compensation to Board of Directors and Scientific Advisory Board	891	659
Deferred income tax benefit	4,826	3,984
Retirement plan benefit expense	1,982	1,512
Decrease (increase) in assets:
Accounts receivable	6,745	4,697
Inventory	(3,719)	(12,860)
Other current assets	(3,174)	(417)
Other assets	(369)	80
Increase (decrease) in liabilities:
Accounts payable and accrued expenses	(5,625)	826
Other current liabilities	256	(58)
Deferred revenue	2,250	48,412
Net cash provided by operating activities	36,231	75,178
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(2,162)	(3,146)
Purchase of intangibles	(96,033)
Purchases of investments	(325,226)	(267,520)
Proceeds from sale of investments	364,017	263,058
Net cash used in investing activities	(59,404)	(7,608)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	202	171
Proceeds from the exercise of common stock options	182	1,372
Payment of withholding taxes related to stock-based compensation to employees	(4,794)	(5,280)
Net cash used in financing activities	(4,410)	(3,737)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(27,583)	63,833
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	97,513	45,418
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 69,930	$ 109,251

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS Non-Cash Activities - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Other Significant Noncash Transactions [Line Items]
Unrealized loss on available-for-sale securities	$ 131	$ 8
Common Stock Issued to Board of Directors and Scientific Advisory Board that was Earned and Accrued for in Previous Period [Member]
Other Significant Noncash Transactions [Line Items]
Other significant noncash transaction, value of consideration received	300	300
Common Stock Issued to Employees that was Earned and Accrued for in Previous Period Net of Shares Withheld for Taxes [Member]
Other Significant Noncash Transactions [Line Items]
Other significant noncash transaction, value of consideration received	1,105	967
Other Capitalized Property Plant and Equipment [Member]
Other Significant Noncash Transactions [Line Items]
Net change in accounts payable and accrued expenses related to purchases of property and equipment	$ (120)	$ (725)

XML

BUSINESS

6 Months Ended

Jun. 30, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

BUSINESS

1. BUSINESS:

Universal Display Corporation (the Company) is a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials. OLEDs are thin, lightweight and power-efficient solid-state devices that emit light, making them highly suitable for use in full-color displays and as lighting products. OLED displays are capturing a growing share of the display market. The Company believes this is because OLEDs offer potential advantages over competing display technologies with respect to power efficiency, contrast ratio, viewing angle, video response time, form factor and manufacturing cost. The Company also believes that OLED lighting products have the potential to replace many existing light sources in the future because of their high power efficiency, excellent color rendering index, low operating temperature and novel form factor. The Company's technology leadership and intellectual property position should enable it to share in the revenues from OLED displays and lighting products as they enter mainstream consumer and other markets.

The Company's primary business strategy is to (1) further develop and license its proprietary OLED technologies to manufacturers of products for display applications, such as mobile phones, televisions, tablets, wearables, portable media devices, notebook computers, personal computers, and automotive interiors, and specialty and general lighting products; and (2) develop new OLED materials and sell existing and any new materials to those product manufacturers. The Company has established a significant portfolio of proprietary OLED technologies and materials, primarily through internal research and development efforts and acquisitions of patents and patent applications, as well as maintaining its relationships with world-class partners such as Princeton University (Princeton), the University of Southern California (USC), the University of Michigan (Michigan) and PPG Industries, Inc. (PPG Industries). The Company currently owns, exclusively licenses or has the sole right to sublicense more than 4,100 patents issued and pending worldwide.

The Company sells its proprietary OLED materials to customers for evaluation and use in commercial OLED products. The Company also enters into agreements with manufacturers of OLED display and lighting products under which it grants them licenses to practice under its patents and to use the Company's proprietary know-how. At the same time, the Company works with these and other companies who are evaluating the Company's OLED technologies and materials for possible use in commercial OLED display and lighting products.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Financial Information

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2016 and results of operations for the three and six months ended June 30, 2016 and 2015, and cash flows for the six months ended June 30, 2016 and 2015. While management believes that the disclosures presented are adequate to make the information not misleading, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s latest year-end financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for the full year.

Principles of Consolidation

The consolidated financial statements include the accounts of Universal Display Corporation and its wholly owned subsidiaries, UDC, Inc., UDC Ireland Limited, Universal Display Corporation Hong Kong, Limited, Universal Display Corporation Korea, Y.H., and Universal Display Corporation Japan GK. All intercompany transactions and accounts have been eliminated.

Management’s Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates made are principally in the areas of revenue recognition for license agreements, the useful life of acquired technology, the use and recoverability of inventories, income taxes including realization of deferred tax assets, stock-based compensation and retirement benefit plan liabilities. Actual results could differ from those estimates.

Inventories

Inventories consist of raw materials, work-in-process and finished goods, including inventory consigned to customers, and are stated at the lower of cost, determined on a first-in, first-out basis, or market. Inventory valuation and firm committed purchase order assessments are performed on a quarterly basis and those items that are identified to be obsolete or in excess of forecasted usage are written down to their estimated realizable value. Estimates of realizable value are based upon management’s analyses and assumptions, including, but not limited to, forecasted sales levels by product, expected product lifecycle, product development plans and future demand requirements. A 12-month rolling forecast based on factors, including, but not limited to, production cycles, anticipated product orders, marketing forecasts, backlog, and shipment activities is used in the inventory analysis. If market conditions are less favorable than forecasts or actual demand from customers is lower than estimates, additional inventory write-downs may be required. If demand is higher than expected, inventories that had previously been written down may be sold.

Certain of the Company’s customers have assumed the responsibility for maintaining the Company's inventory at their location based on the customers' demand forecast. Notwithstanding the fact that the Company builds and ships the inventory, the customer does not purchase the consigned inventory until the inventory is drawn or pulled by the customer to be used in the manufacture of the customer’s product. Though the consigned inventory may be at the customer’s physical location, it remains inventory owned by the Company until the inventory is drawn or pulled, which is the time at which the sale takes place.

Fair Value of Financial Instruments

The carrying values of accounts receivable, other current assets, and accounts payable approximate fair value in the accompanying financial statements due to the short-term nature of those instruments. The Company’s other financial instruments, which include cash equivalents and investments, are carried at fair value.

Revenue Recognition and Deferred Revenue

Material sales relate to the Company’s sale of its OLED materials for incorporation into its customers’ commercial OLED products or for their OLED development and evaluation activities. Material sales are recognized at the time title passes, which is typically at the time of shipment or at the time of delivery, depending upon the contractual agreement between the parties.

The Company receives license and royalty payments under certain commercial, development and technology evaluation agreements, some of which are non-refundable. These payments may include royalty and license fees made pursuant to license agreements and certain commercial supply agreements. Amounts received are deferred and classified as either current or non-current deferred revenue based upon current contractual remaining terms; however, based upon on-going relationships with customers, as well as future agreement extensions and other factors, amounts classified as current as of June 30, 2016 may not be recognized as revenue over the next twelve months. For arrangements with extended payment terms where the fee is not fixed and determinable, the Company recognizes revenue when the payment is due and payable. Royalty revenue and license fees included as part of commercial supply agreements are recognized when earned and the amount is fixed and determinable. If the Company used different estimates for the useful life of the licensed technology, or if fees are fixed and determinable, reported revenue during the relevant period would differ.

Technology development and support revenue is revenue earned from government contracts, development and technology evaluation agreements and commercialization assistance fees, which includes reimbursements by government entities for all or a portion of the research and development costs the Company incurs in relation to its government contracts. Revenues are recognized proportionally as research and development costs are incurred, or as defined milestones are achieved.

Currently, the Company's most significant commercial license agreement, which runs through the end of 2017, is with Samsung Display Co., Ltd. (SDC) and covers the manufacture and sale of specified OLED display products. Under this agreement, the Company is being paid a license fee, payable in semi-annual installments over the agreement term of 6.4 years. The installments, which are due in the second and fourth quarter of each year, increase on an annual basis over the term of the agreement. The agreement conveys to SDC the non-exclusive right to use certain of the Company's intellectual property assets for a limited period of time that is less than the estimated life of the assets. Ratable recognition of revenue is impacted by the agreement's extended increasing payment terms in light of the Company's limited history with similar agreements. As a result, revenue is recognized at the lesser of the proportional performance approach (ratable) and the amount of due and payable fees from SDC. Given the increasing contractual payment schedule, license fees under the agreement are recognized as revenue when they become due and payable, which is currently scheduled to be in the second and fourth quarter of each year.

In 2015, the Company entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display) which were effective as of January 1, 2015 and superseded the 2007 commercial supply agreement between the parties. The new agreements have a term that is set to expire by the end of 2022. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under the Company's patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The prepaid royalty amount is included in deferred revenue and a portion of this amount can be credited against total royalties due over the life of the contract. The agreements include customary provisions relating to warranties, indemnities, confidentiality, assignability and business terms. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the term of the agreements, as well as minimum royalty revenue to be generated under the patent license agreement. The Company expects to generate revenue under these agreements that are predominantly tied to LG Display’s sales of OLED licensed products. The OLED commercial supply agreement provides for the sale of materials for use by LG Display, which may include phosphorescent dopants and host materials.

The Company records taxes billed to customers and remitted to various governmental entities on a gross basis in both revenues and cost of material sales in the consolidated statements of operations. The amounts of these pass through taxes reflected in revenues and cost of material sales were $13,000 and $69,000 for the three and six months ended June 30, 2016, respectively, and $240,000 and $850,000 for the three and six months ended June 30, 2015, respectively.

Cost of Material Sales

Cost of material sales consists of labor and material costs associated with the production of materials processed at the Company's manufacturing partners and at the Company's internal manufacturing processing facility. The Company’s portion of cost of material sales also includes depreciation of manufacturing equipment, as well as, manufacturing overhead costs and inventory adjustments for excess and obsolete inventory.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued a new revenue recognition standard entitled Revenue from Contracts with Customers. The objective of the standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer. The standard is effective for annual reporting periods beginning after December 15, 2017. Earlier adoption as of the original date is optional; however, the Company will adopt the standard beginning January 1, 2018. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company is currently assessing which method it will choose for adoption, and is evaluating the impact of the adoption of this new accounting standard on its consolidated results of operations and financial position.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity that uses the first-in first-out method for inventory to report inventory cost at the lower of cost or net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2015-11 may have on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires the classification of all deferred tax assets and liabilities as noncurrent. The standard is effective for annual reporting periods beginning after December 15, 2016. The standard allows for either "prospective" adoption, meaning the standard is applied to the most current period presented in the financial statements or "full retrospective” adoption, meaning the standard is applied to all periods presented. Earlier adoption is permitted. The Company is evaluating the effect that ASU 2015-17 may have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Accounting. The objective of the standard is to simplify the accounting and related disclosures associated with employee share-based accounting. The standard is effective for annual reporting periods beginning after December 15, 2016. The ASU requires prospective adoption, meaning the standard is applied to the most current period presented in the financial statements. Earlier adoption is permitted. The Company is evaluating the effect that ASU 2016-09 may have on its consolidated financial statements and related disclosures.

