<PAGE>
As filed with the Securities and Exchange Commission on May 12, 2000
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 5 POST-EFFECTIVE AMENDMENT NO. 3
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)
<TABLE>
<S> <C> <C>
Colorado 5049-05 84-1153295
- ----------------------------------- ----------------------------------- ---------------------
(State or other jurisdiction (Primary Standard Industrial IRS Employer
of incorporation or organization) Classification Code Number) Identification Number
</TABLE>
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:
Andrew F. Pollet
Pollet & Richardson
a Law corporation
10900 Wilshire Boulevard
Suite 500
Los Angeles, California 90024
(310) 208-1182
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this 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>
PROSPECTUS
CELL ROBOTICS INTERNATIONAL, INC.
---------------------------------
1,505,000 Shares of Common Stock
80,000 Redeemable Public Warrants
5,175 Redeemable Class A Warrants
___________________________________________________________
OTC Electronic Bulletin Board Trading Symbols
Common Stock CRII
Public Warrants CRIIW
Class A Warrants No public trading
market exists
__________________________________________________________
An investment in our securities involves a high degree of risk. You should
purchase our securities only if you can afford a complete loss of your
investment. See "Risk Factors" beginning at page 10.
Neither the SEC nor any state securities commission has approved or disapproved
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The Date of This Prospectus is May 9, 2000
<PAGE>
CELL ROBOTICS INTERNATIONAL, INC.
Table of Contents
<TABLE>
<CAPTION>
Item No. and Heading
In Form S-3 Location
Registration Statement In Prospectus
---------------------- -------------
<S> <C>
1. Forepart of the Registration Statement and Forepart of Registration Statement and outside
outside front cover page of Prospectus front cover page of Prospectus
2. Inside front and outside back cover pages of Inside front and outside back cover pages of
Prospectus Prospectus
3. Summary Information, Risk Factors and Prospectus Summary, Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Used of Proceeds
5. Determination of Offering Price Determination of Offering Price
6. Dilution Dilution
7. Selling Securityholder Selling Securityholder
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Securities to be Registered
10. Interest of Named Experts and Counsel Interest of Named Experts and Counsel
11. Material Changes Material Changes
12. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
Indemnification for Securities Act Liabilities
</TABLE>
<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 laser-based medical devices, and are continuing to develop
additional sophisticated medical laser products.
As a pioneer in the development of optical trapping technology, we have evolved
from being a developer of laser-based laboratory instruments to a supplier of
novel medical laser products. Our product lines include laser-based research
workstations, In Vitro Fertilization Workstations, and the Personal and
Professional Lasette(R), which utilizes a laser to sample blood for diabetics to
measure their glucose.
In 1999, we focused our efforts primarily on the large diabetic market and
developing the award-winning Lasette(R), a compact, portable laser skin
perforator. This groundbreaking product provides diabetics with nearly painless
sampling of capillary blood and little residual soreness. The Lasette(R) is the
only FDA cleared alternative to the steel lancet or needle for diabetics for
both home-use and clinical-use to be able to sample their blood for glucose
testing to determine their subsequent insulin injections. The Lasette(R) is also
cleared for all blood screening test applications for clinical and home
settings.
We believe that the certain trends in blood sampling will provide us with unique
opportunities:
. An increasing demand for less painful alternatives for capillary blood
sampling;
. Eliminate cross-contamination from accidental needle or lancet sticks
in hospitals and clinics;
. A growing number of diagnosed diabetics seeking better blood glucose
control;
. A widening understanding of the need to provide testing methods for
needle-phobic individuals.
To capitalize on these opportunities, our strategy is focused on introducing the
Lasette(R) and positioning the Company as a leader in the development of
technologically advanced and innovative medical devices that offer more
effective, safer and less painful solutions than conventional procedures.
Other products and technology includes: In Vitro Fertilization Workstation to
increase pregnancy rates, Cell Robotics Research Workstation which uses laser
light for manipulating and cutting cells, chromosomes and DNA molecules, and a
new broad-based patent for "laser initiated PCR" for single cell diagnostics.
1
<PAGE>
How to Contact Us
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.
