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Executives

Joe Hassett – IR

Steve Abramson – President and CEO

Sid Rosenblatt – EVP and CFO

Analysts

Darice Liu – Brigantine Advisors

Jim Ricchiuti – Needham & Co

Rob Stone – Cowen and Co

Hendi Susanto – Gabelli & Company

Andrew Abrams – Avian Securities

Jonathon Skeels – Davenport

Jed Dorsheimer – Canaccord

Universal Display Corp. (PANL) Q1 2011 Earnings Call May 9, 2011 5:00 PM ET

Operator

Good day and welcome to the Universal Display Corporation first quarter 2011 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Joe Hassett. Please go ahead.

Joe Hassett

Thank you and good afternoon, everybody. With us today are Steve Abramson, President and Chief Executive Officer and Sid Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display Corporation.

Let me begin today by reminding you that this call is a property of Universal Display. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Universal Display is strictly prohibited.

Further, as this call is being webcast live and will be made available for a period of time on Universal Display’s website. This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, May 9, 2011.

All statements in this conference that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements regarding Universal Display's beliefs, expectations, hopes, or intentions regarding the future.

It is important to note that these statements are subject to risks and uncertainties that could cause Universal Display's actual results to differ from those projected. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC. Universal Display disclaims any obligation to update any of these statements.

With that I'd like to turn the call over to Steve Abramson, President and CEO of Universal Display. Please go ahead, Steve.

Steve Abramson

Thank you, Joe and welcome to everyone listening on today’s call on webcast. This afternoon I will start with a quick overview of our first quarter financial results, discuss highlights from the quarter and update every one of our plans to expand usage of our PHOLED Technology and material in both the display and lighting markets. Sid will then follow with more detail on our financials before we open the call to questions.

All in all the first quarter was a good start to what we believe will be a very exciting year. Quarter-over-quarter our revenues were up, operating losses down and our balance sheet became significantly stronger. We are also cash flow positive in the first quarter. Sid will give you the details.

Of course our success comes from the growing demand for bright beautiful energy efficient OLED displays powered by our Universal PHOLED Technology and materials. And there has been no slowdown in the torn pace of OLED display market growth. Let me quickly review with some of the industry analysts are saying about the market. According to DisplaySearch AMOLED sales exceeded $1 billion in 2010. We have just rated their AMOLED revenue projections to reach about $4.2 billion this year, $7.5 billion next year and $10.7 billion in 2013. And according to a recent Computerworld over 40 million active-matrix OLED phones shipped in 2010.

Google Nexus S smartphone, AT&Ts Pantech Laser, Verizon's Droid Incredible, and the Nokia E7 are among the leading smartphones incorporating OLED displays. And Samsung recently launched the Galaxy S2 with its high resolution super AMOLED display panel. According to Shin Jong-gyu, President of the Wireless Business Division of Samsung Electronics quote the new model has much evolved from its predecessor Galaxy S. Some 14 million units of which have been sold since June last year and we will fascinate even more users. The cutting edge headset will be provided by 140 mobile carriers at over 120 car trees. And we will bring us another Samsung smartphone boom in the global market.

To meet the increasing demand manufacturers are bringing new capacity on line as soon as this year. LG Display is reported to be ready to start commercial production on Gen 4.5 tab. This tab has a design capacity of about 12,000 sub trades a month, which equates to about 3 million in cell phone side display for month.

According to reports, the first line of sales on mobile displays new Gen 5.5 tab is almost complete and we will start producing panel soon. When this tab is fully operational SMD will be capable of producing 30 million in cell phone size displays per month. SMD supply nearly 90% of the 46 million display that shipped in 2010 according market researcher iSuppli and for SMD said they project shipments to grow by a factor of 35 to 700 million units by 2015.

Meanwhile, AU Optronics have said that they are scheduled to start mass production our new Gen 3.5 AMOLED line in the second half of this year. From these reports it appears that we are on the verge of eliminating a major bottle neck to increase OLED production. This should result a corresponding increase in the demand for our proprietary OLED materials and technology. A little further out in the horizon for nevertheless getting closer every quarter manufacturers are continuing to prepare for the introduction of OLED televisions. Barry Young, Managing Director of the OLED Association sees 1 to 2 million 30inch and 40inch OLED televisions in 2012 although they are expected to be costly.