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CASH, CASH EQUIVALENTS AND INVESTMENTS

6 Months Ended

Jun. 30, 2016

Cash And Cash Equivalents [Abstract]

CASH, CASH EQUIVALENTS AND INVESTMENTS

3. CASH, CASH EQUIVALENTS AND INVESTMENTS:

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company classifies its remaining investments as available-for-sale. These securities are carried at fair market value, with unrealized gains and losses reported in shareholders’ equity. Gains or losses on securities sold are based on the specific identification method. Investments as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):

	Amortized		Unrealized					AggregateFair
Investment Classification	Cost		Gains		(Losses)			Market Value
June 30, 2016
Certificates of deposit	$	10,626	$	9	$	(2	)	$	10,633
Corporate bonds		234,222		12		(53	)		234,181
U.S. Government bonds		17,498		—		(262	)		17,236
	$	262,346	$	21	$	(317	)	$	262,050
December 31, 2015
Certificates of deposit	$	11,532	$	3	$	(14	)	$	11,521
Corporate bonds		233,848		—		(139	)		233,709
U.S. Government bonds		54,953		1		(16	)		54,938
	$	300,333	$	4	$	(169	)	$	300,168

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INVENTORY

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

INVENTORY

4. INVENTORY:

Inventory consisted of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	6,538	$	6,539
Work-in-process		1,776		1,064
Finished goods		8,153		5,145
Inventory	$	16,467	$	12,748

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

5. FAIR VALUE MEASUREMENTS:

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2016 (in thousands):

			Fair Value Measurements, Using
	Total carrying value as of June 30, 2016		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	22,376	$	22,376	$	—	$	—
Short-term investments		246,281		246,281		—		—
Long-term investments		15,767		15,767		—		—

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2015 (in thousands):

			Fair Value Measurements, Using
	Total carrying value as of December 31, 2015		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	34,980	$	34,980	$	—	$	—
Short-term investments		297,981		297,981		—		—
Long-term investments		2,187		2,187		—		—

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial asset's or liability’s classification is determined based on the lowest level input that is significant to the fair value measurement.

Changes in fair value of the investments are recorded as unrealized gains and losses in other comprehensive income. If a decline in fair value of an investment is deemed to be other than temporary, the cost of the Company’s investment will be written down by the amount of the other-than-temporary impairment with a resulting charge to net income. There were no other-than-temporary impairments of investments as of June 30, 2016 or December 31, 2015.

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RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY, UNIVERSITY OF SOUTHERN CALIFORNIA AND THE UNIVERSITY OF MICHIGAN

6 Months Ended

Jun. 30, 2016

Research And Development [Abstract]

RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY, UNIVERSITY OF SOUTHERN CALIFORNIA AND THE UNIVERSITY OF MICHIGAN

6. RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY, UNIVERSITY OF SOUTHERN CALIFORNIA AND THE UNIVERSITY OF MICHIGAN:

The Company funded OLED technology research at Princeton University and, on a subcontractor basis, at the University of Southern California for 10 years under a Research Agreement executed with Princeton University in August 1997 (the 1997 Research Agreement). The principal investigator conducting work under the 1997 Research Agreement transferred to the University of Michigan in January 2006. Following this transfer, the 1997 Research Agreement was allowed to expire on July 31, 2007.

As a result of the transfer, the Company entered into a new Sponsored Research Agreement with the University of Southern California to sponsor OLED technology research and, on a subcontractor basis, with the University of Michigan. This new Sponsored Research Agreement (as amended, the 2006 Research Agreement) was effective as of May 1, 2006 and had an original term of three years. On May 1, 2009, the Company amended the 2006 Research Agreement to extend the term of the agreement for an additional four years. The 2006 Research Agreement superseded the 1997 Research Agreement with respect to all work being performed at the University of Southern California and the University of Michigan. Payments under the 2006 Research Agreement were made to the University of Southern California on a quarterly basis as actual expenses were incurred. The Company incurred a total of $5.0 million in research and development expense for work performed under the 2006 Research Agreement during the extended term, which ended on April 30, 2013.

Effective June 1, 2013, the Company amended the 2006 Research Agreement again to extend the term of the agreement for an additional four years. As of June 30, 2016, the Company was obligated to pay the University of Southern California up to $2.1 million for work to be actually performed during the remaining extended term, which expires April 30, 2017. From June 1, 2013 through June 30, 2016, the Company incurred $3.5 million in research and development expense for work performed under the 2006 Research Agreement.

On October 9, 1997, the Company, Princeton University and the University of Southern California entered into an Amended License Agreement (as amended, the 1997 Amended License Agreement) under which Princeton University and the University of Southern California granted the Company worldwide, exclusive license rights, with rights to sublicense, to make, have made, use, lease and/or sell products and to practice processes based on patent applications and issued patents arising out of work performed by Princeton University and the University of Southern California under the 1997 Research Agreement. Under this 1997 Amended License Agreement, the Company is required to pay Princeton University royalties for licensed products sold by the Company or its sublicensees. For licensed products sold by the Company, the Company is required to pay Princeton University 3% of the net sales price of these products. For licensed products sold by the Company’s sublicensees, the Company is required to pay Princeton 3% of the revenues received by the Company from these sublicensees. These royalty rates are subject to renegotiation for products not reasonably conceivable as arising out of the 1997 Research Agreement if Princeton University reasonably determines that the royalty rates payable with respect to these products are not fair and competitive.

The Company is obligated, under the 1997 Amended License Agreement, to pay to Princeton University minimum annual royalties. The minimum royalty payment is $100,000 per year. The Company recorded royalty expense in connection with this agreement of $2.0 million and $1.7 million for the three months ended June 30, 2016 and 2015, respectively, and $2.8 million and $2.4 million for the six months ended June 30, 2016 and 2015, respectively.

The Company also is required, under the 1997 Amended License Agreement, to use commercially reasonable efforts to bring the licensed OLED technology to market. However, this requirement is deemed satisfied if the Company invests a minimum of $800,000 per year in research, development, commercialization or patenting efforts respecting the patent rights licensed to the Company.

In connection with entering into the 2006 Research Agreement, the Company amended the 1997 Amended License Agreement to include the University of Michigan as a party to that agreement effective as of January 1, 2006. Under this amendment, Princeton University, the University of Southern California and the University of Michigan have granted the Company a worldwide exclusive license, with rights to sublicense, to make, have made, use, lease and/or sell products and to practice processes based on patent applications and issued patents arising out of work performed under the 2006 Research Agreement. The financial terms of the 1997 Amended License Agreement were not impacted by this amendment.

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ACQUIRED TECHNOLOGY

6 Months Ended

Jun. 30, 2016

Finite Lived Intangible Assets Net [Abstract]

ACQUIRED TECHNOLOGY

7. ACQUIRED TECHNOLOGY:

Acquired technology consists of acquired license rights for patents and know-how obtained from PD-LD, Inc., Motorola, BASF SE (BASF) and Fujifilm. These intangible assets consist of the following (in thousands):

	June 30, 2016
PD-LD, Inc.	$	1,481
Motorola		15,909
BASF		96,033
Fujifilm		109,462
		222,885
Less: Accumulated amortization		(60,416	)
Acquired technology, net	$	162,469

Amortization expense related to acquired technology was $2.8 million and $2.7 million for the three months ended June 30, 2016 and 2015, respectively, and $5.6 million and $5.5 million for the six months ended June 30, 2016 and 2015, respectively. Amortization expense is included in the patent costs and amortization of acquired technology expense line item on the Consolidated Statements of Operations and is expected to be $15.9 million in 2016 and $20.6 million for each of the five subsequent fiscal years.

Motorola Patent Acquisition

In 2000, the Company entered into a royalty-bearing license agreement with Motorola whereby Motorola granted the Company perpetual license rights to what are now 74 issued U.S. patents relating to Motorola’s OLED technologies, together with foreign counterparts in various countries. These patents will all expire in the U.S. by 2018.

On March 9, 2011, the Company purchased these patents from Motorola, including all existing and future claims and causes of action for any infringement of the patents, pursuant to a Patent Purchase Agreement. The Patent Purchase Agreement effectively terminated the Company’s license agreement with Motorola, including any obligation to make royalty payments to Motorola. The technology acquired from Motorola is being amortized over a period of 7.5 years.

Fujifilm Patent Acquisition

On July 23, 2012, the Company entered into a Patent Sale Agreement with Fujifilm. Under the agreement, Fujifilm sold more than 1,200 OLED-related patents and patent applications in exchange for a cash payment of $105.0 million, plus costs incurred in connection with the purchase. The agreement contains customary representations and warranties and covenants, including respective covenants not to sue by both parties thereto. The agreement permitted the Company to assign all of its rights and obligations under the agreement to its affiliates, and the Company assigned, prior to the consummation of the transactions contemplated by the agreement, its rights and obligations to UDC Ireland Limited (UDC Ireland), a wholly-owned subsidiary of the Company formed under the laws of the Republic of Ireland. The transactions contemplated by the agreement were consummated on July 26, 2012. The Company recorded the $105.0 million plus $4.5 million of purchase costs as acquired technology, which is being amortized over a period of 10 years.

BASF Patent Acquisition

On June 28, 2016, UDC Ireland entered into and consummated an IP Transfer Agreement with BASF. Under the IP Transfer Agreement, BASF sold to UDC Ireland all of its rights, title and interest to certain of its owned and co-owned intellectual property rights relating to the composition of, development, manufacture and use of OLED materials, including OLED lighting and display stack technology, as well as, certain tangible assets. The intellectual property includes knowhow and more than 500 issued and pending patents in the area of phosphorescent materials and technologies. These assets were acquired in exchange for a cash payment of €86.8 million ($95.8 million). In addition, UDC Ireland also took on certain rights and obligations under three joint research and development agreements to which BASF was a party. The IP Transfer Agreement also contains customary representations, warranties and covenants of the parties. UDC Ireland recorded the payment of €86.8 million ($95.8 million) and acquisition costs incurred of $261,000 as acquired technology which is being amortized over a period of 10 years.

