<PAGE>
As filed with the Securities and Exchange Commission on July 6, 1999.
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 POST-EFFECTIVE AMENDMENT NO. 2
ON ON
FORM S-3 FORM S-3
TO TO
FORM SB-2 FORM SB-2
REGISTRATION STATEMENT REGISTRATION STATEMENT
UNDER UNDER
SECURITIES ACT OF 1933 SECURITIES ACT OF 1933
Registration No. 33-80347 Registration No. 333-40895
CELL ROBOTICS INTERNATIONAL, INC.
----------------------------------------
(Name of small business issuer in its Charter)
Colorado 5049-05 84-1153295
- ---------------------- ---------------------------- --------------------
(State or other juris- (Primary Standard Industrial IRS Employer
diction of incorporation Classification Code Number) Identification Number
or organization)
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)
Dr. Ronald K. Lohrding, President
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. and Nathan L. Stone, Esq.
Neuman, Drennen & Stone, LLC
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
<PAGE>
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. [ ]
===========================================================================
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>
CELL ROBOTICS INTERNATIONAL, INC.
Item No. and Heading
In Form S-3 Location
Registration Statement In Prospectus
---------------------- -------------
1. Forepart of the Registration Forepart of Registration
Statement and outside front Statement and outside front
cover of Prospectus cover page of Prospectus
2. Inside front and back cover Inside front and outside back
pages of Prospectus cover pages of Prospectus
3. Summary Information, Risk Prospectus Summary, Risk
Factors and Ratio of Earnings Factors
To Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Determination of Offering Price
6. Dilution Dilution
7. Selling Securityholder *
8. Plan of Distribution Plan of Distribution
9. Description of Securities Description of Securities
to be Registered
10. Interest of Named Experts and Legal Matters
Counsel
11. Material Changes *
12. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
13. Disclosure of Commission Indemnification
Position on Indemnification
for Securities Act Liabilities
- -------------------------------------
* Omitted from Prospectus because Item inapplicable or answer is in the
negative.
<PAGE>
<PAGE>
Prospectus
CELL ROBOTICS INTERNATIONAL, INC.
---------------------------------
115,000 REDEEMABLE CLASS A COMMON STOCK PURCHASE WARRANTS-
* issuable upon exercise of Placement Agent's Warrants we granted to
Paulson Investment Company, Inc.;
* each exercisable through December 31, 2000 to purchase 1 share of our
common stock for a price of $1.75 per share, which will result in gross
proceeds to us of $201,250 if all 115,000 warrants are exercised;
* each redeemable by us upon thirty (30) days notice at a redemption price
of $.25 per warrant but only if certain requirements are met. See
"DESCRIPTION OF SECURITIES - CLASS A WARRANTS - REDEMPTION."
80,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS-
* issuable upon exercise of a Representative's Warrant we granted to
Paulson in connection with a public offering of units of our securities;
* each exercisable through February 2, 2003 to purchase 1 share of our
common stock for a price of $2.40 per share, which will result in gross
proceeds to us of $192,000 if all 80,000 warrants are exercised;
* each redeemable by us upon thirty (30) days notice at a redemption price
of $.25 per warrant but only if certain requirements are met. See
"DESCRIPTION OF SECURITIES-PUBLIC WARRANTS- REDEMPTION."
1,505,000 SHARES, $.004 PAR VALUE, COMMON STOCK CONSISTING OF:
* 230,000 shares issuable to Paulson upon the exercise of the Placement
Agent's Warrants;
* 115,000 shares issuable upon the exercise of the 115,000 Class A Warrants
that Paulson will receive upon exercise of the Placement Agent's
Warrants;
* 160,000 shares issuable upon exercise of the Representative's Warrant;
* 80,000 shares issuable upon the exercise of 80,000 Public Warrants
Paulson will receive upon exercise of the Representative's Warrant; and
* 920,000 shares issuable upon the exercise of Public Warrants sold in the
public offering.
-----------------------------------------------
OTC Electronic Bulletin Board Trading Symbols-
Common Stock - CRII
Public Warrants - CRIIW
Class A Warrants - No public trading
market exists
-----------------------------------------------
For a discussion of certain matters that you should consider in evaluating
an investment in our securities, see "Risk Factors" commencing at page 10.
The securities we are offering 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.
The Date of This Prospectus is July ____, 1999.
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
This summary highlights important information about our business and about
the offerings. Because it is a summary, it does not contain all the
information you should consider before investing in our securities. Please
read the entire prospectus.
CELL ROBOTICS INTERNATIONAL, INC.
We were organized on September 28, 1988 as Intelligent Financial
Corporation. In February 1995, we acquired all of the issued and
outstanding shares of Cell Robotics, Inc., a New Mexico corporation, which
had been formed in 1988 to develop the Cell Robotics Workstation. In May
1995, we changed our name from Intelligent Financial Corporation to Cell
Robotics International, Inc. We have developed, and are manufacturing,
marketing and selling, a number of sophisticated medical laser products,
and are continuing to develop additional sophisticated medical laser
products. We maintain our principal offices at 2715 Broadbent Parkway,
N.E., Suite A-E, Albuquerque, New Mexico 87107. Our telephone number at
that address is (505) 343-1131, our facsimile number is (505) 344-8112, and
our internet website address is http://www.cellrobotics.com.
INTRODUCTION TO THE OFFERINGS
We are offering 230,000 shares of our common stock, and Class A common
stock purchase warrants that are exercisable to purchase an additional
115,000 shares of common stock. These securities are issuable to Paulson
Investment Company, Inc. pursuant to Placement Agent's Warrants we granted
to Paulson in connection with a private offering of units of our securities
that we completed during the third quarter of 1995. The Placement Agent's
Warrants are exercisable to purchase 11.5 private units at a price of
$25,000 per unit. Each private unit consists of 20,000 shares of common
stock and 10,000 Class A Warrants. Each Class A Warrant can be exercised
to purchase one share of common stock for a price of $1.75 per share. Once
issued, the Class A Warrants must be exercised before December 31, 2000 or
they will expire. Until the Class A Warrants either expire or are
exercised, we have the right to redeem them at a redemption price of $0.25
each. In order to exercise our right to redeem the Class A Warrants, we
must give thirty days advance written notice, and the following conditions
must be meet:
1. a registration statement registering the sale of the shares of
common stock issuable upon the exercise of the Class A Warrants
under the Securities Act must be in effect;
2. there must exist a public trading market on the Nasdaq SmallCap
Market or the OTC Electronic Bulletin Board for our common stock;
and
3. the closing public trading price of our common stock must have
equaled or exceeded $3.50 per share for at least ten consecutive
trading days immediately preceding the date of our Class A Warrant
redemption notice.
This prospectus also relates to our offer of up to 115,000 shares of common
stock issuable upon exercise of the 115,000 Class A Warrants that Paulson
will receive upon exercise of the Placement Agent's Warrants.
We are also offering160,000 shares of our common stock and common stock
purchase warrants ("Public Warrants") that are exercisable to purchase an
additional 80,000 shares of our common stock. These securities are
issuable to Paulson pursuant to a Representative's Warrant we granted to
Paulson in connection with a public offering of units of our securities
that we completed during the first quarter of 1998. The Representative's
Warrant is exercisable to purchase 40,000 public units at a price of $9.90
per unit. Each public unit originally consisted of one share of our
convertible preferred stock, and two Public Warrants. However, effective
February 2, 1999, we exercised our right to automatically convert all
outstanding shares of our convertible preferred stock into shares of common
stock at a conversion ratio of four shares of common stock for each share
of preferred stock. As a result, each public unit now consists of four
shares of our common stock and two Public Warrants. Each Public Warrant
can be exercised to purchase one share of common stock for a price of $2.40
per share. Once issued, the Public Warrants must be exercised before
February 2, 2003 or they will expire. Until the Public Warrants either
expire or are exercised, we have the right to redeem them at a redemption
price of $0.25 each. In order to exercise our right to redeem the Public
Warrants, we must give thirty days advance written notice, and the
following conditions must be meet:
1. a registration statement registering the sale of the shares of
common stock issuable upon the exercise of the Public Warrants under
the Securities Act must be in effect;
2. the closing bid price of our common stock must have equaled or
exceeded $4.80 per share for at least ten consecutive trading days
immediately preceding the date of our redemption notice; and
3. the expiration of our thirty day redemption notice period must occur
before February 2, 2003.
This prospectus also relates to our offer of up to 80,000 shares of common
stock issuable upon exercise of the 80,000 Public Warrants that Paulson
will receive upon exercise of the Representative's Warrant.
Finally, this prospectus relates to our offer of up to 920,000 shares of
common stock issuable upon the exercise of Public Warrants that were sold
in the public offering.
We will not receive any proceeds from the resale of our common stock and/or
Public Warrants. However, if Paulson exercises all of the Placement
Agent's Warrants and all of the Class A Warrants issued as part of the
private units purchased upon exercise of the Placement Agent's Warrants, we
will receive gross proceeds of $488,750. Additionally, assuming the
exercise of all of the Representative's Warrant and all of the Public
Warrants issued as part of the public units purchased upon exercise of the
Representative's Warrant, we will receive additional gross proceeds of
$588,000. Finally, assuming all of the Public Warrants are exercised to
purchase 920,000 shares of common stock we will receive additional gross
proceeds of $2,208,000.
In conjunction with both the private offering and the public offering, we
agreed to pay the cost of registering the securities covered by this
prospectus which we estimate will cost $25,000. Anyone reselling
securities acquired in the public offering will, however, pay the other
costs related to the sale of their securities, including discounts,
commissions and transfer fees. See "Plan of Distribution".
A public market for our Class A Warrants currently does not exist.
However, our common stock and Public Warrants are traded on the Bulletin
Board under the symbols CRII and CRIIW, respectively. On June 23, 1999,
the closing bid and ask prices of our common stock and Public Warrants were
$1.78 and $1.84 and $.94 and $1.25, respectively. There can be no
assurance that a market for our Class A Warrants will develop in the
future, or that a market for our common stock or Public Warrants, or any of
them individually, will continue in the future. We have no arrangements
with broker-dealers concerning the maintenance of a trading market for our
securities. As a result, your ability to resell our securities may be
severely limited and you may be required to hold our securities for an
indefinite period of time.
THE SPECIFIC OFFERINGS
THE PLACEMENT AGENT'S WARRANT OFFERING
Securities Offered: (1) 230,000 shares of common stock, $.004
par value, and 115,000 Class A
Warrants included in the private units
issuable to Paulson upon exercise of
the Placement Agent's Warrants.
Common Shares Outstanding:
Before the Offering 7,884,591
After the Offering(2) 8,114,591
Offering Price: $25,000 per unit.
- ---------------
(1) The shares of common stock and Class A Warrants are issuable to
Paulson upon exercise by Paulson of the Placement Agent's Warrants
which are exercisable to acquire a total of 11.5 private units, each
unit consisting of 20,000 shares of common stock and 10,000 Class A
Warrants. The securities comprising the private units will be
immediately separated and transferrable. The private units are not
being separately registered and there will be no public trading
market developed for the private units.
(2) Excludes: (1) 680,850 shares of common stock reserved for future
issuance pursuant to the exercise of incentive stock options granted
under our 1992 Stock Incentive Plan; (2) 100,000 shares of common
stock reserved for future issuance pursuant to the terms of an
agreement with Chronimed, Inc.; (3) 385,970 shares of common stock
reserved for future issuance pursuant to the exercise of outstanding
non-qualified stock options; (4) 450,000 shares of common stock
reserved for issuance upon the exercise of options held by our
president, Ronald K. Lohrding, Ph.D; (5) up to 150,000 shares of
common stock which may become issuable upon the exercise of options
granted under the terms of an agreement with a consultant; (6)
115000 shares of common stock issuable upon exercise of the Class A
Warrants; (7) 160,000 shares of common stock issuable upon exercise
of the Representative's Warrant; (8) 80,000 shares of common stock
issuable upon exercise of the 80,000 Public Warrants also issuable
upon exercise of the Representative's Warrant; (9) 920,000 shares
of common stock issuable upon the exercise of Public Warrants that
were sold in the public offering; (10) 157,576 shares of common
stock issuable upon the exercise of warrants that were sold in a
private offering; and (11) 100,000 shares of common stock issuable
upon exercise of a warrant granted to GEM Edwards, Inc.
THE CLASS A WARRANT OFFERING
Common Shares: 115,000 shares of common stock,
$.004 par value
Common Shares Outstanding:
Before the Offering 7,884,591
After the Offering (1)(2) 8,229,591
Offering Price Per Share: $1.75
- ------------------
(1) Assumes the Placement Agent's Warrants have been exercised to
purchase 230,000 shares of common stock and Class A Warrants
exercisable to purchase an additional 115,000 shares of common
stock. Also assumes the exercise by Paulson of the Class A Warrants
to purchase 115,000 shares of common stock. However, we do not have
the right to compel, nor has Paulson committed to, the exercise of
the Placement Agent's Warrants or the Class A Warrants.
Accordingly, there can be no assurance of the number, if any, of
shares which will be purchased pursuant to the exercise of the
Placement Agent's Warrants or Class A Warrants.