In 2013 and 2014 Young sees 5 to 6 million OLED televisions and by 2015 10 to 15 million OLED TVs priced very competitively with LCD and Plasma Units. They are very important to LG Display, Sony and Samsung all plan to launch OLED televisions in the next few years. We also continued to advance our flexible display technologies, which SEMI predicts will be a $10 billion market by the end of the decade with applications such as mobile displays, newspapers and even variable displays.

Our white OLED lighting technology is also making inroads in the approximately $100 billion lighting market. Most recently, we were honored by the U.S. Department of Energy for our significant achievement in solid state lighting R&D accomplished under DOD funded programs. As one of only four companies to receive a transformations in lighting award we are recognized for our advances in white OLED lighting performance using our high efficiency OLED technology and materials.

Specifically, along with project partners Armstrong World Industries, the University of Michigan and the University of Southern California we successfully demonstrated two fast OLED Luminaire the first of their kind in the U.S. this achievement marked a critical step in the development of OLED lighting in a complete Luminaire system which included decorative housing, power supply, mounting and maintenance comforts.

To capitalize on what is said to be an exciting increase in the demand for OLED displays and lighting products we have been strengthening our organization. We are investing in infrastructure to support our growth objectives. This past quarter we established a new facility in Honk Kong to build on and expand our footprint in Asia. This facility will host a world-class chemistry laboratory to support our expanding research and development initiative in OLED materials and technologies. These investments will strengthen and broaden our line of OLED materials to support our customers in the fast growing OLED market.

We also established a new subsidiary in Japan to better its supports in our Japanese OLED display and lighting customers and partners. Establishing a subsidiary further demonstrates our commitment to providing comprehensive business and technical support to our OLED customers and partners in Japan. This complements a new subsidiary we established in Korea last year.

We’ve also announced a number of technological advances. This quarter we unveiled a novel single layer encapsulation technology for plastic substrate systems and thin film devices including rigid and flexible OLED displays and lighting panels. Developing collaboration with our research partner Princeton University our single hybrid organic, inorganic layer approach has been demonstrated successfully as an encapsulate for flexible and rigid OLED devices. The encapsulation layer provides an effective permeation barrier to protect thin film devices from environmental conditions such as moisture and oxygen, which is critical for the long-term performance of OLED display lighting products using environmentally benign and non-toxic materials in potentially low cost process the barrier film technology they also be well suited for high performance plastic substrate system and other thin film devices such as photovoltaics and batteries.

This is an elegant solution to improve the manufacturing and performance of OLED and a range of other thin film devices. One of the other challenges we are working on is the further developed new deposition methods for the cost effective manufacture of large area OLED displays and lighting devices. One message in which we have been making progress is in solution based manufacturing processes.

On April 21, we announced advances in our Universal P2OLED solution processable OLED material system. These advances drive OLED performance closer to the levels currently have paid using vacuum based manufacturing today. Lowering the cost of OLED technology will open the door to even more applications potentially expanding the market opportunities significantly.

In two weeks the Annual Society for Information Display Convention will be held in Los Angles, if you are there please visit us at our booth number 1212. Let me briefly close with an update on our strategy and potential uses of the proceeds from our recent public offer. We believe that we are the largest and most innovative technology materials developer in the phosphorescent OLED space. While it has taken us 15 years to get to this place the OLED revolution is just beginning. We intend to leverage and expand our position to grow with this rapidly expanding market thereby enhancing shareholder value. We believe there will be many opportunities to do this as the OLED market expands whether to enhance patent portfolio, additional material sales outside of phosphorescent, expanded technology offerings from flexible displays and lighting products or additional pathways. We will continue to update you on our progress in these areas as exciting new development occur.

On behalf of all of us at Universal Display I would like to thank our supports for the dedication to the company over the past 15 years. We believe that the events in this past quarter had demonstrated a value of that commitment and showed the incredible potential of OLED. We look forward to our growth prospects with us sharing that growth with you in the future. With that I will turn the call over to Sid who will take you through the financial results in more detail. Sid?

