Universal Display Corp/PA – ‘10KSB40’ for 12/31/97

As of:  Tuesday, 3/31/98   ·   For:  12/31/97   ·   Accession #:  950115-98-617   ·   File #:  1-12031

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Annual Report — Small Business — [x] Reg. S-B Item 405   —   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB40     Form 10Ksb                                            36    201K 
 2: EX-10.34    Research Agreement                                     6     23K 
 3: EX-10.35    Amended License Agreement                             17     54K 
 4: EX-23       Consent of Arthur Andersen                             1      5K 
 5: EX-27       Financial Data Schedule                                1      6K 

10KSB40   —   Form 10Ksb
Document Table of Contents

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 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE         
EXCHANGE ACT OF 1934                                          
For the fiscal year ended December 31, 1997                   

OR

[ ]      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                     (I.R.S. Employer      
incorporation or organization)                    Identification No.)   

Three Bala Plaza East                 
Suite 104                 
   Bala Cynwyd, Pennsylvania               19004
----------------------------------------     ---------- 
(Address of principal executive offices)     (Zip Code) 

Registrant's telephone number, including area code: (610) 617-4010
                                                    --------------
 Securities registered pursuant to Section 12(b) of the Act:

None

 Securities registered pursuant to Section 12(g) of the Act:

Common Stock (par value $0.01 per share)
----------------------------------------
(Title of Class)

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 and 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                                   
      ---    ---

Check if there is no disclosure of delinquent filers in response to Item 405 of 
Regulation S-B contained in this form, and no disclosure will be contained, to  
the best of registrant's knowledge, in definitive proxy or information          
statements incorporated by reference in Part III of this Form 10-KSB or any     
amendment of this Form 10-KSB [X]                                               

The aggregate market value of the voting stock held by non-affiliates of the    
Registrant, based upon the closing sale price of Common Stock reported by The   
Nasdaq Stock Market on March 3, 1998, was approximately $28,829,896. For the    
purposes of calculation, all executive officers and directors of the Company and
all beneficial owners of more than 10% of the Company's stock (and their        
affiliates) were considered affiliates. As of March 17, 1998, the Registrant had
outstanding 10,302,268 shares of Common Stock.                                  

 Documents Incorporated by Reference

Portions of the Company's Proxy Statement to be filed with the Securities and   
Exchange Commission for the Annual Meeting of Shareholders to be held on June   
11, 1998, are incorporated by reference into Part III of this report.           

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 TABLE OF CONTENTS

PART 1

                                                                            Page
                                                                            ----

ITEM 1.       BUSINESS                                                       3  

ITEM 2.       PROPERTIES                                                     8  

ITEM 3.       LEGAL PROCEEDINGS                                              8  

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS            8  

            EXECUTIVE OFFICERS OF THE REGISTRANT                           8

PART II       

ITEM 5.       MARKET FOR THE REGISTRANTS COMMON EQUITY AND                      
            RELATED STOCKHOLDER MATTERS                                    9

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                 
            CONDITION AND RESULTS OF OPERATIONS                            9

ITEM 7.       FINANCIAL STATEMENTS                                          11  

ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                  
            ACCOUNTING AND FINANCIAL DISCLOSURE                           11

PART III        

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL              
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE       
            EXCHANGE ACT                                                  11

ITEM 10.      EXECUTIVE COMPENSATION                                        11  

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                   
            AND MANAGEMENT                                                11

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                11  

 PART IV

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K                          11  

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This document contains certain forward-looking statements that are subject to   
risks and uncertainties. Forward-looking statements include certain information 
relating to the flat panel display industry, OLED technology, strategy, markets,
research, development, manufacturing, intellectual property, competition, and   
properties, as well as information contained elsewhere in this Report where     
statements are preceded by, followed by or include the words "believes,"        
"expects", "anticipates", "potential" or similar expressions. For such          
statements, the Company claims the protection of the safe harbor for            
forward-looking statements contained in the private Securities Litigation Reform
Act of 1995. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including without 
limitation, those discussed elsewhere in this Report and in the documents       
incorporated herein by reference.                                               

PART I

ITEM 1. BUSINESS                                                                

 General

Universal Display Corporation (the "Company") is engaged in the research,       
development and commercialization of Organic Light Emitting Diode ("OLED")      
technology for use in flat panel displays and other applications. The research  
is being performed by Princeton University and the University of Southern       
California ("USC") (collectively "Research Partners") pursuant to a certain     
Sponsored Research Agreement funded by the Company (See: Business- "Research"). 
The Company has the exclusive right to commercialize the technology being       
developed pursuant to a certain License Agreement (See: Business- "Intellectual 
Property"). The Company's present commercialization strategy is to enter into   
licensing arrangements, joint ventures, and other strategic alliances for the   
volume manufacturing of products utilizing this technology, the Company does not
presently intend to become a volume manufacturer. The Company anticipates that  
its OLED technology, if successfully developed, may have a variety of           
applications, including full color, large area, high resolution, high           
information content displays, such as laptop and notebook computer screens,     
computer monitors and televisions. Potential applications also include          
multi-color, and monochrome small area, low information content displays, such  
as consumer electronic equipment, vehicular dashboard displays, cellular phones 
and other telecommunication displays, computer games, and personal digital      
assistants, as well as transparent applications such as head up displays for    
automobile windshields.                                                         

The Company was incorporated under the laws of the Commonwealth of Pennsylvania 
in April 1985 under the name Enzymatics, Inc. ("Enzymatics"). Another           
corporation named "Universal Display Corporation" ("UDC") was incorporated under
the laws of the State of New Jersey in June 1994. On June 22, 1995, a           
wholly-owned subsidiary of Enzymatics merged with and into UDC. UDC, the        
surviving corporation in the Merger, became a wholly-owned subsidiary of        
Enzymatics and changed its name to "UDC, Inc." Simultaneously with the          
consummation of the Merger, Enzymatics changed its name to "Universal Display   
Corporation."                                                                   

 Flat Panel Display Industry

The market for flat panel displays has been driven by a number of market forces,
including, but not limited to, the increasing popularity of portable computers  
and other consumer electronic devices, the increasing availability of           
information and visual content of electronic formats, the proliferation of      
graphical interfaces and emerging multimedia applications and the conversion of 
traditional analog displays to digital or graphical displays. Existing products 
that use flat panel displays include notebook and laptop computers, portable    
televisions, video cameras, cellular phones, pagers, portable electronic        
devices, digital watches, calculators,                                          

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electronic games and audiovisual equipment, copiers, fax machines, telephones   
and answering machines. In addition, flat panel displays have been utilized in  
military applications, including missile controls, ground support and           
communications equipment and avionics.                                          

The Company believes that competition in this market, particularly for full     
color, large area, high resolution, high information content displays is based  
upon image and color quality, viewing angle, power requirements, cost and       
manufacturability. The dominant technology for displays today is the cathode ray
tube ("CRT"), the type of technology in most televisions and computer monitors. 
The dominant technology today for flat panel displays is liquid crystal display 
("LCD") technology, the type of technology in most laptop computers. The Company
believes LCD technology has certain limitations, such as a limited viewing      
angle, limited scalability, narrow temperature ranges, low contrast and inferior
image and color quality when compared to CRT displays. The Company believes that
flat panel displays utilizing its OLED technology, if successfully developed,   
will provide image and color quality, brightness, contrast, scalability and     
viewing angles comparable to CRT displays, and be manufacturable from light     
weight, low cost materials and require a relatively low power source.           

 The Company's OLED Technology

OLED technology is an emerging innovative technology and the Company is not     
aware of any full color, flat panel displays utilizing OLED technology currently
being marketed and sold, although there are numerous companies engaged in       
research and development efforts respecting OLED technology. Pioneer Corporation
of Japan is currently marketing and selling a monochrome OLED device for        
automotive applications. The Company believes that its OLED technology, if fully
developed, will have the capability to address many of the limitations of LCD   
and other developing technologies.                                              

Light emitting diodes ("LED's") are solid-state semiconductor devices that emit 
light when electrical current passes through them. The color of light emitted   
depends on the bandgap of the semiconductor material; narrow bandgap materials  
emit light in the red/orange range and wide bandgap materials emit green or blue
light. Traditional LEDs are created from inorganic semiconductors. The OLED     
technology currently under development by the Company and its research partners 
at Princeton University and USC utilizes a new type of LED created from organic 
materials. Presently, the Company's OLED technology is designed around four     
technology platforms: transparency, flexibility, vertically stacked pixels, and 
lasing.                                                                         

The Company believes that flat panel displays utilizing its OLED technology, if 
successfully developed, will provide image and color quality, brightness,       
contrast and viewing angles comparable or superior to CRT displays and superior 
to LCD; will be manufacturable from light weight, low cost materials; will      
demonstrate efficiency in converting electrical power into light and require    
very low voltage for operation, which will make the OLED technology compatible  
for a variety of flat panel display applications which require light weight and 
portability; and will be scaleable for use in large area, high resolution, high 
information, full color, flat panel displays.                                   

One technology platform being researched by the Company and its Research        
Partners is based upon the ability to create a transparent organic display. In  
the March 7, 1996 issue of the scientific journal Nature, the researchers at    
Princeton University and USC announced the laboratory demonstration of the first
transparent, thin film organic light emitting device, ("TOLED") which is        
believed to be the crucial first step toward realizing high-definition,         
full-color organic displays. In addition, it provides the ability to develop    
head up, transparent                                                            

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and high contrast displays using organic materials. In December 1997, a patent  
was issued respecting aspects of the TOLED technology. See                      
"Business--Intellectual Property"                                               

A second technology platform being researched by the Company and its Research   
Partners is based upon the vertically stacked pixel structure. In the June 27,  
1997 issue of the scientific journal Science, the researchers at Princeton      
University and USC announced the laboratory demonstration of an independently   
controlled, tunable three color organic light emitting device employing a novel 
vertically stacked pixel architecture ("SOLED") which stacks the red, green and 
blue pixels on top of each other, rather than side by side as in CRTs and LCD's,
theoretically providing for very high image resolution, since one pixel can     
occupy the same space as three or more pixels would in a side by side           
architecture. The SOLED, which was made possible by the creation of the TOLED,  
permits the independent tuning of color, greyscale and intensity and is expected
to allow an individual pixel to emit red, blue and green, either at the same    
time or separately. Combinations of such colors create additional colors so that
each individual pixel will be capable of producing a full range of colors. In   
January and February 1998, two patents were issued respecting aspects of the    
SOLED technology. See: "Business--Intellectual Property"                        

A third technology platform being researched by the Company and its Research    
Partners is the ability to fabricate organic displays on flexible substrates. In
the February 1, 1997 issue of the scientific journal, Optics Letters, the       
researchers at Princeton University and USC announced the laboratory            
demonstration of an OLED deposited on a flexible plastic film (FOLED). Flat     
panel displays are commonly built on glass. The Company believes that this is   
the first time that small molecule organic layers have been deposited on a      
flexible plastic substrate, flexibility being a property that was previously    
believed to be unique to polymer materials. This development may also allow the 
potential for fabricating FOLED products using low cost "roll to roll"          
processing methods.                                                             

A fourth technology platform being researched by the Company and its Research   
Partners is based upon the ability to fabricate an optically pumped organic     
laser. In the September 25, 1997 issue of the scientific journal Nature, the    
researchers at Princeton University and USC announced what they believed to be  
the first evidence of lasing from vacuum deposited thin films of organic        
molecules. The Company believes this is a significant first step towards the    
realization of a electrically pumped solid state lasers based on organic thin   
films                                                                           

While significant advances have been made in the research on OLEDs being        
sponsored by the Company, substantial additional research and development work  
needs to be performed before products utilizing this technology are manufactured
and sold, including issues of operating life, reliability, the development of   
more fully saturated colors, integration with drive electronics and issues      
related to scalability into a production environment and cost effective         
fabrication technologies for monochrome, transparent, flexible and full color,  
large area and small area applications. The development of an electrically      
pumped laser is also necessary before products based on the organic laser are   
manufactured and sold.                                                          

There can be no assurance that the necessary research and development work will 
be successfully completed and that the Company or its Licensees will            
successfully commercialize any products based upon its proprietary technology.  

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Commercialization Strategy and Markets

The Company's present commercialization strategy is to continue the research and
development of OLED technology and to license the technology or enter into joint
ventures or other strategic relationships with experienced manufacturers (who   
may have much of the needed infrastructure already in place) for the            
manufacture, distribution and sale of OLED display products or laser products.  