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EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS

6 Months Ended

Jun. 30, 2016

Long Term Commitment Excluding Unconditional Purchase Obligation [Abstract]

EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS

8. EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS:

On September 22, 2011, the Company entered into an Amended and Restated OLED Materials Supply and Service Agreement with PPG Industries (the New OLED Materials Agreement), which replaced the original OLED Materials Agreement with PPG Industries effective as of October 1, 2011. The term of the New OLED Materials Agreement ran through December 31, 2015 and shall be automatically renewed for additional one year terms, unless terminated by the Company by providing prior notice of one year or terminated by PPG by providing prior notice of two years. The agreement was automatically renewed through December 31, 2017. The New OLED Materials Agreement contains provisions that are substantially similar to those of the original OLED Materials Agreement. Under the New OLED Materials Agreement, PPG Industries continues to assist the Company in developing its proprietary OLED materials and supplying the Company with those materials for evaluation purposes and for resale to its customers.

Under the New OLED Materials Agreement, the Company compensates PPG Industries on a cost-plus basis for the services provided during each calendar quarter. The Company is required to pay for some of these services in all cash. Up to 50% of the remaining services are payable, at the Company’s sole discretion, in cash or shares of the Company’s common stock, with the balance payable in cash. The actual number of shares of common stock issuable to PPG Industries is determined based on the average closing price for the Company’s common stock during a specified number of days prior to the end of each calendar half-year period ending on March 31 and September 30. If, however, this average closing price is less than $20.00, the Company is required to compensate PPG Industries in cash. No shares were issued for services to PPG for the three or six months ended June 30, 2016 or 2015.

The Company is also to reimburse PPG Industries for raw materials used for research and development. The Company records the purchases of these raw materials as a current asset until such materials are used for research and development efforts.

The Company recorded research and development expense of $1.0 million and $1.5 million for the three months ended June 30, 2016 and 2015, respectively, and $1.9 million and $3.0 million for the six months ended June 30, 2016 and 2015, respectively, in relation to the cash portion of the reimbursement of expenses and work performed by PPG Industries, excluding amounts paid for commercial chemicals.

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SHAREHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

SHAREHOLDERS' EQUITY

9. SHAREHOLDERS’ EQUITY:

Common and Preferred Stock

The Company is authorized to issue 100 million shares of $0.01 par value common stock and 5 million shares of $0.01 par value preferred stock. Each share of the Company’s common stock entitles the holder to one vote on all matters to be voted upon by the shareholders. As of June 30, 2016, the Company had issued 48,302,603 shares of common stock and 200,000 shares of preferred stock.

Scientific Advisory Board and Employee Awards

During the first quarters of 2016 and 2015, the Company granted a total of 27,967 and 35,205 shares, respectively, of fully vested common stock to employees and non-employee members of the Scientific Advisory Board for services performed in 2015 and 2014, respectively. The fair value of the shares issued was $1.1 million and $967,000, respectively, for shares issued to employees and $300,000 for both quarters for shares issued to members of the Scientific Advisory Board, which amounts were accrued at December 31, 2015 and 2014, respectively. In connection with the issuance of these grants, 8,106 and 9,565 shares, with fair values of $410,000 and $346,000, were withheld in satisfaction of employee tax withholding obligations in 2016 and 2015, respectively.

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ACCUMULATED OTHER COMPREHENSIVE LOSS

6 Months Ended

Jun. 30, 2016

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE LOSS

10. ACCUMULATED OTHER COMPREHENSIVE LOSS:

Amounts related to the changes in accumulated other comprehensive loss were as follows (in thousands):

	Unrealized gain (loss) on available-for-sale-securities			Net unrealized gain (loss) on retirement plan (2)			Change in cumulative foreign currency translation adjustment		Total			Affected line items in the consolidated statements of operations
Balance December 31, 2015, net of tax	$	(111	)	$	(9,708	)	$	—	$	(9,819	)
Other comprehensive gain (loss) before reclassification		(84	)		—			20		(64	)
Actuarial gain (loss)		—			(353	)		—		(353	)
Reclassification to net income (1)		—			535			—		535		Selling, general and administrative, research and development, and cost of material sales
Change during period		(84	)		182			20		118
Balance June 30, 2016, net of tax	$	(195	)	$	(9,526	)	$	20	$	(9,701	)

	Unrealized gain (loss) on available-for-sale-securities			Net unrealized gain (loss) on retirement plan (2)			Change in cumulative foreign currency translation adjustment		Total			Affected line items in the consolidated statements of operations
Balance December 31 2014, net of tax	$	(28	)	$	(4,354	)	$	—	$	(4,382	)
Other comprehensive gain (loss) before reclassification		4			—			—		4
Actuarial gain (loss)		—			—			—		—
Reclassification to net income (1)		—			420			—		420		Selling, general and administrative, and research and development
Change during period		4			420			—		424
Balance June 30 2015, net of tax	$	(24	)	$	(3,934	)	$	—	$	(3,958	)

(1) The Company reclassified amortization of prior service cost and actuarial loss for its retirement plan from accumulated other comprehensive loss to net income (loss) of $535,000  and $420,000 for the six months ended June 30, 2016 and 2015, respectively.

(2) Refer to Note 12: Supplemental Executive Retirement Plan.

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

STOCK-BASED COMPENSATION

11. STOCK-BASED COMPENSATION:

The Company recognizes in the statements of operations the grant-date fair value of equity based awards, such as shares issued under employee stock purchase plans, restricted stock awards, restricted stock units and performance unit awards issued to employees and directors.

The grant-date fair value of stock awards is based on the closing price of the stock on the date of grant. The fair value of share-based awards is recognized as compensation expense on a straight-line basis over the requisite service period, net of forfeitures. The Company issues new shares upon the respective grant, exercise or vesting of share-based payment awards, as applicable.

Performance unit awards are subject to either a performance-based or market-based vesting requirement. For performance-based vesting, the grant-date fair value of the award, based on fair value of the Company's common stock, is recognized over the service period based on an assessment of the likelihood that the applicable performance goals will be achieved, and compensation expense is periodically adjusted based on actual and expected performance. Compensation expense for performance unit awards with market-based vesting is calculated based on the estimated fair value as of the grant date utilizing a Monte Carlo simulation model and is recognized over the service period on a straight-line basis.

Equity Compensation Plan

In 1995, the Board of Directors of the Company adopted a stock option plan, which was amended and restated in 2003 and is now called the Equity Compensation Plan. The Equity Compensation Plan provides for the granting of incentive and nonqualified stock options, shares of common stock, stock appreciation rights and performance units to employees, directors and consultants of the Company. Stock options are exercisable over periods determined by the Compensation Committee, but for no longer than 10 years from the grant date. Through June 30, 2016, the Company’s shareholders have approved increases in the number of shares reserved for issuance under the Equity Compensation Plan to 10,500,000, and have extended the term of the plan through 2024. As of June 30, 2016, there were 2,712,886 shares that remained available to be granted under the Equity Compensation Plan.

Stock Awards

Restricted Stock Awards and Units

The Company has issued restricted stock awards and units to employees and non-employee members of the Scientific Advisory Board with vesting terms of one to six years. The fair value is equal to the market price of the Company’s common stock on the date of grant for awards granted to employees and equal to the market price at the end of the reporting period for unvested non-employee awards or upon the date of vesting for vested non-employee awards. Expense for restricted stock awards and units is amortized ratably over the vesting period for the awards issued to employees and using a graded vesting method for the awards issued to non-employee members of the Scientific Advisory Board.

During the six months ended June 30, 2016, the Company granted 41,543 shares of restricted stock awards and restricted stock units to employees and non-employee members of the Scientific Advisory Board, which had a total fair value of $2.1 million on the respective dates of grant, and will vest over three to five years from the date of grant, provided that the grantee is still an employee of the Company or is still providing services to the Company on the applicable vesting date.

For the three months ended June 30, 2016 and 2015, the Company recorded, as compensation charges related to all restricted stock awards and units, selling, general and administrative expense of $1.6 million for both periods, research and development expense of $403,000 and $495,000, respectively, and cost of material sales of $94,000 and none, respectively. For the six months ended June 30, 2016 and 2015, the Company recorded, as compensation charges related to all restricted stock awards and units, selling, general and administrative expense of $3.3 million and $2.5 million, respectively, research and development expense of $975,000 and $892,000, respectively, and cost of material sales of $258,000 and none, respectively.

In connection with the vesting of restricted stock awards and units during the six months ended June 30, 2016 and 2015, 82,780 and 97,856 shares, with aggregate fair values of $4.4 million and $4.2  million, respectively, were withheld in satisfaction of tax withholding obligations.

For the three months ended June 30, 2016 and 2015, the Company recorded as compensation charges related to all restricted stock units to non-employee members of the Scientific Advisory Board, research and development expense of $121,000 and $85,000, respectively. For the six months ended June 30, 2016 and 2015, the Company recorded as compensation charges related to all restricted stock units to non-employee members of the Scientific Advisory Board, research and development expense of $164,000  and $274,000, respectively.

Board of Directors Compensation

The Company has granted restricted stock units to non-employee members of the Board of Directors with quarterly vesting over a period of approximately one year. The fair value is equal to the market price of the Company's common stock on the date of grant. The restricted stock units are issued and expense is recognized ratably over the vesting period. For the three months ended June 30, 2016 and 2015, the Company recorded compensation charges for services performed, related to all restricted stock units granted to non-employee members of the Board of Directors, selling, general and administrative expense of $365,000 and $208,000, respectively. For the six months ended June 30, 2016 and 2015, the Company recorded compensation charges for services performed, related to all restricted stock units granted to non-employee members of the Board of Directors, selling, general and administrative expense of $730,000 and $385,000, respectively. In connection with the vesting of the restricted stock, the Company issued 15,000 and 14,167 shares, during the six months ended June 30, 2016 and 2015, respectively, to non-employee members of the Board of Directors.

Performance Unit Awards

During the six months ended June 30, 2016, the Company granted 25,045 performance units, of which 12,520 are subject to a performance-based vesting requirement and 12,525 are subject to a market-based vesting requirement and will vest over the terms described below. Total fair value of the performance unit awards granted was $1.5 million on the date of grant.

Each performance unit award is subject to both a performance-vesting requirement (either performance-based or market-based) and a service-vesting requirement.

The performance-based vesting requirement is tied to the Company's cumulative revenue growth compared to the cumulative revenue growth of companies comprising the Nasdaq Electronics Components Index, as measured over a specific performance period. The market-based vesting requirement is tied to the Company's total shareholder return relative to the total shareholder return of companies comprising the Nasdaq Electronics Components Index, as measured over a specific performance period.