(2) Excludes: (1) 680,850 shares of common stock reserved for future
issuance pursuant to the exercise of incentive stock options granted
under our 1992 Stock Incentive Plan; (2) 100,000 shares of common
stock reserved for future issuance pursuant to the terms of an
agreement with Chronimed, Inc.; (3) 385,970 shares of common stock
reserved for future issuance pursuant to the exercise of outstanding
non-qualified stock options; (4) 450,000 shares of common stock
reserved for issuance upon the exercise of options held by our
president, Ronald K. Lohrding, Ph.D; (5) up to 150,000 shares of
common stock which may become issuable upon the exercise of options
granted under the terms of an agreement with a consultant; (6)
160,000 shares of common stock issuable upon exercise of the
Representative's Warrant; (7) 80,000 shares of common stock issuable
upon exercise of the 80,000 Public Warrants also issuable upon
exercise of the Representative's Warrant; (8) 920,000 shares of
common stock issuable upon the exercise of Public Warrants that were
sold in the public offering; (9) 157,576 shares of common stock
issuable upon the exercise of warrants that were sold in a private
offering; and (10) 100,000 shares of common stock issuable upon
exercise of a warrant granted to GEM Edwards, Inc.
THE REPRESENTATIVE'S WARRANT OFFERING
Securities Offered: (1) 160,000 shares of common stock; and
80,000 Public Warrants which are
included in the public units issuable
to Paulson upon exercise of the
Representative's Warrant
Offering Price: $9.90 per unit
Common Shares Outstanding:
Before the Offering 7,884,591
After the Offering(2) 8,044,591
- -------------------
(1) The shares of common stock and Public Warrants are issuable to
Paulson upon exercise by Paulson of the Representative's Warrant
which is exercisable to acquire 40,000 public units, each unit
consisting of four shares of common stock and two Public Warrants.
The securities comprising the public units will be immediately
separated and transferrable. The public units are not being
separately registered and there will be no public trading market
developed for the public units.
(2) Excludes: (1) 680,850 shares of common stock reserved for future
issuance pursuant to the exercise of Incentive Stock Options granted
under our 1992 Stock Incentive Plan; (2) 100,000 shares of common
stock reserved for future issuance pursuant to the terms of an
agreement with Chronimed, Inc.; (3) 385,970 shares of common stock
reserved for future issuance pursuant to the exercise of outstanding
non-qualified stock options; (4) 450,000 shares of common stock
reserved for issuance upon the exercise of options held by our
president, Ronald K. Lohrding, Ph.D; (5) up to 150,000 shares of
common stock which may become issuable upon the exercise of options
granted under the terms of an agreement with a consultant; (6)
80,000 shares of common stock issuable upon exercise of the 80,000
Public Warrants issuable upon exercise of the Representative's
Warrant; (7) 230,000 shares of common stock issuable upon exercise
of the Placement Agent's Warrants; (8) 115,000 shares of common
stock issuable upon exercise of the Class A Warrant issuable upon
exercise of the Placement Agent's Warrants; (9) 920,000 shares of
common stock issuable upon the exercise of Public Warrants that were
sold in the public offering; (10) 157,576 shares of common stock
issuable upon the exercise of warrants that were sold in a private
offering; and (11) 100,000 shares of common stock issuable upon
exercise of a warrant granted to GEM Edwards, Inc.
THE REPRESENTATIVE'S PUBLIC WARRANT OFFERING
Securities Offered: 80,000 shares of common stock,
$.004 par value
Common Shares Outstanding:
Before the Offering 7,884,591
After the Offering(1)(2) 8,124,591
Offering Price Per Share: $2.40
- ------------------
(1) Assumes the Representative's Warrant has been exercised to purchase
160,000 shares of common stock and Public Warrants exercisable to
purchase an additional 80,000 shares of common stock. Also assumes
the exercise of the Public Warrants to purchase 80,000 shares of
common stock. We do not have the right to compel, nor has Paulson
committed to, the exercise of the Representative's Warrant or the
Public Warrants. Accordingly, there can be no assurance of the
number, if any, of shares of common stock which will be purchased
pursuant to the exercise of the Representative's Warrant or the
Public Warrants.
(2) Excludes: (1) 680,850 shares of common stock reserved for future
issuance pursuant to the exercise of Incentive Stock Options granted
under our 1992 Stock Incentive Plan; (2) 100,000 shares of common
stock reserved for future issuance pursuant to the terms of an
agreement with Chronimed, Inc.; (3) 385,970 shares of common stock
reserved for future issuance pursuant to the exercise of outstanding
non-qualified stock options; (4) 450,000 shares of common stock
reserved for issuance upon the exercise of options held by our
president, Ronald K. Lohrding, Ph.D; (5) up to 150,000 shares of
common stock which may become issuable upon the exercise of options
granted under the terms of an agreement with a consultant; (6)
230,000 shares of common stock issuable upon exercise of the
Placement Agent's Warrants; (7) 115,000 shares of common stock
issuable upon exercise of the Class A Warrants issuable upon
exercise of the Placement Agent's Warrants; (8) 920,000 shares of
common stock issuable upon the exercise of Public Warrants that were
sold in the public offering; (9) 157,576 shares of common stock
issuable upon the exercise of warrants that were sold in a private
offering; and (10) 100,000 shares of common stock issuable upon
exercise of a warrant granted to GEM Edwards, Inc.
THE PUBLIC WARRANT OFFERING
Securities Offered: 920,000 shares of common stock, $.004
par value
Common Shares Outstanding:
Before the Offering 7,884,591
After the Offering(1) 8,804,591
Offering Price Per Share: $2.40
- -----------------
(1) Excludes: (1) 680,850 shares of common stock reserved for future
issuance pursuant to the exercise of Incentive Stock Options granted
under our 1992 Stock Incentive Plan; (2) 100,000 shares of common
stock reserved for future issuance pursuant to the terms of an
agreement with Chronimed, Inc.; (3) 385,970 shares of common stock
reserved for future issuance pursuant to the exercise of outstanding
non-qualified stock options; (4) 450,000 shares of common stock
reserved for issuance upon the exercise of options held by our
president, Ronald K. Lohrding, Ph.D; (5) up to 150,000 shares of
common stock which may become issuable upon the exercise of options
granted under the terms of an agreement with consultant; (6) 230,000
shares of common stock issuable upon exercise of the Placement
Agent's Warrants; (7) 115,000 shares of common stock issuable upon
exercise of the Class A Warrants issuable upon exercise of the
Placement Agent's Warrants; (8)160,000 shares of common stock
issuable upon exercise of the Representative's Warrant; (9)80,000
shares of common stock issuable upon exercise of the 80,000 Public
Warrants issuable upon exercise of the Representative's Warrant;
(10) 157,576 shares of common stock issuable upon the exercise of
warrants that were sold in a private offering; and (11) 100,000
shares of common stock issuable upon exercise of a warrant granted
to GEM Edwards, Inc.
<PAGE>
<PAGE>
RISK FACTORS
The offerings described in this prospectus involve a high degree of risk.
You should carefully consider the factors set forth under "Risk Factors",
as well as the possibility of the loss of your entire investment in our
securities, before deciding to invest in our securities.
USE OF PROCEEDS
We will not receive any proceeds from the resale of our common stock or
Public Warrants. We may, however, receive proceeds from the following:
1. Up to $488,750 upon the exercise of the Placement Agent's Warrants
and upon exercise of all the Class A Warrants issued as part of the
private units purchased upon exercise of the Placement Agent's
Warrants;
2. Up to $588,000 upon the exercise of the Representative's Warrant and
upon exercise of all the Public Warrants issued as part of the
public units purchased upon exercise of the Representative's
Warrant; and
3. Up to $2,208,000 upon the exercise of all the Public Warrants.
If we receive any proceeds we will use them to provide working capital for
our operations.
<PAGE>
<PAGE>
RISK FACTORS
An investment in our securities is speculative and involves a high degree
of risk. Please carefully consider the following risk factors, as well as
the possibility of the loss of your entire investment, before deciding to
invest in our securities.
HISTORY OF OPERATING LOSSES; FUTURE PROFITABILITY UNCERTAIN.
To date, we have been unable to profitably market our products, and there
can be no assurance that we will ever achieve significant revenues or
profitable operations in the future.
From our inception in 1988 through March 31, 1999, we have incurred losses
of approximately $15.8 million, approximately $8.2 million of which
consisted of research and development costs, with the balance consisting of
general and administrative and marketing expenses. To date, we have been
unable to profitably market our products. We have principally relied upon
the proceeds from debt and equity financings to provide our working
capital. For the years ended December 31, 1998 and 1997 and for the three
months ended March 31, 1999 and 1998, our net losses applicable to common
shareholders were $2,057,573, $2,472,892, $936,817 and $294,712,
respectively. In addition, our operations used net cash of $1,935,800,
$2,253,941, $494,908 and $579,062 for the years ended December 31, 1998 and
1997 and the three months ended March 31, 1999 and 1998, respectively. We
have yet to sell any of our products in commercial quantities. Even if we
eventually generate increased revenues from product sales, we do not expect
to achieve operating profits before the first quarter of 2000. Our ability
to achieve a profitable level of operations in the future will depend in
large part on successful marketing of existing products, finalizing
development of additional medical laser products, obtaining additional
regulatory approval for these products and bringing several of these
products to market. The likelihood of our long-term success 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 we operate. There can be no assurance that
we will ever achieve significant revenues or profitable operations.
FUTURE REVENUE GROWTH DEPENDENT ON MEDICAL LASER PRODUCTS.
Our future revenue growth is dependent on the success of our medical laser
products. However, there can be no assurance that all or any of our medical
laser products will receive the required governmental regulatory approvals
or become commercially viable or achieve market acceptance.
Prior to fiscal 1998, all of our product revenue was generated through the
sale of scientific instruments. However, we are currently relying heavily
upon the success of our medical laser products which have recently been, or
are in the process of being, introduced into the medical laser products
market. These medical laser products are subject to all of the risks of
failure inherent in the market introduction of innovative technologies.
Those risks include, but are not limited to, the following:
1. The possibilities that some or all of the proposed products may fail
to receive additional necessary regulatory clearances;
2. That the proposed products may have features which render them
uneconomical either to manufacture or market;
3. That there does not exist demand for the products at levels or
prices at which we can operate profitably; or
4. That third parties will market a superior product.
As a result, there can be no assurance that all or any of our medical laser
products will receive all of the required governmental regulatory approvals
or become commercially viable or achieve market acceptance. During fiscal
1998 and the first three months of fiscal 1999, revenues from sales of our
scientific research instruments totaled approximately $896,000 and
$209,000, respectively, while sales of our laser-based medical devices
generated approximately $353,700 and $288,400, respectively, in product
revenue. While we anticipate improved sales of our medical laser products
as our marketing plans develop, there can be no assurance that these
improvements will occur in a timely fashion, if ever, or that sales of our
medical laser products will be successful or profitable.
ADDITIONAL FINANCING REQUIREMENTS.
We will require substantial funds for commercialization of our medical
laser products, establishing manufacturing and testing capabilities and
marketing and sales efforts. There can be no assurance that the required
additional funds will be available on acceptable terms, if at all.
Our capital requirements depend upon numerous factors, including, but not
limited to, the following:
1. The progress of our product commercialization;
2. The requirement for additional clinical testing;
3. The time and cost involved in obtaining additional regulatory
approvals;
4. The cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
5. Competing technological and market developments;
6. Our ability to establish collaborative arrangements;
7. The development of commercialization activities and arrangements;
and
8. The purchase of capital equipment.
We expect that we will require substantial additional capital in the next
nine months. We 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 we are currently offering, may
result. If adequate funds are not available, we may be required to delay,
scale back or eliminate one or more of our development programs or to
obtain funds by entering into arrangements with collaborative partners or
others that may require us to relinquish rights to certain of our products
or technologies that we would not otherwise relinquish. See "Use of
Proceeds."
LIMITED PROTECTION FROM PATENTS AND PROPRIETARY TECHNOLOGY.
Our laser-based medical devices currently have no patent protection and our
scientific research instruments have only limited patent protection. As a
result, we may be unable to prevent the unauthorized use of our products or
unauthorized disclosure of our proprietary information.
We rely primarily on a combination of patent, trade secret, copyright and
trademark laws, confidentiality procedures and other intellectual property
protection methods to protect our proprietary technology. Our laser-based
medical devices currently have no patent protection and our scientific
research instruments have only limited patent protection. The commercial
success of our laser-based medical devices will depend, in part, upon our
ability to protect and defend our intellectual property rights and the
competitive advantages that those rights offer to our products. There can
be no assurance that we will be successful in these efforts.