The Company believes that an initial market may be for low information content  
applications using segmented or character displays such as for cellular phones, 
instrumentation displays, or consumer electronics. These applications may be    
multicolor or monochrome. There are also potential markets for a transparent    
device, for example, as head-up displays on vehicle windshields. The Company    
also believes that the OLED technology under development could also have        
significant applicability for small, full color displays, such as for personal  
digital assistants, projection displays, viewfinders in camcorders, video       
phones, hand held computers and numerous industrial, medical and military uses. 
The Company also believes that the technology has potential application in large
area, full color displays such as laptop computers, desktop computers and       
televisions and in numerous defense-related markets. The Company believes that  
an electrically pumped organic semiconductor laser could have applications in a 
number of markets, including fiber-optic communications, audio compact discs    
(CDs), CD-ROM drives, DVD Discs, DVD-ROM's, laser printers, rewritable optical  
storage drives, bar code scanners and digital printing presses.                 

There can be no assurance that the Company will be able to enter into           
appropriate licensing, joint ventures or other strategic relationships, or that 
the terms of such relationships, if entered into, would be favorable to the     
Company.                                                                        

The Company is part of a team that includes Princeton University, the University
of Southern California, and Hughes Research Laboratories that was awarded a $3  
million research contract from the U.S.Department of Defense Advanced Research  
Projects Agency ("DARPA") to fund the development of "Multi-Color               
Ultralightweight Organic Light Emitting Diode (OLED) Displays." The three year  
contract commenced September 1, 1997 and the Company expects to receive         
approximately $700,000 for its part of the project relating principally to the  
fabrication of prototypes and reliability improvements.                         

In September 1997, the Company and Princeton University were jointly            
awarded a $100,000 Phase I grant by the National Science Foundation ("NSF")     
under the Small Business Technology Transfer Program for further development of 
its OLED technology principally related to more fully saturated colors. The     
grant is expected to be completed within one year, and if successful can        
possibly lead to a Phase II proposal for additional funding from the NSF.       

In September 1997, the Company and Princeton University received a $100,000     
contract award from the New Jersey Commission on Science and Technology for     
further development of its OLED technology and to study the feasibility of      
manufacturing OLED displays in New Jersey.                                      

In September 1997 the Company joined the United States Display Consortium       
("USDC"), a cooperative industry/government effort aimed at developing an       
infrastructure to support a North American flat panel display infrastructure.   
The USDC's role is to provide a common platform for flat panel display          
manufacturers, developers, users and the manufacturing equipment and supplier   
base. It has more than 130 members, as well as support from DARPA. The Company  
is one of 14 members on the Governing Board of USDC.                            

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Research

  Research relating to the OLED technology is being conducted at Princeton
University's Advanced Technology Center for Photonics and Optoelectronics       
Materials and at the USC Synthetic Materials Laboratories (on a subcontract     
basis with Princeton University). In October 1997, the Company entered into a   
new five year Sponsored Research Agreement (the "1997 Sponsored Research        
Agreement") for research activities related to Organic Light Emitters, which    
continues and expands the scope of the Sponsored Research Agreement dated August
1, 1994 (the "1994 Sponsored Research Agreement"). In October 1997, the Company,
Princeton University and USC also entered into an Amended License Agreement (the
"1997 License Agreement). See "Business--Intellectual Property". The development
of commercially viable applications for the OLED technology is principally      
dependent on the success of the research efforts of Dr. Stephen Forrest and Dr. 
Mark Thompson (the "Principal Investigators") conducted pursuant to such        
agreements. The scope and technical aspects of the research and the resources   
and efforts directed to such research is subject to the control of Princeton    
University and the Principal Investigators.                                     

The Company paid Princeton University $347,374 in 1997 pursuant to the Sponsored
Research Agreement. The 1997 Sponsored Research Agreement requires the Company  
to pay up to $4.4 million to Princeton University from July 1998 thorough July  
2002, which period is subject to extension. The 1997 Sponsored Research         
Agreement provides that if Dr. Forrest is unavailable to continue to serve as a 
Principal Investigator, either because he is no longer associated with Princeton
University or otherwise, and a successor acceptable to both the Company and     
Princeton University is not available, Princeton University has the right to    
terminate the 1997 Sponsored Research Agreement. The Company believes that      
additional research and development efforts are required for the development of 
products based upon the OLED technology. See "Business--The Company's OLED      
Technology". Loss to the Company of the Principal Investigators' services or    
termination of the 1997 Sponsored Research Agreement would have a material      
adverse effect on the Company.                                                  

 Intellectual Property

The Company's rights to the OLED technology are governed by the 1997 Sponsored  
Research Agreement and the 1997 License Agreement. Pursuant to such agreements, 
all patents and other intellectual property rights relating to the OLED         
technology are the property of Princeton University, or USC, as applicable, and 
the Company is the worldwide exclusive licensee.                                

In December 1997, the first patent, titled "Transparent Contacts for Organic    
Light Emitters", was issued to Princeton University by the U.S. Patent and      
Trademark Office in connection with the Sponsored Research. In January and      
February, 1998, two additional patents relating to Multicolor Organic Light     
Emitting Devices were issued to Princeton University. Princeton University and  
USC have filed approximately 30 additional patent applications relating to the  
OLED technology in the United States, and have filed for intellectual property  
protection internationally. In addition, the Company has obtained an exclusive  
worldwide royalty-free license from USC (the "USC License") to manufacture and  
market products based on inventions claimed in a patent issued to USC in May    
1994, relating to, among other things, a method of depositing ultra-thin, very  
smooth, ordered organic layers using vacuum deposition.                         

Under an Interinstitutional Agreement between Princeton University and USC,     
Princeton University manages the intellectual property rights being developed   
pursuant to the 1994 and 1997 Sponsored Research Agreement                      

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and licensed to the Company pursuant to the License Agreement, and the Company  
is required to reimburse Princeton University for all costs incurred in filing, 
prosecuting and maintaining patent applications and patents.                    

The Company has the worldwide exclusive license to manufacture and market       
products based on such patents, pending patent applications and any future      
patent applications and inventions conceived or discovered under the 1997       
Sponsored Research Agreement, and to sublicense those rights. In circumstances  
where the Company sublicenses the OLED technology (except to affiliates), or    
sells products utilizing the OLED technology, the Company is required to pay to 
Princeton University a royalty in the amount of 3% of the Company's net         
sublicense fees or net sales of products utilizing the OLED technology.         

There can be no assurance that patents applied for will be obtained or that any 
such patents will afford the Company and Princeton University commercially      
significant protection of its OLED technology. In addition, the patent laws of  
other countries may differ from those of the United States as to the            
patentability of the OLED technology and the degree of protection afforded.     
Other companies and institutions may independently develop equivalent or        
superior technologies and may obtain patent or similar rights with respect      
thereto. There are a number of other companies and organizations that have been 
issued patents and are filing additional patent applications relating to OLED   
technology and there can be no assurance that the exercise of the Company's     
licensing rights respecting its OLED technology being developed by Princeton    
University and USC will not infringe on the patents of others. In the event of  
infringement, the Company and Princeton University could, under certain         
circumstances, be required to obtain a license or modify its methods or other   
aspects of the OLED technology. Under the 1997 License Agreement, the Company   
has the right to prosecute at it's own expense any infringement of the patent   
rights. Princeton is entitled to 23% of the net proceeds, if any, received from 
final judgments in infringement actions respecting the patent rights.           

In connection with the 1997 License Agreement and the 1997 Sponsored Research   
Agreement, the Company issued to Princeton University 140,000 shares of Common  
Stock and 10 year warrants to purchase 175,000 shares of common stock at an     
exercise price of $7.25 per share, and the Company issued to USC 60,000 shares  
of common stock and 10 year warrants to purchase 75,000 shares of common stock  
at an exercise price of $7.25 per share. Under the 1997 License Agreement, the  
Company is required to use commercially reasonable efforts to bring the OLED    
technology to market. This requirement is deemed satisfied provided the Company 
performs its obligations under the 1997 Sponsored Research Agreement, and, upon 
expiration or termination thereof, the Company invests a minimum of $800,000 per
year in research, development, commercialization or patenting efforts respecting
the OLED technology. Princeton University has the right to terminate the 1997   
License Agreement in certain specified circumstances, and prior to any          
termination, all disputes under the 1997 License Agreement and the 1997         
Sponsored Research Agreement are subject to mediation and arbitration, except   
those relating to the validity, construction or effect of patents.              

The United States government, through the Defense Advanced Research Projects    
Agency ("DARPA"), has provided funding to Princeton University for research     
activities related to certain aspects of its OLED technology. In the event that 
all or certain aspects of its OLED technology developed (if any) from the       
Company's funding to Princeton University is deemed to fall within the planned  
and committed activities of DARPA's funding, the federal government, pursuant to
federal law, could have certain rights relating to the OLED technology,         
including a license to practice or have practiced on its behalf any such        
technology and, if the federal government determines that the Company has not   
taken effective steps to achieve practical application of such technology in a  
field of use in a reasonable time, require the Company to grant licenses to     
other parties in any such field of use. In addition, the federal government's   
rights could restrict the Company's ability to market the OLED technology to the
federal government for military and other applications which could have a       
material adverse                                                                

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effect on the Company. There can be no assurance as to which aspects of the OLED
technology the federal government has any rights and the extent of such rights. 
Continued funding of Princeton University's research activities by the federal  
government, which is anticipated, may give the federal government rights to     
aspects of the OLED technology developed in the future.                         

In order to protect Princeton University's tax exempt status, the 1994 License  
Agreement provides that Princeton University may, in its sole discretion,       
determine whether, pursuant to the provisions of the Tax Reform Act of 1986, it 
is required to negotiate the royalties and other considerations payable to      
Princeton University on products not reasonably conceivable by the parties at   
the time of execution of the 1994 License Agreement. If Princeton University    
reasonably concludes that the consideration payable by the Company for any such 
product is not fair and competitive, Princeton University may exercise its right
to renegotiate the royalties and other consideration payable by the Company for 
any such product prior to the expiration of 180 days after the first patent is  
filed or other intellectual property protection is sought. The Company has the  
right to commence arbitration proceedings to challenge Princeton University's   
exercise of such renegotiation rights. If the parties are unable to agree to    
royalties and other consideration for such products within a specified period of
time, then Princeton University is free to license third parties without        
repayment of any funds provided under the 1994 Sponsored Research Agreement.    

The Company and Princeton University may also rely on proprietary know-how and  
trade secrets and employ various methods to protect concepts, ideas and         
documentation of their technology. However, such methods may not afford complete
protection, and there can be no assurance that others will not independently    
develop similar know-how or obtain access to the Company's or Princeton         
University's know-how, trade secrets, concepts, ideas and documentation.        

 Competition

The display industry is characterized by intense competition. CRTs currently    
dominate the television and desktop computer monitor market and improvements in 
CRTs have further increased display quality. Flat panel displays have been      
developed and are in commercial use in certain applications where the weight,   
power requirements, and bulky size of the CRT inhibit its use. CRT displays are 
not currently available for flat panel display applications. Flat panel displays
have been available for a significant period of time and a variety of           
advancements in flat panel displays have been made over the last several years. 
However, flat panel displays with the capabilities necessary to replace CRTs in 
all applications have not been developed.                                       

The flat panel display market is currently dominated by products utilizing LCD  
technology and is expected to be dominated by LCD technology for the foreseeable
future. The Company believes that LCDs have certain limitations, such as a      
limited viewing angle, limited scalability, low response rate, low contrast and 
inferior image and color quality when compared to CRT displays (the current     
standard for display quality). LCDs are also more expensive to produce than     
CRTs. However, compared to CRTs, LCD displays are smaller, have lower power     
requirements (leading to longer battery life), emit no measurable radiation, are
not affected by magnetic fields generated by speakers or VCRs and have uniform  
brightness throughout the screen. Numerous companies, however, are making       
substantial investments in, and conducting research to improve these            
characteristics of LCD technology.                                              

Several other flat panel display technologies have recently been developed or   
are being developed, such as field emissive, inorganic electroluminescent,      
polymeric light emitting diode, gas plasma, and vacuum fluorescent displays.    
Field emissive displays essentially employ an array of miniature CRTs, may be   
efficient in converting                                                         

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electrical power into light at a relatively low cost, but high voltage power    
sources and high temperature fabrication equipment may be required. Inorganic   
electroluminescent displays offer better contrast and broader viewing angles    
than LCDs and gas plasma displays, but also use more power than LCDs and are    
difficult to view in bright ambient light. Displays utilizing polymeric light   
emitting diodes may, if successfully developed, offer better image and color    
quality and broader viewing angles than LCDs, but require improvements in       
operating life, saturated colors and manufacturing technologies. Gas plasma     
displays, used in outdoor signs, some laptop computers and recently introduced  
for large screen televisions are durable and reliable, have long lives and      
superior video speed (useful in video applications) but have high power         
requirements; dot matrix display panels on copiers, microwave ovens and video   
cassette recorders, have superior brightness, are inexpensive and are capable of
providing full color, but are difficult to manufacture and have high power      
requirements, making them unsuitable for portable products.                     

