<PAGE>
As filed with the Securities and Exchange Commission on June 3, 1998
Registration No. 333-________
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
CELL ROBOTICS INTERNATIONAL, INC.
(Exact name of Registrant as specified on its Charter)
Colorado 84-1153295
- --------------------------------- -------------------------
(State or other jurisdiction IRS Employer
of incorporation or organization) Identification Number
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
(505) 343-1131
----------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
Ronald K. Lohrding, Ph. D.
Cell Robotics International, Inc.
2715 Broadbent Parkway N.E.
Albuquerque, new Mexico 87107
(505) 343-1131
----------------------------------------------------------
(Name, address, including zip code, and telephone number
of agent for service of process)
Copies to:
Clifford L. Neuman, Esq.
Nathan L. Stone, Esq.
Neuman, Drennen & Stone, LLC
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
===========================================================================
<PAGE>
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Proposed Proposed
Each Class Maximum Maximum Amount of
of Securities Amount Offering Aggregate Regis-
to be to be Price Offering tration
Registered Registered Per Share Price Fee
(3) (2) (1)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Stock, 78,788 $10.00 (3) $ 787,880.00 $ 238.75
$.04 par value:
Common Stock, 315,152 $ 2.25 (4) $ 709,092.00 $ 214.88
$.004 par value,
Underlying Preferred
Stock:
Common Stock 157,576 $ 0.94 (5) $ 148,121.44 $ 44.89
Purchase Warrants:
Common Stock, 157,576 $ 2.40 (6) $ 378,182.40 $ 114.60
$.004 par value,
Underlying Warrants:
TOTAL: $2,023,275.84 $ 613.12
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</TABLE>
(1) Pursuant to Rule 416, the Registration Statement also relates to an
indeterminate number of additional shares of Common Stock issuable
upon exercise of outstanding Common Stock Purchase Warrants (the
"Warrants") pursuant to anti-dilution provisions contained therein,
which shares of Common Stock are registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Based upon the average of the bid and ask prices of the Preferred
Stock being offered by the Selling Securityholders in accordance with
Rule 457(c).
(4) Based upon the average of the bid and ask prices of the Common Stock
being offered by the Selling Securityholders in accordance with Rule
457(c).
(5) Based upon the average of the bid and ask prices of the Common Stock
Purchase Warrants being offered by the Selling Securityholders in
accordance with Rule 457(c).
(6) Based upon the $2.40 per share exercise price of the Warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Item No. and Heading
In Form S-3
Registration Statement Location in Prospectus
----------------------- -----------------------
1. Forepart of the Registration Forepart of the Registration
Statement and outside front Statement and outside front
cover of Prospectus page of Prospectus
2. Inside front and outside back Inside front and outside back
cover pages of Prospectus cover pages of Prospectus
3. Summary Information, Risk Risk Factors
Factors and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Determination of Offering Price
6. Dilution Dilution
7. Plan of Distribution Plan of Distribution
8. Description of Securities Description of Securities
to be Registered
9. Interest of Named Experts Legal Matters
and Counsel
10. Material Changes Recent Developments
11. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
12. Disclosure of Commission Indemnification
Position on Indemnification for
Securities Act Liabilities
<PAGE>
<PAGE>
PROSPECTUS
CELL ROBOTICS INTERNATIONAL, INC.
-------------------------------------------------------------
78,788 Shares
Series A Convertible Preferred Stock
157,576
Common Stock Purchase Warrants
472,728 Shares
$.004 par value Common Stock
This Prospectus relates to the offering of securities of Cell Robotics
International, Inc., a Colorado corporation (the "Company" or "CRII").
The first offering relates to the reoffer of 78,788 shares of Series A
Convertible Preferred Stock, $.04 par value ("Preferred Stock") of the
Company, and 157,576 Common Stock Purchase Warrants of the Company
("Warrants") owned by certain securityholders of the Company (the "Selling
Securityholders" and the "Selling Securityholders' Offering," respectively).
Each share of Preferred Stock is convertible into four shares of the Company's
common stock, $.004 par value (the "Common Stock"), subject to adjustment
under certain circumstances ("the Conversion Stock") at any time at the option
of the Holder thereof. Each share of Preferred Stock shall automatically
convert into four shares of Common Stock upon the earlier of (a) February 2,
2001 or (b) the date upon which the sum of closing bid prices of the Preferred
Stock and two Warrants has been at least $12.375 for at least ten consecutive
trading days. Dividends in the form of shares of the Company's Common Stock
will accrue on all outstanding shares of Preferred Stock at the rate of
four-tenths of one share of Common Stock every six months commencing February
2, 1998. Such Common Stock dividends shall be issued and distributed within
30 days following their accrual every six months. Each Warrant is exercisable
to purchase one share of Common Stock at an exercise price of $2.40 per share
(the "Exercise Price") for the period of time commencing on February 10, 1998
and expiring on February 2, 2003, (the "Warrant Term"), unless earlier
redeemed. The Company may redeem the outstanding Warrants, in whole or in
part, at any time upon at least 30 days' prior written notice to the
registered holders thereof, at a price of $.25 per Warrant, provided that (i)
there is in effect a registration statement registering for sale under the
Securities Act of 1933 as amended ("Securities Act") the shares of Common
Stock issuable upon exercise of the Warrant; (ii) the closing bid price of the
Company's Common Stock has been at least $4.80 for the ten consecutive trading
days immediately preceding the date of such notice of redemption; and (iii)
the expiration of the 30 day notice period is within the Warrant Term. The
Selling Securityholders may offer all shares of the Company's Preferred Stock
and Warrants covered by this Prospectus in transactions in the over-the-
counter market at prices obtainable at the time of sale, or in privately-
negotiated transactions at prices determined by negotiation. The Selling
Securityholders may effect such transactions by selling the shares to or
through securities broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders, and/or the purchasers of the securities for whom such
broker-dealers may act as agent or to whom they sell as principals, or both
(which compensation as to a particular broker/dealer may be in excess of
customary commissions). See "SELLING SECURITYHOLDERS" and "PLAN OF
DISTRIBUTION." The Selling Securityholders and the broker-dealers through
whom sales of the securities are made may be deemed to be "Underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). If any broker-dealers are used by the Selling Securityholders, any
commissions paid to broker-dealers, and if broker-dealers purchase any
securities as principals, any profits received by such broker-dealers on the
resales of the securities may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any profits realized by
the Selling Securityholders may be deemed to be underwriting compensation.
This Prospectus also relates to the offer by the Company of up to 315,152
shares of Common Stock issuable upon conversion of the Preferred Stock (the
"Conversion Stock Offering") and the offer by the Company of up to 157,576
shares of Common Stock pursuant to the exercise of the Warrants (the "Warrant
Stock Offering"). Except as set forth above, the Company does not have the
right to compel the conversion of the Preferred Stock or the exercise of the
Warrants, and the Selling Securityholders have not committed to convert the
Preferred Stock or to exercise any of the Warrants. Accordingly, there can be
no assurance of the number, if any, of shares of Common Stock which may be
issued by the holders of the Preferred Stock and Warrants pursuant to the
conversion of Preferred Stock and/or the exercise of the Warrants under this
Prospectus.
The Company will not receive any consideration in connection with the
conversion of the Preferred Stock. Assuming holders of the Warrants exercise
all Warrants to purchase 157,576 shares of Common Stock, the Company will
receive gross proceeds of $378,182.40. The Company will not receive any of
the proceeds from the resale of shares of Preferred Stock or Warrants by the
Selling Securityholders. Pursuant to an agreement between the Company and the
Selling Securityholders, the Company has agreed to pay all of the expenses
incurred in connection with the preparation and filing of the Registration
Statement of which this Prospectus forms a part, estimated to be $12,000. The
Selling Securityholders will, however, pay the other costs related to the sale
of the Preferred Stock and Warrants, including discounts, commissions and
transfer fees. See "PLAN OF DISTRIBUTION." The Company has agreed to
indemnify the Selling Securityholders against certain liabilities, including
liability under the Securities Act.
The Company's Common Stock is traded on the OTC Electronic Bulletin Board
("Bulletin Board") under the trading symbol CRII. On May 28, 1998, the
closing bid and ask prices of the Company's Common Stock were $2.1875 and
$2.3125 respectively. There can be no assurance that a market for the Common
Stock will continue in the future. The Company has no arrangements with
broker-dealers concerning the maintenance of a trading market for the Common
Stock.
The Company's Preferred Stock is traded on the Bulletin Board under the
symbol CRIIP. On May 28, 1998, the closing bid and ask prices of the
Company's Preferred Stock were $9.50 and $10.50 respectively. There can be no
assurance that a market for the Preferred Stock will continue in the future.
The Company has no arrangements with broker-dealers concerning the maintenance
of a trading market for the Preferred Stock.
The Company's Warrants are traded on the Bulletin Board under the symbol
CRIIW. On May 28, 1998, the closing bid and ask prices of the Company's
Warrants were $0.75 and $1.125 respectively. There can be no assurance that a
market for the Warrants will continue in the future. The Company has no
arrangements with broker-dealers concerning the maintenance of a trading
market for the Warrants.
------------------------------------------
FOR DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE COMPANY, SEE "RISK FACTORS" COMMENCING AT PAGE 8 HEREOF.
------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONS, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Price to Underwriting Proceeds to
Warrantholders Discount (3) Company (2)
--------------- -------------- -------------
<S> <C> <C> <C>
Per share: $2.40 * $2.40
Total $378,182.40 * $378,182.40
- ---------------------------------------------------------------------------
</TABLE>
The Date of This Prospectus is ________________, 1998.
(1) Reflects the exercise by the Warrantholders of all outstanding
Warrants to purchase an aggregate of 157,576 shares of Common Stock at
an Exercise Price of $2.40 per share. The Company does not have the
right to compel the exercise of the Warrants, and the Warrantholders
have not committed to exercise any of the Warrants. Accordingly,
there can be no assurance of the number, if any, of shares of Common
Stock which will be purchased by the Warrantholders pursuant to their
exercise of the Warrants. The Company intends to maintain a current
Prospectus until the Warrants expire on February 2, 2003, or until
they are all exercised, if earlier. The Company may at any time and
from time to time extend the Warrant Term or reduce the Warrant
Exercise Price, provided written notice of such extension or reduction
is given to the registered holders of the Warrants prior to the
expiration date then in effect. See "DESCRIPTION OF SECURITIES-
WARRANTS."
(2) The Warrantholders may reoffer their shares in transactions in the
over-the-counter market at prices obtainable at the time of sale or in
privately negotiated transactions at prices determined by negotiation.
The Warrantholders may effect transactions by selling to or through
securities broker-dealers and such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions
from the Warrantholders. While it is impracticable to determine the
precise amount that the Warrantholders will incur, it is anticipated
that any such discounts, selling concessions or commissions will be
consistent with those customarily charged by broker-dealers who are
members of the National Association of Security Dealers, Inc.
("NASD").