Sid Rosenblatt

Thank you, Steve and again thank you everyone for joining us on the call today. I will be reviewing the financial results for the first quarter as well as sharing some insights from the quarter after which we will open the call to take your questions.

Revenues for the first quarter totaled $9.6 million an increase of $5.4 million or 126% compared to $4.2 million for the first quarter of 2010. As mentioned on our last call revenues on a sequential basis compared to the fourth quarter reflects those seasonality we typically experience in the first quarter as well as lack of any new industry capacity coming online. Commercial revenue was $4.7 million for the first quarter an increase of 159% compared to commercial revenue of $1.8 million for the first quarter of 2010.

The increase was primarily due to increased commercial chemical and royalty revenues, which mainly represented chemical shipped and royalties received under our patent license agreement with Samsung SMD. Developmental revenue was $4.9 million for the first quarter an increase of 101% compared to developmental revenue of $2.4 million for the first quarter of 2010. The increase was primarily due to a $1.6 million increase in development chemical sales and nearly an $800,000 increase in contract research revenue. The increase in contract research revenue reflects an overall increase in contract value this quarter compared to the first quarter of last year.

Development revenue was down sequentially from $6.3 million in the fourth quarter of last year to mainly due to decreased sales of development chemicals. As we have said in the past we cannot accurate predict the timing of development chemical purchases due to the early stage of our industry. Total operating expenses for the first quarter were $12.3 million up from $8.5 million for the first quarter of 2010. However, sequentially compared to the fourth quarter operating costs were up only $850,000 mainly due to increased cost associated with our PPG agreement.

Research and development expenses for the first quarter were $6.6 million up compared to $4.8 million for the same period in 2010. The increase was primarily due to increased costs associated with our PPG agreement and increased employee costs mainly associated with stock compensation, R&D investments remains consistent with our ongoing research efforts and commitments to advance our various OLED technologies.

Selling, general and administrative expenses for the quarter were $3.9 million up from $2.6 million for the same quarter in 2010. The increase was mainly due to increased employee cost primarily executive compensations and cost associated with the implementation of an unfunded executive officer pension plan. On a sequential basis, there was no changes in the G&A expenses on an operational level. And cost increased in the quarter of $1.6 million compared to $781,000 for the first quarter of 2010 and $1.5 million for the fourth quarter of 2010.

The increase was due primarily to timing of prosecution and maintenance cost associated with a number of patents and patent applications as well as the timing of the cost ongoing and new fashion matters. For the quarter, we reported an operating loss of $2.7 million down more than $1.5 million from the $4.2 million operating loss reported in the first quarter of 2010. The loss on the sequential to the fourth quarter of 2010 was larger due to reduced revenue of $1.2 million in operating expenses of approximately $800,000.

Due to distortion in our results caused by some large non-operational charges that affect our bottom line is a better indicator of our fundamental financial position than is our net boss. In particular at the end of the first quarter we had outstanding warrants to purchase approximately 317,000 of common stock which warrants contain a down round provision requiring liability classification The change in fair value of these warrants during the period resulted in an $8.9 million non cash expense in our in our first quarter statement of operations, compared to a $713 gain for the same period in 2010. This is an unfortunate side effect of the recent increase in our price of our common stock. The warrants mature in the third quarter of the current year.

For the quarter we have an income tax expense of 296,000 compared to an income tax benefit of 464000 for the first quarter of 2010. We filed for and in May of 2005 were granted a five-year exemption from Korean withholding tax or on royalty payments received from Samsung SMD. Under our patent license that exemption remains in effect until May 2010. Since which time Samsung SMD has been required to withhold taxes upon payment of royalties to us. In 2011 and 2010 the withholding tax rate for royalty payments made by Samsung SMD was 16.5%. For the first quarter foreign income taxes of 296000 were withheld in connection with our royalty revenues. In contrast for the first quarter of 2010, we reported the sale of our New Jersey NOLs and R&D tax credits, thereby reporting a gain of 462000. We did not sell any annuals or tax credits in the first quarter of 2011.