The maximum number of performance units that may vest based on performance is two times the shares granted. Further, if the Company's total shareholder return is negative, the performance units may not vest at all.

For the three months ended June 30, 2016 and 2015, the Company recorded general and administrative expense of $278,000 and $175,000, respectively, research and development expense of $77,000 and $45,000, respectively, and cost of material sales of $28,000 and none, respectively, related to performance units. For the six months ended June 30, 2016 and 2015, the Company recorded general and administrative expense of $555,000 and $504,000, respectively, research and development expense of $154,000 and $142,000, and cost of material sales of $57,000 and none, respectively, related to performance units.

In connection with the vesting of performance units during the six months ended June 30, 2016 and 2015, none and 16,071 shares with an aggregate fair value of none and  $752,000, respectively, were withheld in satisfaction of tax withholding obligations.

Employee Stock Purchase Plan

On April 7, 2009, the Board of Directors of the Company adopted an Employee Stock Purchase Plan (ESPP). The ESPP was approved by the Company’s shareholders and became effective on June 25, 2009. The Company has reserved 1,000,000 shares of common stock for issuance under the ESPP. Unless sooner terminated by the Board of Directors, the ESPP will expire when all reserved shares have been issued.

Eligible employees may elect to contribute to the ESPP through payroll deductions during consecutive three-month purchase periods. Each employee who elects to participate will be deemed to have been granted an option to purchase shares of the Company’s common stock on the first day of the purchase period. Unless the employee opts out during the purchase period, the option will automatically be exercised on the last day of the period, which is the purchase date, based on the employee’s accumulated contributions to the ESPP. The purchase price will equal 85% of the lesser of the closing price per share of common stock on the first day of the period or the last business day of the period.

Employees may allocate up to 10% of their base compensation to purchase shares of common stock under the ESPP; however, each employee may purchase no more than 12,500 shares on a given purchase date, and no employee may purchase more than $25,000 of common stock under the ESPP during a given calendar year.

During the six months ended June 30, 2016 and 2015, the Company issued 4,331 and 5,819 shares, respectively, of its common stock under the ESPP, resulting in proceeds of $201,000 and $171,000, respectively.

For the three months ended June 30, 2016 and 2015, the Company recorded charges of $10,000 for both periods to selling, general and administrative expense, $18,000 and $13,000, respectively, to research and development expense, and $4,000 and none, to cost of material sales, respectively, related to the ESPP equal to the amount of the discount and the value of the look-back feature.

For the six months ended June 30, 2016 and 2015, the Company recorded charges of $20,000 and $21,000, respectively, to selling, general and administrative expense, $35,000 and $26,000, respectively, to research and development expense, and $8,000 and none, to cost of material sales, related to the ESPP equal to the amount of the discount and the value of the look-back feature.

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SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

6 Months Ended

Jun. 30, 2016

Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

12. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN:

On March 18, 2010, the Compensation Committee and the Board of Directors of the Company approved and adopted the Universal Display Corporation Supplemental Executive Retirement Plan (SERP), effective as of April 1, 2010. On March 3, 2015, the Compensation Committee and the Board of Directors amended the SERP to include salary and bonus as part of the plan. Prior to this amendment, the SERP benefit did not take into account any bonuses. This change increased the liability related to the SERP. The purpose of the SERP, which is unfunded, is to provide certain of the Company’s key employees with supplemental retirement benefits following a cessation of their employment and to encourage their continued employment with the Company. As of June 30, 2016 there were six participants in the SERP.

The Company records amounts relating to the SERP based on calculations that incorporate various actuarial and other assumptions, including discount rates, rate of compensation increases, retirement dates and life expectancies. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits.

The components of net periodic pension cost were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Service cost	$	350	$	319	$	708	$	548
Interest cost		207		166		437		286
Amortization of prior service cost		393		436		830		678
Amortization of loss		4		—		7		—
Total net periodic benefit cost	$	954	$	921	$	1,982	$	1,512

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

13. COMMITMENTS AND CONTINGENCIES:

Commitments

Under the 2006 Research Agreement with USC, the Company is obligated to make certain payments to USC based on work performed by USC under that agreement, and by Michigan under its subcontractor agreement with USC. See Note 6 for further explanation.

Under the terms of the 1997 Amended License Agreement, the Company is required to make minimum royalty payments to Princeton. See Note 6 for further explanation.

The Company has agreements with seven executive officers which provide for certain cash and other benefits upon termination of employment of the officer in connection with a change in control of the Company. If the executive’s employment is terminated in connection with the change in control, the executive is entitled to a lump-sum cash payment equal to two times the sum of the average annual base salary and bonus of the officer and immediate vesting of all stock options and other equity awards that may be outstanding at the date of the change in control, among other items.

In order to manage manufacturing lead times and help ensure adequate material supply, the Company entered into a New OLED Materials Agreement (see note 8) that will allow PPG Industries to procure and produce inventory based upon criteria as defined by the Company. These purchase commitments consist of firm, noncancelable and unconditional commitments. In certain instances, this agreement allows the Company the option to reschedule and adjust the Company’s requirements based on its business needs prior to firm orders being placed. As of June 30, 2016 and December 31, 2015, the Company had purchase commitments for inventory of $6.2 million and $9.0 million, respectively.

Patent Related Challenges and Oppositions

Each major jurisdiction in the world that issues patents provides both third parties and applicants an opportunity to seek a further review of an issued patent. The process for requesting and considering such reviews is specific to the jurisdiction that issued the patent in question, and generally does not provide for claims of monetary damages or a review of specific claims of infringement. The conclusions made by the reviewing administrative bodies tend to be appealable and generally are limited in scope and applicability to the specific claims and jurisdiction in question.

The Company believes that opposition proceedings are frequently commenced in the ordinary course of business by third parties who may believe that one or more claims in a patent do not comply with the technical or legal requirements of the specific jurisdiction in which the patent was issued. The Company views these proceedings as reflective of its goal of obtaining the broadest legally permissible patent coverage permitted in each jurisdiction. Once a proceeding is initiated, as a general matter, the issued patent continues to be presumed valid until the jurisdiction’s applicable administrative body issues a final non-appealable decision. Depending on the jurisdiction, the outcome of these proceedings could include affirmation, denial or modification of some or all of the originally issued claims. The Company believes that as OLED technology becomes more established and its patent portfolio increases in size, so will the number of these proceedings.

Below are summaries of certain active proceedings that have been commenced against issued patents that are either exclusively licensed to the Company or which are now assigned to the Company. The Company does not believe that the confirmation, loss or modification of the Company’s rights in any individual claim or set of claims that are the subject of the following legal proceedings would have a material impact on the Company’s materials sales or licensing business or on the Company’s consolidated financial statements, including its consolidated statements of income, as a whole. However, as noted within the descriptions, some of the following proceedings involve issued patents that relate to the Company’s fundamental phosphorescent OLED technologies and the Company intends to vigorously defend against claims that, in the Company’s opinion, seek to restrict or reduce the scope of the originally issued claim, which may require the expenditure of significant amounts of the Company’s resources. In certain circumstances, when permitted, the Company may also utilize the proceedings to request modification of the claims to better distinguish the patented invention from any newly identified prior art and/or improve the claim scope of the patent relative to commercially important categories of the invention. The entries marked with an "*" relate to the Company’s UniversalPHOLED phosphorescent OLED technology, some of which may be commercialized by the Company.

Opposition to European Patent No. 1394870*

On April 20, 2010, Merck Patent GmbH; BASF Schweitz AG of Basel, Switzerland; Osram GmbH of Munich, Germany; Siemens Aktiengesellschaft of Munich, Germany; and Koninklijke Philips Electronics N.V., of Eindhoven, The Netherlands filed Notices of Opposition to European Patent No.1394870 (the EP '870 patent). The EP '870 patent, which was issued on July 22, 2009, is a European counterpart patent, in part, to U.S. patents 6,303,238; 6,579,632; 6,872,477; 7,279,235; 7,279,237; 7,488,542; 7,563,519; and 7,901,795; and to pending U.S. patent application 13/035,051, filed on February 25, 2011 (hereinafter the “U.S. '238 Patent Family”). They are exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

An Oral Hearing was held before an EPO panel of first instance in Munich, Germany, on April 8-9, 2014. The panel rejected the original claims and amended the claims to comply with EPO requirements by more narrowly defining the scope of the claims. The '870 patent, in its amended form, was held by the panel to comply with the EPO requirements.

The Company believes the EPO's decision relating to the broad original claims is erroneous and has appealed the ruling to reinstate a broader set of claims. This patent, as originally granted by the EPO, is deemed valid during the pendency of the appeals process.

At this time, based on the Company’s current knowledge, the Company believes that the patent being challenged should be declared valid and that all or a significant portion of the Company’s claims should be upheld. However, the Company cannot make any assurances of this result.

Invalidation Trial in Japan for Japan Patent No. 4511024*

On June 16, 2011, the Company learned that a Request for an Invalidation Trial was filed in Japan by Semiconductor Energy Laboratory, Co., Ltd. for its Japanese Patent No. JP-4511024 (the JP '024 patent), which issued on May 14, 2010. The JP '024 patent is a counterpart patent, in part, to the U.S. '238 Patent Family, which relate to the EP '870 patent, which is subject to one of the above-noted European oppositions and which relates to the Company’s UniversalPHOLED phosphorescent OLED technology. They are exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

On May 10, 2012, the Company learned that the JPO issued a decision upholding the validity of certain claimed inventions in the JP '024 Patent but invalidating the broadest claims in the patent. The Company appealed the JPO’s decision to the Japanese IP High Court. On October 31, 2013, the Japanese IP High Court ruled that the prior art references relied on by the JPO did not support the JPO’s findings, reversed the JPO’s decision with respect to the previously invalidated broad claims in the JP ‘024 patent and remanded the matter back to the JPO for further consideration consistent with its decision. The JPO subsequently issued a decision upholding the validity of certain claimed inventions in the JP '024 Patent but invalidating the broadest claims in the patent. The Company appealed the decision to reinstate a broader set of claims but the IP High Court declined to reinstate the broader set of claims. The Company appealed the IP High Court's decision to the Japanese Supreme Court for reconsideration of the legal basis of the IP High Court's decision. This patent, as originally granted by the JPO, is deemed valid during the pendency of the appeals process.

Although the Company cannot provide any assurances as to the possible outcome of future appellate proceedings which the Company may elect to pursue, if any, the patent is expected to be maintained at least with respect to the narrower set of claims which were not the subject of the IP High Court's invalidation ruling.