The LaserTweezers(-Registered Mark-) application of the Cell Robotics
Workstation is being produced and sold under a license agreement with
Lucent Technologies, Inc., f/k/a AT&T, and a related optical trapping
patent. Both our Lasette(-TM-) and RevitaLase(-TM-) products were
originally developed using mutifaceted crystal resonator technology
acquired from Tecnal Products, Inc., a subsidiary of Lovelace Scientific
Resources, Inc. Subsequently, we have advanced the laser design employed
in both products and have sought, or are preparing to seek, continuations
of existing patents and/or new patents protecting those designs. One
result of this effort has been our receipt of a Notice of Allowance from
the U.S. Patent and Trademark Office ("PTO") of a new patent for certain
advantageous modifications of the laser beam used in skin perforators, such
as the Lasette(-TM-). Generally, receipt of a Notice of Allowance means
that examination on the merits of our application is concluded, the
examining attorney has identified allowable claims in the application, and
that the application is passed to allowance in anticipation of assignment
of a patent number and issue date. However, no enforceable patent rights
exist until the patent is actually issued, and there can be no assurance
when, or if, the patent will issue. This patent, if issued, will cover
proprietary aspects of both current and projected future models of the
Lasette(-TM-). Patents covering other aspects of the Lasette(-TM-) are
currently pending in the PTO and World Patent Office. The IVF Workstation
is not currently protected by any specific issued patents; however, we have
submitted an application to the PTO and World Patent Office seeking
protection for certain laser design aspects of the system. We will also
seek to protect certain data-processing aspects of the system. To this
end, collectively, we currently have five patent cases pending, in various
phases, most with international counterparts, including applications for:
1. A Microscope with Laser Port Microscope and Stage, claims filed
March 2, 1998;
2. A Dermal Perforator (referred to above), filed July 3, 1996, which
has received a Notice of Allowance;
3. A Lens Shield for Laser Skin Perforation, filed April 22, 1997;
4. An application for apparatus and process related to providing
uniform distribution of energy to microscope targets, filed June 18,
1998; and
5. An application for apparatus and process related to activating
Thermo-Enzyme reactions with EM Energy, filed May 19, 1998.
There can be no assurance that any patents will be issued as a result of
the foregoing, or, if issued, the degree of protection that they will
afford.
We also rely on trade secret protection for our 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 our trade secrets, that such trade secrets will not be disclosed or that
we can effectively protect our rights to unpatented trade secrets. Despite
the precautions we have taken, unauthorized parties may attempt to
engineer, reverse engineer, copy or obtain and use our products and other
information we consider proprietary. We pursue a policy of having our
employees and consultants execute non-disclosure agreements upon
commencement of employment or consulting relationships with us. These
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 our
trade secrets or other proprietary information in the event of unauthorized
use or disclosure of the information.
Further, we have developed and rely on the trademarks that we use with our
products, including the Lasette(-TM-), the RevitaLase(-TM-) and the IVF
Workstation(-TM-). We have registered the marks Smartstage(-Registered
Mark-) and LaserTweezers(-Registered Mark-) and have applied for a federal
registration for the names Lasette(-TM-) and LaserScissors(-TM-). We
intend to apply for federal registration with respect to the use of the
RevitaLase(-TM-), Cellselector(-TM-) and IVF Workstation(-TM-) trademarks.
Where registrations of trademarks have not been issued, we claim common law
trademark rights to those names. There can be no assurance, however, that
we will obtain additional registrations for any of our trademarks or that
we will not be subject to opposition, cancellation or infringement
proceedings based upon the use of these trademarks. The loss of the use of
any one or more of the trademarks could have a material adverse effect upon
our ability to profitably market the associated product.
RISK OF FUTURE PATENT LITIGATION.
There can be no assurance that other patent holders or other third parties
will not claim infringement by us or our licensors with respect to our
current and future technology, or that we will not be required, in the
future, to initiate an infringement action against other third parties for
infringement of our patent rights. Any litigation could consume a
substantial portion of our financial and personnel resources and,
regardless of the outcome of this litigation, have a material adverse
impact upon our business, results of operations and financial condition.
Since there is no patent protection currently afforded our medical laser
products, there can be no assurance that other patent holders or other
third parties will not claim infringement by us or our licensors with
respect to our 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 might be infringed by our 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 we have,
and have made substantial investments in competing technologies, will not
apply for and obtain patents that will prevent, limit or interfere with our
ability to make and sell our products. We are aware of several patents held
by third parties that relate to certain aspects of our products. There can
be no assurance that these patents would not be used as a basis to
challenge our current or future patents, to limit the scope of our patent
rights or to limit our ability to obtain additional or broader patent
rights. A successful challenge to the validity of any of our existing or
future patents and/or patent rights may adversely affect our competitive
position and could limit our ability to commercialize one or more of our
medical laser products and our scientific products. Further, we may in the
future be required to initiate litigation to protect our patent position.
There can be no assurance that we will have the resources necessary to
pursue such litigation or otherwise protect our 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 us to
significant liabilities to third parties, require us and others to cease
selling products that infringe or require disputed rights to be licensed
from third parties. These licenses may not be available on satisfactory
terms or at all. Moreover, if claims of infringement are asserted against
our future co-development partners or customers, those partners or
customers may seek indemnification from us for damages and expenses they
incur. There can no be assurance that we 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 we believe that
there will continue to be, significant litigation in the laser-based
biotechnological industry regarding patent and other intellectual property
rights. Any litigation could consume a substantial portion of our
financial and personnel resources and, regardless of the outcome, could
have a material adverse impact upon our business, results of operations and
financial condition.
INTENSE COMPETITION.
We are in an extremely competitive industry that is dominated by several
companies which have significantly greater financial, technical, and
marketing resources than we have.
The industry in which we compete 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 our products non-competitive.
There are many companies, both public and private, that are engaged in the
development of products for the same applications we are pursuing. Many of
those companies have substantially greater financial, research and
development, manufacturing and marketing experience and resources than we
have and represent substantial long-term competition for us. These
companies may succeed in developing products that are more effective or
less costly than any products that we may currently own or which we may
develop in the future. Specifically, we are aware of several other
companies which are developing glucose testing products based on
non-invasive technologies, such as skin patches and diode-pumped 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 our business and
financial condition.
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 we are able to establish and maintain a
significant proprietary position with respect to our products, competition
will likely depend primarily on the effectiveness of our products and their
price competitiveness. In addition, our competitive position also depends
upon our 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 THE LUCENT LICENSE.
Given the minimum annual royalties due and payable under the Lucent
license, there can be no assurance that we will be able to increase sales
of the Cell Robotics Workstation to a level that renders the product
economically viable.
The LaserTweezers(-Registered Mark-) application of our Cell Robotics
Workstation was based upon an exclusive patent license from AT&T, now known
as Lucent Technologies, Inc., which required the payment of substantial
minimum annual royalties in the future. Specifically, under the Lucent
license, we were required to pay a royalty equal to five percent (5%) of
the value of each product sold utilizing the patents, subject to minimum
annual royalties initially in the amount of $100,000 at December 31,
1996 and increasing by an additional $50,000 per year to as high as
$500,000 per year, regardless of actual sales. Absent a revision of the
Lucent license, if future sales of the Cell Robotics Workstation did not
increase substantially over historical levels, it was likely that future
sales of the product would be rendered uneconomical by virtue of the
minimum royalty required under the Lucent license. Additionally, at least
two European companies have developed and are marketing products which we
believe violate Lucent's patents. To date, Lucent has elected not to
pursue patent infringement claims against these companies and their
distributors, and under the terms of the original Lucent license, we
cannot compel Lucent to initiate any proceedings.
As a result of the foregoing, as of June 30, 1998, we were $200,000 in
arrears in our minimum royalty payment obligations. However, we have
agreed with Lucent to amend the Lucent license. Specifically, we have paid
Lucent the sum of $100,000 in lieu of all sums due and owing for fiscal
1997 and 1998. Additionally, we have agreed to increase the royalty under
the Lucent license from five percent (5%) to seven percent (7%) of the
value of each product sold utilizing Lucent's patents. However, the
minimum annual royalties under the Lucent license will be reduced to flat
$35,000 per year for the term of the Lucent license. Notwithstanding the
foregoing amendments to the Lucent license, there can be no assurance that
we will be able to increase sales of the Cell Robotics Workstation to a
level that renders the product economically viable. During fiscal 1998 and
the first three months of fiscal 1999, sales of the LaserTweezers(-
Registered Mark-) application of the Cell Robotics Workstation have
accounted for 38.4% and 27.25%, respectively, of our total revenues.
During these same periods, Asian sales of the LaserTweezers(-Registered
Mark-) application represented 8.4% and 8.8%, respectively, of our total
revenue.
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE AND PRODUCT OBSOLESCENCE.
The medical device industry is characterized by extensive research efforts
and rapid technological progress. Our failure to anticipate or respond
adequately to technological developments could have a material adverse
effect on our operating results and financial condition.
Our 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 some or all of our
products or potential products non-competitive, obsolete and/or
unmarketable. In order to compete successfully, we must continue to improve
our current products and develop and market new products that keep pace
with technological developments. Accordingly, even if our medical laser
products achieve market acceptance, our future success in this market will
depend in significant part on our ability to continually improve the
performance, features, and reliability of our products in response to both
evolving demands of the marketplace and competitive product offerings.
There can be no assurance that we will be successful in so doing. Our
failure to anticipate or respond adequately to technological developments
could have a material adverse effect on our operating results and financial
condition. Our pursuit of necessary technological advances will require
substantial time and expense, and there can be no assurance that we will
succeed in adapting our products to changing technology standards and
customer requirements. There can be no assurance that the announcement or
introductions of new products by us or our 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 our
business, financial condition and results of operations.
RISK OF INABILITY TO COMPLY WITH GOVERNMENT REGULATION; NEED FOR ADDITIONAL
PRODUCT CLEARANCES AND APPROVALS.
The medical devise industry is subject to extensive government regulation.
The cost of complying with these regulations is significant, and our
failure to meet or comply with existing or future regulations could have a
material adverse effect on our operations.
The testing, manufacture, labeling, distribution, marketing and advertising
of products such as our existing and proposed products and our 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. Our 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
this testing and obtaining required 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 our
submitted application. Similar delays may also be encountered in other
countries. Failure to receive timely approval from these agencies could
result in our incurring substantial costs and could also have a material
adverse effect upon our operations and financial condition. In addition,
if regulatory clearance of a product is granted, the clearance may entail
limitations on the indicated uses for which the product may be marketed.
Also, modifications may be made to our 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 our products or that ultimately any such
improvements will receive FDA clearance.
The Professional Lasette(-TM-) has received FDA clearance for capillary
blood sampling from all individuals including diabetics, in both clinical
and home settings. The FDA clearance for home use of the Professional
Lasette(-TM-) for measuring glucose levels was granted on December 7, 1998.
Although the current Professional Lasette(-TM-) can now be sold for home
use, at this time a smaller and less expensive Personal Lasette(-TM-) is
under development that more clearly focuses on the large home-use market.
The design of the Personal Lasette(-TM-) has been reviewed by the FDA, and
the FDA has indicated that no additional FDA clearance will be required for
the current design of this product.
The laser-assisted hatching module of the IVF Workstation(-TM-) has only
begun clinical trials, which could consist of as many as 600 clinical
cycles. In September, 1998, our representatives met with the FDA to
discuss a reduction in the size of the clinical trial. The FDA agreed in
March, 1999 to a smaller clinical trial. As a result, the clinical trials
could take a year or more 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 Regulations," 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
our products outside of the United States are also subject to certain
manufacturing standards promulgated by the International Standards
Organization ("ISO"). We have been working towards ISO 9001 certification
since January, 1997. On September 3 and 4, 1998, an ISO 9001 audit was
conducted by TUV Essen, of San Jose, California. We passed the audit, and,
as a result, received ISO 9001 certification effective November, 1998.
Additionally, our non-medical products received the CE Mark, and the
Professional Lasette(-TM-) received the RWTUV Mark, both, as of May 15,
1998. The Professional Lasette(-TM-) subsequently received the CE Mark in
October, 1998, following our receipt of ISO certification.
In addition, our manufacturing activities are subject to regulation and
control under the Occupational Safety and Health Act and regulations
promulgated under it. Should we fail to comply with regulatory
requirements we could be subjected 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 our products outside of the United States will be subject to
regulatory requirements governing clinical trials and marketing approval.
These requirements vary widely from country to country and could delay
introduction or continuing sales of our products in foreign countries. In
addition, the foreign sale of at least one of our lasers is subject to the
Export Control Act and can only be exported under a license held by our
Russian supplier. Should that source of supply fail to maintain this
license, our ability to export that laser product would be suspended until
we were able to identify and enter into an arrangement with a new, licensed
supplier.
THE COMPETITIVE ADVANTAGE OF OUR LASER PRODUCTS IS DEPENDENT, IN PART, UPON
OUR RELATIONSHIP WITH THE SOLE SUPPLIER OF CRYSTALS USED IN OUR ERBIUM:YAG
LASERS.
If the source of supply of the crystals we use in our Erbium:YAG lasers
were restricted or eliminated it is likely that alternative sources of
supply would be substantially more expensive, which, in turn, would reduce
our margin and impair our competitive advantage.
The Erbium:YAG lasers we use in the Lasette(-TM-) and the RevitaLase(-TM-)
are made from crystals which we have manufactured in Russia through a
strategic relationship. Our competitive advantage in these products is
derived to a degree from the significant cost savings which we are able to
realize by having our crystals manufactured by our Russian supplier.
Specifically, prices quoted by other crystal suppliers we have identified
are from 170% to 250% higher than the prices currently charged by our
Russian supplier. In the past, we have had disagreements with our Russian
supplier regarding the supplier's rights and obligations relative to the
distribution of intellectual property and problems related to crystal
quality. As a result, we have renegotiated the terms of the strategic
relationship with this supplier to address the supplier's desire to be able
to distribute all or portions of the intellectual property in the event we
are unable to meet certain minimal sales requirements. Additionally the
supplier has installed crystal growth equipment that has improved the
quality of their products. To date, the supply of laser components from
this supplier has not been interrupted. However, if this source of supply
were restricted or eliminated due to factors specifically affecting the
supplier, such as the supplier's inadvertent or intentional
non-performance, 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 our control, we could lose our strategically important
source of supply for laser crystals, which would reduce our margin and
impair our competitive advantage.