The Company believes that each of these developing technologies may have one or 
more of the limitations associated with LCD technology or other limitations,    
such as lack of reliability, high power requirements (restricting portability), 
high production cost and/or difficulty of manufacture. The Company believes that
flat panel displays utilizing its OLED technology, if successfully developed,   
will provide image and color quality, brightness, contrast, scalability and     
viewing angles comparable to CRT displays, be manufacturable from light weight, 
low cost materials and require a relatively low power source.                   

Numerous domestic and foreign companies have developed or are developing CRT,   
LCD, gas plasma and other display technologies. Substantially all of these      
competitors, including Sony Corporation, NEC Corporation, Fujitsu Corporation,  
Hitachi Corporation, Toshiba Corporation and Samsung Corporation have greater   
name recognition and financial, technical, marketing, personnel and research    
capabilities than the Company. There can be no assurance that the Company's     
competitors will not succeed in developing technologies and applications that   
are more cost effective, have fewer display limitations than or have other      
advantages as compared to its OLED technology.                                  

In addition, a number of companies, including those mentioned above, and Eastman
Kodak Company, Pioneer Electronic Corporation, Sharp Corporation, Sanyo         
Corporation, TDK Corporation, Mitsubishi Chemical Corporation, Seiko-Epson      
Corporation and Idemitsu Corporation are engaged in research and development    
activities with respect to technology using OLEDs. There can be no assurance    
that the Company will be able to compete successfully or develop commercial     
applications for its OLED technology.                                           

 Employees

The Company has thirteen employees, six of whom are full-time employees.        

Facilities

The Company's corporate offices are located at Three Bala Plaza East, Suite 104,
Bala Cynwyd, Pennsylvania.                                                      

ITEM 2. PROPERTIES                                                              

The Company currently leases approximately 2,700 square feet of office space in 
Bala Cynwyd, Pennsylvania. The Company also leases approximately 900 square feet
in Princeton, New Jersey, and certain of its employees are guest researchers at 
the Princeton University Center for Photonic and Optoelectronic Materials,      
("POEM")                                                                        

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where they are entitled to use the laboratories and facilities. The Company also
leases approximately 620 square feet in Coeur D'Alene, Idaho.                   

ITEM 3. LEGAL PROCEEDINGS                                                       

None.                                                                           

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS                       

No matters were submitted to a vote of security holders in the fourth quarter of
1997.                                                                           

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the Company's
executive officers:                                                             

                                                                [Download Table]

Name                  Age  Position                                          
----                  ---  --------                                          
                                                                             
Sherwin I. Seligsohn  62   Chairman, Chief Executive Officer and Director    
Steven V. Abramson    46   President,  Chief Operating Officer and Director  
Sidney D. Rosenblatt  50   Executive Vice President, Chief Financial Officer,
                           Treasurer and Secretary and Director              

Executive Officers are elected annually and hold office until their successors  
are elected and qualified.                                                      

   Sherwin I. Seligsohn has been Chairman and Chief Executive Officer of the
Company since the Company's inception. He was President of the Company until May
1996. Mr. Seligsohn founded, and since August 1991 has served as sole Director, 
Chairman, President and Secretary of, American Biomimetics Corporation ("ABC"), 
International Multi-Media Corporation ("IMMC"), and Wireless Unified Network    
Systems Corporation ("WUNSC") . He is also Chairman and Chief Executive Officer 
of Global Photonic Energy Corporation ("Global"). From June 1990 to October     
1991, Mr. Seligsohn was Chairman Emeritus of InterDigital Communications, Inc.  
("InterDigital"), formerly International Mobile Machines Corporation. Mr.       
Seligsohn was the founder of InterDigital and from August 1972 to June 1990     
served as its Chairman. Mr. Seligsohn is a member of the Advisory Board of the  
Advanced Technology Center for Photonics and Optoelectronic Materials (POEM) at 
Princeton University.                                                           

  Steven V. Abramson joined Universal Display Corporation as President and
Chief Operating Officer in May 1996. He is also a member of the Board of        
Directors. Mr. Abramson is also President and Chief Operating Officer of Global 
and a member of its Board of Directors. From March, 1992-- May, 1996 he was Vice
President, General Counsel, Secretary and Treasurer of Roy F. Weston, Inc. a    
worldwide environmental consulting and engineering firm. From 1982-1991 he was  
with InterDigital, where he held various positions, including General Counsel,  
Executive Vice President and General Manager of the Technology Licensing        
Division. Mr. Abramson is a member of the Advisory Board of the Advanced        
Technology Center for Photonics and Optoelectronic Materials (POEM) at Princeton
University and a member of the Board of Governors of the USDC.                  

 Sidney D. Rosenblatt has been Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the Company since June 1995. He has been a  
member of the Board of Directors since May 1996.                                

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Mr. Rosenblatt is also Executive Vice President, Chief Financial Officer,       
Secretary and Treasurer of Global, and a member of its Board of Directors. Mr.  
Rosenblatt is the owner of and has served as the President and Chief Executive  
Officer of S. Zitner Company since August 1990. From May 1982 to August 1990,   
Mr. Rosenblatt served as the Senior Vice President, Chief Financial Officer and 
Treasurer of InterDigital. Mr. Rosenblatt sits on the Board of Directors and    
Executive Committee for the Greater Philadelphia Chamber of Commerce, Chairman  
of the Board for the Small Business Division of the Greater Philadelphia Chamber
of Commerce and sits on various Boards for non-profit organizations.            

 PART II

ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following table sets forth the high and low sales prices of the   
Company's Common Stock as reported by the The Nasdaq Stock Market for the period
indicated. The Company completed its initial public offering of Common Stock on 
April 11, 1996, at $5.00 per share.                                             

                                                             High        Low
                                                              Close      Close
                                                              ------     -----
1996                                                              
       Second Quarter (from April 11, 1996)               10 1/2     4
           Third Quarter                                      8          4 5/8
           Fourth Quarter                                     6 5/8      4 3/4
1997                                                              
           First Quarter                                      7 3/8      3 5/8
           Second Quarter                                     5 3/4      3 7/8
       Third Quarter                                      6          4
           Fourth Quarter                                     7 7/8      4 1/4

     As of March 20, 1998, there were approximately 199 holders of record of the
Company's Common Stock. The Company's Common Stock is listed on the small cap   
segment of The Nasdaq Stock Market under the symbol PANL.                       

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS                                                   

General                                                                         

Since inception, the Company has engaged, and for the foreseeable future expects
to continue to be engaged, exclusively in the research and development and      
commercialization of its OLED for use in flat panel displays and other          
applications. To date, the Company has generated minimal revenues and does not  
expect to generate any meaningful revenues for the foreseeable future and until 
such time, if ever, it successfully demonstrates that its OLED technology is    
commercially viable for one or more flat panel display and other applications   
and enters into license agreements, joint ventures or strategic alliances with  
third parties with respect to the technology. The Company has incurred          
significant losses since its inception, resulting in an accumulated deficit of  
$10,780,495 at December 31, 1997.                                               

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Results of Operations                                                           

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996           

   The Company had a net loss of $5,927,718 (or $.64 per share) for the year
ended December 31, 1997 compared to a net loss of $1,768,995 (or $.21 per share)
for the year ended December 31, 1996. The increase in the net loss was primarily
attributable to increased research and development expenses of which $3,120,329 
was a non-cash expense related to the issuance of Common Stock and warrants to  
Princeton University and USC, and increased general and administrative expenses 
in 1997 compared to 1996. Exclusive of the non-cash expenses, the Company's net 
loss was $2,807,389 (or $.30 per share) in 1997. The Company earned $93,605 from
contract research revenue in 1997 compared to no revenue in 1996. The revenue   
was derived primarily from a subcontract with Princeton University pursuant to a
3-year, $3 million contract Princeton University received from the Defense      
Advanced Research Projects Administration.                                      

Research and development expenses were $4,207,898 for the year ended December   
31, 1997 compared to $948,568 for the year ended December 31, 1996. For the year
ended December 31, 1997, research and development expenses consisted of (i) the 
issuance of common stock and warrants in connection with the Company's 1997     
Sponsored Research Agreement, which resulted in a non-cash charge of $3,120,329;
(ii) payments in the amount of $347,374 to Princeton University under the 1994  
Sponsored Research Agreement; and (iii) payments in the amount of $740,195 for  
patent applications, prosecution, and other intellectual property rights        
expenses. Research and development expenses for the same period in 1996         
consisted primarily of payments to Princeton University under the 1994 Sponsored
Research Agreement.                                                             

General and administrative expenses were $1,986,628 for the year ended December 
31, 1997 compared to $938,741 for the year ended December 31, 1996. The         
increased general and administrative expenses in 1997 compared to 1996 were     
primarily related to the increased general and administrative expenses          
associated with the hiring of executives, technical personnel, and support staff
and leasing of office space for the Company's headquarters and a non-cash charge
in the amount of $100,000 relating to a Consulting Agreement with the           
Underwriter of the Company's 1996 Public Offering.                              

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995           

The Company had a net loss of $1,768,995 (or $.21 per share) for the year ended 
December 31, 1996 compared to a net loss of $3,072,661 (or $.45 per share) for  
the year ended December 31, 1995. The reduction in the net loss was primarily   
attributable to research and development expenses for 1994 and 1995 being       
expensed and paid in 1995, and a non-recurring payment for the sublicense of    
certain technologies in 1995.                                                   

Research and development costs were $948,568 for the year ended December 31,    
1996 compared to $2,073,739 for the year ended December 31, 1995. In 1996, the  
research and development expenses were attributed to payments under the 1994    
Sponsored Research Agreement with Princeton University and patent expenses. For 
the year ended December 31, 1995, the Company incurred $2,073,739 in research   
and development expenses. Such expenses consisted of (i) repayment of $674,000  
to ABC for amounts previously paid to Princeton University by ABC under the 1994
Sponsored Research Agreement; (ii) payment of $500,000 to ABC to acquire the    
sublicense under the 1993 Sponsored Research Agreement; (iii) payments in the   
aggregate amount of $549,739 made to Princeton University under the 1994        
Sponsored Research Agreement; and (iv) a nonrecurring, non-cash expense of      
$350,000 representing the fair market value of 200,000 shares of Series A       
Preferred Stock issued to ABC in connection with the Technology Transfer        
Agreement.                                                                      

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General and administrative costs were $938,741 for the year ended December 31,  
1996 compared to $998,922 for the year ended December 31, 1995. The 1996        
expenses were primarily associated with the hiring of executives, support staff 
and leasing of office space for the Company's headquarters compared to 1995     
general and administrative expenses which were primarily professional fees and  
fees associated with financing activities.                                      

Liquidity and Capital Resources                                                 

As of December 31, 1997, the Company had cash of $85,470 and short-term         
investments of $4,539,570 compared to cash of $638,225 and short-term           
investments of $2,430,000 at December 31, 1996. During 1997, private placement  
warrants to purchase 1,124,000 shares of the Company's Common Stock were        
exercised, resulting in net cash proceeds of $3,940,800 to the Company. On April
11, 1996, the Company completed a public offering of 1,300,000 shares of Common 
Stock at a price of $5.00 per share and redeemable warrants to purchase         
1,495,000 shares of Common Stock at an exercise price of $3.50 per share, at a  
price of $.10 per warrant. The Company received net cash proceeds of $5,282,665 
from the public offering (excluding $223,263 representing a portion of the      
offering expenses previously charged to general and administrative expenses).   
Net working capital increased to $5,003,863 at December 31, 1997 from working   
capital of $3,023,010 at December 31, 1996, as a result of the exercise of the  
warrants. The Company's net cash used in operating activities was $2,441,698;   
$2,370,449; and $1,921,787 in 1997, 1996 and 1995 respectively. Non-cash        
expenses related to the issuance of Common Stock, warrants and options were     
$3,436,329; $25,000; and $9,950 in 1997, 1996, and 1995 respectively.           