Opposition to European Patent No. 1390962

On November 16, 2011, Osram AG and BASF SE each filed a Notice of Opposition to European Patent No. 1390962 (EP '962 patent), which relates to the Company’s white phosphorescent OLED technology. The EP '962 patent, which was issued on February 16, 2011, is a European counterpart patent to U.S. patents 7,009,338 and 7,285,907. They are exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

The EPO combined the oppositions into a single opposition proceeding, and a hearing on this matter was held in December 2015, wherein the EPO Opposition Division revoked the patent claims for alleged insufficiencies under EPC Article 83. The Company believes the EPO's decision relating to the original claims is erroneous, and has appealed the decision. The patent, as originally granted, is deemed valid during the pendency of the appeals process.

At this time, based on its current knowledge, the Company believes that the patent being challenged should be declared valid, and that all or a significant portion of the Company's claims should be upheld. However, the Company cannot make any assurances of this result.

Opposition to European Patent No. 1933395*

On February 24 and 27, 2012, Sumitomo, Merck Patent GmbH and BASF SE filed oppositions to the Company's European Patent No. 1933395 (the EP '395 patent). The EP ‘395 patent is a counterpart to the EP ‘637 patent, and, in part, to U.S. Patents 7,001,536, 6,902,830, and 6,830,828, and to JP patents 4358168 and 4357781. This patent is exclusively licensed to the Company by Princeton, and the Company is required to pay all legal costs and fees associated with this proceeding.

At an Oral Hearing on October 14, 2013, the EPO panel issued a decision that affirmed the basic invention and broad patent coverage in the EP '395 patent, but narrowed the scope of the original claims.

On February 26, 2014, the Company appealed the ruling to reinstate a broader set of claims. The patent, as originally granted by the EPO, is deemed to be valid during the pendency of an appeals process. Two of the three opponents also filed their own appeals of the ruling. In January 2015, Sumitomo withdrew its opposition of the '395 patent, and the EPO accepted the withdrawal notice. The appeal proceedings were held in the second quarter of 2016. As a result of the proceedings, the board concluded the oral proceedings and proposed to reinstate a broader set of claims pending the resolution of a remaining question of the applicable law, a question that the board has deferred to the Enlarged Board of Appeals for review. The originally-granted claims remain in force during the pendency of this process.

In addition to the above proceedings and now-concluded proceedings which have been referenced in prior filings, from time to time, the Company may have other proceedings that are pending which relate to patents the Company acquired as part of the Fujifilm patent or BASF OLED Patent acquisitions or which relate to technologies that are not currently widely utilized in the marketplace.

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CONCENTRATION OF RISK

6 Months Ended

Jun. 30, 2016

Risks And Uncertainties [Abstract]

CONCENTRATION OF RISK

14. CONCENTRATION OF RISK:

Included in technology development and support revenue in the accompanying statement of operations is $59,000 and $31,000 for the three months ended June 30, 2016 and 2015, respectively, and $116,000 and $43,000 for the six months ended June 30, 2016 and 2015, respectively, of revenue which was derived from contracts with United States government agencies. Revenues derived from contracts with United States government agencies represented less than 1% of the consolidated revenue for all periods presented.

Revenues and accounts receivable from the Company's largest customers were as follows (in thousands):

	% of Revenues for the three months ended June 30,				% of Revenues for the six months ended June 30,				Accounts Receivable as of
Customer	2016		2015		2016		2015		June 30, 2016
A		76%		74%		64%		63%	$	6,298
B		18%		18%		29%		21%	$	9,055
C		3%		1%		4%		1%	$	2,309

Revenues from outside of North America represented approximately 99%  of the consolidated revenue for both the three months ended June 30, 2016 and 2015, and approximately 99% of the consolidated revenue for both the six months ended June 30, 2016 and 2015. Revenues by geographic area are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Country	2016		2015		2016		2015
South Korea		61,196		53,822		87,142		76,033
China		1,812		291		3,569		680
Japan		800		2,886		2,104		10,656
Other non-U.S. locations		405		576		1,018		1,204
Total non-U.S. locations	$	64,213	$	57,575	$	93,833	$	88,573
United States		179		517		262		742
Total revenue	$	64,392	$	58,092	$	94,095	$	89,315

The Company attributes revenue to different geographic areas on the basis of the location of the customer.

Long-lived assets (net), by geographic area are as follows (in thousands):

	June 30, 2016		December 31, 2015
United States	$	22,440	$	22,187
Other		170		220
Total long-lived assets	$	22,610	$	22,407

Substantially all chemical materials were purchased from one supplier. See Note 8.

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INCOME TAXES

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

15. INCOME TAXES:

The Company is subject to income taxes in both United States and foreign jurisdictions. The effective income tax rate was 33.6% and 33.5%, respectively, for the three and six months ended June 30, 2016. For the three and six months ended June 30, 2016, income tax expense of $11.0 million and $12.0 million, respectively, was recorded primarily related to foreign tax withheld on royalty and license fees paid to the Company and federal income taxes.

The effective income tax rate was (173.4) % and (340.7) %, respectively, for the three and six months ended June 30, 2015. The Company’s effective tax rate rose significantly due to an inventory write-down primarily related to UDC Ireland, which resulted in a loss for the full year 2015. Due to continued losses at UDC Ireland no tax benefit was recorded. For the three and six months ended June 30, 2015, an income tax expense of $7.5 million and $8.1 million, respectively, was recorded primarily related to foreign tax withheld on royalty and license fees paid to the Company and federal income taxes.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. At this time there is no evidence to release the valuation allowances that relate to UDC Ireland, foreign tax credits and New Jersey research and development credits.

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NET INCOME (LOSS) PER COMMON SHARE

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

NET INCOME (LOSS) PER COMMON SHARE

16. NET INCOME (LOSS) PER COMMON SHARE:

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share ("ASC 260"), which requires earnings per share for each class of stock to be calculated using the two-class method. The two-class method is an allocation of income between the holders of common stock and the Company's participating security holders. Under the two-class method, income for the reporting period is allocated between common shareholders and other security holders based on their respective participation rights in undistributed income. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method.

Basic net income per common share is computed by dividing net income allocated to common shareholders by the weighted-average number of shares of common stock outstanding for the period excluding unvested restricted stock units and performance units. Net income allocated to the holders of the Company's unvested restricted stock awards is calculated based on the shareholders proportionate share of weighted average shares of common stock outstanding on an if-converted basis. The effect of using the two-class method is immaterial to the consolidated financial statements and does not change the reported earnings per share figures and as such is not presented.

For purposes of determining diluted net income per common share, basic net income per share is further adjusted to include the effect of potential dilutive common shares outstanding, including stock options, restricted stock units and performance units, and the impact of shares to be issued under the ESPP.

The following table is a reconciliation of net income (loss) and the shares used in calculating basic and diluted net income (loss) per common share for the three and six months ended June 30, 2016 and 2015 (in thousands, except share and per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Numerator:
Net income (loss)	$	21,802	$	(11,771	)	$	23,751	$	(10,457	)
Denominator:
Weighted average common shares outstanding – Basic		46,927,543		46,388,218			46,862,199		45,840,599
Effect of dilutive shares:
Common stock equivalents arising from stock options    and ESPP		4,051		—			6,914		—
Restricted stock awards and units and performance    units		110,260		—			116,261		—
Weighted average common shares outstanding – Diluted		47,041,854		46,388,218			46,985,374		45,840,599
Net income (loss) per common share:
Basic	$	0.46	$	(0.25	)	$	0.51	$	(0.23	)
Diluted	$	0.46	$	(0.25	)	$	0.51	$	(0.23	)

For the three months ended June 30, 2016 and 2015, the combined effects of unvested restricted stock awards, restricted stock units, performance unit awards and stock options of none and 947,442, respectively, were excluded from the calculation of diluted EPS as their impact would have been antidilutive. For the six months ended June 30, 2016 and 2015, the combined effects of unvested restricted stock awards, restricted stock units, performance units and stock options of 99 and 947,442, respectively, and the impact of shares to be issued under the ESPP, which was minor, were excluded from the calculation of diluted EPS as their impact would have been antidilutive.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

17. SUBSEQUENT EVENTS:

On June 23, 2016 the Company announced that it had entered into an agreement to acquire Adesis, Inc. (Adesis). Adesis was a privately held contract research organization (CRO) with 43 employees specializing in organic and organometallic synthetic research, development, and commercialization. Adesis is a technology vendor to companies in the pharmaceutical, fine chemical, biomaterials, and catalyst industries, and has worked with the Company over the last few years to help advance and accelerate a number of the Company’s product offerings. The transaction closed on July 11, 2016. Under the terms of the agreement, the Company’s subsidiary, UDC, Inc. acquired all outstanding shares of Adesis in a merger for approximately $33.0 million in cash. The acquisition was funded through use of existing cash and investments.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Accounting

Interim Financial Information

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2016 and results of operations for the three and six months ended June 30, 2016 and 2015, and cash flows for the six months ended June 30, 2016 and 2015. While management believes that the disclosures presented are adequate to make the information not misleading, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s latest year-end financial statements, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for the full year.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Universal Display Corporation and its wholly owned subsidiaries, UDC, Inc., UDC Ireland Limited, Universal Display Corporation Hong Kong, Limited, Universal Display Corporation Korea, Y.H., and Universal Display Corporation Japan GK. All intercompany transactions and accounts have been eliminated.

Management's Use of Estimates

Management’s Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates made are principally in the areas of revenue recognition for license agreements, the useful life of acquired technology, the use and recoverability of inventories, income taxes including realization of deferred tax assets, stock-based compensation and retirement benefit plan liabilities. Actual results could differ from those estimates.

Inventories

Inventories

Inventories consist of raw materials, work-in-process and finished goods, including inventory consigned to customers, and are stated at the lower of cost, determined on a first-in, first-out basis, or market. Inventory valuation and firm committed purchase order assessments are performed on a quarterly basis and those items that are identified to be obsolete or in excess of forecasted usage are written down to their estimated realizable value. Estimates of realizable value are based upon management’s analyses and assumptions, including, but not limited to, forecasted sales levels by product, expected product lifecycle, product development plans and future demand requirements. A 12-month rolling forecast based on factors, including, but not limited to, production cycles, anticipated product orders, marketing forecasts, backlog, and shipment activities is used in the inventory analysis. If market conditions are less favorable than forecasts or actual demand from customers is lower than estimates, additional inventory write-downs may be required. If demand is higher than expected, inventories that had previously been written down may be sold.