Through the quarter ended March 31,1999, revenue generated from the sale
of products utilizing the Russian crystals totaled $171,990, or
approximately 33.3% of our revenue generated during this period.
RISKS RELATED TO THE UNCERTAINTY OF MARKET ACCEPTANCE; SUBSTANTIAL
MARKETING EFFORTS AND EXPENSE REQUIRED.
Achieving market acceptance for our proprietary products will require
substantial marketing efforts and expense, and there can be no assurance
that the marketplace will accept the potential benefits of our technology
or be willing to pay for any cost differential with existing technologies.
Achieving market acceptance for our 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 existing technologies. For example, the Lasette(-TM-)
will compete directly with stainless steel lancets which 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 our ability to educate
potential customers, including third-party distributors, of the distinctive
characteristics and benefits of our products. There can be no assurance
that our 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.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
Given our limited international business experience, the risks of economic
or political instability, and the uncertainties with respect to foreign
laws and regulation, doing business in foreign jurisdictions can be very
risky.
During fiscal 1998, and through the first quarter of fiscal 1999, our
revenues from international sales totaled approximately $490,892, or34.4%
of total revenue, and $201,475, or 39% of total revenue, respectively.
While we believe that doing business in such international locations and
various European and Asian countries offers significant opportunity, we
have only limited international business experience. Furthermore, these
operations are subject to the imponderable risks of economic or political
instability within these foreign jurisdictions, not to mention the
uncertainties with respect to future changes in laws, rules and regulations
controlling these operations. Finally, there exist inherent and
substantial risks in purchasing component parts from, and selling products
in, jurisdictions separated by vast distances, which will accentuate the
need to enter into strategic relationships with loyal and qualified
suppliers and distributors in these jurisdictions. In addition to the
foregoing risks, each specific international location poses risks peculiar
to that site. For instance, Russia's political or economic instability
could adversely affect the supply of crystals we utilize in our Lasette(-
TM-) and RevitaLase(-TM-) products. Likewise, while we believe that the
economic downturn recently experienced by most Asian countries has not, to
date, had a material adverse effect on sales of our products in those
countries, a prolonged economic downturn and/or continued currency
devaluation relative to the U.S. Dollar, could eventually have an adverse
effect on sales of our products in the Asian marketplace. During fiscal
1998 revenues generated from Asian sales were approximately $136,499, or
9.55% of total revenue. During the first three months of fiscal 1999,
revenues from Asian sales were approximately $45,450, or 8.8% of total
revenue.
We cannot predict or quantify the degree to which any or all of the
foregoing factors may adversely impact our future operations.
POTENTIAL LOSS OF EXCLUSIVE LASETTE(-TM-) DISTRIBUTION RIGHTS.
Our failure to meet certain minimum order requirements or to comply with
other agreed upon terms could result in the loss of our exclusive right to
distribute the Lasette(-TM-).
We are relying upon Big Sky Laser Technologies, Inc. to manufacture the
first generation Lasette(-TM-). To this end, effective June 1, 1998, we
entered into an OEM supplier agreement with Big Sky. Under the terms of
this agreement, Big Sky has the exclusive manufacturing rights and we have
exclusive distribution rights, subject to certain minimum order
requirements. Specifically, we must order a minimum of 1,500 units during
the first twelve months, and a minimum of 3,000 units in each subsequent
twelve month period to maintain our exclusive distribution rights. Either
party may terminate the agreement on 90 days written notice in the event of
a material breach that is not cured within 30 days of receipt of notice.
Otherwise, if not earlier terminated, the agreement terminates five years
after execution.
RISK OF DEPENDENCE ON MANUFACTURERS.
We currently do not have written agreements with a number of the third
party manufacturers that produce various product components for us, and
therefore have no assurance that these third parties will commit any
resources to the commercialization of our products. Any supply
interruption could have a material adverse effect on our business.
We are dependent on third parties to produce and manufacture certain
components of our products. Certain key components used in the manufacture
of our products are currently obtained from single vendors. Except as
described above, there are no written agreements with these third parties,
and no third party is obligated to perform any services for us on which we
depend in order to meet our business objectives. Consequently, there can be
no assurance that these third parties will commit any resources to the
commercialization of our products. Any supply interruption in a
sole-sourced component could potentially have a material adverse effect on
our ability to manufacture products until a new source of supply was
qualified. There can be no assurance that we would be successful in
qualifying additional sources on a timely basis, if ever. Failure to do so
would have a material adverse effect on our business, financial condition,
and results of operations.
RISK OF PRODUCT DEFECTS AND WARRANTY CLAIMS.
Undetected product errors or defects could result in costly warranty claims
and redevelopment costs, and could adversely affect or delay market
acceptance of our products.
Products as complex as those we develop may contain undetected errors or
defects when first introduced or as new versions are released. In addition,
we offer on existing products, and plan to offer on future products, a
one-year warranty against defects in materials and workmanship. There can
be no assurance that, despite our testing, or the testing of our 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 our products, even those which have been
successfully redesigned or improved, could be materially adversely
affected.
POTENTIAL ADVERSE EFFECT OF OUR LACK OF STRATEGIC RELATIONSHIPS ON
MARKETING AND SALES.
There can be no assurance that we will be successful in recruiting
marketing personnel with the required skills or that we will be able to
enter into the strategic relationships needed to effectively market our
products.
We believe that in order to increase revenues and achieve profitability,
our products must achieve a significant degree of market acceptance. This,
in turn, is dependent upon our ability to establish an effective sales
organization for our proprietary products or to enter into distribution
arrangements with other entities selling to our target markets. To this
end, we currently have three full-time employees, and one part-time
employee, who are responsible for sales of our various products. We also
have in place distribution arrangements covering:
1. The Lasette(-TM-) with Chronimed, Inc. who replaced our previous
distributors and has been given exclusive marketing rights
worldwide;
2. The IVF Workstation with distributors in Switzerland, Germany,
Denmark, Sweden, the United Kingdom, South Korea and Brazil and we
are working on agreements with distributors in Israel,
Our agreement with Chronimed includes a two-year, multi-million dollar
minimum purchase commitment by Chronimed, pursuant to which Chronimed must
purchase a minimum of 1,500 Professional Lasette(-TM-) devices during year
one, and a minimum of 5,000 second generation Personal Lasette(-TM-)
devices during year two, subject to certain adjustments. The Chronimed
agreement also requires Chronimed to make a capital investment consisting
of staged purchases of $600,000 of our common stock at $1.50 per share
which was the market value of our common stock on the date the agreement
with Chronimed was signed, contingent upon achievement of certain
milestones related to our development of the second generation Personal
Lasette(-TM-) device. This second generation Personal Lasette(-TM-) is a
smaller Lasette(-TM-) being developed to meet the needs of the home blood
sampling for glucose testing market. In accordance with the terms and
conditions of its agreement with us, Chronimed made its first equity
investment on September 11, 1998, pursuant to which Chronimed purchased
200,000 shares of our common stock for an aggregate purchase price of
$300,000. Chronimed made its second equity investment in June, 1999,
pursuant to which it purchased 100,000 shares of our common stock for an
aggregate purchase price of $150,000. Chronimed's capital investment will
be used for the development of this second generation Personal Lasette(-TM-
). The worldwide diabetic market is very large and continues to grow, but
there can be no assurance the Lasette(-TM-) product will achieve market
acceptance.
A significant decrease in purchases by our distributors, including
Chronimed, or the failure by our distributors to comply with the terms of
their agreements with us, could have a material adverse effect on our
operations and future profitability.
DEPENDENCE UPON KEY PERSONNEL.
Our future success is dependent, in part, on our ability to attract and
retain key personnel. The loss of the services of key personnel could have
a material adverse effect upon our operations and on our research and
development efforts.
Our future success is dependent on the continued service of our key
technical, marketing, sales, and management personnel and on our ability to
continue to attract, motivate, and retain highly qualified employees. We
currently have in place employment agreements with Ronald K. Lohrding,
Ph.D., our President and CEO, Craig Rogers, our Vice President of Investor
Relations, Secretary and Treasurer, and Mr. H. Travis Lee, our Vice
President of Marketing and Sales. Our key employees, including those with
employment agreements, may voluntarily terminate their employment with us
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 our strategy is often lengthy.
Accordingly, the loss of the services of key personnel could have a
material adverse effect upon our operations and on research and development
efforts. Further, we do not have key person life insurance covering our
management personnel or other key employees, other than a $500,000 term
policy on our President and CEO, Ronald K. Lohrding, Ph.D.
RISK OF INABILITY TO MANAGE GROWTH.
Our failure to manage growth properly could have a material adverse effect
upon our business, financial condition and results of operations.
The medical device industry is characterized by extensive research efforts,
rapid technological progress, evolving industry standards, and frequent new
product and service introductions. Thus, the ability to timely deliver
state-of-the-art products and to provide meaningful customer support for a
highly technical product offering is indispensable. For this reason, we
have adopted a long term growth strategy to develop our product lines and
strengthen our market position via continued research and development
efforts, and through appropriate acquisitions. However, our ability to
manage our growth, if any, will require the continued improvement and
expansion of our management, operational and financial systems and
controls. Any measurable growth in our business will result in additional
demands on our customer support, sales, marketing, administrative and
technical resources and will place significant strain on our management,
administrative, operation, financial and technical resources and increase
demand upon our systems and controls. There can be no assurance that we
will be able to successfully address these additional demands. There also
can be no assurance that our operating and financial control systems will
be adequate to support our future operations and anticipated growth.
Failure to manage our growth properly could have a material adverse effect
upon our business, financial condition and results of operations.
RISKS ASSOCIATED WITH OUR ABILITY TO MAKE UNSPECIFIED ACQUISITIONS.
Additional acquisitions, if consummated, could adversely affect our
operations.
In furtherance of our goal to implement and maintain a strategic plan of
expansion of our product offering we may seek potential acquisitions of
patents, products, technologies and businesses that could complement or
expand our business. In the event we were to identify an appropriate
acquisition candidate, there is no assurance that we would be able to
successfully negotiate, finance or integrate the acquired patents,
products, technologies or businesses. Furthermore, such an acquisition
could cause a diversion of our managerial time and resources. There can be
no assurance that a given acquisition, when consummated, would not
materially adversely affect our business and results of operations. See
"Risk Factors - Dependence Upon Key Personnel." See also, "Risk Factors -
Risk of Inability to Manage Growth."
POTENTIAL ADVERSE EFFECTS OF HEALTH CARE REFORM AND POTENTIAL LIMITATIONS
ON THIRD-PARTY REIMBURSEMENT RELATED MATTERS.
Continuing efforts of government and third-party payers to contain or
reduce the costs of health care could adversely affect the market for, and
future sales of, our products.
Our future success may be affected by the continuing efforts of government
and third-party payers to contain or reduce the costs of health care
through various means. We cannot predict the effect health care reforms may
have on our business, and there can be no assurance that any reforms will
not have a material adverse effect on our operations. Certain medical
laser products that we are developing are designed for use in elective
medical procedures, such as "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
payers, such as government and private insurance plans. Third-party payers
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 our laser medical products will be considered cost
effective and that reimbursement to the consumer will be available or will
be sufficient to allow us to sell our products on a competitive basis.
POTENTIAL ADVERSE EFFECTS FROM DECREASES IN GOVERNMENT SUPPORT OF
SCIENTIFIC PURSUITS.
A reduction or withdrawal of government support of scientific pursuits
could result in a lower demand for our products.
The principal markets for our 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 our 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
lower demand for our products.
RISK OF PRODUCT LIABILITY.
Our clinical and commercial activities may expose our assets and resources
to liability claims in excess of our insurance limits.
Clinical trials or marketing of any of our products may expose our assets
and resources to liability claims from the use of these products. We
currently carry product liability insurance with limits of $2,000,000;
however, there can be no assurance that we will be able to obtain or
maintain insurance on acceptable terms for our clinical and commercial
activities or that this 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 our business and results
of operations.
BROAD DISCRETION IN THE APPLICATION OF PROCEEDS.
We will have broad discretion to allocate any proceeds we receive from the
Offerings. We cannot guarantee that the monies received will improve our
operations.
We will have broad discretion to allocate the proceeds of the Offerings and
to determine the timing of expenditures. We expect that the proceeds of
the Offerings, if any, will be used principally for product research and
development and to launch our medical laser products. We are 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. Also, while we will apply the proceeds in a manner consistent with
our fiduciary duty and in a manner consistent with our best interests, we
cannot assure you that the monies received will result in any present or
future improvement in our results of operations. See "Use of Proceeds."
RISK OF SUBSTANTIAL DILUTION.
The exercise prices of our Class A Warrants and Public Warrants is
considerably higher than our per share net tangible book value. As a
result, the exercise of Class A Warrants and/or Public Warrants may result
in substantial dilution.