(3) Consists of proceeds to the Company from the exercise by the
Warrantholders of all Warrants which are exercisable to purchase
157,576 shares of the Company's Common Stock at an Exercise Price of
$2.40 per share. Does not reflect deduction of expenses of the
Offering for printing, legal, accounting, transfer agent and
miscellaneous expenses of the Offering, the total of which is
estimated at $12,000, which the Company has agreed to pay. See "USE OF
PROCEEDS."
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction, or in any jurisdiction in
which the person making such offer or solicitation is not qualified to do so.
<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance with
the Exchange Act files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information concerning the Company can be
inspected and copied (at prescribed rates) at the Commission's Public
Reference Section, Room 1024, 450 Fifth Street, N.W. Judiciary Plaza,
Washington, D.C. 20549, as well as at the following Regional Offices:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material also may be obtained at prescribed rates from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and are publicly available through
the Commission's website at http://www.sec.gov.
The Company has filed a Registration Statement on Form S-3 with the
Commission, Washington, D.C., in accordance with the provisions of the Act.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information pertaining to the shares of Common Stock, shares of Preferred
Stock and Warrants offered hereby and the Company, reference is made to the
Registration Statement, including the exhibits and financial statements
incorporated therein by reference. Reference also should be made to Pre-
Effective Amendment No. 2 to the Company's Registration Statement on Form SB-2
which was declared effective by the Commission on February 2, 1998, the
Company's Annual Report to Shareholders and Annual Report on Form 10-KSB for
the year ended December 31, 1997, the Company's definitive Proxy Statement,
and the Company's Quarterly Report on Form 10-QSB for the quarter ended March
31, 1998, incorporated by reference into this Prospectus. Statements herein
contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an Exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
obtained from the Commission upon payment of the fees prescribed therefore and
may be examined at the principal office of the Commission in Washington, D.C.
<PAGE>
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
(a) Pre-Effective Amendment No. 2 to Registration Statement on Form SB-2,
Registration No. 333-40895, declared effective by the Commission on
February 2, 1998.
(b) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, SEC File No. 0-27840, as filed with the Commission
on April 3, 1998.
(c) The Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on May 29, 1998, SEC File No. 0-27840, as
filed with the Commission on April 20, 1998.
(d) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998, SEC File No. 0-27840, as filed with the Commission on
May 8, 1998.
All documents filed by the Company with the Commission pursuant to Section
13a, 13c, 14 or 15d of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering covered by this Prospectus will be
deemed incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents.
Any statement contained in the above-referenced documents shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained in this Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
A copy of the documents incorporated by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by
reference to this Prospectus), may be obtained at no charge by a written or
oral request to Ronald K. Lohrding, Ph.D., President and CEO, Cell Robotics
International, Inc., 2715 Broadbent Parkway N.E., Albuquerque, New Mexico
87107 (505) 343-1131. In addition, such materials filed electronically by
the Company with the Commission are available at the Commission's worldwide
website at http://www.sec.gov/edgarhp/htm.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and are thus prospective. Such statements are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. Such risks and uncertainties include, but are not limited to,
competitive pressures, changing economic conditions and other factors, some of
which will be outside of the control of the Company. See "RISK FACTORS."
<PAGE>
<PAGE>
THE COMPANY
The Company was organized on September 28, 1988 as Intelligent Financial
Corporation ("IFC"). In February 1995, IFC acquired all of the issued and
outstanding shares of Cell Robotics, Inc. ("CRI"), a New Mexico corporation
(the "Acquisition"), which had been formed in 1988 to develop the Cell
Robotics Workstation. In May 1995, IFC changed its name to Cell Robotics
International, Inc. The Company has developed, and is preparing to
manufacture, market and sell, a number of sophisticated medical laser
products. The Company maintains its principal offices at 2715 Broadbent
Parkway, N.E., Suite A-E, Albuquerque, New Mexico 87107. Its telephone number
at that address is (505) 343-1131, its facsimile number is (505) 344-8112, and
its Internet Website address is http://www.cellrobotics.com/cell.
<PAGE>
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD REVIEW CAREFULLY THE FOLLOWING INVESTMENT
CONSIDERATIONS IN EVALUATING THE COMPANY AND ITS BUSINESS:
HISTORY OF OPERATING LOSSES; FUTURE PROFITABILITY UNCERTAIN.
- ------------------------------------------------------------
From its inception in 1988 through March 31, 1998, the Company has incurred
losses of approximately $13.9 million, substantially all of which consisted of
research and development and general and administrative expenses. To date, the
Company has been unable to profitably market its products. The Company has
principally relied upon the proceeds from debt and equity financings to
provide its working capital. For the years ended December 31, 1997 and 1996
and for the three months ended March 31, 1998 and 1997, the Company's net
losses were $2,472,892, $1,544,090, $294,712 and $487,439, respectively. In
addition, the Company's operations used net cash of $2,253,941 and $579,062
for the year ended December 31, 1997 and three months ended March 31, 1998,
respectively. The Company has yet to sell any of its products in commercial
quantities. Moreover, even if the Company eventually generates increased
revenues from product sales, the Company does not expect to achieve operating
profits before the last quarter of 1998. The Company's ability to achieve a
profitable level of operations in the future will depend in large part on
finalizing development of its medical laser products, obtaining additional
regulatory approval for such products and bringing several of these products
to market. The likelihood of long-term success of the Company must be
considered in light of the expenses, difficulties and delays frequently
encountered in the development and commercialization of new medical laser
products, competitive factors in the marketplace as well as the burdensome
regulatory environment in which the Company operates. There can be no
assurance that the Company will ever achieve significant revenues or
profitable operations.
Future Revenue Growth Dependent on Medical Laser Products.
- ----------------------------------------------------------
The Company is relying heavily upon the success of its medical laser products
which are in the product introduction stage. These medical laser products are
subject to all of the risks of failure inherent in the market introduction of
innovative technologies. Those risks include the possibilities that some or
all of the proposed products may fail to receive additional necessary
regulatory clearances, that the proposed products may have features which
render them uneconomical either to manufacture or market, that there does not
exist demand for the products at levels or prices at which the Company can
operate profitably, or that third parties will market a superior product. As a
result, there can be no assurance that all or any of the Company's medical
laser products will receive all of the required governmental regulatory
approvals or become commercially viable or achieve market acceptance.
Additional Financing Requirements.
- ----------------------------------
The Company will require substantial funds for commercialization of its
medical laser products, establishing manufacturing and testing capabilities
and marketing and sales efforts. The Company's capital requirements depend
upon numerous factors, including the progress of its product
commercialization, the requirement for additional clinical testing, the time
and cost involved in obtaining additional regulatory approvals, the cost of
filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
the ability of the Company to establish collaborative arrangements, the
development of commercialization activities and arrangements, and the purchase
of capital equipment. Unless the Company is able to achieve profits from
operations within the next 12 months, or if the Company experiences
unanticipated cash requirements during the next 12 months, the Company expects
that it may require substantial additional capital. The Company may seek
additional funding through public or private financings or collaborative or
other arrangements with third parties. There can be no assurance that
additional funds will be available on acceptable terms, if at all. If
additional funds are raised by issuing equity securities, further substantial
dilution to existing stockholders, including purchasers of the Securities
offered hereby, may result. If adequate funds are not available, the Company
may be required to delay, scale back or eliminate one or more of its
development programs or to obtain funds by entering into arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its products or technologies that the Company would not
otherwise relinquish. See "USE OF PROCEEDS."
Patent Litigation.
- ------------------
In October 1997, Venisect, Inc. ("Venisect") commenced a patent infringement
action (the "Venisect Litigation") in which it claimed the Lasette(-TM-)
infringed the U.S. patent underlying Venisect's competitive skin perforator.
The United States District Court for the Eastern District of Arkansas (the
"Court") subsequently dismissed the Venisect Litigation, without prejudice,
due to lack of personal jurisdiction and improper venue. Venisect has
recently filed a notice that it will appeal that decision. Moreover, the
Court's ruling does not prevent Venisect from re-filing in a proper
jurisdiction at a later date in the event its appeal is unsuccessful. While
the Company has investigated the Venisect patent with its advisors, including
patent counsel, and believes that no basis for any infringement claim exists,
there can be no assurance that the Company will be able to successfully defend
the patent infringement claims made by Venisect in the event Venisect is
successful in appealing the Court's ruling or should Venisect re-file its
claims in a proper jurisdiction. If Venisect ultimately prevails in this
litigation, the Company may be permanently enjoined from selling the Lasette(-
TM-) and may be obligated to pay significant damages to the plaintiff. Even if
the Company is successful in its defense of the Venisect Litigation, the cost
of such defense could be substantial and the Company's management may be
required to devote a substantial amount of time to such defense. Accordingly,
the Venisect Litigation could have a material adverse impact on the Company's
business and financial condition.
Limited Protection from Patents and Proprietary Technology.
- -----------------------------------------------------------
The Company's medical laser products currently have no patent protection. The
Company intends to file applications for patents covering some features of the
medical laser products; however, there can be no assurance that patents will
be issued or, if issued, the degree of protection that they will afford. The
Company's current scientific research instruments only have limited patent
protection. The Company has licenses to or assignments of United States
patents and certain corresponding foreign patents that cover certain aspects
of some of its products. However, there can be no assurance as to the degree
of protection offered by these patents. These patents may have limited
commercial value or may lack sufficient breadth or scope to adequately protect
the aspects of the Company's technology to which they relate.
Since there is no patent protection currently afforded the Company's medical
laser products, there can be no assurance that other patent holders or other
third parties will not claim infringement by the Company or its licensors with
respect to current and future technology. Because United States patent
applications are held and examined in secrecy, it is also possible that
presently pending United States patent applications will eventually issue with
claims that will be infringed by the Company's products. There can be no
assurance that additional competitors, in the United States and in foreign
countries, many of which have substantially greater resources than the Company
and have made substantial investments in competing technologies, will not
apply for and obtain patents that will prevent, limit or interfere with the
Company's ability to make and sell its products. The Company is aware of
several patents held by third parties that relate to certain aspects of its
products. There can be no assurance that these patents would not be used as a
basis to challenge the Company's current or future patents, to limit the scope
of its patent rights or to limit its ability to obtain additional or broader
patent rights. A successful challenge to the validity of any of the Company's
existing or future patents and/or patent rights may adversely affect the
Company's competitive position and could limit the Company's ability to
commercialize one or more of its medical laser products and its scientific
products. Further, the Company may in the future be required to initiate
litigation to protect its patent position. There can be no assurance that the
Company will have the resources necessary to pursue such litigation or
otherwise protect its patent rights. The defense and prosecution of patent
suits is costly and time-consuming, even if the outcome is favorable. This is
particularly true in foreign countries where the expense associated with a
proceeding can be prohibitive. An adverse outcome in the defense of a patent
or infringement suit could subject the Company to significant liabilities to
third parties, require the Company and others to cease selling products that
infringe or require disputed rights to be licensed from third parties. Such
licenses may not be available on satisfactory terms or at all. Moreover, if
claims of infringement are asserted against future co-development partners or
customers of the Company, those partners or customers may seek indemnification
from the Company for damages and expenses they incur. There can no be
assurance that the Company would prevail in any such action or that any
license required under any such patent would be made available under
acceptable terms, if at all. There has been, and the Company believes that
there will continue to be, significant litigation in the laser-based
biotechnological industry regarding patent and other intellectual property
rights. Any litigation, including the Venisect Litigation, could consume a
substantial portion of the Company's financial and personnel resources and,
regardless of the outcome of such litigation, have a material adverse impact
upon the Company's business, results of operations and financial condition.