Certain of the Company’s customers have assumed the responsibility for maintaining the Company's inventory at their location based on the customers' demand forecast. Notwithstanding the fact that the Company builds and ships the inventory, the customer does not purchase the consigned inventory until the inventory is drawn or pulled by the customer to be used in the manufacture of the customer’s product. Though the consigned inventory may be at the customer’s physical location, it remains inventory owned by the Company until the inventory is drawn or pulled, which is the time at which the sale takes place.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying values of accounts receivable, other current assets, and accounts payable approximate fair value in the accompanying financial statements due to the short-term nature of those instruments. The Company’s other financial instruments, which include cash equivalents and investments, are carried at fair value.

Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue

Material sales relate to the Company’s sale of its OLED materials for incorporation into its customers’ commercial OLED products or for their OLED development and evaluation activities. Material sales are recognized at the time title passes, which is typically at the time of shipment or at the time of delivery, depending upon the contractual agreement between the parties.

The Company receives license and royalty payments under certain commercial, development and technology evaluation agreements, some of which are non-refundable. These payments may include royalty and license fees made pursuant to license agreements and certain commercial supply agreements. Amounts received are deferred and classified as either current or non-current deferred revenue based upon current contractual remaining terms; however, based upon on-going relationships with customers, as well as future agreement extensions and other factors, amounts classified as current as of June 30, 2016 may not be recognized as revenue over the next twelve months. For arrangements with extended payment terms where the fee is not fixed and determinable, the Company recognizes revenue when the payment is due and payable. Royalty revenue and license fees included as part of commercial supply agreements are recognized when earned and the amount is fixed and determinable. If the Company used different estimates for the useful life of the licensed technology, or if fees are fixed and determinable, reported revenue during the relevant period would differ.

Technology development and support revenue is revenue earned from government contracts, development and technology evaluation agreements and commercialization assistance fees, which includes reimbursements by government entities for all or a portion of the research and development costs the Company incurs in relation to its government contracts. Revenues are recognized proportionally as research and development costs are incurred, or as defined milestones are achieved.

Currently, the Company's most significant commercial license agreement, which runs through the end of 2017, is with Samsung Display Co., Ltd. (SDC) and covers the manufacture and sale of specified OLED display products. Under this agreement, the Company is being paid a license fee, payable in semi-annual installments over the agreement term of 6.4 years. The installments, which are due in the second and fourth quarter of each year, increase on an annual basis over the term of the agreement. The agreement conveys to SDC the non-exclusive right to use certain of the Company's intellectual property assets for a limited period of time that is less than the estimated life of the assets. Ratable recognition of revenue is impacted by the agreement's extended increasing payment terms in light of the Company's limited history with similar agreements. As a result, revenue is recognized at the lesser of the proportional performance approach (ratable) and the amount of due and payable fees from SDC. Given the increasing contractual payment schedule, license fees under the agreement are recognized as revenue when they become due and payable, which is currently scheduled to be in the second and fourth quarter of each year.

In 2015, the Company entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display) which were effective as of January 1, 2015 and superseded the 2007 commercial supply agreement between the parties. The new agreements have a term that is set to expire by the end of 2022. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under the Company's patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The prepaid royalty amount is included in deferred revenue and a portion of this amount can be credited against total royalties due over the life of the contract. The agreements include customary provisions relating to warranties, indemnities, confidentiality, assignability and business terms. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the term of the agreements, as well as minimum royalty revenue to be generated under the patent license agreement. The Company expects to generate revenue under these agreements that are predominantly tied to LG Display’s sales of OLED licensed products. The OLED commercial supply agreement provides for the sale of materials for use by LG Display, which may include phosphorescent dopants and host materials.

The Company records taxes billed to customers and remitted to various governmental entities on a gross basis in both revenues and cost of material sales in the consolidated statements of operations. The amounts of these pass through taxes reflected in revenues and cost of material sales were $13,000 and $69,000 for the three and six months ended June 30, 2016, respectively, and $240,000 and $850,000 for the three and six months ended June 30, 2015, respectively.

Cost of Material Sales

Cost of Material Sales

Cost of material sales consists of labor and material costs associated with the production of materials processed at the Company's manufacturing partners and at the Company's internal manufacturing processing facility. The Company’s portion of cost of material sales also includes depreciation of manufacturing equipment, as well as, manufacturing overhead costs and inventory adjustments for excess and obsolete inventory.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued a new revenue recognition standard entitled Revenue from Contracts with Customers. The objective of the standard is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer. The standard is effective for annual reporting periods beginning after December 15, 2017. Earlier adoption as of the original date is optional; however, the Company will adopt the standard beginning January 1, 2018. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company is currently assessing which method it will choose for adoption, and is evaluating the impact of the adoption of this new accounting standard on its consolidated results of operations and financial position.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity that uses the first-in first-out method for inventory to report inventory cost at the lower of cost or net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating the effect that ASU 2015-11 may have on its consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires the classification of all deferred tax assets and liabilities as noncurrent. The standard is effective for annual reporting periods beginning after December 15, 2016. The standard allows for either "prospective" adoption, meaning the standard is applied to the most current period presented in the financial statements or "full retrospective” adoption, meaning the standard is applied to all periods presented. Earlier adoption is permitted. The Company is evaluating the effect that ASU 2015-17 may have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Accounting. The objective of the standard is to simplify the accounting and related disclosures associated with employee share-based accounting. The standard is effective for annual reporting periods beginning after December 15, 2016. The ASU requires prospective adoption, meaning the standard is applied to the most current period presented in the financial statements. Earlier adoption is permitted. The Company is evaluating the effect that ASU 2016-09 may have on its consolidated financial statements and related disclosures.

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CASH, CASH EQUIVALENTS AND INVESTMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Cash And Cash Equivalents [Abstract]

Schedule of Cash, Cash Equivalents and Investments

Investments as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):

	Amortized		Unrealized					AggregateFair
Investment Classification	Cost		Gains		(Losses)			Market Value
June 30, 2016
Certificates of deposit	$	10,626	$	9	$	(2	)	$	10,633
Corporate bonds		234,222		12		(53	)		234,181
U.S. Government bonds		17,498		—		(262	)		17,236
	$	262,346	$	21	$	(317	)	$	262,050
December 31, 2015
Certificates of deposit	$	11,532	$	3	$	(14	)	$	11,521
Corporate bonds		233,848		—		(139	)		233,709
U.S. Government bonds		54,953		1		(16	)		54,938
	$	300,333	$	4	$	(169	)	$	300,168

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INVENTORY (Tables)

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	6,538	$	6,539
Work-in-process		1,776		1,064
Finished goods		8,153		5,145
Inventory	$	16,467	$	12,748

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2016 (in thousands):

			Fair Value Measurements, Using
	Total carrying value as of June 30, 2016		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	22,376	$	22,376	$	—	$	—
Short-term investments		246,281		246,281		—		—
Long-term investments		15,767		15,767		—		—

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2015 (in thousands):

			Fair Value Measurements, Using
	Total carrying value as of December 31, 2015		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	34,980	$	34,980	$	—	$	—
Short-term investments		297,981		297,981		—		—
Long-term investments		2,187		2,187		—		—

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ACQUIRED TECHNOLOGY (Tables)

6 Months Ended

Jun. 30, 2016

Finite Lived Intangible Assets Net [Abstract]

Acquired technology

These intangible assets consist of the following (in thousands):

	June 30, 2016
PD-LD, Inc.	$	1,481
Motorola		15,909
BASF		96,033
Fujifilm		109,462
		222,885
Less: Accumulated amortization		(60,416	)
Acquired technology, net	$	162,469

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

6 Months Ended

Jun. 30, 2016

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Loss

Amounts related to the changes in accumulated other comprehensive loss were as follows (in thousands):

	Unrealized gain (loss) on available-for-sale-securities			Net unrealized gain (loss) on retirement plan (2)			Change in cumulative foreign currency translation adjustment		Total			Affected line items in the consolidated statements of operations
Balance December 31, 2015, net of tax	$	(111	)	$	(9,708	)	$	—	$	(9,819	)
Other comprehensive gain (loss) before reclassification		(84	)		—			20		(64	)
Actuarial gain (loss)		—			(353	)		—		(353	)
Reclassification to net income (1)		—			535			—		535		Selling, general and administrative, research and development, and cost of material sales
Change during period		(84	)		182			20		118
Balance June 30, 2016, net of tax	$	(195	)	$	(9,526	)	$	20	$	(9,701	)

	Unrealized gain (loss) on available-for-sale-securities			Net unrealized gain (loss) on retirement plan (2)			Change in cumulative foreign currency translation adjustment		Total			Affected line items in the consolidated statements of operations
Balance December 31 2014, net of tax	$	(28	)	$	(4,354	)	$	—	$	(4,382	)
Other comprehensive gain (loss) before reclassification		4			—			—		4
Actuarial gain (loss)		—			—			—		—
Reclassification to net income (1)		—			420			—		420		Selling, general and administrative, and research and development
Change during period		4			420			—		424
Balance June 30 2015, net of tax	$	(24	)	$	(3,934	)	$	—	$	(3,958	)

(1) The Company reclassified amortization of prior service cost and actuarial loss for its retirement plan from accumulated other comprehensive loss to net income (loss) of $535,000  and $420,000 for the six months ended June 30, 2016 and 2015, respectively.

(2) Refer to Note 12: Supplemental Executive Retirement Plan.