At March 31, 1999, we had a net tangible book value of $1,671,607 or
approximately $.21 per share of common stock outstanding, based upon
7,784,591 shares issued and outstanding. Assuming the exercise of the
Placement Agent's Warrants and all of the Class A Warrants issued as part
of the private units purchased upon exercise of the Placement Agent's
Warrants, investors exercising Class A Warrants will incur immediate and
substantial dilution of their investment of approximately $1.54 per share,
or approximately 88% of the Class A Warrant exercise price, based upon our
adjusted net tangible book value as of March 31, 1999. This dilution does
not reflect the possible exercise of the Representative's Warrant or the
possible exercise of the Public Warrants to be issued as part of the public
units purchased upon exercise of the Representative's Warrant. This
dilution also does not reflect the possible exercise of 920,000 Public
Warrants which will further dilute existing shareholders. Specifically,
assuming the exercise of the Placement Agent's Warrants and all of the
Class A Warrants issued as part of the private units purchased upon
exercise of the Placement Agent's Warrants, the exercise of the
Representative's Warrant and all of the Public Warrants issued as part of
the public units purchased upon exercise of the Representative's Warrant,
and assuming further the exercise of all 920,000 Public Warrants, the
number of shares of common stock will increase to 9,289,591 and the net
tangible book value will increase to $4,931,357 after subtracting the
expenses of the Offerings estimated to be $25,000, resulting in a net
tangible book value per share of approximately $.53. Thus, to the extent
that currently outstanding options and warrants to purchase our common
stock are exercised, and depending upon our net tangible book value on the
date of exercise, there may be further, substantial, dilution to investors
in the Offerings exercising Class A Warrants and/or Public Warrants. See
"Dilution."
RISKS ASSOCIATED WITH INABILITY TO FORCE WARRANT EXERCISE.
We cannot predict the number of Class A Warrants and/or Public Warrants, if
any, that will be exercised, or the proceeds that we will receive from the
exercise of these warrants.
Holders of Class A Warrants and Public Warrants are under no obligation to
exercise their 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 our decision to call 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 Class A
Warrants and/or Public Warrants, or any of them, will be exercised prior to
their expiration, or that we will receive any proceeds from the exercise of
any warrants.
NO DIVIDENDS.
We do not anticipate paying dividends on common stock in the foreseeable
future.
We have not declared or paid cash dividends on our common stock in the
preceding two fiscal years. We currently intend to retain all future
earnings, if any, to fund the operation of our business, and therefore do
not anticipate paying dividends on common stock in the foreseeable future.
POTENTIAL ADVERSE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE.
The market price of our securities could be adversely affected by future
sales of our securities.
Future sales of our common stock (including common stock issued upon the
exercise of outstanding options and warrants) in the public market could
materially adversely affect the market prices of our common stock and
Public Warrants. These sales also might make it more difficult for us to
sell our equity securities or equity-related securities in the future at a
time and price that we deem acceptable, or at all. As of June 23, 1999,
7,884,591 shares of our common stock were issued and outstanding, of which
6,789,387 are unrestricted and freely tradeable at the discretion of their
owners and 1,095,204 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 our
affiliates, who beneficially owned restricted shares of common stock for at
least one year is entitled to sell, within any three month period, a number
of shares that does not exceed the greater of:
1. one percent of the total number of outstanding shares of the same
class; or
2. if the common stock is quoted on Nasdaq or a stock exchange, the
average weekly trading volume during the four calendar weeks
immediately preceding the sale. A person who presently is not, and
who has not been an affiliate of ours for at least three months
immediately preceding the sale, and who has beneficially owned the
shares of common stock for at least two years is entitled to sell
his or her shares under Rule 144 without regard to the volume
limitations described above.
Of the1,095,204 outstanding shares of our common stock that are restricted,
approximately 409,404 shares are eligible for sale in the public market
without restriction in reliance upon Rule 144(k). 385,800 of the 1,095,204
restricted shares outstanding are beneficially owned by our officers,
directors and affiliates, all of which are immediately eligible for resale
subject to the volume limitations of Rule 144. In addition to the
1,095,204 restricted shares outstanding, we currently have outstanding
various warrants exercisable to purchase an additional 1,762,576 shares of
common stock. In addition, we currently have issued and outstanding options
to purchase an aggregate of 1,666,820 shares of common stock, of which
1,600,000 underlying shares of common stock may be freely tradeable upon
exercise due to a registration statement covering our Stock Incentive Plan.
No prediction can be made as to the effect, if any, that sales of shares of
common stock or the availability of these 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 and
Public Warrants and could impair our 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, and markets for, our common stock and Public
Warrants.
POSSIBLE DILUTION FROM FUTURE SALES OF COMMON STOCK.
Our ability to issue additional securities without shareholder approval
could have substantial dilutive and other adverse effects on existing
stockholders and investors in these Offerings.
We have the authority to issue up to 12,500,000 shares of common stock and
to issue options and warrants to purchase shares of our common stock
without stockholder approval. Future issuance of common stock could be at
values substantially below the offering prices in these Offerings and
therefore could represent further substantial dilution to you as an
investor in the Offerings. In addition, we 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.
We may authorize the issuance of other classes of our preferred stock with
rights preferential to the rights of investors in these Offerings without
shareholder approval.
Our Articles of Incorporation, as amended, authorize the issuance of up to
2,500,000 shares of preferred stock. We have the authority to fix and
determine the relative rights and preferences of additional shares, as well
as the authority to issue these shares, without further stockholder
approval. As a result, we could authorize the issuance of a series of
preferred stock which would grant to holders:
1. preferred rights to our assets upon liquidation;
2. the right to receive dividend coupons before dividends would be
declared to common stockholders; and
3. the right to the redemption of these shares, together with a
premium, prior to the redemption of common stock.
Common stockholders have no redemption rights. In addition, we could issue
large blocks of preferred stock to fend against unwanted tender offers or
hostile takeovers without further stockholder approval. See "Description of
Securities."
RISKS RELATED TO LIMITED LIQUIDITY IN TRADING MARKETS OF OUR SECURITIES.
The trading markets for our securities is limited and sporadic.
There currently does not exist a public trading market for our Class A
Warrants. Our common stock and Public Warrants are traded on the Bulletin
Board under the trading symbols CRII and CRIIW, respectively. While there
currently exists a limited and sporadic public trading market for these
securities, the prices are subject to high degrees of volatility and there
can be no assurance that these markets will improve in the future. As a
result, there can be no assurances that you will be able to liquidate your
investment without considerable delay, if at all. Additionally, the other
factors we discuss in this "Risk Factors" section of this prospectus may
have a significant impact on the market prices of our common stock and
Public Warrants. See "Description of Securities."
RISKS OF PRICE AND VOLUME FLUCTUATIONS.
Market fluctuations and other factors may adversely affect the market
prices of our securities.
The over-the-counter markets for securities such as our common stock and
Public Warrants 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 our industry
and the investment markets generally, as well as economic conditions and
quarterly variations in our results of operations, may adversely affect the
market prices of our securities.
RISKS OF LOW-PRICED STOCKS.
To the extent our securities are classified as penny stocks, it may be more
difficult for you to sell your common stock and/or Public Warrants.
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 Five Dollars
($5.00) per share, subject to certain exceptions. These exceptions include
any equity security listed on Nasdaq and any equity security issued by an
issuer that has:
1. net tangible assets of at least Two Million Dollars ($2,000,000), if
the issuer has been in continuous operation for three (3) years; or
2. net tangible assets of at least Five Million Dollars ($5,000,000),
if the issuer has been in continuous operation for less than three
(3) years; or
3. an average annual revenue of at least Six Million Dollars
($6,000,000), if the issuer has been in continuous operation for
less than three (3) 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 with it.
Our common stock and the Public Warrants are 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 a 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 our securities that are or
become subject to the penny stock rules. Many brokers may be unwilling to
engage in transactions in our securities because of the added disclosure
requirements, thereby making it more difficult for you, as a purchaser of
securities in the Offerings, to dispose of your securities. Additionally,
to the extent our securities are or become subject to the penny stock rules
we may have difficulty raising additional capital and you, as a purchaser
of penny stocks, may find it difficult to obtain current pricing
information due to a lack of mainstream news coverage and a limited number
of quotation sources.
POTENTIAL ADVERSE EFFECTS OF MARKET OVERHANG FROM WARRANTS AND OUTSTANDING
OPTIONS.
The issuance of shares of common stock upon the exercise of our outstanding
warrants will result in dilution to the interests of our stockholders and
you as an investor in the Offering, and may have an adverse effect on the
trading price and market for our common stock.
We have outstanding options and warrants exercisable to acquire 3,429,396
shares of common stock, 575,141 of which are subject to future vesting.
Included in the foregoing are 1,051,820 options which have been granted
under our Incentive Stock Option Plan, 851,679 of which are immediately
exercisable. Also included in the foregoing is 230,000 shares of common
stock issuable to Paulson upon exercise of the Placement Agent's Warrants,
and an additional 115,000 shares of common stock issuable upon exercise of
the Class A Warrants issuable to Paulson under the Placement Agent's
Warrants. Additionally, included in the foregoing are 160,000 shares of
common stock issuable upon exercise of the Representative's Warrant,
together with an additional 80,000 shares of common stock issuable upon
exercise of the Public Warrants also issuable to Paulson under the
Representative's Warrant. Finally, included in the foregoing are 450,000
shares of common stock issuable upon the exercise of options held by our
President, Ronald K. Lohrding, Ph.D, 150,000 shares of common stock which
may become issuable upon the exercise of options granted under the terms of
an agreement with a consultant, 100,000 shares of common stock which may
become issuable under the terms of an agreement with Chronimed and 100,000
shares of common stock which may become issuable upon the exercise of a
warrant granted under the terms of an agreement with GEM Edwards, Inc.
To the extent that these stock options or warrants are exercised, dilution
to the interests of our stockholders and you as an investor in the
Offerings 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 even the potential of their exercise or conversion may
have an adverse effect on the trading price and market for our common
stock. The holders of our options or our warrants are likely to exercise
them at times when the market price of the common stock exceeds the
exercise price of the securities. Accordingly, the issuance of shares of
common stock upon exercise of the options or our warrants will likely
result in dilution of the equity represented by the then outstanding shares
of common stock held by other stockholders. Holders of our options or our
warrants can be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital on terms which are more
favorable to us than the exercise terms provided by these options or
warrants. See "Description of Securities."
NEED FOR CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATIONS.
The Class A Warrants and/or Public Warrants may be deprived of any value if
a prospectus covering the shares of common stock issuable upon their
exercise is not kept effective and current, or if the underlying shares of
common stock are not, or cannot be, registered in the applicable states.
As a holder of Class A Warrants and/or Public Warrants you will have the
right to 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 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 we have
undertaken and plan to do so, maintaining a current effective registration
statement and prospectus could result in substantial expense, and there can
be no assurance that a current registration statement and prospectus will
be in effect when you may want to exercise the Class A Warrants and/or
Public Warrants. Although we will seek to qualify for sale the shares of
common stock underlying the Class A Warrants and Public Warrants in those
states in which the securities are to be offered and qualification is
required, no assurance can be given that the required qualification will
occur. The warrants may be deprived of any value if a prospectus covering
the shares issuable upon the exercise thereof is not kept effective and
current, or if the underlying shares are not, or cannot be, registered in
the applicable states. See "Description of Securities."
POTENTIAL ADVERSE EFFECT OF WARRANT REDEMPTION.
Our redemption of the Class A Warrants and/or Public Warrants could force
you to exercise the warrants at a time when it may be disadvantageous for
you to do so.
We can redeem the Class A Warrants at a price of $0.25 per warrant upon 30
days' notice, mailed after the closing bid price of our common stock has
equaled or exceeded $3.50 for a period of ten consecutive trading days. We
can redeem the Public Warrants at a price of $0.25 per warrant upon 30
days' notice, mailed after the closing bid price of our common stock has
equaled or exceeded $4.80 for a period of ten consecutive trading days. As
a holder of Class A Warrants and/or Public Warrants, you will have exercise
rights until the close of the business day preceding the date fixed for
redemption. However, as a holder of Class A Warrants and/or Public
Warrants, upon redemption you could be forced:
1. To exercise the Class A Warrants and/or Public Warrants and pay the
exercise price at a time when it may be disadvantageous for you to
do so;
2. To sell the Class A Warrants at fair value and/or Public Warrants at
the then current market price when you might otherwise wish to hold
them; or
3. To accept the redemption price, which is likely to be substantially
less than the fair value of the Class A Warrants and/or market value
of the Public Warrants at the time of redemption.
Neither the Class A Warrants nor the Public Warrants may be redeemed or
exercised unless a registration statement pursuant to the Securities Act
covering the underlying shares of common stock is current and these shares
have been qualified for sale, or there is an exemption from applicable
qualification requirements, under the securities laws of your state of
residence as a holder of the Class A Warrants and/or Public Warrants. See
"Description of Securities."
RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE.
Our failure to adequately address and resolve our Year 2000 issues on or
before December 31, 1999 could result in system failures causing disruption
in our operations and an inability to engage in normal business
activities.
THE PROBLEM. The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year.
As a result, any of our computer programs that have date sensitive software
may recognize a date using "00" as the year 1900 rather than the year
2000, which, in turn, could result in system failures or miscalculations
causing disruptions in our operations, and the operations of our suppliers
and customers.