The Offerings
This Prospectus relates to multiple offerings which we are registering on behalf
of Paulson Investment Company Inc., and certain of its officers, whom we
collectively refer to as the Selling Securityholders. See "Selling
Securityholder" and "Description of Securities Registered". The offerings
under this Prospectus consist of the following:
. 160,000 shares of common stock and 80,000 Public Warrants issuable to
the Selling Securityholders upon their exercise of the Representative
Warrants. We are also registering the 80,000 common shares issuable
upon the exercise of the Public Warrants;
. 10,350 shares of common stock and 5,175 Class A Warrants issuable to
one of the Selling Securityholders upon the exercise of her Placement
Agent's Warrants. We are also registering the 5,175 common shares
issuable upon the exercise of the Class A Warrants; and
. 329,475 shares of common stock issued to two Selling Securityholders
upon their exercise of the Placement Agent's Warrants and the Class A
Warrants in February 2000.
We are also registering 920,000 shares of common stock issuable to the public
warrant holders upon the exercise of their Public Warrants.
Market for Securities
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. 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.
Redeemable Class A and Public Warrants
We have the right, at our discretion, to call all of the Class A Warrants and
Public Warrants for redemption on 30 days' prior written notice at a redemption
price of $.25 per warrant if all of the following requirements are concurrently
met:
1. a registration statement registering the sale of the shares of common
stock issuable upon the exercise of the Class A and Public Warrants
under the Securities Act is in effect; and
2. there exists a public trading market on the NASDAQ Market or the OTC
Electronic Bulletin Board for our common stock; and
2
<PAGE>
3. the closing public trading price of our common stock has equaled or
exceeded $3.50 per share relating to our Class A Warrants and $4.80
per share relating to our Public Warrants, for at least ten
consecutive trading days immediately before the date of our redemption
notice.
Upon the SEC declaring this registration effective, we will have met requirement
1 above. Currently, our common stock trades on the OTC Electronic Bulletin
Board meeting requirement 2. Our stock price has in the immediate past,
exceeded the threshold prices in requirement 3. If the common stock price
should continue to do so for 10 consecutive days after this registration
statement is declared effective, we will have the right to redeem the
outstanding Class A Warrants and Public Warrants after our 30 days prior written
notice to you. 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 identified in the notice. If you fail to exercise the
Class A Warrants and/or the Public Warrants, you will be forced to sell us these
warrants at the redemption price, even though you may wish to hold them or even
though the redemption price is substantially lower than their fair value.
3
<PAGE>
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 Investment and certain of
its officers upon exercise of their
Representative's Warrants
Common Shares Outstanding:
Before the Offering 8,244,121
After the Offering as adjusted/(2)/ 8,404,121
Offering Price: $9.90 per unit
__________________
(1) The shares of common stock and Public Warrants are issuable to Paulson
Investment and certain of its officers upon exercise of their
Representative's Warrants 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 transferable. The public units are not being separately
registered and there will be no public trading market developed for the
public units.
(2) Based upon the outstanding shares at December 31, 1999 and excludes: (1)
647,153 shares of common stock reserved for future issuance pursuant to the
exercise of qualified Incentive Stock Options granted under our 1992 Stock
Incentive Plan; (2) 370,970 shares of common stock reserved for future
issuance pursuant to the exercise of outstanding non-qualified stock
options; (3) 450,000 shares of common stock reserved for issuance upon the
exercise of options reserved for our president, Ronald K. Lohrding, PhD;
(4) up to 220,000 shares of common stock which may become issuable upon the
exercise of options granted under the terms of consulting and service
agreements; (5) 80,000 shares of common stock issuable upon exercise of
the 80,000 Public Warrants issuable upon exercise of the Representative's
Warrant; (6) 10,350 shares of common stock issuable upon exercise of the
Placement Agent's Warrants; (7) 5,175 shares of common stock issuable upon
exercise of the Class A Warrant 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)
329,475 shares of common stock issued to the Selling Securityholders; (10)
157,576 shares of common stock issuable upon the exercise of warrants that
were sold in a private offering; (11) 100,000 shares of common stock
issuable upon exercise of a warrant granted to GEM Edwards, Inc; and (12)
up to 500,000 shares of common stock reserved to pay in full a promissory
note.