After taking the stock warrant liability expense into account, we incurred a net loss for the fourth quarter of an $11.9 million or $0.31 per diluted share compared to a net loss of 3 million or $0.08 per diluted share for the first quarter of 2010. For the quarter cash providing, provided by operating activities was 1.6 million compared to cash used of 443000 for the same period in 2010. This is the second quarter and in a row where we shared cash provided from operating activities. The increase the increase this quarter was mainly due a decrease of approximately 1.2 million in our operating loss after adjusting for the impact of non-cash items, an increase of $379000 in deferred revenue and license received, and the impacts of and the impact of the timing of receipts of accounts receivable.

As Steve recently mentioned our financial position is the best in the history of the Company, our balance sheet increased and remained strong with cash, cash equivalents, and short-term investments of $325 million as of March 31. This was mainly the result of our common stock offering which closed on March 30 and was led by Goldman Sachs. We sold 5750000 shares of common stock at $46 per share and received net purchase of approximately $215 million. With that we would like to take a moment while the operator compiles our Q&A list and then we will start taking your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We will take our first question from Darice Liu with Brigantine Advisors.

Darice Liu – Brigantine Advisors

Good afternoon, guys. A couple of questions regarding OLED lighting. It seems that a number of companies are looking into or are already creating OLED lighting color times. Can you provide more color on the level of activity going on with your lighting customers, both developmental and commercial? And can you also talk about when do your development agreements transition to license agreements? For example, acuity lighting last week introduced OLED lighting products for the first time, which they sourced from LG Chemical, which I believe is one of your developmental customers?

Steve Abramson

Good set of questions, Darice. I guess to start off, over the past six months to a year, we have been seeing increased activity both among additional lighting customers as well as within each of those lighting customers. So we do see an acceleration of activity both with the number of customers, as well as within each customer. In terms of the transition it is really a gradual transition. As you know, we basically work with the manufacturers and so, when they sell, when they would sell products for commercial use very often that would be recorded as commercial revenue, depending on the specific, the specific deal. Right now we are working with customers to enable the prototypes from a wide variety of areas, both through equity and the trade shows.

Darice Liu – Brigantine Advisors

You mentioned that in the past six months that you have seen increased activity. Can you quantify somehow, if you see an increase in developmental customers for OLED lighting?

Steve Abramson

Well we are seeing more customers and we are seeing more activity in those customers. Now overall there is still a very, very small portion of our total revenues but we are seeing the increase.

Darice Liu – Brigantine Advisors

Okay. With that momentum growing, and you talked about how your P Squared materials have been, are getting closer, on par with your powder materials. When you talk to your potential customers your developmental customers, can you talk about what is going on from the manufacturing side, and what type of manufacturing method you are going to be using in your JV facility with Moser Baer? Is it going to be fine middle mass? Is it going to be Inject printing or roll printing?

Steve Abramson

Well we are developing our material so other people want to use so whether people want to use vacuum deposition, or any of the solution processing techniques under development, we want to make sure that our materials will be applicable to those manufacturing methods. So different customers are working with one or more of those manufacturing methodologies I don't recall if those of our, okay most of ours are probably going to be using VT so we are on the final line.

Darice Liu – Brigantine Advisors

Okay. Thank you, guys. I will go back into the queue.

Steve Abramson

Thanks Darice.

Sid Rosenblatt

Thanks Darice.

Operator

And we will take our next question from Jim Ricchiuti with Needham & Co.

Jim Ricchiuti – Needham & Co

Thanks. Good afternoon. Question with respect to the commercial chemicals revenue in the quarter, did any of that come from LG Display, is that or is LG still all in the development chemicals area?

Sid Rosenblatt

There is a few customers the bulk of it is from SMD but there is a small amount that are from at least two other customers.

Jim Ricchiuti – Needham & Co

Okay. And Sid, as we look out at that line, is there going to be a bigger shift as we go into the next quarter, or is it the September quarter?

Sid Rosenblatt

We expect it to start to shift, I don’t think LG has announced that the they are making, we have read that they are making samples, sampling products, but I have not read when they have stated publicly when they will start shipping commercial products that on a regular basis yet.

Jim Ricchiuti – Needham & Co

Okay. And on the contract R&D side, is that level of revenue that you saw in Q1, is that sustainable? Or maybe you could just–?

Sid Rosenblatt

Not, not just. It is up, and we expect it to be up in the next quarter not from this number but. The number for the year is, I expect it to be in the $5 to $5.5 million range. Okay.