The Company anticipates, based on management's internal forecasts and           
assumptions relating to its operations (including assumptions regarding working 
capital requirements of the Company, the progress of research and development,  
the availability and amount of other sources of funding available to Princeton  
University for research relating to the OLED technology and the timing and costs
associated with the preparation, filing and prosecution of patent applications  
and the enforcement of intellectual property rights) that it has sufficient cash
to meet its obligations for at least the current fiscal year. The 1997 Sponsored
Research Agreement requires the Company to pay up to $4.4 million to Princeton  
University from July 1998 through July 2002, which period is subject to         
extension. The 1997 Sponsored Research Agreement requires the Company to pay up 
to $4.4 million to Princeton University from July 1998 thorough July 2002, which
period is subject to extension. Substantial additional funds will be required   
thereafter for the research, development and commercialization of OLED          
technology, obtaining and maintaining intellectual property rights, working     
capital and other purposes, the timing and amount of which is difficult to      
ascertain. There can be no assurance that additional funds will be available    
when needed, or if available, on commercially reasonable terms.                 

The Company is currently in the process of evaluating its information technology
infrastructure for Year 2000 compliance. The Company does not expect that the   
cost to modify such infrastructure to Year 2000 compliance will be material to  
its financial condition or results of operations. The Company does not          
anticipate any material disruption in its operations as a result of any failure 
by the Company to be in compliance.                                             

ITEM 7. FINANCIAL STATEMENTS WITHIN THE 10-KSB                                  

The financial statements and notes thereto of the Company are attached
hereto beginning on page F-1.                                                   

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND         
FINANCIAL DISCLOSURE                                            

None.                                                                           

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PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT                          

Information with respect to this item is set forth in the Company's   
definitive Proxy Statement (the "Proxy Statement") to be filed with the         
Securities and Exchange Commission for the Annual Meeting of Shareholders to be 
held on June 11, 1998, under the headings "Nominees for Election as Directors"  
and "Compliance with Section 16(a) of the Exchange Act" and is incorporated     
herein by reference. Information regarding the Company's executive officers is  
included in Part I on page 8 herein.                                            

ITEM 10. EXECUTIVE COMPENSATION                                                 

   Information with respect to this item is set forth in the Proxy Statement
under the heading "Executive Management Compensation" and is incorporated herein
by reference.                                                                   

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         

   Information with respect to the ownership of securities of the Company by
certain persons is set forth in the Proxy Statement under the heading "Principal
Shareholders" and is incorporated herein by reference.                          

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         

    Information with respect to transactions with management and others is set
forth in the Proxy Statement under the heading "Certain Transactions," and is   
incorporated herein by reference.                                               

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                       

(a)  The following documents are filed as part of this report:        

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The following is a list of exhibits filed as part of this Annual Report on Form 
10-K. Where so indicated by footnote, exhibits which 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 INDEX

Exhibit                                                                    Page 
Number                               Description                          Number
-------                              -----------                          ------

3.1        Articles of Incorporation of the Company. (Exhibit 3.1)(1)         

3.2        Bylaws of the Company. (Exhibit 3.1)(1)                            

4.1        Specimen stock certificate representing the Common Stock.          
(Exhibit 4.1)(3)                                        

4.2        Specimen warrant certificate representing the Warrants.            
(Exhibit 4.2)(3)                                        

4.3        Form of Public Warrant Agreement. (Exhibit 4.3)(1)                 

4.4        Form of Underwriter's Warrant Agreement. (Exhibit 4.4)(1)          

4.5        Statement of Designations and Preferences of Series A              
Non-Convertible Preferred Stock. (Exhibit 4.5)(2)       

10.1        License Agreement dated August 1, 1994 between The Trustees of      
  Princeton University and American Biomimetics Corporation.
(Exhibit 10.1)(3)                                       

10.2        Amendment to License Agreement (August 1, 1994) dated April         
 11, 1995 between the Trustees of Princeton University and
American Biomimetics Corporation. (Exhibit 10.2)(2)     

10.3        Sponsored Research Agreement dated August 1, 1994 between the       
 Trustees of Princeton University and American Biomimetics
Corporation. (Exhibit 10.3)(3)                          

10.4        Letter Amendment dated May 5, 1995, between the Trustees of         
  Princeton University and American Biomimetics Corporation.
(Exhibit 10.4)(3)                                       

10.5        Amendment to Sponsored Research Agreement (August 1, 1994)          
dated April 18, 1995 between the Trustees of Princeton  
University and American Biomimetics Corporation.        
(Exhibit 10.5)(2)                                         

10.6        Technology Transfer Agreement dated June 22, 1995 between           
American Biomimetics Corporation and Universal Display  
Corporation. (Exhibit 10.6)(2)                          

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10.7        Assignment and Assumption of License dated June 22, 1995            
      between American Biomimetics Corporation and Universal Display
Corporation. (Exhibit 10.7)(3)                          

10.8        Sublicense Agreement and Option dated June 22, 1995 between         
American Biomimetics Corporation and Universal Display  
Corporation. (Exhibit 10.8)(3)                          

10.9        Assignment and Assumption of Agreement dated August 1, 1995         
between the Trustees of Princeton University and the    
University of Southern California. (Exhibit 10.9)(2)    

10.10       Subcontract No. 341-4014-1 dated August 16, 1995 between the        
Trustees of Princeton University and the University of  
Southern California. (Exhibit 10.10)(3)                 

10.11       Assignment of 1994 Sponsored Research Agreement dated November      
      1, 1995 between American Biomimetics Corporation and Universal
Display Corporation. (Exhibit 10.11)(2)                 

10.12#      Stock Option Agreement dated as of June 23, 1995 between            
Universal Display Corporation and Thomas D. Hays, III.  
(Exhibit 10.12)(2)                                      

10.13#      Stock Option Agreement dated as of June 23, 1995 between            
  Universal Display Corporation and Harvey Nachman. (Exhibit
10.13)(2)                                               

10.14       Registration Rights Agreement dated as of June 23, 1995             
      between Universal Display Corporation and Thomas D. Hays, III.
(Exhibit 10.14)(2)                                      

10.15       Registration Rights Agreement dated as of June 23, 1995             
 between Universal Display Corporation and Harvey Nachman.
(Exhibit 10.15)(2)                                      

10.16       Form of Registration Rights Agreement between Universal             
      Display Corporation and Certain Subscribers to Purchase Common
  Stock of Universal Display Corporation. (Exhibit 10.16)(2)

10.17#      Form of Stock Option Agreement dated as of June 23, 1995            
between Universal Display Corporation and Sidney D.     
Rosenblatt. (Exhibit 10.17)(2)                          

10.18#      1992 Stock Option Plan. (Exhibit 10.18)(2)                          

10.19#      1995 Stock Option Plan. (Exhibit 10.19)(2)                          

10.20#      Employment Agreement dated as of November 1, 1995 between           
Universal Display Corporation and Sherwin I. Seligsohn. 
(Exhibit 10.20)(2)                                      

10.21       Form of Services Agreement dated as of December 1, 1995             
 between Universal Display Corporation and Dean L. Ledger.
(Exhibit 10.21)(2)                                      

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10.22#      Form of Stock Option Agreement dated as of June 23, 1995            
between Universal Display Corporation and Sidney D.     
Rosenblatt. (Exhibit 10.22)(2)                          

10.23#      Form of Stock Option Agreement dated as of September 1, 1995        
     between Universal Display Corporation and Stephen R. Forrest.
(Exhibit 10.23)(2)                                      

10.24#      Form of Stock Option Agreement dated as of September 1, 1995        
   between Universal Display Corporation and Mark E. Thompson.
(Exhibit 10.24)(2)                                      

10.25#      Form of Stock Option Agreement dated as of September 1, 1995        
  between Universal Display Corporation and Paul E. Burrows.
(Exhibit 10.25)(2)                                      

10.26       License Agreement dated January 26, 1996 between Universal          
  Display Corporation and University of Southern California.
(Exhibit 10.26)(2)                                      

10.27       Letter Agreement dated September 20, 1995 Agreeing to a             
     Royalty Rate between the Trustees of Princeton University and
Universal Display Corporation. (Exhibit 10.27)(2)       

10.28       Agreement and Plan of Reorganization dated as of April 6, 1995      
    between Enzymatics, Inc., Enzymatics Merger Subsidiary, Inc.
and Universal Display Corporation. (Exhibit 10.28)(2)   

10.29       Form of Consulting Agreement between the Universal Display          
     Corporation and Whale Securities Co., L.P. (Exhibit 10.29)(2)

10.30#      Warrant Agreement dated April 25, 1996 between the Company and      
Steven V. Abramson (Exhibit 10.30)(4)                   

10.31#      Warrant Agreement dated April 25, 1996 between the Company and      
Sherwin I. Seligsohn (Exhibit 10.31)(4)                 

10.32#      Warrant Agreement dated April 25, 1996 between the Company and      
Dean L. Ledger (Exhibit 10.32)(4)                       

10.33#      Warrant Agreement dated April 25, 1996 between the Company and      
Sidney D. Rosenblatt (Exhibit 10.33)(4)                 

10.34*      1997 Sponsored Research Agreement between the Company and           
Princeton University                                    

10.35*      1997 Amended License Agreement between the Company, Princeton       
University and the University of Southern California    

21       Subsidiaries of the Registrant.                                  

23       Consent of Arthur Andersen LLP                                   

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Note: Any of the exhibits listed in the foregoing index not included with       
this Annual Report on Form 10-K may be obtained without charge by writing       
to Mr. Sidney D. Rosenblatt, Corporate Secretary, Universal Display             
Corporation, Three Bala Plaza, Suite 104 East, Bala Cynwyd, Pennsylvania        
19004.                                                                          

(b) No reports were filed on Form 8-K.                                          

Explanation of Footnotes to Listing of Exhibits                                 

*    Filed herewith                                                             
#    Compensation Plan or Agreement                                             
(1)  Filed as an Exhibit to Registered Statement (No. 33-80703) on Form         
SB-2 filed with the Securities and Exchange Commisson on December 21, 
1995                                                                  
(2)  Filed as an Exhibit to Amendment No. 1 to Registration Statement (No.      
33-80703) on Form SB-2 filed with the Securities and Exchange         
Commission on March 20, 1996                                          
(3)  Filed as an Exhibit to Amendment No. 1 to Registration Statement (No.      
33-80703) on Form SB-2 filed with the Securities and Exchange         
Commission on March 20, 1996                                          
(4)  Filed as an Exhibit to the Annual Report on Form 10K-SB for the year       
ended December 31, 1996 filed with the Securities and Exchange        
Commission on March 31, 1996                                          

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
 (a development-stage company)

 INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements of the Company:                               

Report of Independent Public Accountants                       F-2    

Consolidated Balance Sheets                                    F-3    

Consolidated Statements of Operations                          F-4    

    Consolidated Statements of Shareholders' Equity (Deficit)      F-5 and F-6

Consolidated Statements of Cash Flows                          F-7    

Notes to Consolidated Financial Statements                     F-8    

F-1 

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                        

To Universal Display Corporation:                                               

We have audited the accompanying consolidated balance sheets of Universal       
Display Corporation (a Pennsylvania corporation in the development-stage) and   
subsidiary as of December 31, 1997 and 1996, and the related consolidated       
statements of operations, shareholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1997 and the period from    
inception (June 17, 1994) to December 31, 1997. These financial statements are  
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.      