4
<PAGE>
The Representative's Public Warrant Offering
Securities Offered/(1)/: 80,000 shares of common stock,
Common Shares Outstanding:
Before the Offering 8,244,121
After the Offering as adjusted/(2)/ 8,484,121
Offering Price Per Share: $2.40
___________________
(1) Assumes the Representative's Warrants have 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) Based upon the outstanding shares at December 31, 1999 and excludes: (1)
647,153 shares of common stock reserved for future issuance pursuant to the
exercise of qualified Incentive Stock Options granted under our 1992 Stock
Incentive Plan; (2) 370,970 shares of common stock reserved for future
issuance pursuant to the exercise of outstanding non-qualified stock
options; (3) 450,000 shares of common stock reserved for issuance upon the
exercise of options reserved for our president, Ronald K. Lohrding, PhD;
(4) up to 220,000 shares of common stock which may become issuable upon the
exercise of options granted under the terms of consulting and service
agreements; (5) 10,350 shares of common stock issuable upon exercise of the
Placement Agent's Warrants; (6) 5,175 shares of common stock issuable upon
exercise of the Class A Warrants issuable upon exercise of the Placement
Agent's Warrants; (7) 920,000 shares of common stock issuable upon the
exercise of Public Warrants that were sold in the public offering; (8)
329,475 shares of common stock issued to the Selling Securityholders; (9)
157,576 shares of common stock issuable upon the exercise of warrants that
were sold in a private offering; (10) 100,000 shares of common stock
issuable upon exercise of a warrant granted to GEM Edwards, Inc; and (11)
up to 500,000 shares of common stock reserved to pay in full a promissory
note.
5
<PAGE>
The Placement Agent's Warrant Offering
Securities Offered:/(1)/ 10,350 shares of common stock and
5,175 Class A Warrants included in
the private units that will be
issuable to Lorraine Maxfield upon
the exercise of her Placement
Agent's Warrants.
Common Shares Outstanding:
Before the Offering 8,244,121
After the Offering as adjusted/(2)/ 8,254,471
Offering Price: $25,000 per unit.
__________________
(1) The shares of common stock and Class A Warrants are issuable to Lorraine
Maxfield upon exercise of her Placement Agent's Warrants which are
exercisable to acquire a total of .5175 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
transferable. The private units are not being separately registered and
there will be no public trading market developed for the private units. On
February 11, 2000, Paulson Investment and Chester L. Paulson collectively
exercised 10.9825 of the private units for at a total exercise price of
$274,563 for which they received 219,650 common shares and 109,825 Class A
Warrants. Also, on February 11, 2000, Paulson Investment and Mr. Paulson
exercised 109,825 Class A Warrants at a total exercise price of $192,194
for which Paulson received 109,825 common shares.
(2) Based upon the outstanding shares at December 31, 1999 and excludes: (1)
647,153 shares of common stock reserved for future issuance pursuant to the
exercise of qualified incentive stock options granted under our 1992 Stock
Incentive Plan; (2) 370,970 shares of common stock reserved for future
issuance pursuant to the exercise of outstanding non-qualified stock
options; (3) 450,000 shares of common stock reserved for issuance upon the
exercise of options reserved for our president, Ronald K. Lohrding, Ph.D.;
(4) up to 220,000 shares of common stock which may become issuable upon the
exercise of options granted under the terms of consulting and service
agreements; (5) 5,175 shares of common stock issuable upon exercise of the
Class A Warrants; (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) 329,475 shares of common stock issued to the Selling Securityholders;
(10) 157,576 shares of common stock issuable upon the exercise of warrants
that were sold in a private offering; (11) 100,000 shares of common stock
issuable upon exercise of a warrant granted to GEM Edwards, Inc; and (12)
up to 500,000 shares of common stock reserved to pay in full a promissory
note.
6
<PAGE>
The Class A Warrant Offering
Common Shares: 5,175 shares of common stock,
Common Shares Outstanding:
Before the Offering/(1)/ 8,254,471
After the Offering as adjusted/(2)/ 8,259,646
Offering Price Per Share: $1.75
_____________________
(1) Assumes the Placement Agent's Warrants have been exercised to purchase the
10,350 shares of common stock and 5,175 Class A Warrants. We do not have
the right to compel, nor has Lorraine Maxfield committed to, the exercise
of the remaining Placement Agent's Warrants. Accordingly, there can be no
assurance of the maximum number of shares, which will be purchased pursuant
to the exercise of the Placement Agent's Warrants or Class A Warrants.