The Company also relies on trade secret protection for its unpatented
proprietary technology. However, trade secrets are difficult to protect. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets, that such trade secrets will not be disclosed or
that the Company can effectively protect its rights to unpatented trade
secrets. Despite precautions taken by the Company, unauthorized parties may
attempt to engineer, reverse engineer, copy or obtain and use its products and
other information the Company considers proprietary. The Company pursues a
policy of having its employees and consultants execute non-disclosure
agreements upon commencement of employment or consulting relationships with
the Company, which agreements provide that all confidential information
developed or made known to the individual during the course of the
relationship shall be kept confidential except in specified circumstances.
There can be no assurance, however, that these agreements will provide
meaningful protection for the Company's trade secrets or other proprietary
information in the event of unauthorized use or disclosure of such
information.
Further, the Company has developed and relies on the trademarks that it uses
with its products, including the Lasette(-TM-), the RevitaLase(-TM-) and the
IVF Workstation(-TM-). The Company has applied for a federal registration for
the name Lasette(-TM-) and intends to apply for federal registration with
respect to the use of the RevitaLase(-TM-) and IVF Workstation(-TM-)
trademarks. Where registrations of trademarks have not been issued, the
Company claims common law trademark rights to those names. Notwithstanding,
there can be no assurance that the Company will obtain additional
registrations for any of its trademarks or that the Company will not be
subject to opposition, cancellation or infringement proceedings based upon the
use of such trademarks. The loss of the use of any one or more of the
trademarks could have a material adverse effect upon the Company's ability to
profitably market the associated product.
Competition.
- ------------
The industry in which the Company competes is characterized by intense
competition, extensive research and development efforts and rapid
technological progress. New product developments and enhancements of existing
products are expected to continue and there can be no assurance that
discoveries by others will not render the Company's products non-competitive.
There are many companies, both public and private, that are engaged in the
development of products for the same applications being pursued by the
Company. Many of those companies have substantially greater financial,
research and development, manufacturing and marketing experience and resources
than the Company and represent substantial long-term competition for the
Company. Such companies may succeed in developing products that are more
effective or less costly than any products that may currently be owned or
which may be developed by the Company in the future. Specifically, the Company
is aware of several other companies which are developing glucose testing
products based on non-invasive technologies, such as skin patches and
diode-pumping laser products. If these products are approved for sale and
become commercially available in the United States in the future, they could
have a material adverse effect on sales of the Lasette(-TM-) and on the
business and financial condition of the Company.
Factors affecting competition in the laser-based medical and biotechnological
industry vary depending on the extent to which the competitor is able to
achieve a competitive advantage based upon proprietary technology. If the
Company is able to establish and maintain a significant proprietary position
with respect to its products, competition will likely depend primarily on the
effectiveness of the products and their price competitiveness. In addition,
the Company's competitive position also depends upon its ability to attract
and retain qualified scientific and other personnel, develop effective
proprietary products, acquire technology from third parties, implement
development and marketing plans, obtain patent protection and secure adequate
capital resources.
Risks Associated with Licenses.
- -------------------------------
The LaserTweezers(-Registered Mark-) application of the Cell Robotics
Workstation is based upon an exclusive patent license from AT&T (the "AT&T
License"), which requires the payment of substantial minimum annual royalties
in the future. If future sales of the Cell Robotics Workstation do not
increase substantially over historical levels, it is likely that future sales
of the product will be rendered uneconomical by virtue of the minimum royalty
required under the AT&T License. Under such circumstances, the Company may
elect to allow the AT&T License to terminate and as a result lose its ability
to continue to market the LaserTweezers(-Registered Mark-) module of the Cell
Robotics Workstation.
Technological Change and Product Obsolescence.
- ----------------------------------------------
The medical device industry is characterized by extensive research efforts,
rapid technological progress, evolving industry standards, frequent new
product and service introductions and enhancements and intense competition
from numerous organizations, including pharmaceutical and medical diagnostic
equipment companies, academic institutions, and others. New developments are
expected to continue at a rapid pace. There can be no assurance that research
and discoveries by others will not render any of the Company's products or
potential products non-competitive, obsolete and/or unmarketable. In order to
compete successfully, the Company must continue to improve its current
products and develop and market new products that keep pace with technological
developments. Accordingly, even if the Company's medical laser products
achieve market acceptance, its future success will depend in significant part
on its ability to continually improve the performance, features, and
reliability of its products in response to both evolving demands of the
marketplace and competitive product offerings. There can be no assurance that
the Company will be successful in so doing. Any failure by the Company to
anticipate or respond adequately to technological developments could have a
material adverse effect on its operating results and financial condition. The
Company's pursuit of necessary technological advances will require substantial
time and expense, and there can be no assurance that the Company will succeed
in adapting its products to changing technology standards and customer
requirements. There can be no assurance that the announcement or introductions
of new products by the Company or its competitors or any change in industry
standards will not cause customers to defer or cancel purchases of existing
products, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
Government Regulation; Need for Additional Product Clearances and Approvals.
- ---------------------------------------------------------------------------
The testing, manufacture, labeling, distribution, marketing and advertising of
products such as the Company's existing and proposed products and its ongoing
research and development activities are subject to extensive regulation by
government regulatory authorities in the United States and other countries.
The FDA and comparable agencies in foreign countries impose substantial
requirements on the introduction of new medical laser products through lengthy
and detailed clinical testing procedures, and other costly and time-consuming
compliance procedures. The Company's products must receive FDA clearance
before they can be commercially marketed in the United States, which in many
instances involves rigorous pre-clinical and clinical testing and an extensive
FDA approval process. The time required for completing such testing and
obtaining such approvals is uncertain, and FDA clearance may never be obtained
for some products or applications. Delays or rejections may be encountered
based upon changes in FDA policy during the period of product development and
FDA regulatory review of the Company's submitted application. Similar delays
may also be encountered in other countries. Failure to receive timely approval
from these agencies could result in the Company's incurring substantial costs
and could also have a material adverse effect upon the Company's operations
and financial condition. In addition, if regulatory clearance of a product is
granted, such clearance may entail limitations on the indicated uses for which
the product may be marketed. Also, modifications may be made to the Company's
products to incorporate enhancements to their functionality and performance
based upon new data and design review. There can be no assurance that the FDA
will not request additional information relating to product improvements, that
any such improvements would not require further regulatory review thereby
delaying testing, approval and commercialization of the Company's products or
that ultimately any such improvements will receive FDA clearance.
While the Lasette(-TM-) has been cleared by the FDA for clinical use for all
adult glucose/hematocrit testing, including diabetics, the Company believes
that realizing the full commercial potential of the Lasette(-TM-) will depend
upon the Company receiving FDA clearance to sell the Lasette(-TM-) to all
diabetics (adults and children) for home use. The Company is applying for FDA
clearance to sell the product for home use by diabetics; however, there can be
no assurance that such clearance will be issued or, if issued, that it will
not be subject to restrictions that could substantially impair its future
profitability. In addition, the laser-assisted hatching module of the IVF
Workstation(-TM-) has only begun clinical trials, which will consist of at
least 600 clinical cycles. It is estimated that the clinical trials for this
product will take at least one year to complete, with no assurance that once
completed the product will receive FDA clearance for sales in the United
States.
FDA regulations also require manufacturers of medical devices to adhere to
certain "Medical Device Quality System Regulation" ("MDQS"), which include
testing, design, quality control and documentation procedures. Compliance with
applicable regulatory requirements is subject to continual review and will be
monitored through periodic inspections by the FDA. Similarly, sales of the
Company's products outside of the United States are also subject to certain
manufacturing standards promulgated by the International Standards
Organization ("ISO"). In addition, the Company's manufacturing activities are
subject to regulation and control under the Occupational Safety and Health Act
(OSHA) and regulations promulgated thereunder. Later discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on such product or manufacturer, including fines, delays, or
suspensions of regulatory clearances, seizures, recalls of products, operating
restrictions and criminal prosecution. The failure to comply with regulatory
requirements could subject the Company to regulatory or judicial enforcement
actions, including, but not limited to, product recall or seizures,
injunctions, civil penalties, criminal prosecution, refusals to approve new
products and withdrawal of existing approvals, as well as potentially enhanced
product liability exposure. Sales of the Company's products outside of the
United States will be subject to regulatory requirements governing clinical
trials and marketing approval.
In addition, the foreign sale by the Company of at least one of its lasers is
subject to the Export Control Act and can only be exported under a license
held by the Company's supplier. Should that source of supply fail to maintain
such license, the Company's ability to export that laser product would be
suspended until it was able to identify and enter into an arrangement with a
new licensed supplier. These requirements vary widely from country to country
and could delay introduction or continuing sales of the Company's products in
foreign countries.
Dependence Upon Source of Supply.
- ---------------------------------
The Erbium:YAG lasers used by the Company in the Lasette(-TM-) and the
RevitaLase(-TM-) are made from crystals which the Company has manufactured in
Russia through a strategic relationship. The Company's competitive advantage
in these products is derived to a degree upon the significant cost savings
which the Company is able to realize by having its crystals manufactured by
its Russian supplier. However, the continuation of the Company's relationship
with this source of supply is in doubt due to current unresolved disputes,
including problems related to crystal quality. If this source of supply were
restricted or eliminated due to factors specifically affecting such supplier,
such as the inadvertent or intentional non-performance by such source, or
events flowing from Russia's political or economic instability, it is likely
that alternative sources of supply would be substantially more expensive. As a
result of the foregoing, and other factors beyond the control of the Company,
the Company could lose its strategically important source of supply for laser
crystals, which would impair its competitive advantage.
Uncertainty of Market Acceptance.
- ---------------------------------
Achieving market acceptance for the Company's proprietary products will
require substantial marketing efforts and expense. As with any new technology,
there is substantial risk that the marketplace will not accept the potential
benefits of such technology or be willing to pay for any cost differential
with the existing technologies. For example, the Lasette(-TM-) will compete
directly with stainless steel lancets which only cost pennies apiece and
non-invasive procedures and products are currently being developed by other
companies. Market acceptance of these current and proposed products will
depend, in large part, upon the ability of the Company to educate potential
customers, including third-party distributors, of the distinctive
characteristics and benefits of its products. There can be no assurance that
current or proposed products will be accepted by the end users or that any of
the current or proposed products will be able to compete effectively against
current and alternative products.
Dependence on Manufacturers.
- ----------------------------
The Company is relying upon a third party to manufacture the Lasette(-TM-).