Jim Ricchiuti – Needham & Co

Okay. And then is there any guidance you can give just with respect to R&D? How should we think about that? Should there be much of a change going forward from these levels?

Sid Rosenblatt

I have we have added some folks in Hong Kong laboratories, and I don't expect from our stand point here to see any significant increases. One of the issues, speaking of stock compensation for some of the officers always changes based on upon the stock price so that sometime we don’t have much control over.

Jim Ricchiuti – Needham & Co

All right that’s the last – and why don’t you also just give an update on green phosphorescent material on where you stand, particularly as we get closer to the SID conference, if you could talk a little bit about what we might be hearing there.

Sid Rosenblatt

We are continuing to provide it to a number of customers and materials have been qualified to number of customers putting them in test lines. We have really don’t have anything that we could announce at this time in terms of who will adopt green. I know your question is coming from the question is going to be when, when Samsung going to go green and that’s really something that right now we are still I am sure we will get questions about Samsung we are still negotiating with Samsung.

Jim Ricchiuti – Needham & Co

Thanks a lot.

Sid Rosenblatt

Thanks, Jim

Steve Abramson

Thanks, Jim.

Operator

We will go next to Rob Stone with Cowen and Company.

Rob Stone – Cowen and Co

Hi, guys. Without backs, was there anything one time in nature in Q1 as you were ramping up these new facilities or are we likely to be seeing same or higher levels from here?

Steve Abramson

I think you should see stable levels from here.

Sid Rosenblatt

There is no one time charges, the CapEx expenditures obviously for Hong Kong are going to be amortized over the useful life. But it's not, significant numbers for the folks there.

Steve Abramson

And in terms of thinking about the run rate for the year, we likely to see additional step-ups like we saw in the last couple of quarters, or what would you say about the flow?

Sid Rosenblatt

I think in these quarters, one, if it's stock compensation, we can't really that’s market-to-market at the end of each quarter. That sort of goes up and down. The PPG expenses in this quarter on the R&D side were up. And I expect them to be probably at the same levels for the rest of the year.

Rob Stone – Cowen and Co

What is it that drives the higher PPG?

Sid Rosenblatt

They do a lot of development work and as we scale up the developmental materials, we either develop a new molecule with them, that we have developed here and they try to see whether it is manufacturable, and then, as we move molecules towards commercial production, we do a number of runs, all of which is now classified as R&D expenses. And perhaps some of these are reported into developmental chemical costs but as you have seen our costs of sales is only based upon commercial chemical sales at this time.

Rob Stone – Cowen and Co

Are you still discussing with PPG the potential to manufacture at a second location?

Sid Rosenblatt

We are – part of our discussions with PPG have been to look at the second location. And, yes, we think it's very important that there is a second location and that there is increased capacity.

Rob Stone – Cowen and Co

Would that potentially allow you to locate someplace that would be favorable for your future tax planning?

Sid Rosenblatt

No. I think it's more the facility that we are in today doesn't have room to expand and they have a facility a little further west that does have excess capacity. So as we scale these batches up, we want to move to place that actually is better for us in terms of its ability to continue to scale.

Rob Stone – Cowen and Co

So with that, how should we think about the tax item that you – that you mentioned? What's a good way to relate that to your...

Sid Rosenblatt

The tax item that I mentioned has nothing to do with PPG.

Rob Stone – Cowen and Co

So I just meant that, I would thank Wayne [ph] from the substitute taxes in general, I thought you might be able to locate some points where you wouldn’t have to pay the exorbitant U.S. rate. But leaving that aside.

Sid Rosenblatt

Okay. I wasn’t sure where you are going. It’s, we are looking at a number of options as, we’ve got significant and – that we can carry over but we are looking obviously as the revenues turn and the profitability turns, we are looking at message of making sure that we don’t pay more than our fair share of factors.

Rob Stone – Cowen and Co

The question for Steve, you’ve mentioned a few times the ramp up plans of the big tree, the guide that we note about for a while are you seeing indications of capacity plans by other, said by OEMs potentially the smaller players for another chance coming along?

Steve Abramson

Well, this number above the people that are interested. But until anybody announces something publicly, we really can’t say anything, I think.