OUR STATE OF READINESS. We have instituted a Year 2000 Project. As part
of our Year 2000 Project, we have completed our initial evaluation of
current computer systems, software and embedded technologies. The
evaluation revealed that our network hardware and operating system, voice
mail system, e-mail system, and accounting and manufacturing software are
the major resources that do have Year 2000 compliance issues. These
resources will need to be either replaced or upgraded. Fortunately, the
identified systems and/or programs are "off-the-shelf" products with Year
2000 compliant versions now available.
Our network and network operating system has been replaced. The e-mail
system and accounting and manufacturing software have been installed and
implementation has begun. Our voice mail system is scheduled to be
replaced during the second quarter of 1999. All other relevant programs,
including Microsoft Windows95(-Registered Mark-) operating system, are
scheduled for upgrade by the end of June, 1999.
We have determined that there should be no Year 2000 issues for the
products we have already sold, excluding issues associated with the
Microsoft Windows95(-Registered Mark-) operating system which is
incorporated into our Workstation products. Customers who have purchased
our Workstation products will be notified about Microsoft Windows95(-
Registered Mark-) and problems will be addressed as incurred.
As part of our Year 2000 Project, we have also contacted our significant
suppliers, distributors and large customers to determine the extent to
which we are vulnerable to those third parties' failure to remediate their
Year 2000 compliance issues. To date, approximately seventy-two percent of
our significant suppliers contacted have responded, and of those
responding, fifty-four percent have indicated that they have remediated
their Year 2000 compliance issues. Of our distributors and large customers
contacted, approximately thirty-three percent have responded and of these,
eighty percent have indicated they are Year 2000 compliant. We will
continue to contact our significant suppliers, distributors and large
customers as part of our Year 2000 Project. However, there can be no
guarantee that the systems of other companies on which our business relies
will be timely converted or that failure to convert by another company, or
a conversion that is incompatible with our systems, would not have a
material adverse effect on our operations.
THE COSTS TO ADDRESS OUR YEAR 2000 ISSUES. Expenditures in 1998 for the
year 2000 Project were approximately $16,000. We expect that completion of
our Year 2000 Project may result in additional expenditures of
approximately $23,000.The Risks Associated with Our Year 2000 Issues. Our
failure to resolve Year 2000 issues on or before December 31, 1999 could
result in system failures or miscalculations causing disruption in
operations, including, among other things, a temporary inability to process
transactions, send invoices, send and/or receive e-mail and voice mail, or
engage in similar normal business activities. Additionally, failure of
third parties upon whom our business relies to timely remediate their Year
2000 issues could result in disruptions in our supply of parts and
materials, late, missed or unapplied payments, temporary disruptions in
order processing and other general problems related to our daily
operations. While we believe our Year 2000 Project will adequately address
our internal Year 2000 issues, until we receive responses from a more
significant number of our suppliers and customers, the overall risks
associated with the Year 2000 issue remain difficult to accurately describe
and quantify, and there can be no guarantee that the Year 2000 issue will
not have a material adverse effect on our operations.
OUR CONTINGENCY PLAN. We have not, to date, implemented a Year 2000
Contingency Plan. It is our goal to have the major Year 2000 Issues
resolved by the end of the second quarter of fiscal 1999. As part of our
Year 2000 Project, we plan to retain the services of an outside consultant
to verify and validate our Year 2000 compliance. Final Year 2000
verification and validation is scheduled to occur by the end of September,
1999. We will develop and implement a contingency plan at this time should
it appear that our Year 2000 Project has not been satisfactorily completed.
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ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
You may read and copy any document we file at the Commission's Public
Reference Rooms in Washington, D.C., New York, New York, and Chicago,
Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the Public Reference Rooms. You can also obtain copies of
our Commission filings by going to the Commission's website at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later
information that we file with the Commission will automatically update and
supersede this information. We incorporate by reference the documents
listed below and any future filings we make with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
This prospectus is part of a registration statement we filed with the
Commission.
1. Pre-Effective Amendment No. 2 to our Registration Statement on
Form SB-2, Registration No. 333-40895;
2. Our definitive Proxy Statement;
3. Our Annual Report on Form 10-KSB for the year ended December
31, 1998;
4. Our Quarterly Report on Form 10-QSB for the quarter ended March
31, 1999; and
5. Pre-Effective Amendment No. 3 to our Registration Statement on
Form S-3, filed with the Commission on January 20, 1999.
You may request a copy of these filings at no charge by a written or oral
request to Ronald K. Lohrding, Ph.D., President, Cell Robotics
International, Inc., 2715 Broadbent Parkway N.E., Albuquerque, New Mexico
87107, (505) 343-1131. In addition, you can obtain these filings
electronically at the Commission's worldwide website at
http://www.sec.gov/edgarhp/htm.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have
not authorized anyone else to provide you with different information. We
are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this
prospectus or any supplement to this prospectus is accurate as of any date
other than the date on the front of those documents.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements that plan for or anticipate the future.
Forward-looking statements include statements about the future of the
medical laser products industry, statements about our future business plans
and strategies, and most other statements that are not historical in
nature. In this prospectus, forward-looking statements are generally
identified by the words "anticipate," "plan," "believe," "expect,"
"estimate," and the like. Although we believe that any forward-looking
statements we make in this prospectus are reasonable, because forward-
looking statements involve future risks and uncertainties, there are
factors that could cause actual results to differ materially from those
expressed or implied. For example, a few of the uncertainties that could
affect the accuracy of forward-looking statements, besides the specific
factors identified above in the Risk Factors section of this prospectus,
include:
* changes in general economic and business conditions affecting the
medical laser products industry;
* technical developments that make our products or services
obsolete;
* changes in our business strategies;
* the level of demand for our products and services; and
* our ability to develop or maintain strategic relationships within
the medical laser products industry.
In light of the significant uncertainties inherent in the forward-looking
statements made in this prospectus, particularly in view of our early stage
of operations, the inclusion of this information should not be regarded as
a representation by us or any other person that our objectives and plans
will be achieved.
NO "SAFE HARBOR"
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by certain existing public companies,
does not apply to our offerings.
DILUTION
At March 31, 1999, we had a net tangible book value of $1,671,607 or
approximately $.21 per share of common stock outstanding, based upon
7,784,591 shares issued and outstanding. Net tangible book value per share
is determined by dividing the number of outstanding shares of common stock
into our net tangible book value (total assets less total liabilities and
intangible assets).
The foregoing calculation does not reflect the issuance of 100,000
shares of our common stock to Chronimed in June, 1999 for a purchase price
of $150,000, or the possible occurrence of the following events:
1. The possible exercise of the Placement Agent's Warrants or the
possible exercise of the Class A Warrants to be issued upon
exercise of the Placement Agent's Warrants;
2. The possible exercise of the Representative's Warrant or the
possible exercise of the Public Warrants to be issued as part of
the public units purchased upon exercise of the Representative's
Warrant; or
3. The possible exercise of 920,000 Public Warrants.
The occurrence of all or any one of the foregoing events, will further
dilute existing shareholders. Specifically, if any outstanding warrants
are exercised, including the Placement Agent's Warrants and the Class A
Warrants issuable upon exercise of the Placement Agent's Warrants, the
Public Warrants issuable upon exercise of the Representative's Warrant,
and/or the Public Warrants sold in the public offering, of which there can
be no assurance, the number of common shares outstanding will increase and
our net tangible book value will increase. The exercise of any of our
outstanding warrants at a time when the exercise price is greater than our
net tangible book value per share will result in an immediate increase in
the net tangible book value of our existing shareholders, and you, as an
exercising warrantholder, will experience immediate dilution in the value
of your investment. Dilution is the reduction of value of your investment
measured by the difference between the warrant exercise price you pay and
our net tangible book value per share after giving effect to the exercise
of your warrants, if your 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 our net tangible book value. As a result, assuming
the exercise of the Placement Agent's Warrants and all of the Class A
Warrants issued as part of the private units purchased upon exercise of the
Placement Agent's Warrants, and assuming further the exercise of the
Representative's Warrant, and the exercise of the Public Warrants issued as
part of the public units purchased upon exercise of the Representative's
Warrant, and finally, assuming the exercise of all 920,000 Public Warrants
currently outstanding, our net tangible book value would increase to
$4,931,357 after subtracting the expenses of the Offerings estimated to be
$25,000, resulting in an adjusted net tangible book value per share of
approximately $.53 per share based on 9,289,591 shares issued and
outstanding.
As a result, as an investor exercising Class A Warrants you will incur
immediate and substantial dilution of your investment of approximately
$1.22 per share, or approximately 70% of the Class A Warrant exercise
price, and as an investor exercising Public Warrants you will incur
immediate and substantial dilution of your investment of approximately
$1.87 per share, or approximately 78% of the Public Warrant exercise price,
based upon our adjusted net tangible book value as of March 31, 1999, and
after giving effect to the transactions we have discussed above. Thus, to
the extent that currently outstanding options and warrants to purchase our
common stock are exercised, and depending upon our net tangible book value
on the date of exercise, there may be further, substantial, dilution to you
as an investor exercising Class A Warrants and/or Public Warrants.
USE OF PROCEEDS
The 1,505,000 shares of common stock covered by this prospectus consist of
the following:
1. 230,000 shares of common stock issuable to Paulson upon exercise
of the Placement Agent's Warrants; and
2. 115,000 shares of common stock which may be purchased by Paulson
upon exercise of Class A Warrants at a price of $1.75 per share
also issuable upon exercise of the Placement Agent's Warrants;
and
3. 160,000 shares of common stock issuable to Paulson upon exercise
of the Representative's Warrant; and
4. 80,000 shares of common stock which may be purchased by Paulson
upon exercise of Public Warrants at a price of $2.40 per share
also issuable upon exercise of the Representative's Warrant; and
5. 920,000 shares of common stock issuable upon exercise of Public
Warrants sold in the public offering exercisable at a price of
$2.40 per share. See "Plan of Distribution".
We will not receive any proceeds from the resale of our common stock,
Class A Warrants and/or Public Warrants. We may, however, receive proceeds
from the following:
1. If Paulson exercises the Placement Agent's Warrants we will
receive gross proceeds of $287,500. Additionally, if all of
the shares we are offering are purchased pursuant to the
exercise of the Class A Warrants issued to Paulson upon
exercise of the Placement Agent's Warrants, which we cannot
guarantee, then we will receive additional gross proceeds of
up to $201,250;
2. If Paulson exercises the Representative's Warrant we will
receive gross proceeds of $396,000. Additionally, if all of
the shares we are offering are purchased pursuant to the
exercise of the Public Warrants issued to Paulson upon
exercise of the Representative's Warrant, which we cannot
guarantee, then we will receive additional gross proceeds of
up to $192,000; and
3. If all of the shares we are offering are purchased pursuant
to the exercise of the Public Warrants sold in the public
offering, which we cannot guarantee, then we will receive
additional gross proceeds of up to $2,208,000.
Pursuant to an agreement with Paulson and those investors who purchased our
securities in the public offering, we have agreed to pay the cost of
registering the securities covered by this prospectus which we estimate
will cost $25,000. Those investors who purchased our securities in the
public offering will, however, pay the other costs related to the resale of
their securities, including discounts, commissions and transfer fees.
We anticipate that the proceeds, if any, which we receives from the
exercise of the Placement Agent's Warrants, the Class A Warrants, the
Representative's Warrant and/or the Public Warrants will be applied to
provide additional working capital. 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.
We regularly evaluate possibilities for the acquisition of other
businesses, technologies or products, but at present there are no
negotiations, arrangements, agreements or understandings with respect to
any potential material acquisition other than as noted in this prospectus.
Due to our inability to precisely forecast the number of units which may be
sold pursuant to the exercise of the Placement Agent's Warrants and/or the
Representative's Warrant, or the number, if any, of Class A Warrants and/or
Public Warrants which will thereafter be exercised by Paulson and those
investors that acquired our securities in the public offering, we are
unable to predict the precise period for which our various Offerings will
provide financing. Our working capital requirements are a function of
future sales growth and potential business or product acquisitions, neither
of which can be predicted with any reasonable degree of certainty. We may
need to seek funds through loans or other financing arrangements in the
future, and there can be no assurance that we will be able to make these
arrangements in the future should the need arise. See "Risk Factors".
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DETERMINATION OF OFFERING PRICE
DETERMINATION OF CLASS A WARRANT EXERCISE PRICE:
The exercise price of the Class A Warrants is $1.75 per share. The
exercise price was determined by negotiation with Paulson in connection
with the private offering. In determining the offering price, together
with Paulson we considered, among other things, our financial condition,
our net tangible book value, our limited operating history and the general
condition of the securities market. Accordingly, the exercise price should
not be considered an indication of our actual value. The price bears no
relation to our assets, book value, earnings or net worth or any other
traditional criteria of value.
DETERMINATION OF PUBLIC WARRANT EXERCISE PRICE:
The offering price of the common stock we are offering pursuant to the
exercise of the Public Warrants is $2.40 per share. The exercise price of
the Public Warrants was determined by negotiation with Paulson in
connection with the public offering. In determining the exercise price of
the Public Warrants, together with Paulson we considered, among other
things, our financial condition, our net tangible book value, our limited
operating history and the general condition of the securities market.
Accordingly, the exercise price of the Public Warrants should not be
considered an indication of our actual value. The exercise price of the
Public Warrants bear no relation to our assets, book value, earnings or net
worth or any other traditional criteria of value.