To this end, the Company is currently renegotiating the terms of a
manufacturing agreement with this manufacturer. There can, however, be no
assurance that the Company's renegotiation efforts will be successful, or that
the terms of any new agreement with this manufacturer will be more favorable
to the Company. The Company is dependent on third parties to produce and
manufacture certain components for its other products. Certain key components
used in the manufacturing of the Company's products are currently obtained
from single vendors. Except as described above, there are no written
agreements with such third parties, and no third party is obligated to perform
any services for the Company on which the Company depends in order to meet its
business objectives. Consequently, there can be no assurance that these third
parties will commit any resources to the commercialization of the Company's
business. Any supply interruption in a sole-sourced component could
potentially have a material adverse effect on the Company's ability to
manufacture products until a new source of supply were qualified. There can be
no assurance that the Company would be successful in qualifying additional
sources on a timely basis, if ever. Failure to do so would have a material
adverse effect on the Company's business, financial condition, and results of
operations.
Product Defects and Warranties.
- -------------------------------
Products as complex as those developed by the Company may contain undetected
errors or defects when first introduced or as new versions are released. In
addition, the Company offers on existing products and plans to offer on future
products a one-year warranty against defects in materials and workmanship.
There can be no assurance that, despite testing by the Company or its
customers, errors will not be found in new products resulting in warranty
claims, product redevelopment costs and loss of, or delay in, market
acceptance and additional costs. If a product initially fails to produce
acceptable results, customer acceptance of the Company's products, even those
which have been successfully redesigned or improved, could be materially
adversely affected.
Marketing and Sales; Lack of Strategic Relationships.
- -----------------------------------------------------
In order for the Company to increase revenues and achieve profitability, the
Company's products must achieve a significant degree of market acceptance. The
Company's future success is dependent upon its ability to establish an
effective sales organization for its proprietary products or to enter into
distribution arrangements with other entities selling to its target markets.
No assurances can be given that the Company will be able to hire and retain
its own sales force or enter into appropriate distribution arrangements. The
Company must attract, build, train and motivate a marketing and sales force
which the Company currently is working to expand. Building a successful sales
force takes time, and requires a significant amount of capital. The Company
intends to acquire experienced marketing personnel, and to enter into
marketing and distribution agreements with various strategic partners. There
can be no assurance that the Company will be successful in recruiting
marketing personnel with the required skills or that it will be able to enter
into such strategic relationships. In addition, there can be no assurance that
a commercial market for the Company's products will develop, that the Company
will be able to compete effectively on price or some other basis, if such a
market does develop, or that the Company's products will perform up to market
expectations.
Dependence Upon Key Personnel.
- ------------------------------
The Company's future success is dependent on the continued service of its key
technical, marketing, sales, and management personnel and on its ability to
continue to attract, motivate, and retain highly qualified employees. The
Company's key employees may voluntarily terminate their employment with the
Company at any time. Competition for such employees is intense and the process
of locating technical and management personnel with the combination of skills
and attributes required to execute the Company's strategy is often lengthy.
Accordingly, the loss of the services of key personnel could have a material
adverse effect upon the Company's operations and on research and development
efforts. Further, the Company does not have key person life insurance covering
its management personnel or other key employees, other than a $500,000 term
policy on its president and CEO, Ronald K. Lohrding, Ph.D.
Management of Growth; Unspecified Acquisitions.
- -----------------------------------------------
The Company's ability to manage its growth, if any, will require it to
continue to improve and expand its management, operational and financial
systems and controls. Any measurable growth in the Company's business will
result in additional demands on its customer support, sales, marketing,
administrative and technical resources and will place significant strain on
the Company's management, administrative, operation, financial and technical
resources and increase demand upon its systems and controls. There can be no
assurance that the Company will be able to successfully address these
additional demands. There also can be no assurance that the Company's
operating and financial control systems will be adequate to support its future
operations and anticipated growth. Failure to manage the Company's growth
properly could have a material adverse effect upon the Company's business,
financial condition and results of operations. The Company may also seek
potential acquisitions of patents, products, technologies and businesses that
could complement or expand the Company's business. In the event the Company
were to identify an appropriate acquisition candidate, there is no assurance
that the Company would be able to successfully negotiate, finance or integrate
such acquired patents, products, technologies or businesses. Furthermore, such
an acquisition could cause a diversion of management's time and resources.
There can be no assurance that a given acquisition, when consummated, would
not materially adversely affect the Company's business and results of
operations. See "RISK FACTORS - DEPENDENCE UPON KEY PERSONNEL."
Health Care Reform and Potential Limitations on Third-Party Reimbursement
Related Matters.
- ---------------------------------------------------------------------------
The Company's future success may be affected by the continuing efforts of
government and third-party payors to contain or reduce the costs of health
care through various means. The Company cannot predict the effect health care
reforms may have on its business, and there can be no assurance that any such
reforms will not have a material adverse effect on the Company. Certain of the
medical lasers products that the Company is developing are designed for use in
elective medical procedures, such as cosmetic surgery and "in vitro"
fertilization. In both the United States and elsewhere, uses of elective
medical procedures are dependent in part on the availability of reimbursement
to the consumer from third-party payors, such as government and private
insurance plans. Third-party payors are increasingly challenging the prices
charged for medical products and services. It is unlikely that the cost of the
Lasette(-TM-) will qualify as a reimbursable expense under most health
insurance programs. There can be no assurance that the Company's laser medical
products will be considered cost effective and that reimbursement to the
consumer will be available or will be sufficient to allow the Company to sell
its products on a competitive basis.
Limited Market for Scientific Instruments.
- ------------------------------------------
The principal markets for the Company's scientific instrumentation products
are colleges, universities and other institutions engaged in scientific
research. Most, if not all, of these potential customers rely upon federal and
state funding in order to support their research activities. The ability of
these institutions to purchase the Company's products is dependent upon
receiving adequate funding from the public sector. A reduction or withdrawal
of government support of scientific pursuits could result in, a diminished
demand for the Company's products.
Risk of Product Liability.
- --------------------------
Clinical trials or marketing of any of the Company's products may expose the
Company to liability claims from the use of such products. The Company
currently carries product liability insurance with limits of $2,000,000;
however, there can be no assurance that the Company will be able to obtain or
maintain insurance on acceptable terms for its clinical and commercial
activities or that such insurance would be sufficient to cover any potential
product liability claim or recall. Failure to have sufficient coverage could
have a material adverse effect on the Company's business and results of
operations.
Broad Discretion and Application of Proceeds.
- ---------------------------------------------
The Company expects that the proceeds of this offering, if any, will be used
principally for product research and development and to launch its medical
laser products. The Company is not currently able to estimate precisely the
allocation of the proceeds among such uses, and the time and amount of
expenditures will vary depending upon numerous factors. The Company's Board of
Directors will have broad discretion to allocate the proceeds of this offering
and to determine the timing of expenditures. See "USE OF PROCEEDS."
Federal Income Tax Liability on Preferred Stock Dividend.
- ---------------------------------------------------------
Subject to certain conditions and assumptions, the payment and distribution by
the Company of the dividend in the form of Common Stock to holders of the
Preferred Stock will be characterized as a dividend for federal income tax
purposes. In general, distributions classified as dividends for federal income
tax purposes constitute ordinary income and will be recognized by the holders
of the Preferred Stock as taxable income upon the accrual of such dividend.
The amount of income tax attributable to receipt of such Common Stock dividend
is dependent, upon other things, upon the taxpayer's other income and expenses
for such year and the rates then in effect. While the Company has undertaken
and intends to distribute the Common Stock dividend within 30 days following
its accrual every six months, there can be no assurance that holders of the
Preferred Stock will be able to dispose of the Common Stock in market
transactions in sufficient quantities to pay the income tax which may be
attributable to receipt of such dividends. As a result, there is a risk that
holders of Preferred Stock will recognize taxable income with respect to the
Common Stock dividend and be required to pay income tax attributable to such
dividend without being able to liquidate sufficient quantities of the Common
Stock to pay the associated tax liability. THE TAX TREATMENT TO A HOLDER MAY
VARY DEPENDING ON SUCH HOLDER'S PARTICULAR SITUATION. POTENTIAL INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT THAT MAY BE
ANTICIPATED TO RESULT FROM THE OWNERSHIP OR DISPOSITION OF THE PREFERRED STOCK
IN THEIR PARTICULAR CIRCUMSTANCES.
Substantial Dilution.
- ---------------------
At March 31, 1998, the Company had a net tangible book value of $3,168,728 or
approximately $.63 per share of Common Stock outstanding, based upon 5,045,414
shares issued and outstanding. Assuming the exercise of all outstanding
Warrants, investors in this Offering exercising Warrants will incur immediate
and substantial dilution of their investment of approximately $1.72 per share,
or 71.7% of the Warrant Exercise Price, based upon the Company's adjusted net
tangible book value as of March 31, 1998. Such dilution does not reflect the
possible conversion of 538,788 shares of Preferred Stock into 2,155,152 shares
of Common Stock, which will further dilute existing shareholders. To the
extent that currently outstanding options and warrants to purchase the
Company's Common Stock are exercised, and depending upon the Company's net
tangible book value on the date of exercise, there may be further,
substantial, dilution to investors in this Offering exercising Warrants. See
"DILUTION."
Exercise Price Of Warrants.
- ---------------------------
The Exercise Price of the Warrants was determined by agreement between the
Company and the holders of the Warrants and bears no direct relationship to
the Company's assets, book value, net worth or operations.
No Assurance of Warrant Exercise.
- ---------------------------------
Holders of Warrants are under no obligation to exercise the warrants, and can
be expected to do so only if it is economically reasonable for them to do so.
Typically, warrants are not exercised unless exercise is forced, either by
the Company calling them for redemption, or because they are scheduled to
expire; and then they will be exercised only if the exercise price is less
than the market price of the Common Stock. Accordingly, there is no assurance
that the Warrants will be exercised during the Warrant Term.
No Dividends.
- -------------
The Company has not declared or paid cash dividends on its Common Stock in the
preceding two fiscal years. The Company currently intends to retain all future
earnings, if any, to fund the operation of its business, and therefore does
not anticipate paying dividends on Common Stock in the foreseeable future.
Potential Adverse Effects of Shares Eligible for Future Sale.
- -------------------------------------------------------------
Sales of Common Stock (including Common Stock issued upon the exercise of
outstanding options and warrants and conversion of outstanding shares of
preferred stock) in the public market after this offering could materially
adversely affect the market prices of the Common Stock, the Preferred Stock
and the Warrants. Such sales also might make it more difficult for the Company
to sell equity securities or equity-related securities in the future at a time
and price that the Company deems acceptable, or at all. As of March 31, 1998,
5,045,414 shares of the Company's $.004 par value Common Stock, were issued
and outstanding, of which 4,250,208 are unrestricted and freely tradeable at
the discretion of their owners and 795,206 are "restricted securities" and
under certain circumstances may, in the future, be sold in compliance with
Rule 144 adopted under the Securities Act. In general, under Rule 144, subject
to the satisfaction of certain other conditions, a person, including an
affiliate of the Company, who beneficially owned restricted shares of Common
Stock for at least one (1) year is entitled to sell, within any three
(3) month period, a number of shares that does not exceed the greater of one
percent (1%) of the total number of outstanding shares of the same class, or
if the Common Stock is quoted on NASDAQ or a stock exchange, the average
weekly trading volume during the four (4) calendar weeks immediately preceding
the sale. A person who presently is not, and who has not been an affiliate of
the Company for at least three (3) months immediately preceding the sale, and
who has beneficially owned the shares of Common Stock for at least two
(2) years is entitled to sell such shares under Rule 144 without regard to the
volume limitations described above. Of these restricted shares, approximately
409,406 shares of Common Stock are eligible for sale in the public market
without restriction in reliance upon Rule 144(k) under the Securities Act. Of
the 795,206 restricted shares outstanding, 385,800 are beneficially owned by
officers, directors and affiliates of the Company, all of which are
immediately eligible for resale subject to the volume limitations of Rule 144.