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the consolidated financial position of        
Universal Display Corporation and subsidiary as of December 31, 1997 and 1996,  
and the results of their operations and their cash flows for each of the three  
years in the period ended December 31, 1997 and the period from inception (June 
17, 1994) to December 31, 1997, in conformity with generally accepted accounting
principles.                                                                     

Philadelphia, PA                            ARTHUR ANDERSEN LLP                 
March 3, 1998                                                                   

F-2 

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
 (a development-stage company)

 CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]

                              ASSETS                          December 31,   December 31, 
                                                                  1997           1996     
                                                              ------------   ------------ 
                                                                                          
CURRENT ASSETS:                                                                           
     Cash and cash equivalents (See Note 3)                   $     85,470   $    638,225 
     Short-term investments (See Note 3)                         4,539,570      2,430,000 
     Contract research receivables                                  88,366             -- 
     Receivable from related party                                  51,906             -- 
     Prepaid consulting fee                                        428,985             -- 
     Other current assets                                           89,806         59,091 
                                                              ------------   ------------ 
            Total current assets                                 5,284,103      3,127,316 
                                                              ------------   ------------ 

PROPERTY AND EQUIPMENT, net of accumulated                                                
     depreciation of $39,353 and $11,955                            57,401         61,512 

DEPOSITS                                                            76,073         93,419 
                                                              ------------   ------------ 
              Total assets                                    $  5,417,577   $  3,282,247 
                                                              ============   ============ 

               LIABILITIES AND SHAREHOLDERS' EQUITY                                       

CURRENT LIABILITIES:                                                                      
     Accounts payable and accrued expenses                    $    280,240   $    104,306 
                                                              ------------   ------------ 

SHAREHOLDERS' EQUITY                                                                      
     Preferred Stock, par value $0.01 per share,                                          
         5,000,000 shares authorized, 200,000 shares                                      
         designated                                                                       
     Series A  Nonconvertible Preferred                                                   
         Stock, par value $.01 per share, 200,000 issued                                  
         and outstanding (liquidation value of $7.50 per                                  
         share or $1,500,000)                                        2,000          2,000 
    Common Stock, par value $.01 per share, 25,000,000                                    
         shares authorized, 10,302,268  and 8,937,268 shares                              
         issued and outstanding, respectively (see Note 2)         103,023         89,373 
    Additional paid-in capital                                  15,812,809      7,939,345 
    Deficit accumulated during development-stage               (10,780,495)    (4,852,777)
                                                              ------------   ------------ 

         Total shareholders' equity                              5,137,337      3,177,941 
                                                              ------------   ------------ 
         Total liabilities and shareholders' equity           $  5,417,577   $  3,282,247 
                                                              ============   ============ 

The accompanying notes are an integral part of these statements.

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
 (a development-stage company)

 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                                                                      Period from Inception
                                                Year Ended         Year Ended         Year Ended       (June 17, 1994) to  
                                             December 31, 1997  December 31, 1996  December 31, 1995    December 31, 1997  
                                             -----------------  -----------------  -----------------  ---------------------
                                                                                                                           
REVENUE:                                                                                                                   
     Contract research revenue                  $    93,605        $        --        $        --         $     93,605     
                                                -----------        -----------        -----------         ------------     
OPERATING EXPENSES:                                                                                                        
    Research and development (See Note 3)         4,207,898            948,568          2,073,739            7,230,205     
    General and administrative                    1,986,628            938,741            998,922            3,935,412     
                                                -----------        -----------        -----------         ------------     
          Total operating expenses                6,194,526          1,887,309          3,072,661           11,165,617     
                                                -----------        -----------        -----------         ------------     
                Operating loss                   (6,100,921)        (1,887,309)        (3,072,661)         (11,072,012)    
INTEREST INCOME                                     173,203            118,314                 --              291,517     
                                                -----------        -----------        -----------         ------------     
NET LOSS                                        $(5,927,718)       $(1,768,995)       $(3,072,661)        $(10,780,495)    
                                                -----------        -----------        -----------         ------------     
BASIC AND DILUTED NET LOSS PER COMMON SHARE                                                                                
                                                $     (0.64)       $     (0.21)       $     (0.45)                         
                                                -----------        -----------        -----------                          
WEIGHTED AVERAGE SHARES USED IN                                                                                            
COMPUTING BASIC AND DILUTED                                                                                                
NET LOSS PER COMMON SHARE                         9,327,521          8,287,268          6,847,305                          
                                                -----------        -----------        -----------                          

The accompanying notes are an integral part of these statements.

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
 (a development-stage company)

 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

                                                        [Enlarge/Download Table]


                                                       Series A Nonconvertible                                        
                                                           Preferred Stock                                Additional  
                                                       -----------------------         Common Stock         Paid-In   
                                                       Shares           Amount    Shares         Amount     Capital   
                                                       -------          ------  ----------      --------  ----------- 
                                                                                                                      
BALANCE, INCEPTION - (JUNE 17, 1994)                        --          $   --   6,000,000      $  6,000  $        -- 
   Net Loss                                                 --              --          --            --           -- 
                                                       -------          ------  ----------      --------  ----------- 

BALANCE, DECEMBER 31, 1994                                  --              --   6,000,000         6,000           -- 

   Recapitalization by issuance of Common Stock to                                                                    
      Enzymatics, Inc. (Note 2)                             --              --     523,268        59,233     (243,393)
   Issuance of Common Stock options to former                                                                         
      sole director of Enzymatics, Inc. to satisfy an                                                                 
      Enzymatics, Inc. liability (Note 2)                   --              --          --            --      140,000 
   Issuance of Series A Nonconvertible Preferred                                                                      
      Stock in connection with assignment of                                                                          
      research and license agreements (Note 2)         200,000           2,000          --            --      348,000 
   Issuance of Common Stock through private                                                                           
      placements, net of issuance expenses of                                                                         
      $50,000 (Note 2)                                      --              --   1,114,000        11,140    2,166,860 
   Issuance of Common Stock options (Note 2)                --              --          --            --        9,950 
   Net loss                                                 --              --          --            --           -- 
                                                       -------          ------  ----------      --------  ----------- 
BALANCE, DECEMBER 31, 1995                             200,000           2,000   7,637,268        76,373    2,421,417 

   Issuance of Common Stock in Initial Public                                                                         
      Offering on April 11, 1996 (Note 2)                   --              --   1,300,000        13,000    5,492,928 
   Issuance of Common Stock warrants (Note 6)               --              --          --            --       25,000 
    Net loss                                                --              --          --            --           -- 
                                                       -------          ------  ----------      --------  ----------- 

BALANCE, DECEMBER 31, 1996                             200,000           2,000   8,937,268        89,373    7,939,345 

   Exercise of private placement warrants                   --              --   1,124,000        11,240    3,929,560 
   Issuance of Common Stock warrants                        --              --          --            --      528,985 
   Issuance of Common Stock options                         --              --          --            --      216,000 
   Issuance of Common Stock and warrants in                                                                           
      connection with 1997 Sponsored Research                                                                         
      Agreement (Note 4)                                    --              --     200,000         2,000    3,118,329 
   Exercise of Common Stock options and warrants            --              --      41,000           410       80,590 
   Net loss                                                 --              --          --            --           -- 
                                                       -------          ------  ----------      --------  ----------- 

BALANCE, DECEMBER 31, 1997                             200,000          $2,000  10,302,268      $103,023  $15,812,809 
                                                       =======          ======  ==========      ========  =========== 

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                                                        [Enlarge/Download Table]

                                                         Deficit                      
                                                       Accumulated                    
                                                         During           Total       
                                                       Development     Shareholders'  
                                                          Stage       (Equity/Deficit)
                                                       ------------   ----------------
                                                                                      
BALANCE, INCEPTION - (JUNE 17, 1994)                   $       --       $    6,000    
   Net Loss                                                (11,121)        (11,121)   
                                                       -----------      ----------    
BALANCE, DECEMBER 31, 1994                                 (11,121)         (5,121)   

   Recapitalization by issuance of Common Stock to                                    
      Enzymatics, Inc. (Note 2)                                 --        (184,160)   
   Issuance of Common Stock options to former                                         
      sole director of Enzymatics, Inc. to satisfy an                                 
      Enzymatics, Inc. liability (Note 2)                       --         140,000    
   Issuance of Series A Nonconvertible Preferred                                      
      Stock in connection with assignment of                                          
      research and license agreements (Note 2)                  --         350,000    
   Issuance of Common Stock through private                                           
      placements, net of issuance expenses of                                         
      $50,000 (Note 2)                                          --       2,178,000    
   Issuance of Common Stock options (Note 2)                    --           9,950    
   Net loss                                             (3,072,661)     (3,072,661)   
                                                       -----------      ----------    
BALANCE, DECEMBER 31, 1995                              (3,083,782)       (583,992)   

   Issuance of Common Stock in Initial Public                                         
      Offering on April 11, 1996 (Note 6)                       --       5,505,928    
   Issuance of Common Stock warrants (Note 6)                   --          25,000    
    Net loss                                            (1,768,995)     (1,768,995)   
                                                       -----------      ----------    

BALANCE, DECEMBER 31, 1996                              (4,852,777)      3,177,941    

   Exercise of private placement warrants                       --       3,940,800    
   Issuance of Common Stock warrants                            --         528,985    
   Issuance of Common Stock options                             --         216,000    
   Issuance of Common Stock and warrants in                                           
      connection with 1997 Sponsored Research                                         
      Agreement (Note 4)                                        --       3,120,329    
   Exercise of Common Stock options and warrants                --          81,000    
   Net loss                                             (5,927,718)     (5,927,718)   
                                                       -----------      ----------    

BALANCE, DECEMBER 31, 1997                             $(10,780,495)    $5,137,337    
                                                       ============     ==========    

The accompanying notes are an integral part of these statements.

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
 (a development-stage company)
 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]


                                                                Year Ended            Year Ended        Year Ended   
                                                             December 31,1997      December 31,1996  December 31,1995
                                                             ----------------      ----------------  ----------------
                                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                
   Net loss                                                    $(5,927,718)          $(1,768,995)      $(3,072,661)  
   Depreciation                                                     27,398                10,926             1,029   
   Issuance of Common Stock options and warrants                   316,000                25,000             9,950   
   Issuance of Common Stock and warrants in connection with                                                          
      amended research and license agreements                    3,120,329                    --                --   
   Acquired in-process technology                                       --                    --           350,000   
   Adjustments to reconcile net loss to net cash used in                                                             
      operating activities:                                                                                          
   (Increase) decrease in assets:                                                                                    
      Contract research receivables                                (88,366)                   --                --   
   Receivable from related party                                   (51,906)                   --                --   
      Other current assets                                         (30,715)              (59,091)               --   
      Deposits                                                      17,346               (93,419)               --   
   Increase (decrease) in liabilities:                                                                               
      Accounts payable and accrued expenses                        175,934              (379,394)          439,540   
      Payable to related parties                                        --              (105,476)          350,355   
                                                               -----------           -----------       -----------   
         Net cash used in operating activities                  (2,441,698)           (2,370,449)       (1,921,787)  
                                                               -----------           -----------       -----------   
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                
  Purchases of equipment                                           (23,287)              (67,294)           (6,173)  
  Purchases of short-term investments                           (5,019,570)           (2,430,000)               --   
  Proceeds from sale of short-term investments                   2,910,000                    --                --   
                                                               -----------           -----------       -----------   
         Net cash used in investing activities                  (2,132,857)           (2,497,294)           (6,173)  
                                                               -----------           -----------       -----------   

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                
  Proceeds from issuance of Common Stock                         4,021,800             5,505,928         1,928,000   
                                                               -----------           -----------       -----------   

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                  (552,755)              638,185                40   

CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD                      638,225                    40                --   

CASH AND CASH EQUIVALENTS, END OF PERIOD:                      $    85,470           $   638,225       $        40   
                                                               ===========           ===========       ===========   



                                                                      Period from                                    
                                                                       Inception                                     
                                                                   (June 17, 1994) to                                
                                                                   December 31, 1997                                 
                                                                   ------------------                                
                                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                
   Net loss                                                          $(10,780,495)                                   
   Depreciation                                                            39,353                                    
   Issuance of Common Stock options and warrants                          350,950                                    
   Issuance of Common Stock and warrants in connection with                                                          
      amended research and license agreements                           3,120,329                                    
   Acquired in-process technology                                         350,000                                    
   Adjustments to reconcile net loss to net cash used in                                                             
      operating activities:                                                                                          
   (Increase) decrease in assets:                                                                                    
      Contract research receivables                                       (88,366)                                   
   Receivable from related party                                          (51,906)                                   
      Other current assets                                                (89,806)                                   
      Deposits                                                            (76,073)                                   
   Increase (decrease) in liabilities:                                                                               
      Accounts payable and accrued expenses                               236,080                                    
   Payable to related parties                                             250,000                                    
                                                                     ------------                                    
         Net cash used in operating activities                         (6,739,934)                                   
                                                                     ------------                                    
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                
         Purchases of equipment                                           (96,754)                                   
         Purchases of short-term investments                           (7,449,570)                                   
  Proceeds from sale of short-term investments                          2,910,000                                    
                                                                     ------------                                    
         Net cash used in investing activities                         (4,636,324)                                   
                                                                     ------------                                    

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                
  Proceeds from issuance of Common Stock                               11,461,728                                    
                                                                     ------------                                    

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                           85,470                                    

CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD                                  --                                    

CASH AND CASH EQUIVALENTS, END OF PERIOD:                                  85,470                                    
                                                                     ============                                    

The accompanying notes are an integral part of these statements.