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SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (Tables)

6 Months Ended

Jun. 30, 2016

Defined Benefit Pension Plans And Defined Benefit Postretirement Plans Disclosure [Abstract]

Components of net periodic pension cost

The components of net periodic pension cost were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Service cost	$	350	$	319	$	708	$	548
Interest cost		207		166		437		286
Amortization of prior service cost		393		436		830		678
Amortization of loss		4		—		7		—
Total net periodic benefit cost	$	954	$	921	$	1,982	$	1,512

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CONCENTRATION OF RISK (Tables)

6 Months Ended

Jun. 30, 2016

Risks And Uncertainties [Abstract]

Revenues and accounts receivable from our largest customers

Revenues and accounts receivable from the Company's largest customers were as follows (in thousands):

	% of Revenues for the three months ended June 30,				% of Revenues for the six months ended June 30,				Accounts Receivable as of
Customer	2016		2015		2016		2015		June 30, 2016
A		76%		74%		64%		63%	$	6,298
B		18%		18%		29%		21%	$	9,055
C		3%		1%		4%		1%	$	2,309

Revenues by geographic area

Revenues by geographic area are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Country	2016		2015		2016		2015
South Korea		61,196		53,822		87,142		76,033
China		1,812		291		3,569		680
Japan		800		2,886		2,104		10,656
Other non-U.S. locations		405		576		1,018		1,204
Total non-U.S. locations	$	64,213	$	57,575	$	93,833	$	88,573
United States		179		517		262		742
Total revenue	$	64,392	$	58,092	$	94,095	$	89,315

Long-lived assets (net) by geographic area

Long-lived assets (net), by geographic area are as follows (in thousands):

	June 30, 2016		December 31, 2015
United States	$	22,440	$	22,187
Other		170		220
Total long-lived assets	$	22,610	$	22,407

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NET INCOME (LOSS) PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following table is a reconciliation of net income (loss) and the shares used in calculating basic and diluted net income (loss) per common share for the three and six months ended June 30, 2016 and 2015 (in thousands, except share and per share data):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Numerator:
Net income (loss)	$	21,802	$	(11,771	)	$	23,751	$	(10,457	)
Denominator:
Weighted average common shares outstanding – Basic		46,927,543		46,388,218			46,862,199		45,840,599
Effect of dilutive shares:
Common stock equivalents arising from stock options    and ESPP		4,051		—			6,914		—
Restricted stock awards and units and performance    units		110,260		—			116,261		—
Weighted average common shares outstanding – Diluted		47,041,854		46,388,218			46,985,374		45,840,599
Net income (loss) per common share:
Basic	$	0.46	$	(0.25	)	$	0.51	$	(0.23	)
Diluted	$	0.46	$	(0.25	)	$	0.51	$	(0.23	)

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BUSINESS - Additional Information (Details)	Jun. 30, 2016 patent
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Number of patents issued and pending application	4,100

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Accounting Policies [Abstract]
License fee agreement, term of agreement			6 years 4 months 24 days
Taxes, other	$ 13,000	$ 240,000	$ 69,000	$ 850,000

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CASH, CASH EQUIVALENTS AND INVESTMENTS - Schedule of Cash, Cash Equivalents and Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Cash and Cash Equivalents [Line Items]
Investments, Amortized Cost Basis	$ 262,346	$ 300,333
Investments, Gross Unrealized Gains	21	4
Investments, Gross Unrealized Losses	(317)	(169)
Investments	262,050	300,168
Certificates of Deposit [Member]
Cash and Cash Equivalents [Line Items]
Cash Equivalents, at Carrying Value	10,626	11,532
Cash Equivalents, Gross Unrealized Gain	9	3
Cash Equivalents, Gross Unrealized Losses	(2)	(14)
Cash and Cash Equivalents, Fair Value Disclosure	10,633	11,521
Corporate Debt Securities [Member]
Cash and Cash Equivalents [Line Items]
Available-for-sale Debt Securities, Amortized Cost Basis	234,222	233,848
Available-for-sale Securities, Gross Unrealized Gains	12
Available-for-sale Securities, Gross Unrealized Losses	(53)	(139)
Available-for-sale Securities, Fair Value Disclosure	234,181	233,709
US Treasury and Government [Member]
Cash and Cash Equivalents [Line Items]
Available-for-sale Debt Securities, Amortized Cost Basis	17,498	54,953
Available-for-sale Securities, Gross Unrealized Gains		1
Available-for-sale Securities, Gross Unrealized Losses	(262)	(16)
Available-for-sale Securities, Fair Value Disclosure	$ 17,236	$ 54,938

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INVENTORY - Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 6,538	$ 6,539
Work-in-process	1,776	1,064
Finished goods	8,153	5,145
Inventory	$ 16,467	$ 12,748

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FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	$ 246,281	$ 297,981
Long-term investments	15,767	2,187
Fair Value, Measurements, Recurring [Member] | Reported Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	22,376	34,980
Short-term investments	246,281	297,981
Long-term investments	15,767	2,187
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	22,376	34,980
Short-term investments	246,281	297,981
Long-term investments	$ 15,767	$ 2,187

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FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS - Additional Information (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Other than temporary impairments of investments	$ 0	$ 0

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RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY, UNIVERSITY OF SOUTHERN CALIFORNIA AND THE UNIVERSITY OF MICHIGAN - Additional Information (Details) - USD ($)		3 Months Ended		6 Months Ended		36 Months Ended	37 Months Ended	48 Months Ended	84 Months Ended	120 Months Ended
	Jun. 01, 2013	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Apr. 30, 2009	Jun. 30, 2016	Apr. 30, 2013	Apr. 30, 2013	Jul. 31, 2007
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Royalty expense		$ 1,966,000	$ 1,673,000	$ 2,841,000	$ 2,458,000
1997 Research Agreement [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Term of agreement (in years)										10 years
2006 Research Agreement - Original Term [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Term of agreement (in years)						3 years		4 years
Research and development expense incurred									$ 5,000,000
2006 Research Agreement - Extended Term [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Term of agreement (in years)	4 years
Research and development expense incurred							$ 3,500,000
Maximum obligation		2,100,000		$ 2,100,000			$ 2,100,000
1997 Amended License Agreement [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Royalty rate for licensed products sold by the Company (in hundredths)				3.00%
Royalty rate for licensed products sold by the Company's sublicenses (in hundredths)				3.00%
Minimum royalty payment per year					100,000
Royalty expense		$ 2,000,000	$ 1,700,000	$ 2,800,000	$ 2,400,000
Minimum investment per year				$ 800,000

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ACQUIRED TECHNOLOGY - Acquired technology (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Acquired technology, gross	$ 222,885
Less: Accumulated amortization	(60,416)	$ (54,837)
Acquired technology, net	162,469	$ 72,015
PD LD, Inc [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired technology, gross	1,481
Motorola [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired technology, gross	15,909
BASF [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired technology, gross	96,033
FUJIFILM [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired technology, gross	$ 109,462

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ACQUIRED TECHNOLOGY - Additional Information (Details) € in Millions					3 Months Ended		6 Months Ended
	Jun. 28, 2016 USD ($) patent	Jun. 28, 2016 EUR (€) patent	Jul. 23, 2012 USD ($) patent	Mar. 09, 2011	Jun. 30, 2016 USD ($) patent	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) patent	Jun. 30, 2015 USD ($)
Finite-Lived Intangible Assets [Line Items]
Amortization related to acquired technology					$ 2,800,000	$ 2,700,000	$ 5,579,000	$ 5,500,000
Future amortization expense, remainder of fiscal year					15,900,000		15,900,000
Future amortization expense, fiscal year 2					20,600,000		20,600,000
Future amortization expense, fiscal year 3					20,600,000		20,600,000
Future amortization expense, fiscal year 4					20,600,000		20,600,000
Future amortization expense, fiscal year 5					20,600,000		20,600,000
Future amortization expense, fiscal year 6					$ 20,600,000		$ 20,600,000
Licensing Agreements [Member] | Motorola [Member]
Finite-Lived Intangible Assets [Line Items]
Number of patents under license agreement | patent					74		74
Amortization period of acquired intangible assets (in years)				7 years 6 months
Patents | FUJIFILM [Member]
Finite-Lived Intangible Assets [Line Items]
Number of patents acquired (more than) | patent			1,200
Assigned value of acquired intangible assets			$ 105,000,000
Cash paid for OLED patents			$ 4,500,000
OLED patents useful life			10 years
Patents | BASF [Member]
Finite-Lived Intangible Assets [Line Items]
Number of patents acquired (more than) | patent	500	500
Assigned value of acquired intangible assets	$ 95,800,000	€ 86.8
Cash paid for OLED patents	$ 261,000
OLED patents useful life	10 years	10 years

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EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Mar. 31, 2016	Sep. 30, 2015	Jun. 30, 2015
Long-term Purchase Commitment [Line Items]
Percent Of Services Payable In Cash Or Shares	50.00%		50.00%
Issuance of common stock in connection with materials and license agreements (in shares)	0	0	0			0
New OLED Materials Agreement and OLED Materials Agreement [Member] | Cash Distribution
Long-term Purchase Commitment [Line Items]
Charges to expense for cash portion of reimbursement of expenses	$ 1.0	$ 1.5	$ 1.9			$ 3.0
New OLED Materials Agreement and OLED Materials Agreement [Member] | Weighted Average
Long-term Purchase Commitment [Line Items]
Minimum average closing price of common stock (in dollars per share)				$ 20.00	$ 20.00

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SHAREHOLDERS' EQUITY - Additional Information (Details) - $ / shares	6 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Class Of Stock [Line Items]
Preferred Stock, shares authorized ( in shares)	5,000,000	5,000,000
Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock voting rights	Each share of the Company’s common stock entitles the holder to one vote on all matters to be voted upon by the shareholders.
Common Stock, shares authorized (in shares)	100,000,000	100,000,000
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, shares issued (in shares)	48,302,603	48,132,223
Series A Nonconvertible Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred Stock, shares issued (in shares)	200,000	200,000

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SHAREHOLDERS' EQUITY - Deferred Compensation Arrangement - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Jun. 30, 2016
Deferred Compensation Arrangement with Employees and Non-Employees, Share-Based Payments [Line Items]
Fair value of shares withheld for tax withholding obligations			$ 4,794,000
Employees and Non Employee Members of Scientific Advisory Board [Member]
Deferred Compensation Arrangement with Employees and Non-Employees, Share-Based Payments [Line Items]
Shares issued (in shares)	27,967	35,205
Employees [Member]
Deferred Compensation Arrangement with Employees and Non-Employees, Share-Based Payments [Line Items]
Fair value of shares issued	$ 1,100,000	$ 967,000
Shares withheld for tax withholding obligations (in shares)	8,106	9,565
Fair value of shares withheld for tax withholding obligations	$ 410,000	$ 346,000
Members of Scientific Advisory Board [Member]
Deferred Compensation Arrangement with Employees and Non-Employees, Share-Based Payments [Line Items]
Fair value of shares issued	$ 300,000	$ 300,000

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ACCUMULATED OTHER COMPREHENSIVE LOSS - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance, net of tax				$ (9,819)	$ (4,382)
Other comprehensive gain (loss) before reclassification				(64)	4
Actuarial gain (loss)				(353)
Reclassification to net income (loss)	[1]			535	420
TOTAL OTHER COMPREHENSIVE INCOME		$ 820	$ 298	118	424
Ending balance, net of tax		(9,701)	(3,958)	(9,701)	(3,958)
Unrealized gain (loss) on available-for-sale securities [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance, net of tax				(111)	(28)
Other comprehensive gain (loss) before reclassification				(84)	4
TOTAL OTHER COMPREHENSIVE INCOME				(84)	4
Ending balance, net of tax		(195)	(24)	(195)	(24)
Actuarial gain (loss) on retirement plan [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance, net of tax	[2]			(9,708)	(4,354)
Actuarial gain (loss)	[2]			(353)
Reclassification to net income (loss)	[1],[2]			535	420
TOTAL OTHER COMPREHENSIVE INCOME	[2]			182	420
Ending balance, net of tax	[2]	(9,526)	$ (3,934)	(9,526)	$ (3,934)
Change in cumulative foreign currency translation adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Other comprehensive gain (loss) before reclassification				20
TOTAL OTHER COMPREHENSIVE INCOME				20
Ending balance, net of tax		$ 20		$ 20

[1] The Company reclassified amortization of prior service cost and actuarial loss for its retirement plan from accumulated other comprehensive loss to net income (loss) of $535,000 and $420,000 for the six months ended June 30, 2016 and 2015, respectively.