Additionally, the Company currently has outstanding 538,788 shares of
Preferred Stock which will be convertible into 2,155,152 shares of Common
Stock and Warrants exercisable to purchase an additional 1,077,576 shares of
Common Stock. Further, if all of the Preferred Stock remains outstanding until
their automatic conversion in three years, the Company will issue as a
dividend on that Preferred Stock 215,515 shares of Common Stock every six
months, or an aggregate of 1,293,090 shares of Common Stock over three years.
In addition, the Company currently has issued and outstanding options and
warrants to purchase an aggregate of 1,270,905 shares of Common Stock, of
which 1,005,785 underlying shares of Common Stock may be freely tradeable upon
exercise due to a registration statement covering the Plan. The Company may
also grant options to purchase an additional 300,000 shares of Common Stock
under the Employee Stock Purchase Plan ("ESPP"). No prediction can be made as
to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices prevailing
from time-to-time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
market prices for the Common Stock, Preferred Stock and Warrants and could
impair the Company's ability to raise capital in the future through the sale
of equity securities. Actual sales or the prospect of future sales of shares
of Common Stock under Rule 144 may have a depressive effect upon the prices of
the Common Stock, Preferred Stock and Warrants and the markets therefor.
Possible Dilution from Future Sales of Common Stock.
- ----------------------------------------------------
The Company's Board of Directors has the authority to issue up to 12,500,000
shares of Common Stock and to issue options and warrants to purchase shares of
the Company's Common Stock without stockholder approval. Future issuance of
Common Stock could be at values substantially below the offering price in this
offering and therefore could represent further substantial dilution to
investors in this offering. In addition, the Board could issue large blocks of
common stock to fend off unwanted tender offers or hostile takeovers without
further stockholder approval. See "DESCRIPTION OF SECURITIES."
Potential Adverse Effects of Future Sales of Preferred Stock.
- -------------------------------------------------------------
The Company's Articles of Incorporation, as amended, authorize the issuance of
up to 2,500,000 shares of $.04 par value preferred stock. In addition to the
Preferred Stock offered hereby, the Board of Directors has been granted the
authority to fix and determine the relative rights and preferences of
additional preferred shares, as well as the authority to issue such shares,
without further stockholder approval. As a result, the Board of Directors
could authorize the issuance of a series of preferred stock which would grant
to holders preferred rights to the assets of the Company upon liquidation, the
right to receive dividend coupons before dividends would be declared to common
stockholders, and the right to the redemption of such shares, together with a
premium, prior to the redemption of Common Stock. Common stockholders have no
redemption rights. In addition, the Board could issue large blocks of
preferred stock to fend against unwanted tender offers or hostile takeovers
without further stockholder approval. See "DESCRIPTION OF SECURITIES."
Management's Lack of Voting Influence.
- --------------------------------------
The Company's President, Ronald K. Lohrding, owns 300,000 shares of Common
Stock, and vested options exercisable to acquire an additional 310,417 shares
of Common Stock, together representing 11.22% of the total issued and
outstanding shares of Common Stock. All of the Company's officers and
directors as a group own only 427,442 shares of Common Stock, and vested
options exercisable to acquire an additional 670,750 shares of Common Stock.
Even giving effect to the exercise of their outstanding and vested options,
the Company's officers and directors as a group would exercise voting control
over only 18.54% of the Company's outstanding shares of Common Stock following
completion of this offering. As a result of this lack of voting influence as
stockholders, there can be no assurance that the Company's officers and
directors will be able to implement the Company's business plans and
strategies. Further, it is possible that stockholders with greater voting
influence could initiate actions which could be adverse to those plans or
hostile to current management.
Limited Public Trading Market for the Company's Securities.
- -----------------------------------------------------------
The Company's Common Stock, Preferred Stock and Warrants are traded on the OTC
Electronic Bulletin Board ("Bulletin Board") under the trading symbols CRII,
CRIIP and CRIIW, respectively. While there currently exists a limited and
sporadic public trading market for the Company's securities, the prices are
subject to high degrees of volatility and there can be no assurance that such
a market will improve in the future. As a result, there can be no assurances
that an investor will be able to liquidate his investment without considerable
delay, if at all. Factors discussed herein may have a significant impact on
the market prices of the Company's Common Stock, Preferred Stock, and
Warrants. See "DESCRIPTION OF SECURITIES."
Risks of Price and Volume Fluctuations.
- ---------------------------------------
The over-the-counter markets for securities such as the Preferred Stock,
Warrants and Common Stock historically have experienced extreme price and
volume fluctuations during certain periods. These broad market fluctuations
and other factors, such as new product developments and trends in the
Company's industry and the investment markets generally, as well as economic
conditions and quarterly variations in the Company's results of operations,
may adversely affect the market prices of the securities.
The Securities Enforcement and Penny Stock Reform Act of 1990.
- --------------------------------------------------------------
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain
exceptions. Such exceptions include any equity security listed on NASDAQ and
any equity security issued by an issuer that has (i) net tangible assets of at
least $2,000,000, if such issuer has been in continuous operation for three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has
been in continuous operation for less than three years, or (iii) average
annual revenue of at least $6,000,000, if such issuer has been in continuous
operation for less than three years. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the
risks associated therewith.
The Company's Common Stock is, the Preferred Stock may become, and the
Warrants will be subject to rules adopted by the Commission regulating
broker-dealer practices in connection with transactions in "penny stocks."
Those disclosure rules applicable to penny stocks require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized list disclosure document prepared by the Commission.
That disclosure document advises an investor that investments in penny stocks
can be very risky and that the investor's salesperson or broker is not an
impartial advisor but rather paid to sell the shares. It contains an
explanation and disclosure of the bid and offer prices of the security, any
retail charges added by the dealer to those prices ("markup" or "markdown"),
and the amount of compensation or profit to be paid to or received by the
salesperson in connection with the transaction. The disclosure contains
further admonitions for the investor to exercise caution in connection with an
investment in penny stocks, to independently investigate the security as well
as the salesperson with whom the investor is working, and to understand the
risky nature of an investment in the security. Further, the disclosure
includes information regarding the market for penny stocks, explanations
regarding the influence that market makers may have upon the market for penny
stocks and the risk that one or two dealers may exercise domination over the
market for such security and therefore control and set prices for the security
not based upon competitive forces. The broker-dealer must also provide the
customer with certain other information and must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. Further, the
rules require that following the proposed transaction the broker provide the
customer with monthly account statements containing market information about
the prices of the securities. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules. Many brokers may be
unwilling to engage in transactions in the Company's securities because of the
added disclosure requirements, thereby making it more difficult for purchasers
of Units in this offering to dispose of their securities.
Potential Adverse Effects of Market Overhang from Preferred Stock, Warrants
and Outstanding Options.
- ---------------------------------------------------------------------------
The Company has outstanding options and warrants exercisable to acquire
2,428,481 shares of Common Stock, 265,120 of which are subject to future
vesting. Included in the foregoing are 1,250,000 shares of Common Stock
reserved for issuance under the Company's Incentive Stock Option Plan of which
the Company has granted 1,005,785 options with respect to such shares, all of
which are immediately exercisable. In addition, the Company has reserved
300,000 shares for issuance under the Company's ESPP. Finally, the Company has
outstanding shares of Preferred Stock convertible into 2,155,152 shares of
Common Stock. To the extent that such stock options or warrants are exercised,
or the Preferred Stock converted, dilution to the interests of the Company's
stockholders will likely occur. Additional options and warrants may be issued
in the future at prices not less than 85% of the fair market value of the
underlying security on the date of grant. Exercise of these options or
warrants, or conversion of the Preferred Stock, or even the potential of their
exercise or conversion may have an adverse effect on the trading price and
market for the Common Stock. The holders of the Preferred Stock, options or
warrants are likely to convert or exercise them at times when the market price
of the Common Stock exceeds the conversion or exercise prices of the
securities. Accordingly, the issuance of shares of Common Stock upon exercise
of the options or warrants or conversion of the Preferred Stock will likely
result in dilution of the equity represented by the then outstanding shares of
Common Stock held by other stockholders. Holders of the Preferred Stock,
options or warrants can be expected to convert or exercise them at a time when
the Company would, in all likelihood, be able to obtain any needed capital on
terms which are more favorable to the Company than the exercise terms provided
by such options or warrants. See "DESCRIPTION OF SECURITIES."
Need for Current Prospectus and State Blue Sky Registrations.
- -------------------------------------------------------------
Holders of the Preferred Stock and/or Warrants will have the right to convert
the Preferred Stock or exercise the Warrants to acquire shares of Common Stock
only if there is a current and effective Registration Statement and Prospectus
covering the shares of Common Stock issuable upon their conversion or
exercise, and only if the shares are qualified for sale, or exempt from
qualification, under the securities laws of the applicable state or states.
While the Company has undertaken and plans to do so, maintaining a current
effective Registration Statement and Prospectus could result in substantial
expense to the Company, and there can be no assurance that a current
Registration Statement and Prospectus will be in effect when any of the
Preferred Stock is converted or the Warrants are attempted to be exercised.
Although the Company will seek to qualify for sale the shares of Common Stock
underlying the Preferred Stock and Warrants in those states in which the
securities are to be offered and qualification is required, no assurance can
be given that such qualification will occur. The Preferred Stock and Warrants
may be deprived of any value if a Prospectus covering the shares issuable upon
the conversion or exercise thereof is not kept effective and current, or if
such underlying shares are not, or cannot be, registered in the applicable
states. See "DESCRIPTION OF SECURITIES."
Potential Adverse Effect of Warrant Redemption.
- -----------------------------------------------
The Warrants may be redeemed by the Company at a price of $0.25 per Warrant
upon 30 days' notice, mailed after the closing bid price of the Common Stock
has equaled or exceeded $4.80 for a period of ten consecutive trading days.
Warrantholders shall have exercise rights until the close of the business day
preceding the date fixed for redemption. Redemption of the Warrants could
force the holders to exercise the Warrants and pay the Exercise Price at a
time when it may be disadvantageous for holders to do so, to sell the Warrants
at the then current market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price, which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. The Warrants may not be redeemed or exercised unless a
Registration Statement pursuant to the Securities Act covering the underlying
shares of Common Stock is current and such shares have been qualified for
sale, or there is an exemption from applicable qualification requirements,
under the securities laws of the state of residence of the holder of the
Warrant. See "DESCRIPTION OF SECURITIES."<PAGE>
<PAGE>
DILUTION
The net tangible book value of the Company at March 31, 1998 was
$3,168,728 or approximately $.63 per share of Common Stock outstanding, based
upon 5,045,414 issued and outstanding shares of Common Stock, and without
giving effect to the conversion of 538,788 shares of Preferred Stock into
2,155,152 shares of Common Stock. Net tangible book value per share is
determined by dividing the number of outstanding shares of Common Stock into
the net tangible book value of the Company (total assets less total
liabilities and intangible assets).