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 UNIVERSAL DISPLAY CORPORATION
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND                                                                   

Universal Display Corporation (the "Company"), a development-stage company, is  
engaged in the research and development and commercialization of organic light  
emitting diode ("OLED") technology for potential flat panel display             
applications.                                                                   

The Company, formerly known as Enzymatics, Inc. ("Enzymatics"), was incorporated
under the laws of the Commonwealth of Pennsylvania on April 24, 1985 and        
commenced its current business activities on August 1, 1994. The New Jersey     
corporation formerly known as Universal Display Corporation ("UDC") was         
incorporated under the laws of the State of New Jersey on June 17, 1994. See    
Note 2.                                                                         

Research and development of the OLED technology is being conducted at the       
Advanced Technology Center for Photonics and Optoelectronic Materials at        
Princeton University and at the University of Southern California ("USC") (on a 
subcontract basis with Princeton University), pursuant to a Sponsored Research  
Agreement dated August 1, 1994, as amended (the "1994 Sponsored Research        
Agreement"), originally between the Trustees of Princeton University ("Princeton
University") and American Biomimetics Corporation ("ABC"), a privately held     
Pennsylvania corporation and affiliate of the Company. In October 1997, the     
Company entered into a new 5-year Sponsored Research Agreement with Princeton   
University and USC (the "1997 Sponsored Research Agreement") for research and   
development of the OLED technology. (See Note 4). Pursuant to a license         
agreement dated August 1, 1994 (the "1994 License Agreement") between Princeton 
University and ABC, assigned to the Company by ABC in June 1995, the Company has
a worldwide exclusive license to manufacture and market products based on       
Princeton University's patents and pending patent applications relating to the  
OLED technology and the right to obtain a similar license to inventions         
conceived or discovered under the 1994 Sponsored Research Agreement and to      
sublicense such rights. In October 1997, the Company amended the 1994 License   
Agreement (the "1997 Amended License Agreement") to modify certain terms of the 
license (See Note 4). The Company's Chairman and Chief Executive Officer holds  
similar positions in ABC, a company which is controlled by members of his       
family. See Notes 2 and 8.                                                      

The Company is a development-stage entity with no significant operating activity
to date. Expenses incurred have primarily been in connection with research and  
development funding, obtaining financing and administrative activities. The     
developmental nature of the activities is such that significant inherent risks  
exist in the Company's operations. To the extent that Princeton University's    
research efforts do not result in the development of commercially viable        
applications for the OLED technology, the Company will not have any meaningful  
operations. Even if a product incorporating the OLED technology is developed and
introduced into the marketplace, additional time and funding may be necessary   
before significant revenues are realized. Completion of the commercialization of
the Company's technology will require funds substantially greater than the      
Company currently has available. Notwithstanding the risks discussed above, the 
Company anticipates, based on management's internal forecasts and assumptions   
relating to its operations, that it has sufficient cash to meet its obligations 
for at least the current fiscal year. There is no assurance that such financing 
will be available to the Company when needed, on commercially reasonable terms  
or at all. Also, while the Company funds the OLED technology research, the scope
of and technical aspects of the research and the resources and efforts directed 
to such research is subject to the control of Princeton University and the      
principal investigators. Accordingly, the Company's success is dependent on the 
efforts of Princeton University and the principal investigators. The 1997       
Sponsored Research Agreement provides that if certain of the principal          
investigators are unavailable to continue to serve as principal investigators,  
because such persons are no longer associated with Princeton University or      
otherwise, and successors acceptable to both the Company and Princeton          
University are not available, the 1997 Sponsored Research Agreement will        
terminate.                                                                      

2. STOCK TRANSACTIONS, MERGER, RECAPITALIZATION AND PUBLIC OFFERING             

On June 22, 1995, a wholly-owned subsidiary of the Company consummated an       
Agreement and Plan of Reorganization ("Merger Agreement") with a New Jersey     
corporation formerly known as Universal Display Corporation (herein referred to 
as "UDC"). At the time of the merger, UDC was engaged in the business which is  
currently being conducted by the Company. Prior to the merger, the Company was  
known as Enzymatics, an inactive Pennsylvania corporation, and was engaged in a 
business separate from and unrelated to that of UDC. Enzymatics had incurred    
significant losses since its inception in 1985 and, notwithstanding a public    
offering, failed to find significant alternative sources of financing to enable 
it to continue its operations on any scale. In June 1994, the shareholders of   
Enzymatics approved the sale of substantially all of its assets to a third      
party. Management of UDC concluded that merging with a former publicly traded   
company, and acquiring access to its shareholder base, would facilitate its     
ability to raise additional capital in the private or public markets. Management
of UDC determined that such additional capital would be necessary to fulfill its
financial obligations under the Transfer Agreement (as herein defined) pursuant 
to which it obtained certain rights and obligations related to the OLED         
technology, obtain funds to commercialize the OLED technology, fund the         
acquisition of additional intellectual property rights useful to the OLED       
technology and to fund working capital. As of June 22, 1995, Enzymatics had     
523,268 shares issued and                                                       

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UNIVERSAL DISPLAY CORPORATION 
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

outstanding (after giving effect to a reverse stock split of 10.9672) which were
not actively traded. Pursuant to the Merger Agreement, the former Enzymatics    
shareholders received 523,268 shares of the merged entity's Common Stock.       
Additionally, Nachman, Hays & Associates (NHA), a consulting firm, received     
options to purchase 84,234 shares of the merged entity's Common Stock at an     
exercise price of $.29 per share (see Note 6) as payment of NHA's consulting    
services in connection with the wind-down of Enzymatics. These options were     
issued to satisfy a liability which was reflected on the balance sheet of       
Enzymatics on the date of the merger. The sole director of Enzymatics, is also a
principal of NHA.                                                               

The merger was treated, for accounting purposes, as a recapitalization of UDC   
whereby UDC issued 523,268 shares of Common Stock to the Enzymatics shareholders
and assumed Enzymatics shareholders' deficit of $184,160. The assets and        
liabilities of both companies have been recorded at their historical book values
in these financial statements. The assets of Enzymatics consisted of cash and   
its liabilities consisted of payables related to the merger and other           
professional fees.                                                              

Upon consummation of the merger, UDC's shareholders collectively owned          
approximately 92% of the outstanding shares of the merged entity, with the      
former Enzymatics shareholders retaining the balance of approximately 8%. UDC   
was the surviving corporation in the merger, changed its name to UDC, Inc., and,
as a result of the merger, became a wholly-owned subsidiary of Enzymatics. At   
the effective time of the merger, Enzymatics changed its name to Universal      
Display Corporation. Universal Display Corporation and its wholly owned         
subsidiary, UDC, Inc., are herein referred to collectively as the "Company."    

Contemporaneous with the merger, the Company and ABC entered into a Technology  
Transfer Agreement dated June 22, 1995 (the "Transfer Agreement") pursuant to   
which, among other things, ABC assigned the 1994 License Agreement to the       
Company, and granted to the Company an exclusive worldwide sublicense to patents
and other intellectual property rights to display technology developed under a  
Sponsored Research Agreement dated October 22, 1993 between ABC and Princeton   
University (the "1993 Sponsored Research Agreement") in exchange of (i)         
reimbursement of ABC's scheduled payments and expenses previously made to       
Princeton University under the 1994 Sponsored Research Agreement in the amount  
of $674,000 and a payment of $500,000 for the sublicense under the 1993         
Sponsored Research Agreement which were charged to research and development     
expense (see Notes 3 and 4); (ii) the Company's assumption of ABC's obligation  
to pay all future scheduled payments under the 1994 Sponsored Research          
Agreement, which were approximately $1,610,000, plus expenses related thereto   
estimated to be $500,000 for a total of $2,110,000; and (iii) 200,000 shares of 
the Company's Series A Nonconvertible Preferred Stock (see Notes 3 and 6) with  
a fair value of $350,000.                                                       

Also, contemporaneous with the merger, the Company sold 781,500 units ("Units") 
at a price of $2.00 per Unit, in a private placement, which generated proceeds  
of $1,513,000, net of offering expenses in the amount of $50,000. Each Unit     
consisted of one share of Common Stock and one warrant to purchase one share of 
Common Stock at an exercise price of $3.50 per share. Additionally, 125,000     
Units with a fair value of $250,000, based upon the price of the Units, were    
transferred to a non-affiliate debt holder of ABC to satisfy $250,000 of ABC's  
outstanding debt. Therefore, the Company had a receivable of this amount from   
ABC. Accordingly, ABC netted this $250,000 receivable against the Company's     
payable to related parties account as shown on the accompanying Consolidated    
Balance Sheets (see Note 8). In addition, on July 17, 1995, the Company sold an 
additional 207,500 Units which generated gross proceeds of $415,000.            

On April 11, 1996, the Company consummated a public offering of 1,300,000 shares
of Common Stock at a price of $5.00 per share and redeemable warrants to        
purchase 1,495,000 shares of Common Stock at an exercise price of $3.50 per     
share, at a price of $.10 per warrant. The Company received net cash proceeds of
$5,282,665 from the public offering (excluding $223,263 representing a portion  
of the offering expenses previously charged to general and administration       
expenses).                                                                      

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

Principles of Consolidation                                                     

The consolidated financial statements include the accounts of Universal Display 
Corporation and its wholly-owned subsidiary, UDC, Inc. (see Note 2). All        
significant intercompany transactions and accounts have been eliminated.        

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UNIVERSAL DISPLAY CORPORATION 
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management's Use of Estimates                                                   

The preparation of financial statements in conformity with generally accepted   
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of         
contingent assets and liabilities at the date of the financial statements and   
the reported amounts of revenues and expenses during the reporting period.      
Actual results could differ from those estimates.                               

Cash, Cash Equivalents and Short-Term Investments                               

The Company considers all highly liquid debt instruments purchased with an      
original maturity of three months or less to be cash equivalents. Investments   
are carried at market value, and at December 31, 1997, are classified as        
short-term investments. At December 31, 1997, all of the Company's investments  
are classified as available for sale pursuant to Statement of Financial         
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and   
Equity Securities," (SFAS 115). Therefore, any unrealized holding gains or      
losses should be presented as a separate component of shareholders' equity. At  
December 31, 1997, unrealized holding gains or losses were not material. The    
gross proceeds from sales and maturities of investments were $2,910,000 for the 
year ended December 31, 1997. Gross realized gains and losses for the year ended
December 31, 1997, were not material. For the purpose of determining gross      
realized gains and losses, the cost of securities sold is based upon specific   
identification.                                                                 

Cash, cash equivalents and short-term investments consisted of the following:   

                                                     December 31
                                                    --------------------------
                                                     1997             1996
                                                    ----------       ---------
Cash and cash equivalents:                                              
      Money market funds and demand accounts        $   85,470       $ 638,225
                                                    ==========       =========

Short-term investments:                                                 
      Certificates of deposit                        2,622,014       1,830,000
      Corporate bonds                                1,917,556         600,000
                                                    ----------      ----------
                                                    $4,539,570      $2,430,000
                                                    ==========      ==========

Property and Equipment                                                          

Property and equipment are stated at cost and depreciated on a straight-line    
basis over 3 years.                                                             

Net Loss Per Common Share                                                       

The Company has adopted Statement of Financial Accounting Standards No. 128     
("SFAS 128"), "Earnings per Share", which supersedes APB Opinion No. 15 ("APB   
No. 15"), "Earnings per Share", and which is effective for all periods ending   
after December 15, 1997. SFAS 128 requires dual presentation of basic and       
diluted earnings per share ("EPS") for complex capital structures on the face of
the Statements of Operations. Basic EPS is computed by dividing net income by   
the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution from the exercise of conversion of          
securities into common stock. For the years ended December 31, 1997, 1996, and  
1995, the effects of the exercise of outstanding stock options and warrants were
excluded from the calculation of diluted EPS because their effect was           
antidilutive.                                                                   

As a result of the Company's adoption of SFAS 128, the Company's reported loss  
per share for 1996 and 1995 was restated. The effect of this accounting change  
on previously reported loss per share data was as follows:                      

                                                           1996       1995
                                                           ------     ------
Loss per share as reported - primary and fully diluted       $(0.20)    $(0.38) 
Effect of SFAS 128                                            (0.01)     (0.07) 
                                                           ------     ------
Loss per share as restated - basic and diluted               $(0.21)    $(0.45) 
                                                           ======     ======

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 UNIVERSAL DISPLAY CORPORATION
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Research Revenue                                                       

Contract research revenues are recognized as the related expenses are incurred. 