[2] Refer to Note 12: Supplemental Executive Retirement Plan.

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ACCUMULATED OTHER COMPREHENSIVE LOSS - Schedule of Accumulated Other Comprehensive Loss (Parenthetical) (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015
Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]
Reclassification to net income (loss)	[1]	$ 535	$ 420

[1] The Company reclassified amortization of prior service cost and actuarial loss for its retirement plan from accumulated other comprehensive loss to net income (loss) of $535,000 and $420,000 for the six months ended June 30, 2016 and 2015, respectively.

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STOCK-BASED COMPENSATION - Equity Compensation Plan - Additional Information (Details)	6 Months Ended
	Jun. 30, 2016 shares
Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	10,500,000
Number of shares available for grant (in shares)	2,712,886
Maximum [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration term (in years)	10 years

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STOCK-BASED COMPENSATION, Equity Instruments Other Than Options - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock-based compensation, aggregate disclosures [Abstract]
Fair value of shares withheld for tax withholding obligations			$ 4,794,000
Restricted Stock [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Grants in period (shares)			41,543
Total fair value of performance unit awards granted			$ 2,100,000
Shares withheld for tax withholding obligations (in shares)			82,780	97,856
Fair value of shares withheld for tax withholding obligations			$ 4,400,000	$ 4,200,000
Restricted Stock [Member] | Selling, General and Administrative Expenses [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	$ 1,600,000	$ 1,600,000	3,300,000	2,500,000
Restricted Stock [Member] | Research and Development Expense [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	403,000	495,000	975,000	892,000
Restricted Stock [Member] | Cost of Material Sales [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	94,000	0	$ 258,000	0
Restricted Stock [Member] | Minimum [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Restricted stock awards and units vesting terms			3 years
Restricted Stock [Member] | Maximum [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Restricted stock awards and units vesting terms			5 years
Restricted Stock Units (RSUs) [Member] | Research and Development Expense [Member] | Non Employee Members of Scientific Advisory Board [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	121,000	85,000	$ 164,000	$ 274,000
Performance Shares [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Grants in period (shares)			25,045
Total fair value of performance unit awards granted			$ 1,500,000
Shares withheld for tax withholding obligations (in shares)			0	16,071
Fair value of shares withheld for tax withholding obligations			$ 0	$ 752,000
Performance Shares [Member] | Performance-Based Vesting Requirement [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Grants in period (shares)			12,520
Performance Shares [Member] | Market-Based Vesting Requirement [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Grants in period (shares)			12,525
Performance Shares [Member] | Selling, General and Administrative Expenses [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	278,000	175,000	$ 555,000	504,000
Performance Shares [Member] | Research and Development Expense [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	77,000	45,000	154,000	142,000
Performance Shares [Member] | Cost of Material Sales [Member]
Stock-based compensation, aggregate disclosures [Abstract]
Compensation expense	$ 28,000	$ 0	$ 57,000	$ 0

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STOCK-BASED COMPENSATION - Board of Directors Compensation - Additional Information (Details) - Director [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Restricted stock awards and units vesting terms			1 year
Fair value of shares issued	$ 365	$ 208	$ 730	$ 385
Shares issued (in shares)			15,000	14,167

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STOCK-BASED COMPENSATION, Employee Stock Purchase Plan - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 25, 2009
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Proceeds from common stock issued			$ 264,000
Employee Stock Purchase Plan (ESPP) [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Reserved for issuance (in shares)					1,000,000
Purchase period (in months)			3 months
Percentage of market value (in hundredths)			85.00%
Maximum allocation of base compensation (in hundredths)			10.00%
Maximum shares per purchase date (in shares)			12,500
Maximum value per calendar year, per employee			$ 25,000
Common stock issued (in shares)			4,331	5,819
Proceeds from common stock issued			$ 201,000	$ 171,000
Employee Stock Purchase Plan (ESPP) [Member] | Selling, General and Administrative Expenses [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Charges to expense	$ 10,000	$ 10,000	20,000	21,000
Employee Stock Purchase Plan (ESPP) [Member] | Research and Development Expense [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Charges to expense	18,000	13,000	35,000	26,000
Employee Stock Purchase Plan (ESPP) [Member] | Cost of Material Sales [Member]
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Charges to expense	$ 4,000	$ 0	$ 8,000	$ 0

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SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - Additional Information (Details)	Jun. 30, 2016 participant
Supplemental Executive Retirement Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Number of participants	6

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SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - Components of Net Periodic Pension Cost (Details) - Supplemental Executive Retirement Plan [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Components of net periodic pension cost [Abstract]
Service cost	$ 350	$ 319	$ 708	$ 548
Interest cost	207	166	437	286
Amortization of prior service cost	393	436	830	678
Amortization of loss	4		7
Total net periodic benefit cost	$ 954	$ 921	$ 1,982	$ 1,512

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COMMITMENTS AND CONTINGENCIES - Additional Information (Details) $ in Millions	Jun. 30, 2016 USD ($) executive_officer multiple	Dec. 31, 2015 USD ($)
Loss Contingencies [Line Items]
Purchase commitments for inventory | $	$ 6.2	$ 9.0
Commitment With Executive Officers [Member]
Loss Contingencies [Line Items]
Number of executive officers under agreement | executive_officer	7
Multiple of sum of average annual base salary and bonus agreement terms | multiple	2

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CONCENTRATION OF RISK - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) supplier	Jun. 30, 2015 USD ($)
Concentration Risk [Line Items]
Revenue	$ 64,392,000	$ 58,092,000	$ 94,095,000	$ 89,315,000
Supplier Concentration Risk [Member]
Concentration Risk [Line Items]
Number of suppliers from which chemical materials were purchased | supplier			1
Total Revenue [Member] | Government Contracts Concentration Risk [Member]
Concentration Risk [Line Items]
Revenue	$ 59,000	$ 31,000	$ 116,000	$ 43,000
Concentration risk, percentage (less than 1% for contracts with U.S. government agencies)	1.00%	1.00%	1.00%	1.00%
Total Revenue [Member] | Customer Concentration Risk [Member] | Excluding North America [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (less than 1% for contracts with U.S. government agencies)	99.00%	99.00%	99.00%	99.00%

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CONCENTRATION OF RISK - Revenues and Accounts Receivable From Our Largest Customers (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Concentration Risk [Line Items]
Accounts receivable	$ 17,984		$ 17,984		$ 24,729
Total Revenue [Member] | Customer Concentration Risk [Member] | Major Customer A [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (less than 1% for contracts with U.S. government agencies)	76.00%	74.00%	64.00%	63.00%
Total Revenue [Member] | Customer Concentration Risk [Member] | Major Customer B [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (less than 1% for contracts with U.S. government agencies)	18.00%	18.00%	29.00%	21.00%
Total Revenue [Member] | Customer Concentration Risk [Member] | Major Customer C [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (less than 1% for contracts with U.S. government agencies)	3.00%	1.00%	4.00%	1.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Major Customer A [Member]
Concentration Risk [Line Items]
Accounts receivable	$ 6,298		$ 6,298
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Major Customer B [Member]
Concentration Risk [Line Items]
Accounts receivable	9,055		9,055
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Major Customer C [Member]
Concentration Risk [Line Items]
Accounts receivable	$ 2,309		$ 2,309

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CONCENTRATION OF RISK - Revenues by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Concentration Risk [Line Items]
Revenues	$ 64,392	$ 58,092	$ 94,095	$ 89,315
South Korea [Member]
Concentration Risk [Line Items]
Revenues	61,196	53,822	87,142	76,033
China [Member]
Concentration Risk [Line Items]
Revenues	1,812	291	3,569	680
Japan [Member]
Concentration Risk [Line Items]
Revenues	800	2,886	2,104	10,656
Other [Member]
Concentration Risk [Line Items]
Revenues	405	576	1,018	1,204
Total Non-U.S. Locations [Member]
Concentration Risk [Line Items]
Revenues	64,213	57,575	93,833	88,573
UNITED STATES
Concentration Risk [Line Items]
Revenues	$ 179	$ 517	$ 262	$ 742

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CONCENTRATION OF RISK - Long-Lived Assets (Net) by Geographic Area (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Total long-lived assets	$ 22,610	$ 22,407
UNITED STATES
Segment Reporting Information [Line Items]
Total long-lived assets	22,440	22,187
Other [Member]
Segment Reporting Information [Line Items]
Total long-lived assets	$ 170	$ 220

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INCOME TAXES - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, Percent	33.60%	(173.40%)	33.50%	(340.70%)
Income tax expense	$ 11,047	$ 7,466	$ 11,968	$ 8,084

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NET INCOME (LOSS) PER COMMON SHARE - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Numerator:
NET INCOME (LOSS)	$ 21,802	$ (11,771)	$ 23,751	$ (10,457)
Denominator [Abstract]
Weighted average common shares outstanding – Basic	46,927,543	46,388,218	46,862,199	45,840,599
Effect of dilutive shares:
Common stock equivalents arising from stock options and ESPP	4,051		6,914
Restricted stock awards and units and performance units	110,260		116,261
Weighted average common shares outstanding – Diluted	47,041,854	46,388,218	46,985,374	45,840,599
Basic (in dollars per share)	$ 0.46	$ (0.25)	$ 0.51	$ (0.23)
Diluted (in dollars per share)	$ 0.46	$ (0.25)	$ 0.51	$ (0.23)

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NET INCOME (LOSS) PER COMMON SHARE - Additional Information (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Antidilutive securities excluded from calculation of diluted EPS	0	947,442	99	947,442

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SUBSEQUENT EVENTS - Additional Information (Details) - Adesis Inc [Member] $ in Millions		6 Months Ended
	Jul. 11, 2016 USD ($)	Jun. 30, 2016	Jun. 23, 2016 Employee
Subsequent Event [Line Items]
Business acquisition agreement date		Jun. 23, 2016
Number of employees in contract research organization | Employee			43
Transaction closed date		Jul. 11, 2016
Subsequent Event [Member]
Subsequent Event [Line Items]
Shares acquired for cash | $	$ 33.0