If any outstanding shares of Preferred Stock are converted into shares of
Common Stock, the number of Common Shares outstanding will increase, however,
because no remuneration will be paid to the Company upon conversion, the
Company's net tangible book value will not increase. On the other hand, if
any outstanding Warrants are exercised, of which there can be no assurance,
the number of Common Shares outstanding will increase and the Company's net
tangible book value will increase. The exercise of any Warrants at a time when
the exercise price is greater than the Company's net tangible book value per
share will increase the net tangible book value per share of shares held by
the then current shareholders and decrease the net tangible book value per
share of the shares purchased pursuant to the Warrant exercise. Dilution is
the reduction of value of the purchaser's investment measured by the
difference between the Warrant Exercise Price and the net tangible book value
per share after the Offering, if the Warrants are exercised at a time when the
Warrant Exercise Price is greater than the net tangible book value per
outstanding share before the exercise. The dilution per share will decrease
with the exercise of each additional Warrant because the proceeds from each
such exercise will increase the Company's net tangible book value.<PAGE>
<PAGE>
USE OF PROCEEDS
The 78,788 shares of Preferred Stock and 157,576 Warrants covered by this
Prospectus were issued by the Company to the Selling Securityholders in a
private transaction. The 472,728 shares of Common Stock covered by this
Prospectus consist of (i) 315,152 shares of Common Stock issuable upon
conversion of the Preferred Stock, and (ii) 157,576 shares of Common Stock
issuable upon exercise of outstanding Warrants at a price of $2.40 per share.
(See "PLAN OF DISTRIBUTION.")
The Company will not receive any of the proceeds from the sale of
Preferred Stock and/or Warrants which may be sold by the Selling
Securityholders. If all of the 157,576 shares of Common Stock offered hereby
are purchased upon exercise of the Warrants, of which there can be no
assurance, then the Company will receive gross proceeds of up to $378,182.
The Company has agreed to pay all of the expenses incurred in connection with
the registration of securities covered by this Prospectus, estimated to be
$12,000. The Warrantholders and Selling Securityholders will not pay any of
the expenses which are expected to be incurred in connection with the
registration of the shares, but will pay all commissions, discounts and other
compensation to any securities broker-dealers through whom they sell any of
the shares.
The Company will utilize the net proceeds, if any, realized from the
exercise of the Warrants for working capital and for general corporate
purposes, at the discretion of management. Pending their use, proceeds will be
placed in short-term, interest-bearing investment grade securities,
certificates of deposit or direct or guaranteed obligations of the United
States of America.
Due to an inability to precisely forecast the number of Warrants which
may be exercised, the Company is unable to predict the precise period for
which the Warrant Stock Offering will provide financing. The Company's
working capital requirements are a function of its future sales growth and
potential business or product acquisition, neither of which can be predicted
with any reasonable degree of certainty. The Company may need to seek funds
through loans or other financing arrangements in the future, and there can be
no assurance that the Company will be able to make such arrangements in the
future should the need arise. (See "RISK FACTORS.")
DETERMINATION OF OFFERING PRICE
Each share of Preferred Stock is convertible into four shares of Common
Stock (the "Conversion Ratio"). The Offering Price of the 157,576 shares of
Warrant Stock offered pursuant to the exercise of the Warrants is $2.40 per
share. The Conversion Ratio of the Preferred Stock and Exercise Price of the
Warrants was determined by negotiation between the Company and the Selling
Securityholders and bears no relationship to the market price of the Company's
Common Stock, the prevailing market conditions, operating results of the
Company in recent periods, the book value of the Company, or other recognized
criteria of value. The Warrants were issued by the Company as part of Units
sold by the Company at a price of $8.25 per Unit in a private offering (the
"Private Offering"). The Selling Securityholders are accredited investors,
and the terms of the Private Offering were the result of negotiation between
the Company and Selling Securityholders. The Units and price per Unit are
identical to the Units and offering price per Unit sold by the Company in a
secondary public offering underwritten by Paulson Investment Company, Inc. in
February, 1998.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
Selling Securityholders' Offering
- ---------------------------------
This Prospectus relates to the reoffer of 78,788 shares of Preferred
Stock and 157,576 Warrants currently owned by the Selling Securityholders, all
of which were sold as part of Units in the Private Offering.
The Selling Securityholders were granted certain demand and piggyback
registration rights with respect to the Preferred Stock and Warrants sold as
part of the Units.
The Company has been advised by the Selling Securityholders that they may
hold some of the shares of Preferred Stock and/or Warrants which they own or
shares of Common Stock which they may acquire pursuant to the exercise of the
Warrants and/or conversion of Preferred Stock for investment purposes.
However, the Selling Securityholders have not determined how many shares of
Common Stock, Preferred Stock and/or Warrants they will hold for investment
and how many shares or warrants they will sell. The Selling Securityholders
may distribute or resell the shares of Common Stock, Preferred Stock and/or
Warrants offered hereby to the public in the over-the-counter market at prices
and on terms prevailing on the date of sale in negotiated transactions or
otherwise. The Selling Securityholders also may pay customary brokerage
commissions on sales.
The shares of Common Stock, Preferred Stock and Warrants offered by the
Selling Securityholders are offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act.
Conversion Stock Offering
- ------------------------
Each share of Preferred Stock is convertible into four shares of Common
Stock, subject to adjustment under certain circumstances at any time at the
option of the Holder thereof. Each share of Preferred Stock shall
automatically convert into four shares of Common Stock upon the earlier of (a)
February 2, 2001 or (b) the date upon which the sum of closing bid prices of
the Preferred Stock and two Warrants has been at least $12.375 for at least
ten consecutive trading days. Dividends in the form of shares of the Company's
Common Stock will accrue on all outstanding shares of Preferred Stock at the
rate of four-tenths of one share of Common Stock every six months commencing
February 2, 1998. Such Common Stock dividends shall be issued and distributed
within 30 days following their accrual every six months. The Company intends
to maintain a current Prospectus until the shares of Preferred Stock are
converted into shares of Common Stock.
The shares of Common Stock to be issued upon conversion of the Preferred
Stock are offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act.
The Company is offering shares of Common Stock underlying the Preferred
Stock. No underwriter or placement agent has been engaged to assist the
Company in this regard and no commissions or similar compensation will be paid
to any person. Holders of the Preferred Stock may resell the shares offered
hereby from time to time in transactions (which may include block
transactions) in the over-the-counter market, in negotiated transactions,
through the writing of options on the Common Stock or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. Holders of Preferred
Stock may effect such transactions by selling the Common Stock directly to
purchasers or through broker-dealers that may act as agents or principals.
Such broker-dealers may receive compensation in the form of discount,
concessions or commissions from the Preferred Stock holders and/or the
purchasers of the shares of Common Stock for whom such broker-dealers may act
as agents or to whom they sell as principals, or both (which compensation as
to a particular-broker dealer might be in excess of customary commissions).
Warrant Stock Offering
- ----------------------
The Warrants entitle the holders thereof to acquire up to 157,576 shares
of Common Stock at an Exercise Price of $2.40 per share. The Warrants are
exercisable until February 2, 2003, unless earlier redeemed. The Company may
redeem the outstanding Warrants, in whole or in part, at any time upon at
least 30 days' prior written notice to the registered holders thereof, at a
price of $.25 per Warrant, provided that (i) there is in effect a registration
statement registering for sale under the Securities Act the shares of Common
Stock issuable upon exercise of the Warrant; (ii) the closing bid price of the
Company's Common Stock has been at least $4.80 for the ten consecutive trading
days immediately preceding the date of such notice of redemption; and (iii)
the expiration of the 30 day notice period is within the Warrant Term. The
Company does not have the right to compel the exercise of any of the Warrants
and the Warrantholders have not committed to exercise any of the Warrants.
Accordingly, there can be no assurance of the number, if any, of shares that
will be purchased by the Warrantholders pursuant to the exercise of the
Warrants. The Company intends to maintain a current Prospectus until the
Warrants expire, or until they are all exercised, if earlier. The Company may
at any time and from time to time extend the Warrant Term or reduce the
Warrant Exercise Price, provided written notice of such extension or reduction
is given to the registered holders of the Warrants prior to the expiration
date then in effect.
The shares of Common Stock to be issued upon exercise of the Warrants are
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
The Company is offering shares of Common Stock underlying the Warrants.
No underwriter or placement agent has been engaged to assist the Company in
this regard and no commissions or similar compensation will be paid to any
person. The Warrantholders may resell the shares offered hereby from time to
time in transactions (which may include block transactions) in the over-the-
counter market, in negotiated transactions, through the writing of options on
the Common Stock or a combination of such methods of sale, at fixed prices
that may be changed, at market prices prevailing at the time of sale, or at
negotiated prices. The Warrantholders may effect such transactions by selling
the Common Stock directly to purchasers or through broker-dealers that may act
as agents or principals. Such broker-dealers may receive compensation in the
form of discount, concessions or commissions from the Warrantholders and/or
the purchasers of the shares of Common Stock for whom such broker-dealers may
act as agents or to whom they sell as principals, or both (which compensation
as to a particular-broker dealer might be in excess of customary commissions).
The Selling Securityholders, Warrantholders, holders of Preferred Stock,
and any broker-dealers that act in connection with the sale of the shares of
Common Stock as principals may be deemed to be "Underwriters" within the
meaning of Section 2(11) of the Securities Act and any commissions received by
them and any profit on the resale of the shares of Common Stock as principals
might be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Securityholders, Warrantholders and holders of
Preferred Stock may agree to indemnify any agent, dealer, or broker-dealer
that participates in transactions involving sales of the shares of Common
Stock against certain liabilities, including liabilities arising under the
Securities Act. The Company will not receive any proceeds from the resales of
shares of Common Stock by the Selling Securityholders, Warrantholders and
holders of Preferred Stock. Sales of the shares of Common Stock by the
Selling Securityholders, Warrantholders and holders of Preferred Stock or even
the potential of such sales, may have an adverse effect on the market price of
the Common Stock.
The Company has agreed to pay all expenses incurred in connection with
the registration of the shares offered hereby. The Selling Securityholders,
Warrantholders and holders of Preferred Stock shall be exclusively liable to
pay any and all commissions, discounts and other payments to broker-dealers
incurred in connection with their sale of the shares.
The Selling Securityholders have undertaken to the Company to comply with
Regulation M under the Exchange Act and in connection with any distribution of
the Company's securities. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities that may be incurred in connection
with this Offering, including certain liabilities under the Securities Act.