Rob Stone – Cowen and Co

Okay. Thank you.

Steve Abramson

Thanks Rob.

Operator

We’ll take our next question from Hendi Susanto with Gabelli & Company.

Hendi Susanto – Gabelli & Company

Good evening. Good evening. First we have read that Sharp is going to commercialize this very production using oxide semiconductor technology? How do you feel this oxide semiconductor technology, would it help more adoption of OLED display, and if it may help Apple to use OLED for iPad and iPhone down the line? Do you also have any collaboration with Sharp, or other customers on oxide semiconductor technology?

Sid Rosenblatt

The oxide technology is a T-technology and our guys say that if it does work it obviously will be a benefit OLEDs. But there is no plans that we know of to be incorporated with OLED at this time. And in terms of commenting on iPhones – like that we, there is nothing that announced and there is nothing that we can comment on.

Hendi Susanto – Gabelli & Company

Do you have any collaboration with Sharp at this point?

Steve Abramson

We’ve never announced anything with Sharp.

Hendi Susanto – Gabelli & Company

Okay. And then second question, could you give us some perspective on green emitter material and its potential adoption. Besides lower power consumptions? Are there other advantages of green emitter material versus green fluorescence, for example whether it is for some kind of visual enhancement, and furthermore on the display manufacturer side with the adoption of green emitter material require major or minor modification on existing equipment?

Steve Abramson

The major advantage of our green phosphorus in material is in power consumption. Depending on this specific CIE coordinates of either for us in our phosphorous and molecule, that is the color that you’ll see, but those are basically the same. So you get the, the advantage in power consumption, that when you have advantage in power consumption you can also see advantages in lifetime and potentially in lower cost component. What was the other? I’m sorry, what was the second half?

Hendi Susanto – Gabelli & Company

(Inaudible)

Steve Abramson

You designed - it is the same equipment, it’s just these, that you put in different, different materials and you met the tweak, the tweak of the operating process.

Hendi Susanto – Gabelli & Company

So, no change in the CFC back plane and et cetera?

Steve Abramson

No.

Hendi Susanto – Gabelli & Company

Okay. Thank you.

Steve Abramson

You are welcome.

Sid Rosenblatt

Thank you.

Operator

And we got next question from Andrew Abrams with Avian Securities.

Andrew Abrams – Avian Securities

Hi guys. Expectations for the SMD 5.5, do you expect this to be one line open at the onset with the assumption that there will be three lines eventually with the 30k kind of expectations?

Sid Rosenblatt

Whatever was published publicly is all we can comment on, my understanding is it will obviously come on in incrementing, then you have the first section of it is from what we understand in place. But beyond that I really can’t comment until Samsung comments publicly.

Andrew Abrams – Avian Securities

Okay. Can you talk a little bit about the cost of the display as it shows to you in something like the Galaxy, old Galaxy, the new Galaxy, just so we can get some kind of ballpark number on what you guys see as a display price?

Sid Rosenblatt

I can give you the numbers that I have read from display search in terms of the screen size which is it my understanding from display search the Galaxy one phone, display is about $25, I have not seen any estimates of what it is for the next generation product.

Andrew Abrams – Avian Securities

Got it. And on an absolute basis the relative amount of material when you are comparing red to green, I know your eyes are sensitive to, more sensitive to green. Would that mean that you would wind up using less or more or how would the mass work for just looking at those two colors?

Steve Abramson

It probably from pixel size stand point you do the same amount and the amount of people who purchase for us really depends on the nature of the material and the dropping percentage of the amount of materials that we would use in each display and that differ depend on customer to customer, material to material.

Andrew Abrams – Avian Securities

Got it, terrific. Thanks very much, I appreciate it.

Steve Abramson

Well, thanks Andy.

Operator

We’ll take our next question from Jonathon Skeels with Davenport.

Jonathon Skeels – Davenport

Hey guys, just a question on the income tax expense. That 16.5% rate, that on the gross royalty amount?

Sid Rosenblatt

That is correct, there is a statutory rate that any royalty is coming out of career are paid.

Jonathon Skeels – Davenport

Okay. So that will continue your remaining places going forward, right?