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PLAN OF DISTRIBUTION
EXERCISE OF PLACEMENT AGENT'S WARRANTS: PLACEMENT AGENT'S WARRANT OFFERING
This prospectus relates to our offering of 230,000 shares of common stock
and 115,000 Class A Warrants issuable upon exercise of the Placement
Agent's Warrants. The Placement Agent's Warrants were issued to Paulson as
partial compensation for its services as Placement Agent in the private
offering.
We do not have the right to compel the exercise of the Placement Agent's
Warrants and Paulson has made no commitment or other arrangement with
regard to this exercise. Whether any or all of the Placement Agent's
Warrants are exercised will depend upon several factors, including the
prevailing market price of our common stock, the liquidity of that market
and Paulson's investment objectives.
EXERCISE OF CLASS A WARRANTS: THE CLASS A WARRANT OFFERING
We are offering up to 115,000 shares of common stock issuable upon exercise
of the Class A Warrants issuable to Paulson upon exercise of the Placement
Agent's Warrants. Holders of the Class A Warrants are entitled to acquire
up to 115,000 shares of common stock at an exercise price of $1.75 per
share. The Class A Warrants are exercisable until December 31, 2000,
unless earlier redeemed. We may redeem the outstanding Class A Warrants, in
whole or in part, at any time upon at least 30 days' prior written notice
to the registered holders of the Class A Warrants, at a price of $.25 per
warrant, provided that:
1. there is in effect a registration statement registering for
sale under the Securities Act the shares of common stock
issuable upon exercise of the Class A Warrants;
2. there exists a public trading market on Nasdaq or the Bulletin
Board for our common stock; and
3. the closing public trading price of our common stock must have
equaled or exceeded $3.50 per share for at least ten (10)
consecutive trading days immediately preceding the date we give
notice of our intention to redeem the Class A Warrants.
We do not have the right to compel the exercise of any of the Class A
Warrants and Paulson has not committed to exercise any of the Class A
Warrants. Whether any Class A Warrants are exercised will depend upon
several factors, including the prevailing market price of our common stock,
the liquidity of that market, if any, and the personal investment
objectives of the Class A Warrant holders. See "Risk Factors."
Accordingly, there can be no assurance of the number, if any, of shares
that will be purchased pursuant to the exercise of the Class A Warrants.
We intend to maintain a current prospectus until the Class A Warrants
expire, or until they are all exercised, if earlier. We may at any time
and from time to time extend the term of the Class A Warrants or reduce the
exercise price of the Class A Warrants, provided written notice of an
intended extension or reduction is given to the registered holders of the
Class A Warrants prior to the expiration date then in effect.
The shares of common stock to be issued upon exercise of the Class A
Warrants are offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
We are offering the shares of common stock underlying the Class A Warrants.
No underwriter or placement agent has been engaged to assist us in this
regard and no commissions or similar compensation will be paid to any
person. Holders of the shares of common stock issuable upon exercise of the
Class A Warrants may resell the shares 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
charged, at market prices prevailing at the time of sale, or at negotiated
prices. Holders of the shares of common stock issuable upon exercise of
the Class A Warrants may effect such transactions by selling the common
stock directly to purchasers or through broker-dealers that may act as
agents or principals. These broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the person selling the
shares of common stock and/or the purchasers of the shares of common stock
for whom the 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).
EXERCISE OF REPRESENTATIVE'S WARRANT: THE REPRESENTATIVE'S WARRANT OFFERING
This prospectus relates to our offering of 160,000 shares of common stock
and 80,000 Public Warrants issuable upon exercise of the Representative's
Warrant. The Representative's Warrant was issued to Paulson as partial
compensation for its services in connection with the public offering.
We do not have the right to compel the exercise of the Representative's
Warrant and Paulson has made no commitment or other arrangement with regard
to this exercise. Whether any or all of the Representative's Warrant is
exercised will depend upon several factors, including the prevailing market
prices of our common stock and the Public Warrants, the liquidity of these
markets, and Paulson's investment objectives.
EXERCISE OF REPRESENTATIVE'S PUBLIC WARRANTS: THE REPRESENTATIVE'S PUBLIC
WARRANT OFFERING
We are also offering up to 80,000 shares of common stock issuable at $2.40
per share upon exercise of the Public Warrants issuable to Paulson upon
exercise of the Representative's Warrant. The Public Warrants issuable to
Paulson are exercisable until February 2, 2003, unless earlier redeemed.
We may redeem these Pubic Warrants, in whole or in part, at any time upon
at least 30 days' prior written notice to the registered holder of these
Public Warrants, at a price of $.25 per warrant, provided that:
1. there is in effect a registration statement registering for
sale under the Securities Act the shares of common stock
issuable upon exercise of these Public Warrants;
2. the closing bid price of our common stock has been at least
$4.80 for the ten consecutive trading days immediately
preceding the date we give notice of our intention to redeem
these Public Warrants; and
3. the expiration of the 30 day notice period is within the then
current term of these Public Warrants.
We do not have the right to compel the exercise of any of these Public
Warrants and Paulson has not committed to exercise any of them. Whether
any of these Public Warrants are exercised will depend upon several
factors, including the prevailing market price of the Public Warrants and
our common stock, the liquidity of those markets, if any, and the personal
investment objectives of the holder of these Public Warrants. See "Risk
Factors." Accordingly, there can be no assurance of the number, if any, of
shares that will be purchased pursuant to the exercise of these Public
Warrants. We intend to maintain a current prospectus until these Public
Warrants expire, or until they are all exercised, if earlier. We may at
any time and from time to time extend the term of these Public Warrants or
reduce their exercise price, provided written notice of any extension or
reduction is given to the registered holders of these Public Warrants prior
to the expiration date then in effect.
The shares of common stock to be issued upon exercise of these Public
Warrants are offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
We are offering the shares of common stock underlying these Public
Warrants. No underwriter or placement agent has been engaged to assist us
in this regard and no commissions or similar compensation will be paid to
any person. Holders of the shares of common stock issuable upon exercise of
these Public Warrants may resell the shares 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 these methods of sale, at fixed prices
that may be charged, at market prices prevailing at the time of sale, or at
negotiated prices. Holders of the shares of common stock issuable upon
exercise of these Public Warrants may effect these transactions by selling
the common stock directly to purchasers or through broker-dealers that may
act as agents or principals. These broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the person
selling the shares of common stock and/or the purchasers of the shares of
common stock for whom the 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).
EXERCISE OF PUBLIC WARRANTS: THE PUBLIC WARRANT OFFERING
We are also offering up to 920,000 shares of common stock issuable upon
exercise of 920,000 Public Warrants currently owned by certain investors
who acquired these Public Warrants as part of the units sold in the public
offering. The holders of these Public Warrants are entitled to acquire up
to 920,000 shares of common stock at an exercise price of $2.40 per share.
These Public Warrants are exercisable until February 2, 2003, unless
earlier redeemed. We may redeem the outstanding Public 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:
1. there is in effect a registration statement registering for
sale under the Securities Act the shares of common stock
issuable upon exercise of these Public Warrants;
2. the closing bid price of our common stock has been at least
$4.80 for the ten consecutive trading days immediately
preceding the date we give notice of our intention to redeem
these Public Warrants; and
3. the expiration of the 30 day notice period is within the then
current term of these Public Warrants.
We do not have the right to compel the exercise of any of these Public
Warrants and the holders of the Public Warrants have not committed to
exercise any of the Public Warrants. Whether any Public Warrants are
exercised will depend upon several factors, including the prevailing market
price of our Public Warrants and common stock, the liquidity of those
markets, if any, and the personal investment objectives of the investor.
See "Risk Factors." Accordingly, there can be no assurance of the number,
if any, of shares that will be purchased pursuant to the exercise of Public
Warrants. We intend to maintain a current prospectus until the Public
Warrants expire, or until they are all exercised, if earlier. We may at
any time and from time to time extend the term of the Public Warrants or
reduce their exercise price, provided written notice of any extension or
reduction is given to the registered holders of the Public Warrants prior
to the expiration date then in effect.
The shares of common stock to be issued upon exercise of the Public
Warrants are offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
We are offering the shares of common stock underlying the Public Warrants.
No underwriter or placement agent has been engaged to assist us in this
regard and no commissions or similar compensation will be paid to any
person. Holders of the Public Warrants may resell the shares 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 these methods of sale, at
fixed prices that may be charged, at market prices prevailing at the time
of sale, or at negotiated prices. Holders of the Public Warrants may
effect these transactions by selling the common stock directly to
purchasers or through broker-dealers that may act as agents or principals.
These broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the person selling the shares of common
stock and/or the purchasers of the shares of common stock for whom the
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).
INDEMNIFICATION
Our By-Laws provide for the indemnification of our 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 controlling persons
pursuant to those provisions, we have been informed that in the opinion of
the Commission such indemnification is against public policy as expressed
in the Act and, as a result, is unenforceable.
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DESCRIPTION OF SECURITIES
We are 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
June 23, 1999, 7,884,591 shares of common stock and no shares of preferred
stock were issued and outstanding.
COMMON STOCK
Each holder of our 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
preemptive rights and are not subject to redemption or assessment. Each
share of common stock is entitled to share ratably in distributions to
shareholders and to receive ratably any dividends we may declare out of
funds legally available for the payment of dividends. Upon our
liquidation, dissolution or winding up, the holders of common stock are
entitled to receive, pro-rata, that portion of our assets which are legally
available for distribution to shareholders. The issued and outstanding
shares of common stock are validly issued, fully paid and non-assessable.
PREFERRED STOCK
We are authorized to issue up to 2,500,000 shares of $.04 par value
preferred stock. Our preferred stock can be issued in one or more series
as we may determine from time-to-time. In establishing a series, we must
give it a distinctive designation so as to distinguish it from the shares
of all other series and classes, we must fix the number of shares in such
series, and the preferences, rights and restrictions thereof. All shares
of any one series must be alike in every particular. We have the
authority, without shareholder 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;
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 we currently do 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 we will not do so in the future. As a result, we could
authorize the issuance of a series of preferred stock which would grant to
holders preferred rights to our assets upon liquidation, the right to
receive dividend coupons before dividends would be declared to common
stockholders, and the right to the redemption of the shares, together with
a premium, prior to the redemption to common stock. Holders of our common
stock have no redemption rights. In addition, we 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
We have previously authorized the issuance of up to 578,788 shares of
Series A Convertible Preferred Stock. The relative rights and preferences
of holders of these shares of preferred stock was controlled by a
Certificate of Designation of Rights and Preferences of Series A
Convertible Preferred Stock. A copy of this certificate was filed with the
Commission as an exhibit to our Registration Statement on Form SB-2 which
was declared effective by the Commission on February 2, 1998. Effective
February 2, 1999, and in accordance with this certificate, we exercised our
right to automatically convert all of the issued and outstanding shares of
preferred stock into shares of our common stock at the ratio of four shares
of common stock for each share of preferred stock. As a result, we no
longer have any shares of preferred stock outstanding.
PLACEMENT AGENT'S WARRANTS
In connection with a private placement we undertook in 1995, we issued to
Paulson Investment Company, Inc., warrants to purchase, in the aggregate,
11.5 private 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. Placement
Agent's Warrants exercisable to acquire 6.8 private units are exercisable
through August 30, 2000, and Placement Agent's Warrants exercisable to
acquire the remaining 4.7 private units are exercisable until September 18,
2000.
REPRESENTATIVE'S WARRANT
In connection with a public offering of units of our securities that we
completed during the first quarter of 1998 we issued to Paulson a warrant
to purchase 40,000 public units at a price of $9.90 per unit. Each public
unit originally consisted of one share of our convertible preferred stock
and two Public Warrants. However, effective February 2, 1999, we exercised
our right to automatically convert all outstanding shares of our preferred
stock into shares of common stock at a conversion ratio of four shares of
common stock for each share of preferred stock. As a result, each public
unit now consists of four shares of common stock and two Public Warrants.
The Representative's Warrant is exercisable until February 2, 2003.
CLASS A WARRANTS
We have authorized the issuance of up to 115,000 Class A Warrants. Each
Class A Warrant is exercisable to purchase one share of our common stock at
a price of $1.75. The exercise price of the Class A Warrants is subject to
adjustment upon certain events such as stock splits, stock dividends and
similar transactions. We can redeem the Class A Warrants in accordance with
the provisions described below. The exercise period for the Class A
Warrants expires at 5:00 p.m., Mountain time, on December 31, 2000. We may
at any time and from time to time extend the term of the Class A Warrants
or reduce their exercise price, provided written notice of any extension or
reduction is given to the registered holders of the Class A Warrants prior
to the expiration date then in effect. We do not presently contemplate any
extension of the Class A Warrant term or reduction in the Class A Warrant
exercise price.