INDEMNIFICATION
The By-Laws of the Company provide for the indemnification of Officers
and Directors to the maximum extent allowable under Colorado law. Insofar as
the indemnification for liabilities arising under the Securities Act of 1933,
as amended, may be permitted to Directors, Officers or persons controlling the
Company pursuant to such provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
<PAGE>
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding the Common
Stock held by the Selling Securityholders as of March 31, 1998. To the
knowledge of the Company, the Selling Securityholders have had no material
relationship with the Company within the past three years, other than as a
result of the ownership of the securities, except as is expressly noted. The
following information has been furnished to the Company by the person named:
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership Ownership
Prior to Shares After
Offering To Be Offering (5)
Name Shares % (1) Sold (5) Shares %
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard S. Hall (2) 471,664 8.93% 236,364 235,300 4.45%
280 Estrellita Drive
Ft. Myers Beach, FL
Richard S. Hall, Jr. (3) 213,182 4.13% 118,182 95,000 1.84%
12 Suffolk Street
Fairport, NY 14450
William R. Hall (4) 226,182 4.38% 118,182 108,000 2.09%
12 Suffolk Street
Fairport, NY 14450
- ---------------------------
</TABLE>
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus,
or within sixty (60) days of such date, are treated as outstanding
when determining the percent of the class owned by such individual.
(2) Includes 222,500 shares of Common Stock owned by Mr. Hall individually
and/or by the R.S. Hall IRA; 1,000 shares of Common Stock owned by
the Hall Grantor Retained Annuity Trust and 6,000 shares of Common
Stock owned by the R.S. Hall Gift Trust, both of which are controlled
by Mr. Hall; 2,500 shares of Common Stock owned by the Wildwood
Foundation, Inc., a non-profit private foundation founded by Mr. Hall,
and for whom Mr. Hall serves as President and the Board of Trustees
and supervises investment decisions; and 1,000 shares of Common Stock
owned by the Hall Scholarship Trust which was created and is
supervised by Mr. Hall. Also includes 157,576 shares of Common Stock
issuable upon conversion of 39,394 shares of Series A Convertible
Preferred Stock, and 78,788 shares of Common Stock issuable upon
exercise of Common Stock Purchase Warrants held of record by Mr. Hall.
Finally, includes 2,300 shares of Common Stock owned by Tayloreel
Corporation South, Inc., a controlled corporation of Mr. Hall. Mr.
Hall disclaims beneficial ownership of all shares of Common Stock
owned by the Hall Scholarship Trust, and the Wildwood Foundation, Inc.
for purposes of Section 16 of the Exchange Act.
(3) Includes 95,000 shares of Common Stock owned by Richard S. Hall, Jr.
Also includes 78,788 shares of Common Stock issuable upon conversion
of 19,697 shares of Series A Convertible Preferred Stock, and 39,394
shares of Common Stock issuable upon exercise of Common Stock Purchase
Warrants held of record by Richard S. Hall, Jr.
(4) Includes 108,000 shares of Common Stock owned by William R. Hall.
Also includes 78,788 shares of Common Stock issuable upon conversion
of 19,697 shares of Series A Convertible Preferred Stock, and 39,394
shares of Common Stock issuable upon exercise of Common Stock Purchase
Warrants held of record by William R. Hall.
(5) Assuming (i) the conversion of all shares of Preferred Stock into
Common Stock and (ii) the exercise of all Warrants to purchase shares
of Common Stock and (iii) the resale of all shares of Conversion Stock
and Warrant Stock so acquired, of which there can be no assurance.<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 12,500,000 shares of $.004 par
value Common Stock and 2,500,000 shares of $.04 par value Preferred Stock. As
of March 31, 1998, 5,045,414 shares of Common Stock and 538,788 shares of
Preferred Stock were issued and outstanding, and there were 240 stockholders
of record.
Common Stock
- ------------
Each holder of Common Stock is entitled to one vote for each share held of
record. There is no right to cumulative voting of shares for the election of
directors. The shares of Common Stock are not entitled to pre-emptive rights
and are not subject to redemption or assessment. Each share of Common Stock is
entitled to share ratably in distributions to stockholders and to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor. Upon liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive, pro-rata,
the assets of the Company which are legally available for distribution to
stockholders. The issued and outstanding shares of Common Stock are validly
issued, fully paid and non-assessable.
Preferred Stock
- ---------------
The Company is authorized to issue up to 2,500,000 shares of $.04 par value
Preferred Stock. The preferred stock of the corporation can be issued in one
or more series as may be determined from time-to-time by the Board of
Directors. In establishing a series the Board of Directors shall give to it a
distinctive designation so as to distinguish it from the shares of all other
series and classes, shall fix the number of shares in such series, and the
preferences, rights and restrictions thereof. All shares of any one series
shall be alike in every particular. The Board of Directors has the authority,
without stockholder approval, to fix the rights, preferences, privileges and
restrictions of any series of preferred stock including, without limitation:
(1) the rate of distribution, (2) the price at and the terms and conditions on
which shares shall be redeemed, (3) the amount payable upon shares for
distributions of any kind, (4) sinking fund provisions for the redemption of
shares, and (5) the terms and conditions on which shares may be converted if
the shares of any series are issued with the privilege of conversion, and
(6) voting rights except as limited by law.
Although the Company currently does not have any plans to issue shares of
Preferred Stock, other than the Series A Convertible Preferred Stock described
below, or to designate any other series of Preferred Stock, there can be no
assurance that the Company will not do so in the future. As a result, the
Company could authorize the issuance of a series of Preferred Stock which
would grant to holders preferred rights to the assets of the Company upon
liquidation, the right to receive dividend coupons before dividends would be
declared to common stockholders, and the right to the redemption of such
shares, together with a premium, prior to the redemption to Common Stock. The
common stockholders of the Company have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend off unwanted tender
offers or hostile takeovers without further stockholder approval.
Series A Convertible Preferred Stock
- ------------------------------------
The Company has authorized the issuance of up to 578,788 shares of Series A
Convertible Preferred Stock (the "Preferred Stock"). The relative rights and
preferences of holders of shares of Preferred Stock are controlled by a
Certificate of Designation of Rights and Preferences of Series A Convertible
Preferred Stock (the "Certificate"), a copy of which was filed with the
Commission as an Exhibit to the Company's Registration Statement on Form SB-2
which was declared effective by the Commission on February 2, 1998. The
following is a brief summary of the provisions of the Certificate, does not
purport to be a complete statement of all of the relative rights and
preferences of holders of Preferred Stock and is qualified in its entirety by
reference to the Certificate.
Holders of outstanding shares of Preferred Stock have an option to convert
each share of Preferred Stock into four shares of the Company's Common Stock
(the "Conversion Stock") (the "Conversion Ratio"). The Conversion Ratio is
subject to certain anti-dilution adjustments, including adjustments in the
event of stock splits, dividends, reclassifications and the like. In addition,
the shares of Preferred Stock will convert, automatically, into shares of the
Company's Common Stock, upon the earlier of (i) February 2, 2001 or (ii) the
date upon which the sum of the closing bid prices of the Preferred Stock and
two Warrants equals or exceeds $12.375 for ten consecutive trading days.
Dividends payable exclusively in the form of shares of the Company's Common
Stock shall accrue on all outstanding shares of Preferred Stock at the rate of
four-tenths of one share of Common Stock every six months, commencing the date
of this Prospectus. Such dividend, rounded down to the nearest whole share of
Common Stock, shall be issued and distributed within 30 days of accrual every
six months. Other than the dividend payable in the form of Common Stock,
holders of Preferred Stock are not entitled to receive payment of any
additional dividends on the Preferred Stock, but rather are entitled to
participate pro rata in dividends paid on outstanding shares of Common Stock
when and if declared and paid by the Company.
Holders of the Preferred Stock are not entitled to vote on any matters
presented to the Company's shareholders, except as required by law and as
provided to approve certain future actions. Further, the Preferred Stock is
not redeemable by the Company and holders of Preferred Stock have no right to
compel the redemption by the Company of any shares of the Preferred Stock.
Upon liquidation, dissolution, or winding up of the Company, holders of
Preferred Stock shall be entitled to receive, pro rata, cash or assets of the
Company which are legally available for distribution to shareholders equal to
$8.25 per share of Preferred Stock prior to any distributions to the common
stockholders. The issued and outstanding shares of Preferred Stock shall be,
when subscribed and paid for as provided for herein, validly issued, fully
paid and non-assessable.
Warrants
- --------
The Company has authorized the issuance of up to 1,077,576 Warrants. Each
Warrant entitles the holder thereof to purchase one share of Common Stock at a
price of $2.40. The Warrant Exercise Price is subject to adjustment upon
certain events such as stock splits, stock dividends and similar transactions.
The Warrants are subject to redemption by the Company, as described below. The
exercise period for the Warrants expires at 5:00 p.m., Mountain time on
February 2, 2003 (the "Warrant Term"). The Company may at any time and from
time to time extend the Warrant Term or reduce the Warrant Exercise Price,
provided written notice of such extension or reduction is given to the
registered holders of the Warrants prior to the expiration date then in
effect. The Company does not presently contemplate any extension of the
Warrant Term or reduction in the Warrant Exercise Price.
Subject to compliance with applicable securities laws, Warrants
certificates may be transferred or exchanged for new certificates of different
denominations at the offices of the Warrant Agent described below. The holders
of Warrants, as such, are not entitled to vote, to receive dividends or to
exercise any of the rights of shareholders for any purpose.
EXERCISE. The Warrants may be exercised during the Warrant Term only upon
surrender of the Warrant certificate at the offices of the Company with the
form of "Election to Purchase" on the reverse side of the Warrant certificate
completed and signed, accompanied by payment of the full Exercise Price for
the number of Warrants being exercised. Warrantholders will receive one share
of Common Stock for each Warrant exercised, subject to any adjustment required
by the Warrant Agreement. For a holder to exercise Warrants, there must be a
current Registration Statement in effect with the Commission and various state
securities authorities registering the shares of Common Stock underlying the
Warrants or, in the sole determination of the Company and its counsel, there
must be a valid exemption therefrom. The Company has undertaken, and intends,
to maintain a current Registration Statement which will permit the exercise of
the Warrants during the Warrant Term. Maintaining a current effective
Registration Statement could result in substantial expense to the Company and
there is no assurance that the Company will be able to maintain a current
Registration Statement covering the shares issuable upon exercise of the
Warrants. Holders of Warrants will have the right to exercise the Warrants
included therein for the purchase of shares of Common Stock only if a
Registration Statement is then in effect and only if the shares are qualified
for sale under securities laws of the state in which the exercising
warrantholder resides or if the Company, in its and its counsel's sole
discretion, is able to obtain valid exemptions from the foregoing
requirements. Although the Company believes that it will be able to register
or qualify the shares of Common Stock underlying the Warrants for sales in
those states where the securities are offered, there can be no guarantee that
such registration or qualification, or an exemption therefrom, can be
accomplished without undue hardship or expense to the Company. The Warrants
may be deprived of any value if a Registration Statement covering the shares
issuable upon exercise thereof or an exemption therefrom cannot be filed or
obtained without undue expense or hardship or if such underlying shares are
not registered or exempted from such registration in the states in which the
holder of a Warrant resides. In the latter event, the only option available to
a holder of a Warrant may be to attempt to sell his or her Warrants into the
market, if a market then exists and only then in compliance with applicable
securities laws and restrictions on transfer.