(2) Based upon the outstanding shares at December 31, 1999 and excludes: (1)
647,153 shares of common stock reserved for future issuance pursuant to the
exercise of qualified incentive stock options granted under our 1992 Stock
Incentive Plan; (2) 370,970 shares of common stock reserved for future
issuance pursuant to the exercise of outstanding non-qualified stock
options; (3) 450,000 shares of common stock reserved for issuance upon the
exercise of options reserved for our president, Ronald K. Lohrding, PhD;
(4) up to 220,000 shares of common stock which may become issuable upon the
exercise of options granted under the terms of consulting and service
agreements; (5) 160,000 shares of common stock issuable upon exercise of
the Representative's Warrant; (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) 920,000 shares of common stock issuable upon
the exercise of Public Warrants that were sold in the public offering; (8)
329,475 shares of common stock issued to the Selling Securityholders; (9)
157,576 shares of common stock issuable upon the exercise of warrants that
were sold in a private offering; (10) 100,000 shares of common stock
issuable upon exercise of a warrant granted to GEM Edwards, Inc; and (11)
up to 500,000 shares of common stock reserved to pay in full a promissory
note.
7
<PAGE>
The Exercised Placement Agent's Warrants Offering
Securities Offered: 329,475 shares of common stock
Common Shares Outstanding:
Before the Offering/(1)/ 8,573,596
After the Offering/(2)/ 8,573,596
Offering Price Per Share: Price relating to prevailing market prices
__________________
(1) Based upon the outstanding shares at December 31, 1999 and includes the
shares issued to Paulson Investment and Chester L. Paulson for their
exercise of Placement Agent's Warrants and the Class A Warrants on February
11, 2000.
(2) Excludes: (1) 647,153 shares of common stock reserved for future issuance
pursuant to the exercise of qualified Incentive Stock Options granted under
our 1992 Stock Incentive Plan; (2) 370,970 shares of common stock reserved
for future issuance pursuant to the exercise of outstanding non-qualified
stock options; (3) 450,000 shares of common stock reserved for issuance
upon the exercise of options reserved for our president, Ronald K.
Lohrding, PhD; (4) up to 220,000 shares of common stock which may become
issuable upon the exercise of options granted under the terms of
consulting and service agreements; (5) 10,350 shares of common stock
issuable upon exercise of the Placement Agent's Warrants; (6) 5,175 shares
of common stock issuable upon exercise of the Class A Warrants issuable
upon exercise of the Placement Agent's 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 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; (11) 100,000 shares of common stock issuable upon
exercise of a warrant granted to GEM Edwards, Inc; and (12) up to 500,000
shares of common stock reserved to pay in full a promissory note.
8
<PAGE>
The Public Warrant Offering
Securities Offered:/(1)/ 920,000 shares of common stock
Common Shares Outstanding:
Before the Offering 8,244,121
After the Offering/(2)/ 9,164,121
Offering Price Per Share: $2.40
__________________
(1) Assumes the exercise of the Public Warrants held by the public
warrantholders to purchase 920,000 shares of common stock. We do not have
the right to compel, nor have the public warrantholders committed to, the
exercise of the Public Warrants. Accordingly, there can be no assurance of
the number of shares of common stock, which will be purchased pursuant to
the exercise of the Public Warrants.