Subject to compliance with applicable securities laws, Class A Warrant
certificates may be transferred or exchanged for new certificates of
different denominations at the offices of the Warrant Agent described
below. The holders of Class A 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 Class A Warrants may be exercised during their term only
upon surrender of the Class A Warrant certificate at our offices with the
form of "Election to Purchase" on the reverse side of the Class A Warrant
certificate completed and signed, accompanied by payment of the full
exercise price for the number of Class A Warrants being exercised. Holders
of the Class A Warrants will receive one share of common stock for each
Class A Warrant exercised, subject to any adjustment required by the Class
A Warrant Agreement. For a holder to exercise his or her Class A 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 Class A Warrants or, in our sole
determination, and the determination of our counsel, there must be a valid
exemption from these requirements. We have undertaken, and intend, to
maintain a current registration statement which will permit the exercise of
the Class A Warrants during their term. Maintaining a current effective
registration statement could result in substantial expense and there is no
assurance that we will be able to maintain a current registration statement
covering the shares issuable upon exercise of the Class A Warrants. Holders
of Class A Warrants will have the right to exercise the Class A Warrants
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 warrant holder resides
or if we, in our and our counsel's sole discretion, are able to obtain
valid exemptions from these requirements. Although we believe that we will
be able to register or qualify the shares of common stock underlying the
Class A Warrants for sales in those states where the securities are
offered, there can be no guarantee that any registration or qualification,
or an exemption therefrom, can be accomplished without undue hardship or
expense. The Class A Warrants may be deprived of any value if a
registration statement covering the shares issuable upon exercise of the
Class A Warrants, or an exemption from these requirements, cannot be filed
or obtained without undue expense or hardship or if the underlying shares
are not registered or exempted from registration in the states in which the
holder of a Class A Warrant resides. In the latter event, the only option
available to a holder of a Class A Warrant may be to attempt to sell his or
her Class A Warrants into the market, if a market then exists and only then
in compliance with applicable securities laws and restrictions on transfer.
REDEMPTION. We have the right, at our discretion, to call all or less than
all of the Class A Warrants for redemption on 30 days' prior written notice
at a redemption price of $.25 per Class A Warrant if:
1. a registration statement registering the sale of the shares of
common stock issuable upon the exercise of the Class A Warrants
under the Securities Act is in effect; and
2. there exists a public trading market on the Nasdaq SmallCap
Market or the OTC Electronic Bulletin Board for our common
stock; and
3. the closing public trading price of our common stock has
equaled or exceeded $3.50 per share for at least ten
consecutive trading days immediately preceding the date of our
Class A Warrant redemption notice..
If we elect to exercise our redemption right, holders of Class A Warrants
may either exercise their Class A Warrants, sell the Class A Warrants in
the market until the date next preceding the date fixed for redemption, or
tender their Class A Warrants to us for redemption. Within five business
days after the end of the 30 day period, we will mail a redemption check to
each registered holder of a Class A Warrant who holds unexercised Class A
Warrants as of the end of the 30 day period, whether or not the holder has
surrendered the Class A Warrant certificates for redemption. The Class A
Warrants may not be exercised after the end of the 30 day notice period.
PUBLIC WARRANTS
We have authorized the issuance of up to 1,157,576 Public Warrants. Each
Public Warrant is exercisable to purchase one share of our common stock at
a price of $2.40. The exercise price of the Public Warrants is subject to
adjustment upon certain events such as stock splits, stock dividends and
similar transactions. We can redeem the Public Warrants in accordance with
the provisions described below. The exercise period for the Public Warrants
expires at 5:00 p.m., Mountain time, on February 2, 2003. We may at any
time and from time to time extend the term of the Public Warrants or reduce
their exercise price, provided written notice of any extension or reduction
is given to the registered holders of the Public Warrants prior to the
expiration date then in effect. We do not presently contemplate any
extension of the Public Warrant term or reduction in the Public Warrant
exercise price.
Subject to compliance with applicable securities laws, Public Warrant
certificates may be transferred or exchanged for new certificates of
different denominations at the offices of the Warrant Agent described
below. The holders of Public 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 Public Warrants may be exercised during their term only upon
surrender of the Public Warrant certificate at our offices with the form of
"Election to Purchase" on the reverse side of the Public Warrant
certificate completed and signed, accompanied by payment of the full
exercise price for the number of Public Warrants being exercised. Holders
of the Public Warrants will receive one share of common stock for each
Public Warrant exercised, subject to any adjustment required by the Public
Warrant Agreement. For a holder to exercise his or her Public 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 Public Warrants or, in our sole
determination, and the determination of our counsel, there must be a valid
exemption from these requirements. We have undertaken, and intend, to
maintain a current registration statement which will permit the exercise of
the Public Warrants during their term. Maintaining a current effective
registration statement could result in substantial expense and there is no
assurance that we will be able to maintain a current registration statement
covering the shares issuable upon exercise of the Public Warrants. Holders
of Public Warrants will have the right to exercise the Public Warrants 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 warrant holder resides
or if we, in our and our counsel's sole discretion, are able to obtain
valid exemptions from these requirements. Although we believe that we will
be able to register or qualify the shares of common stock underlying the
Public Warrants for sales in those states where the securities are offered,
there can be no guarantee that any registration or qualification, or an
exemption therefrom, can be accomplished without undue hardship or expense.
The Public Warrants may be deprived of any value if a registration
statement covering the shares issuable upon exercise of the Public
Warrants, or an exemption from these requirements, cannot be filed or
obtained without undue expense or hardship or if the underlying shares are
not registered or exempted from registration in the states in which the
holder of a Public Warrant resides. In the latter event, the only option
available to a holder of a Public Warrant may be to attempt to sell his or
her Public Warrants into the market, if a market then exists and only then
in compliance with applicable securities laws and restrictions on transfer.
REDEMPTION. We have the right, at our discretion, to call all or less than
all of the Public Warrants for redemption on 30 days' prior written notice
at a redemption price of $.25 per Public Warrant if:
1. the closing bid price of our common stock exceeds $4.80 per
share for at least ten consecutive trading days;
2. we have in effect a current registration statement covering the
common stock issuable upon exercise of the Public Warrants; and
3. the expiration of the 30 day notice period is within the term
of the Public Warrant.
If we elect to exercise our redemption right, holders of Public Warrants
may either exercise their Public Warrants, sell the Public Warrants in the
market until the date next preceding the date fixed for redemption, or
tender their Public Warrants to us for redemption. Within five business
days after the end of the 30 day period, we will mail a redemption check to
each registered holder of a Public Warrant who holds unexercised Public
Warrants as of the end of the 30 day period, whether or not the holder has
surrendered the Public Warrant certificates for redemption. The Public
Warrants may not be exercised after the end of the 30 day notice period.
WARRANT SOLICITATION FEES
We have no agreement nor any arrangement whereby any fees or other
compensation will be paid to any person or entity upon exercise of the
Placement Agent's Warrants or Representative's Warrant, or upon exercise of
any or all of the Class A Warrants and/or Pubic Warrants.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR
The transfer agent, registrar and Warrant Agent for our common stock, Class
A Warrants and Public Warrants is Corporate Stock Transfer, Inc., Denver,
Colorado.
REPORTS TO SHAREHOLDERS
We intend to furnish annual reports to shareholders which will include
certified financial statements reported on by its certified public
accountants. In addition, we will issue unaudited quarterly or other
interim reports to shareholders as we deem appropriate.
LEGAL MATTERS
The legality of the common stock offered hereby will be passed on for us 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
our common stock.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997 and
for the years then ended, have been incorporated by reference herein in
reliance upon the report of KPMG 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 represen-
tation other than those contained in
this prospectus, and if made such
information or representation must
not be relied upon as having been
given or authorized. This prospectus CELL ROBOTICS INTERNATIONAL, INC.
does not constitute an offer to sell
or a solicitation of an offer to buy 1,505,000 Shares
any securities other than the Securities $.004 par value Common Stock
offered by this prospectus or an offer
to sell or a solicitation of an offer 115,000 Redeemable Class A Warrants
to buy the Securities in any
jurisdiction to any person to whom it 80,000 Redeemable
is unlawful to make such offer or Common Stock Purchase Warrants
solicitation in such jurisdiction.
The delivery of this prospectus shall
not, under any circumstances, create
any implication that there has been no
changes 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>
TABLE OF CONTENTS
Page
----
<S> <C>
Risk Factors 10
Available Information 35
Incorporation of Certain Documents
by Reference 35
Dilution 37
Use of Proceeds 39
Determination of Offering Price 41
Plan of Distribution 42 PROSPECTUS
Indemnification 45 ----------
Description of Securities 46
Legal Matters 50
Experts 50
</TABLE>
, 1999
-------------------
<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:
<TABLE>
<S> <C>
SEC Filing Fee $4,500.00
Printing Expenses* 500.00
Accounting Fees and Expenses* 7,000.00
Legal Fees and Expenses* 7,500.00
Blue Sky Fees and Expenses* 5,000.00
Registrar and Transfer Agent Fee 500.00
Miscellaneous*
----------
Total* $25,000.00
</TABLE>
- --------------------------
* 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
- ---------- -----
* 4.2 Form of Warrant Certificate
5.1 Opinion of Neuman, Drennen & Stone, LLC
** 10.1 Patent License Agreement between American Telephone and
Telegraph Company and Cell Robotics, Inc.
** 10.2 Amendment to AT&T Patent License Agreement
** 10.3 Manufacturing Agreement between Big Sky Laser
Technologies, Inc. and Cell Robotics International,
Inc. dated May 20, 1998.
23.1 Consent of KPMG 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.
** Incorporated by reference from the Company's Pre-
Effective Amendment No. 2 to Registration Statement on
Form S-3, SEC File No. 333-55951, as filed with the
Commission on November 18, 1998.
<PAGE>
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange 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 Post-Effective Amendment No. 4 on Form S-3 to Form SB-2 Registration
Statement and Post-Effective Amendment No. 2 on Form S-3 to Form SB-2 to be
signed on its behalf by the undersigned thereunto duly authorized. In the
City of Albuquerque, State of New Mexico on the 6th day of July, 1999.
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 Post-
Effective Amendment No. 4 on Form S-3 to Form SB-2 Registration Statement
and Post-Effective Amendment No. o.2 Form S-3 to Form SB-2 to 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 7/6/99
- ----------------------------- Executive Officer
Ronald K. Lohrding, Ph.D.
/s/ Jean M. Scharf Chief Financial Officer, 7/6/99
- ----------------------------- Chief Financial Officer
Jean M. Scharf and Controller
/s/ Craig T. Rogers Director 7/6/99
- -----------------------------
Craig T. Rogers
/s/ Mark Waller Director 7/6/99
- -----------------------------
Mark Waller
/s/ Raymond Radosevich Director 7/6/99
- -----------------------------
Raymond Radosevich
/s/ Debra Bryant Director 7/6/99
- -----------------------------
Debra Bryant
<PAGE>
EXHIBIT 5.1
-----------
NEUMAN, DRENNEN & STONE, LLC
Attorneys at Law
Temple-Bowron House
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
facsimile: (303) 449-1045
-----------
July 2, 1999
Cell Robotics International, Inc.
2715 Broadbent Parkway, N.E.
Albuquerque, New Mexico 87107
Re: S.E.C. Post-Effective Amendments on Form S-3 to Registrations
Statements on Form SB-2
-------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Cell Robotics International, Inc. (the
"Company") in connection with Post-Effective Amendments on Form S-3 to Form
SB-2 Registration Statements 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) 115,000 of the
Company's Redeemable Class A Common Stock Purchase Warrants ("Class A
Warrants"), (ii) 80,000 Redeemable Common Stock Purchase Warrants ("Public
Warrants") and (iii) 1,505,000 shares of the Company's common stock, $0.004
par value ("Common Stock") pursuant to the exercise of certain Placement
Agent's Warrants, the exercise of a Representative's Warrant, the exercise of
Class A Warrants and the exercise of certain Public 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 115,000 Class A Warrants, 80,000 Public Warrants and 1,505,000
shares of Common Stock being registered for sale and offered by the Company
will, upon the valid exercise of the Placement Agent's Warrants, the
Representative's Warrant, the Class A Warrants and the Public Warrants and
payment of the related warrant exercise prices, be lawfully and validly
issued, fully paid and non-assessable shares of the Company's Common Stock.
Sincerely,
/s/ Nathan L. Stone
----------------------------------
Nathan L. Stone for
NEUMAN, DRENNEN & STONE LLC
NLS:nn
<PAGE>
KPMG LLP
6565 Americas Parkway, N.E.
Suite 700
Albuquerque, New Mexico 87190
telephone: (505) 884-3939
facsimile: (505) 884-8348
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 LLP
Albuquerque, New Mexico
June 28, 1999
<PAGE>
NEUMAN, DRENNEN & STONE, LLC
Attorneys at Law
Temple-Bowron House
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
facsimile: (303) 449-1045
July 2, 1999
Cell Robotics International, Inc.
2715 Broadbent Parkway N.E.
Albuquerque, New Mexico 87107
Re: Post-Effective Amendments on Form S-3 to Registration Statements on
Form SB-2
----------------------------------------------------------------
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the
legality of the securities being registered by the Post-Effective Amendments
on Form S-3 to Registration Statements on Form SB-2 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 offerings
by the Company described therein of an aggregate of (i) 115,000 of the
Company's Redeemable Class A Common Stock Purchase Warrants ("Class A
Warrants"), (ii) 80,000 Redeemable Common Stock Purchase Warrants ("Public
Warrants") and (iii) 1,505,000 shares of the Company's common stock, $0.004
par value ("Common Stock"), pursuant to the exercise of certain Placement
Agent's Warrants, the exercise of a Representative's Warrant, the exercise of
Class A Warrants and the exercise of certain Public Warrants, 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/