REDEMPTION. The Company shall have the right, at its discretion, to call all
or less than all of the Warrants for redemption on 30 days' prior written
notice at a redemption price of $.25 per Warrant if: (i) the closing bid price
of the Company's Common Stock exceeds $4.80 per share for at least ten
consecutive trading days; (ii) the Company has in effect a current
Registration Statement covering the Common Stock issuable upon exercise of the
Warrants; and (iii) the expiration of the 30 day notice period is within the
Warrant Term. If the Company elects to exercise its redemption right, holders
of Warrants may either exercise their Warrants, sell such Warrants in the
market until the date next preceding the date fixed for redemption, or tender
their Warrants to the Company for redemption. Within five business days after
the end of the 30 day period, the Company will mail a redemption check to each
registered holder of a Warrant who holds unexercised Warrants as of the end of
the 30 day period, whether or not such holder has surrendered the Warrant
certificates for redemption. The Warrants may not be exercised after the end
of such 30 day period.
Placement Agent's Warrant
- -------------------------
In connection with a private placement undertaken by the Company in 1995,
the Company issued to Paulson Investment Company, Inc., a warrant (the
"Placement Agent's Warrant") to purchase 11.5 units at a price of $25,000 per
unit, each unit consisting of 20,000 shares of Common Stock and 10,000 Class A
Warrants. The Placement Agent's Warrant is exercisable until September 30,
2000. Each Class A Warrant included in the units gives to the holder the right
to purchase one additional share of the Company's Common Stock at an exercise
price of $1.75 share. The Class A Warrants are exercisable until December 31,
2000.
Transfer Agent, Warrant Agent and Registrar
- -------------------------------------------
The transfer agent, registrar and Warrant Agent for the Company's Common
Stock is Corporate Stock Transfer, Inc., Denver, Colorado.
Reports to Stockholders
- -----------------------
The Company intends to furnish annual reports to stockholders which will
include audited financial statements reported on by its certified public
accountants. In addition, the Company will issue unaudited quarterly or other
interim reports to stockholders as it deems appropriate.
<PAGE>
<PAGE>
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed on for the
Company by Neuman, Drennen & Stone, LLC, Temple-Bowron House, 1507 Pine
Street, Boulder, Colorado 80302. Clifford L. Neuman, a partner in the firm of
Neuman, Drennen & Stone, LLC, is the beneficial owner of 3,100 shares of the
Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for the years then ended, have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
Independent Certified Public Accountants, incorporated by reference herein and
upon the authority of said firm as experts in accounting and auditing.
<PAGE>
<PAGE>
- ------------------------------------ -----------------------------------
No person is authorized to give any
information or to make any
representation other than those
contained in this Prospectus, and
if made such information or
representation must not be relied CELL ROBOTICS
upon as having been given or INTERNATIONAL, INC.
authorized. This Prospectus does
not constitute an offer to sell or
a solicitation of an offer to buy 78,788 Shares of
any securities other than the Preferred Stock
Securities offered by this
Prospectus or an offer to sell or 157,576 Common Stock
a solicitation of an offer to buy Purchase Warrants
the Securities in any jurisdiction
to any person to whom it is 472,728 Shares of
unlawful to make such offer or Common Stock
solicitation in such jurisdiction.
The delivery of this Prospectus
shall not, under any circumstances,
create any implication that there
has been no change in the affairs
of the Company since the date of
this Prospectus. However, in the
event of a material change, this
Prospectus will be amended or
supplemented accordingly.
TABLE OF CONTENTS
Available information..............3
Incorporation by Reference.........4
The Company........................5
Risk Factors.......................6
Dilution..........................11 --------------------------
Use of Proceeds...................13 PROSPECTUS
Determination of the Offering --------------------------
Price...........................13
Plan of Distribution..............14
Indemnification...................14
Selling Securityholders...........14
Description of Securities.........15 _____________, 1998
Legal Matters.....................16
Experts...........................16
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
--------------------------------------------
The estimated expenses of the offering, all of which are to be
borne by the Company, are as follows:
SEC Filing Fee $ 613.12
Printing Expenses* 500.00
Accounting Fees and Expenses* 3,500.00
Legal Fees and Expenses* 5,500.00
Blue Sky Fees and Expenses* 1,200.00
Registrar and Transfer Agent Fee 500.00
Miscellaneous* 186.88
------------
Total* $ 12,000.00
- ---------------------------
* Estimated
Item 15. Indemnification of Directors and Officers.
------------------------------------------
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
a. Sections 7-109-101 through 7-109-110 of the Colorado
Corporation Code provide for the indemnification of a corporation's officers
and directors under certain circumstances.
* * *
b. Article XII of Registrant's Articles of Incorporation
provide that the corporation may indemnify each director, officer, and any
employee or agent of the corporation, his heirs, executors and administrators,
against expenses reasonably incurred or any amounts paid by him in connection
with any action, suit or proceeding to which he may be made a party by reason
of his being or having been a director, officer, employee or agent of the
corporation to the extent permitted by the law as recited above in
subparagraph (a).
c. Article XII of Registrant's Articles of Incorporation
provides, in part:
"e. To the maximum extent permitted by law or by public
policy, directors of this Corporation are to have no
personal liability for monetary damages for breach of
fiduciary duty as a director."
d. The Company currently pays for and maintains an insurance
policy in the amount of $1,000,000 that covers directors' and officers'
liability.
Item 16. Exhibits.
---------
a. The following Exhibits are filed as part of this
Registration Statement pursuant to Item 601 of Regulation SB:
Exhibit
No. Title
------- ----------------
* 4.1 Form of Preferred Stock Certificate
* 4.2 Form of Warrant Certificate
5.1 Opinion of Neuman, Drennen & Stone, LLC
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Neuman, Drennen & Stone, LLC
- ---------------------------
* Incorporated by reference from the Company's Registration
Statement on Form SB-2, SEC File No. 333-40895, declared
effective by the Commission on February 2, 1998.
Item 17. Undertakings.
-------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel that the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
4. To provide, upon effectiveness, certificates in such
denominations and registered in such names as are required to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes to deliver or to
cause to be delivered with the Prospectus to each person to whom the
prospectus is sent or given the latest annual report to Securityholders that
is incorporated by reference in the Prospectus and furnish pursuant to and
meeting the requirements of Rule 14a-3 or 14c-3 under the Securities Exchange
Act of 1934; and where interim financial information required to be presented
by Article 3 of Regulation S-B are not set forth in the Prospectus, to deliver
or cause to be delivered to each person to whom the Prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial information.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Albuquerque, State of New Mexico on the 3rd
day of June, 1998.
CELL ROBOTICS INTERNATIONAL, INC., a Colorado
corporation
By: /s/ Ronald K. Lohrding, Ph.D.
-------------------------------------------
Ronald K. Lohrding, Ph.D., President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities with Cell Robotics International, Inc. and on the dates indicated.
Signature Title Date
---------- ------ ------
/s/ Ronald K. Lohrding, Ph.D. Chairman of the Board 6/3/98
------------------------------ President, Chief ---------
Ronald K. Lohrding, Ph.D. Executive Officer
/s/ Jean M. Scharf Chief Financial Officer, 6/3/98
------------------------------ Chief Accounting ---------
Jean M. Scharf Officer and Controller
/s/ Craig T. Rogers Director 6/3/98
------------------------------ ---------
Craig T. Rogers
/s/ Mark Waller Director 6/3/98
------------------------------ ---------
Mark Waller
/s/ Raymond Radosevich Director 6/3/98
------------------------------ ---------
Raymond Radosevich
/s/ Debra Bryant Director 6/3/98
------------------------------ ---------
Debra Bryant
<PAGE>
EXHIBIT 24.1
------------
The Board of Directors
Cell Robotics International, Inc.
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick, LLP
Albuquerque, New Mexico
May 28, 1998
<PAGE>
EXHIBIT 24.2
------------
June 3, 1998
Cell Robotics International, Inc.
2715 Broadbent Parkway, N.E.
Albuquerque, New Mexico 87107
Re: S.E.C. REGISTRATION STATEMENT ON FORM S-3
-----------------------------------------
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the legality
of the securities being registered by the Registration Statement to be filed
with the United Stated Securities and Exchange Commission, Washington, D.C.,
pursuant to the Securities Act of 1933, as amended, by Cell Robotics
International, Inc., a Colorado corporation, (the "Company") in connection
with the offering described therein of up to 78,788 shares of its Preferred
Stock, $0.04 par value, 157,576 Common Stock Purchase Warrants of the Company,
and 472,728 shares of the Company's Common Stock, $0.004 par value, as
proposed and more fully described in such Registration Statement.
We further consent to the reference in such Registration Statement to our
having given such opinions.
Sincerely,
/s/ Nathan L. Stone
----------------------------------
Nathan L. Stone
NLS:ms
<PAGE>
EXHIBIT 5.1
-----------
June 3, 1998
Cell Robotics International, Inc.
2715 Broadbent Parkway, N.E.
Albuquerque, New Mexico 87107
Re: S.E.C. REGISTRATION STATEMENT ON FORM S-3
-----------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Cell Robotics International, Inc. (the
"Company") in connection with a Registration Statement to be filed with the
United Stated Securities and Exchange Commission, Washington, D.C., pursuant
to the Securities Act of 1933, as amended, covering the registration of an
aggregate of (i) 78,788 shares of the Company's Series A Convertible Preferred
Stock, $0.04 par value ("Preferred Stock"), (ii) 157,576 Common Stock Purchase
Warrants ("Warrants") and (iii) 472,728 shares of the Company's common stock,
$0.004 par value ("Common Stock") pursuant to the reoffer by certain Selling
Securityholders, the conversion of certain shares of Preferred Stock and the
exercise of certain Warrants. In connection with such representation of the
Company, we have examined such corporate records, and have made such inquiry
of government officials and Company officials and have made such examination
of the law as we deemed appropriate in connection with delivering this
opinion.
Based upon the foregoing, we are of the opinion as follows:
1. The Company has been duly incorporated and organized under the laws
of the State of Colorado and is validly existing as a corporation in good
standing under the laws of that state.
2. The Company's authorized capital consists of twelve million five
hundred thousand (12,500,000) shares of Common Stock having a par value of
$0.004 each and two million five hundred thousand (2,500,000) shares of
Preferred Stock having a par value of $0.04 each.
3. The 472,728 shares of Common Stock being registered for sale and
offered by the Company will, upon the valid conversion of the Preferred Stock
and the valid exercise of the Warrants and payment of the Warrant exercise
price, be lawfully and validly issued, fully paid and non-assessable shares of
the Company's Common Stock.
4. The 78,788 shares of Preferred Stock and 157,576 Warrants being
registered for resale by the Selling Securityholders, are lawfully and validly
issued, fully paid and non-assessable shares of the Company's Preferred Stock
and Warrants of the Company, respectively.
Sincerely,
/s/ Nathan L. Stone
----------------------------------
Nathan L. Stone
NLS:ms