Research and Development                                                        

Expenditures for research and development are charged to operations as incurred.
Research and development expenses consist of the following:                     

                                                        [Enlarge/Download Table]

                                                                Year Ended         Year Ended         Year Ended    
                                                             December 31, 1997  December 31, 1996  December 31, 1995
                                                             -----------------  -----------------  -----------------
                                                                                                                    
Payments made to Princeton University under the 1994                                                                
   Sponsored Research Agreement (See Note 2)                    $  347,374          $713,815           $549,739     

Patent application and prosecution expenses                        715,406           234,753                 --     

Issuance of 200,000 shares of the Company's Common Stock                                                            
   and warrants to purchase 250,000 shares of Common Stock                                                          
   under the 1997 Sponsored Research Agreement (See Note 4)      3,120,329                --                 --     

Reimbursement of ABC payments made to Princeton                                                                     
   University under the 1994 Sponsored Research Agreement                                                           
   (See Note 2)                                                         --                --            674,000     

Payment made to ABC for sublicense under the 1993                                                                   
   Sponsored Research Agreement (See Note 2) accounted for                                                          
   as acquired in-process technology                                    --                --            500,000     

Issuance of 200,000 shares of the Company's Series A                                                                
   Nonconvertible Preferred Stock to ABC in connection with                                                         
   the Transfer Agreement (See Notes 2 and 6) accounted for                                                         
   as in-process technology                                             --                --            350,000     
                                                                ----------          --------         ----------     

Other Expenses                                                      24,789                --                 --     
                                                                ----------          --------         ----------     
                                                                $4,207,898          $948,568         $2,073,739     
                                                                ==========          ========         ==========     

The 200,000 shares of the Company's Series A Nonconvertible Preferred Stock were
valued at $1.75 per share which was based upon an independent appraisal.        

Income Taxes                                                                    

The Company accounts for income taxes under the provisions of Statement of      
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income     
Taxes." SFAS No. 109 requires the liability method of accounting for deferred   
income taxes. Deferred tax assets and liabilities are determined based on the   
difference between the financial statement and tax bases of assets and          
liabilities. Deferred tax assets or liabilities at the end of each period are   
determined using the tax rate expected to be in effect when taxes are actually  
paid or recovered.                                                              

4. SPONSORED RESEARCH AGREEMENT WITH PRINCETON UNIVERSITY                       

On October 9, 1997, the Company entered into a new 5-year Sponsored Research    
Agreement (the "1997 Sponsored Research Agreement"), with Princeton University  
and entered into an Amended License Agreement with Princeton University and USC 
amending its 1994 License Agreement with Princeton University (the "1997 Amended
License Agreement"). The 1997 Sponsored Research Agreement continues and expands
the sponsored research which commenced in 1994 underwhich the Company funds     
additional research and development work at Princeton University (and at USC    
under a subcontract with Princeton University) in OLED technology. The 1997     
Sponsored Research Agreement requires the Company to pay up to $4.4 million     
commencing on July 31, 1998 through July 31, 2002, which period is subject to   
extension. The amounts due to Princeton University will be expensed when paid by
the Company. In addition, Princeton has acknowledged that approximately $1      
million of amounts paid under the 1994 Sponsored Research Agreement were not    
expended and are expected to be used through July 31, 1998.                     
Under the 1997 License Agreement, the Company has the exclusive                 
worldwide license to manufacture and market products, and to sublicense those   
rights, based on Princeton University's and USC's pending patent applications   
relating to the OLED technology and conceived under the 1994 and 1997 Sponsored 
Research Agreements. The Company is required to pay Princeton                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

University a royalty in the amount of 3% of the Company's net sales of products 
utilizing the OLED technology. In circumstances where the Company sublicenses   
the OLED technology (except to affilates), the royalty required to be paid by   
the Company was reduced in the 1997 License Agreement from 50% to 3%. These     
royalty rates are subject to upward adjustments under certain conditions. The   
Company is required to pay minimum royalties to Princeton of $25,000 in 1999,   
$50,000 in 2000, $75,000 in 2001, and $100,000 in 2002 and thereafter           
while the 1997 License Agreement is in effect. In connection with the 1997      
License Agreement and Sponsored Research Agreement, in October 1997, the Company
has issued 140,000 common shares and 175,000 warrants to purchase Common Stock  
to Princeton University as well as 60,000 common shares and 75,000 warrants to  
purchase Common Stock to the University of Southern California. The Company     
recorded a charge of $3,120,329 related to the issuance of the Common Stock and 
warrants to purchase Common Stock. The value of the warrants was determined in  
accordance with Statement of Financial Accounting Standards No. 123 ("SFAS      
123"), "Accounting for Stock-Based Compensation." This charge is included in    
research and development expenses in the accompanying Consolidated Statement of 
Operations.                                                                     

5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                        

Accounts payable and accrued expenses consist of the following:                 

                                   December 31, 1997         December 31, 1996
                                   -----------------         -----------------
Accrued professional fees          $156,857                  $ 65,076 
Other                               123,383                    39,230 
                                  --------                  --------
                                  $280,240                  $104,306
                                  ========                  ========

6. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND WARRANTS          

Series A Nonconvertible Preferred Stock                                         

In 1995, the Company issued 200,000 shares of Series A Nonconvertible Preferred 
Stock ("Series A") to ABC (See Notes 2 and 3), which has a liquidation value of 
$7.50 per share. Series A holders, as a single class, have the right to elect   
two of the Company's Board of Directors. The holders of Series A shares are     
entitled to one vote per share on matters which shareholders are generally      
entitled to vote. The Series A holders are not entitled to any dividends.       

Stock Options                                                                   

Enzymatics 1992 Stock Option Plan                                               

The stock options granted prior to the merger by Enzymatics under the 1992 Stock
Option Plan and which have been assumed by the Company and after giving effect  
to the reverse stock split, were converted into options to purchase 20,538      
shares of Common Stock of the Company at exercise prices ranging from $11.74 to 
$29.61 per share. All of such options are currently exercisable and expire on   
December 31, 1998.                                                              

1995 Stock Option Plan                                                          

In 1995, the directors of the Company adopted the 1995 Stock Option Plan (the   
"1995 Plan"), under which a maximum of 500,000 options may be granted at prices 
not less than 100% of the fair market value of the Common Stock on the date of  
grant as determined by the Board of Directors. In 1997, the Shareholders        
approved the Plan to increase the number of Common shares reserved for the 1995 
Plan to 800,000 options. The 1995 Plan provides for the granting of both        
incentive and nonqualified stock options to employees, officers, directors and  
consultants of the Company. The stock options are exercisable over a period     
determined by the Board of Directors, but no longer than ten years after the    
grant date.                                                                     

In June 1995, the Company granted options to purchase 70,000 shares of Common   
Stock to an officer of the Company at an exercise prices of $2.00 per share,    
which approximated the fair market value of the Common Stock at the grant date. 
These options vest as follows: 20,000 options vested immediately upon grant with
the remaining 50,000 options vesting in equal amounts over three years.         
Accordingly, as of December 31, 1997, 53,333 options were exercisable. These    
options expire in 2005. In addition, in June 1995, the Company granted options  
to purchase 5,000 shares of Common Stock to the same officer of the Company at  
an exercise price of $.01 per share, all of which were exercised in October     
1997. These options vested on the grant date. The Company recorded a charge of  
$9,950, which represents the difference between the deemed value of the Common  
Stock for accounting purposes and the exercise price of the options at the grant
date. This charge is included in general and administrative expenses in the     
accompanying Consolidated Statements of Operations.                             

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UNIVERSAL DISPLAY CORPORATION 
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 1995, the Company granted nonqualified stock options to three principal      
investigators who are conducting research under the 1994 Sponsored Research     
Agreement and the 1993 Sponsored Research Agreement. The Company granted options
to purchase an aggregate of 240,000 shares of Common Stock to the three         
principal investigators at an exercise price of $4.00 per share, which          
approximated the fair market value of the Common Stock at the grant date. These 
options vest as follows: 33% at the grant date with the remaining 67% vesting   
over two years. Accordingly, as of December 31, 1997, options to purchase       
240,000 shares of Common Stock were exercisable. These options expire in 2005.  

In 1996, the Company granted nonqualified stock options to two employees and one
consultant. The Company granted options to purchase an aggregate of 30,000      
shares of Common Stock at an exercise price of $4.12 per share, which           
approximated the fair market value of the Common Stock at the date of grant.    
These options vest as follows: 10,000 shares at the grant date with the         
remaining 20,000 shares vesting over 5 years. During 1997, 6,000 of these       
options were forfeited when an employee left the company. As of December 31,    
1997, options to purchase 16,000 shares of Common Stock were exercisable. These 
options expire in 2006.                                                         

In 1997, the Company granted incentive and nonqualfied stock options to several 
employees, officers, and principal investigators. The Company granted options to
purchase an aggregate of 271,500 shares of Common Stock at exercise prices      
ranging from $4.06 to $5.25 per share, which approximated the fair market value 
of the Common Stock at the date of grant. These options vest either immediately 
upon grant or over a five year period. As 55,000 of these options were granted  
to non-employee principal investigators, the Company recorded a charge of       
$216,000, which represents the value of the options as determined in accordance 
with SFAS 123. This charge is included in general and administrative expenses in
the accompanying Consolidated Statement of Operations. As of December 31, 1997, 
options to purchase 220,900 shares of Common Stock were exercisable. These      
options expire in 2007.                                                         

Other Options                                                                   

In connection with NHA's services relative to consummation of the merger        
discussed in Note 2, in June 1995, the Company granted options to purchase      
84,234 shares of Common Stock at an exercise price of $.29 per share to NHA.    
These options were used to satisfy a liability reflected on the balance sheet of
Enzymatics on the date of the merger. These options vested 100% upon grant and  
15,000 were exercised in 1997. Accordingly, as of December 31, 1997, 69,234     
options were exercisable. These options expire in 2005.                         

The following table summarizes all stock option activity:                       

                                                        [Enlarge/Download Table]

                                             1997                          1996              
                                  ----------------------------   ----------------------------
                                              Weighted Average               Weighted Average
                                  Shares       Exercise Price   Shares        Exercise Price 
                                  -------     ----------------  -------      ----------------
                                                                                             
Outstanding at beginning of year  449,772          $3.72        419,772            $3.69     
Granted                           271,500          $4.99         30,000            $4.12     
Exercised                         (25,000)         $1.00             --               --     
Forfieted                          (6,000)         $4.12             --               --     
                                  -------          -----        -------           ------     
Outstanding at end of year        690,272          $4.17        449,772            $3.72     
                                  -------          -----        -------            -----     
Exercisable at end of year        604,006          $4.16        316,439            $3.80     
                                  -------          -----        -------            -----     
Available for future grant        189,500                       155,000                      
                                  -------                       -------                      
Weighted average fair value of                                                               
     options granted                               $3.85                           $3.18     
                                                   =====                           =====     


                                             1995                                            
                                  ----------------------------                               
                                              Weighted Average                               
                                  Shares       Exercise Price                                
                                  -------     ----------------                               

Outstanding at beginning of year   20,538         $20.67                                     
Granted                           399,234          $2.82                                     
Exercised                             --             --                                      
Forfieted                             --             --                                      
                                  -------          -----                                     
Outstanding at end of year        419,772          $3.69                                     
                                  -------          -----                                     
Exercisable at end of year        208,772          $3.86                                     
                                  -------          -----                                     
Available for future grant        185,000                                                    
                                  -------                                                    
Weighted average fair value of                                                               
     options granted                               $2.54                                     
                                                   =====                                     

The weighted average remaining contractual life for options outstanding at      
December 31, 1997, 1996 and 1995 was 8 years, 8 years and 9 years, respectively.