Sid Rosenblatt

That’s correct.

Jonathon Skeels – Davenport

Okay. And then maybe just one on the Samsung conversation, I know there is not much more you could say than what has already been said. But have those discussions moved from the licensing department up to a higher level within the organization, or can you comment on that at all?

Steve Abramson

Though actually we can’t.

Jonathon Skeels – Davenport

Okay. Alright, thanks.

Steve Abramson

Thanks Jonathon.

Operator

And we’ll go next to Jed Dorsheimer with Canaccord.

Jed Dorsheimer – Canaccord

Alright. Thanks. Any comments on progress on blue?

Steve Abramson

We continue to work really hard, Jed, we haven’t made any announces recently. We do believe that our display architecture we call RGB-1B2 is a very significant is there it’s for the adoption of blue because it will enables us to do is use a lot of learning that we take it from our green molecule and apply to light blue which we are finding on, is the way that we can significant efficiencies advancement and lifetime improvement.

And we, I just not use deep blue that much, in deep blue is the stickiest of the issues. So we think that and one of the major events over the last year and so it has been a development of this quad pixel architecture using red, green B-1B2, a light blue and the dark blue pixel.

Jed Dorsheimer – Canaccord

And so using the quad pixel, how far away from the requirements for display application?

Steve Abramson

You know what, it’s tough to say, we are still ways away.

Jed Dorsheimer – Canaccord

Right.

Steve Abramson

We are ways away, but we are over a lot closer than we used to be.

Jed Dorsheimer – Canaccord

Okay. What did pricing do on the materials? I am not asking for what the prices are but just on a quarter-to-quarter basis how should we think about what are the rate of change in terms of pricing or on a program basis?

Steve Abramson

It’s really consistent.

Jed Dorsheimer – Canaccord

Okay.

Steve Abramson

On a commercial side the price program is very consistent.

Jed Dorsheimer – Canaccord

And then on the contract on the, I guess the license agreement that you have in place, other than LG, is there anyone with most favorite nation’s cost in their contract?

Steve Abramson

Yes, we actually don’t really talk about the specifics of the contract, Jed.

Jed Dorsheimer – Canaccord

Okay, is that, maybe just broadly speaking are any other contracts tied to Samsung?

Steve Abramson

Was nobody is really tied to Samsung. I mean from, nobody is really tied to Samsung in that respect.

Jed Dorsheimer – Canaccord

Okay. There is norm [ph] that are based of, when the Samsung sign, there is no contracts that our implements that all to Samsung?

Steve Abramson

Not in any legal sense, that’s correct.

Jed Dorsheimer – Canaccord

Okay. I think that’s it for me. Thanks.

Steve Abramson

Thanks Jed.

Operator

And our final question today comes from Darice Liu with Brigantine Advisors.

Darice Liu – Brigantine Advisors

Just following up on the green question, how much does the recipe [ph] has to change and how much down time would be need for town to switch from, florescent green to phosphorous green there, finalize the license agreement?

Steve Abramson

What? Hey, I am not sure there is a connection between the finalization of a license agreement and the adoption of green. But the manufacturers are very skilled keeping the lines running while inserting new materials. So I suspect they have the methodology down so they can keep the line running fairly efficiently, as they would introduce a new material.

Darice Liu – Brigantine Advisors

Okay. And then can you provide an update in your relationship with Idemitsu Kosan. Are you still working with them and is there any implication with Idemitsu Kosan now starting to gain some customers including Panasonic Electric Works. So I believe it was working with you?

Steve Abramson

We are still working very closely with Panasonic Electric Works, sorry Idemitsu Kosan. So it is the two Panasonic formed a joint venture to produce OLED lighting panel. But that doesn’t affect our relationship beside the one of them.

Darice Liu – Brigantine Advisors

Okay. Thank you, guys.

Steve Abramson

Thank you, Darice.

Operator

And that is our final question ladies and gentlemen, at this time Mr. Abramson, I’ll turn the call back over to you.

Steve Abramson

I would like to thank you all for being on the call and again if you have any follow-up questions, please feel free to give us a call. Thank you very much for your time.

Sid Rosenblatt

Thank you.

Operator

This does conclude today’s conference, we appreciate your participation.

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