Common Stock Warrants                                                           

In connection with the June 22, 1995 private placement and the July 17, 1995    
private placement (See Note 2), the Company issued 906,500 warrants and 207,500 
warrants, respectively each warrant entitled the holder to purchase one share of
Common Stock at an exercise price of $3.50 per share. In 1997, all of these     
outstanding warrants were exercised.                                            

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 UNIVERSAL DISPLAY CORPORATION
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 11, 1996, the Company consummated a public offering of 1,300,000 shares
of Common Stock at a price of $5.00 per share and redeemable warrants to        
purchase 1,495,000 shares of Common Stock at an exercise price of $3.50 per     
share. In connection with the public offering, the Company issued warrants to   
its underwriter to purchase up to 130,000 shares of Common Stock at an exercise 
price of $8.25 per share and warrants to purchase an additional 130,000 shares  
of Common Stock at an exercise price of $3.675 per share. In April 1996, the    
Company issued warrants to third parties to purchase up to 578,000 shares of    
Common Stock at an exercise price of $4.125 per share. These warrants expire in 
2006.                                                                           

In August 1996, the Company granted warrants to purchase 20,000 shares of Common
Stock to an individual in exchange for consulting services. These warrants have 
an exercise price of $6.00 per share, vest immediately, and expire in August    
2006. The Company recorded a charge of $25,000, which represents the value of   
the warrant as determined in accordance with SFAS 123. This charge is included  
in general and administrative expenses in the accompanying Consolidated         
Statements of Operations.                                                       

In April 1996, the Company granted warrants to four employees and one consultant
to purchase 925,000 shares of the Company's Common Stock at an exercise price of
$4.125 per share, which approximated the fair market value of the Common Stock  
at the date of grant. These warrants vest at 25% at the date of grant and the   
remaining 75% vest over 5 years, provided these employees are employed by the   
Company on the vesting date. These warrants expire in 2006.                     

In 1997, the Company granted warrants to Princeton University and the University
of Southern California under the 1997 Sponsored Research Agreement (see Note 4) 
to purchase an aggregate of 250,000 shares of Common Stock at an exercise price 
of $7.25 per share, which approximated the fair market value of the Common Stock
at the date of grant. These warrants vest immediately upon grant and expire in  
2007. Also in 1997, the Company granted warrants to consultants to purchase     
200,000 shares of Common Stock at an exercise price of $4.80 per share. These   
warrants vest immediately upon grant and expire in 2002. The Company valued the 
warrants in accordance with SFAS 123. The warrants will be expensed over the    
three year consulting period. In 1997, the Company recorded a charge of         
$100,000, which is included in general and administrative expenses in the       
accompanying Consolidated Statement of Operations. The unamortized portion of   
this charge is recorded as prepaid consulting fee on the accompanying           
Consolidated Balance Sheet.                                                     

Pro Forma Disclosure for Stock-Based Compensation                               

The Company accounts for its employee stock-based compensation plans under APB  
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no     
compensation expense has been recognized other than the $9,950 charge relating  
to 5,000 options granted to an officer in the Company in 1995. In 1995, the     
Financial Accounting Standards Board issued Statement of Financial Accounting   
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 
123 establishes a fair value based method of accounting for stock-based         
compensation plans. SFAS 123 requires that an employer's financial statements   
include certain disclosures about stock-based employee compensation arrangements
regardless of the method used to account for the plan. Had the Company          
recognized compensation cost for its stock based compensation plans consistent  
with the provisions of SFAS 123, the Company's net loss and net loss per share  
would have been increased to the following pro forma amounts:                   

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 UNIVERSAL DISPLAY CORPORATION
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               1997              1996             1995
                               -----------       -----------      ------------
Net Loss:                                                               
        As Reported            $(5,927,718)      $(1,768,995)     $(3,072,661)
        Pro Forma               (6,985,174)       (2,432,979)      (3,373,918)

Net Loss per Share:                                                     
        As Reported                  $(.64)            $(.21)           $(.45)
        Pro Forma                    $(.75)             (.29)            (.49)

The fair value of each option or warrant granted is estimated on the date       
of grant using the Black-Scholes option pricing model with the following        
assumptions used for grants in 1997, 1996 and 1995, respectively: risk-free     
interest rates of 5.9% to 6.7%, 6.6% and 5.9% to 6.1%, expected dividend yields 
of zero for each year, expected volatility of 81%, 80% and 80% and expected     
lives of 7 years for each year.                                                 

Because the SFAS 123 method of accounting has not been applied to options and   
warrants granted prior to January 1, 1995, the resulting pro forma compensation 
cost may not be representative of that to be expected in future years.          

7. RESEARCH CONTRACTS                                                           

Contract research revenue consists of the following:                            

                                                                [Download Table]

                                                                     Year Ended    
                                                                  December 31, 1997
                                                                  -----------------
                                                                                   
Department of Defense Advanced  Research Projects Agency (DARPA)       $72,630     
New Jersey Commission on Science and Technology (NJCST)                 15,736     
National Science Foundation (NSF)                                        5,239     
                                                                       -------     
                                                                       $93,605     
                                                                       =======     

8. RELATED PARTY TRANSACTIONS                                                   

ABC paid professional fees of $16,154, as well as certain other administrative  
expenses of $138,019 on behalf of the Company from November 1994 through        
December 1995. As of December 31, 1995, the Company had reimbursed ABC for      
$63,245 of such expenses. ABC provided the Company with certain administrative  
services, however there was no charge from ABC to the Company for these services
for the period from inception (June 17, 1994) to December 31, 1994 and for the  
year ended December 31, 1995.                                                   

As discussed in Note 2, the Company had a payable to ABC of $1,174,000 (due to  
the Transfer Agreement) and a receivable from ABC of $250,000 (see Note 2). As  
of December 31, 1995, the Company had reimbursed ABC the net amount due of      
$924,000.                                                                       

In 1997, the Company shared certain administrative support and office space with
Global Photonic Energy Corporation managed by certain officers of the Company   
and in which certain shareholders have a significant minority interest. The     
officers of the Company are also the officers of this related company. The      
Company charged Global Photonic Energy Corporation $51,906 in 1997 for these    
services. This amount is included in receivable from related party on the       
accompanying consolidated balance sheet.                                        

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 UNIVERSAL DISPLAY CORPORATION
 (a development-stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. COMMITMENTS                                                                  

Lease Commitments                                                               

The Company has several operating lease arrangements for office space and office
equipment. Total rent expense was $78,078 for the year ended December 31, 1997. 
Minimum future rental payments for operating leases as of December 31, 1997 are 
as follows:                                                                     

Year              Amount
 ----             --------
 1998             $ 91,467
 1999             $ 88,089
 2000             $ 84,698
 2001             $ 35,049
                  --------
                  $299,303
                  ========

10. INCOME TAXES                                                                

The components of income taxes are as follows:                                  

                                                                [Download Table]

                       December 31, 1997  December 31, 1996  December 31, 1995
                       -----------------  -----------------  -----------------
                                                                              
Current                   $        --         $      --          $      --    
Deferred                   (2,015,424)         (601,344)          (966,152)   
                          -----------         ---------          ---------    
                           (2,015,424)         (601,344)          (966,152)   
Increase in valuation                                                         
 allowance provision        2,015,424           601,344            966,152    
                          -----------         ---------          ---------    

                          $        --         $      --          $      --    
                          ===========         =========          =========    

The difference between the Company's federal statutory income tax rate and its  
effective income tax rate is primarily due to non-deductible expenses and the   
valuation allowance.                                                            

As of December 31, 1997, the Company had net operating loss carryforwards of    
approximately $5,500,000, which will begin to expire in 2010. The net operating 
loss carryforwards differ from the accumulated deficit principally due to the   
timing of the recognition of certain expenses. In accordance with the Tax Reform
Act of 1986, the net operating loss carryforwards could be subject to certain   
limitations.                                                                    

Significant components of the Company's deferred tax assets and liabilities as  
of December 31, 1997 and 1996 are as follows:                                   

                                      December 31, 1997      December 31, 1996
                                      -----------------      -----------------
Gross deferred tax assets                                                       
Net operating loss carryforwards        $2,051,418            $   747,961 
Capitalized start-up costs               1,192,472                590,458 
Capitalized technology license             170,000                170,000 
Other                                      169,030                 59,077 
                                      -----------            -----------
                                        3,582,920              1,567,496
Valuation allowance                        (3,582,920)            (1,567,496)   
Net deferred tax assets                   $        --            $        --    
                                      ===========            ===========

A valuation allowance was established for 100% of the net deferred tax asset,   
since the Company has incurred substantial operating losses and expects         
additional losses in 1998. The Company's management has concluded that the      
realizability of the deferred tax assets is uncertain.                          

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UNIVERSAL DISPLAY CORPORATION     

SIGNATURES                                                                      

Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange 
Act of 1934, Universal Display Corporation has duly caused this report to be    
signed on its behalf by the undersigned, thereunto duly authorized:             

UNIVERSAL DISPLAY CORPORATION       

By: /s/ SHERWIN I. SELIGSOHN        
                     -----------------------------------------
Sherwin I. Seligsohn
                             Chairman of the Board and Chief Executive Officer

Date: March 31, 1998                
--------------          

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and  
in the capacities indicated on the dates indicated.                             

                                                                [Download Table]

         Name                      Title                             Date      
         ----                      -----                             ----      
                                                                               
/s/ SHERWIN I. SELIGSOHN  Chairman of Board and Chief            March 31, 1998
------------------------  Executive Officer                                    
Sherwin I. Seligsohn                                                           

/s/ STEVEN V. ABRAMSON    President, Chief Operating Officer     March 31, 1998
------------------------  and Director                                         
Steven V. Abramson                                                             

/s/ SIDNEY D. ROSENBLATT  Executive Vice President, Chief        March 31, 1998
------------------------  Financial Officer, Treasurer,                        
Sidney D. Rosenblatt      Secretary and Director                               

/s/ DEAN L. LEDGER        Executive Vice President and Director  March 31, 1998
------------------------                                                       
Dean L. Ledger                                                                 

/s/ ELIZABETH H. GEMMILL  Director                               March 31, 1998
------------------------                                                       
Elizebeth H. Gemmill                                                           

/s/ CAMILLE NAFFAH        Director                               March 31, 1998
------------------------                                                       
Camille Naffah                                                                 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10KSB40’ Filing		Date		First		Last			Other Filings
		7/31/02		30
		12/31/98		31					10KSB,  10KSB/A
		7/31/98		30
		6/11/98		1		15			DEF 14A
		4/1/98
Filed on:		3/31/98		36					10QSB
		3/20/98		12
		3/17/98		1
		3/3/98		1		21
For Period End:		12/31/97		1		35
		12/15/97		29
		10/9/97		30
		9/25/97		5
		9/1/97		6
		6/27/97		5
		2/1/97		5
		12/31/96		13		35			10-K405,  10KSB40,  10KSB40/A
		4/25/96		18
		4/11/96		12		33
		3/31/96		19					10QSB
		3/20/96		19
		3/7/96		4
		1/26/96		18
		12/31/95		13		35
		12/21/95		19
		12/1/95		17
		11/1/95		17
		9/20/95		18
		9/1/95		18
		8/16/95		17
		8/1/95		17
		7/17/95		28		32
		6/23/95		17		18
		6/22/95		3		32
		5/5/95		16
		4/18/95		16
		4/11/95		16
		4/6/95		18
		1/1/95		34
		12/31/94		24		34
		8/1/94		7		27
		6/17/94		21		34
		10/22/93		28
									List all Filings

4 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/22/24  Universal Display Corp./PA        10-K       12/31/23  122:14M                                    Donnelley … Solutions/FA
 2/23/23  Universal Display Corp./PA        10-K       12/31/22  129:18M                                    Donnelley … Solutions/FA
 2/23/22  Universal Display Corp./PA        10-K       12/31/21  122:15M                                    Donnelley … Solutions/FA
 2/18/21  Universal Display Corp./PA        10-K       12/31/20  118:15M                                    ActiveDisclosure/FA