(2) Based upon the outstanding shares at December 31, 1999 and excludes: (1)
647,153 shares of common stock reserved for future issuance pursuant to the
exercise of qualified Incentive Stock Options granted under our 1992 Stock
Incentive Plan; (2) 370,970 shares of common stock reserved for future
issuance pursuant to the exercise of outstanding non-qualified stock
options; (3) 450,000 shares of common stock reserved for issuance upon the
exercise of options reserved for our president, Ronald K. Lohrding, PhD;
(4) up to 220,000 shares of common stock which may become issuable upon the
exercise of options granted under the terms of consulting and service
agreements; (5) 10,350 shares of common stock issuable upon exercise of the
Placement Agent's Warrants; (6) 5,175 shares of common stock issuable upon
exercise of the Class A Warrants issuable upon exercise of the Placement
Agent's 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 issuable upon exercise of the
Representative's Warrant; (9) 329,475 shares of common stock issued to the
Selling Securityholders; (10) 157,576 shares of common stock issuable upon
the exercise of warrants that were sold in a private offering; (11) 100,000
shares of common stock issuable upon exercise of a warrant granted to GEM
Edwards, Inc; and (12) up to 500,000 shares of common stock reserved to pay
in full a promissory note.
9
<PAGE>
RISK FACTORS
An investment in our warrants and common stock is very speculative and
involves a high degree of risk. You should carefully consider the following
risk factors, along with the other matters referred to in this prospectus,
before you decide to buy our warrants or common stock. If you decide to buy our
warrants and common stock, you should be able to afford a complete loss of your
investment.
WE HAVE A HISTORY OF OPERATING LOSSES, AND OUR FUTURE PROFITABILITY IS
UNCERTAIN.
To date, we have been unable to profitably market our products, and we
cannot assure you that we will ever achieve significant revenues or profitable
operations in the future. To date, we have generated limited revenues from
product sales. We do not have significant experience in manufacturing,
marketing or selling our products. Our future development efforts may not
result in commercially viable products. We may fail in our efforts to introduce
our products or to obtain required regulatory clearances. Our products may
never gain market acceptance, and we may never generate revenues or achieve
profitability.
FUTURE REVENUE GROWTH WILL DEPEND ON OUR ABILITY TO MARKET AND SELL OUR MEDICAL
LASER PRODUCTS.
Our future revenue growth is dependent on our success in marketing our
medical laser products. The risks associated with the introduction of
innovative technologies, like our medical laser products, include, but are not
limited to, the following:
. the possibility that some or all of the proposed products may fail to
receive additional necessary regulatory clearances;
. the current and future products may have features which render them
uneconomical, either to manufacture or to market;
. the demand for the products may be too low, or the prices at which the
products are accepted by purchasers may be too low, and may prevent us
from operating profitably; or
. third parties may manufacture and market a superior product.
Although we have obtained several FDA clearances, 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.
WE MAY NEED MORE MONEY, WHICH MAY NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR
AT ALL.
We require substantial funds for obtaining regulatory approvals for our
medical laser products, for manufacturing and testing our products, for
launching our products in the marketplace, and for selling our products. We
also need money to file, prosecute, defend and enforce patent claims and other
intellectual property rights and to purchase capital equipment. There can be no
assurance that the required additional funds will be available on acceptable
terms, if at all.
Because we have no significant revenues, we expect that we will require
substantial additional capital for the near future. Debt financing, if we can
obtain it, may involve pledging some or all of our assets. 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 enter into arrangements that would
require us to relinquish certain rights that we would not otherwise want to
relinquish. We may seek additional capital by issuing equity or debt
securities. If additional funds are raised by issuing common stock or other
types of equity securities, further dilution to existing stockholders, including
purchasers of the securities we are currently
10
<PAGE>
offering, may result.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, INCLUDING OUR PATENTS,
WHICH COULD ADVERSELY AFFECT THE VALUE OF YOUR INVESTMENT.
The commercial success of our products will depend, in part, upon our
ability to protect and defend our intellectual property rights and the
competitive advantages that those rights offer. 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. We cannot assure you, however, that these
measures will prove to be effective. If these measures do not prove to be
effective, it could prevent us from profitably marketing the associated product
and adversely affect our business, results of operations and financial
condition.
Currently, we have been issued two patents and we have applied for
additional patent protection for our laser-based medical devices, although we
cannot assure you that any additional patents will be issued. Our scientific
research instruments have only limited patent protection.
Additionally, we rely on trade secret protection for our proprietary
technology. We cannot assure you that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets, that our trade secrets will not be disclosed
or that we can effectively protect our rights to our 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 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 patents or to limit our ability to obtain additional
or broader patent rights. A successful challenge to our existing or future
patents may adversely affect our competitive position.
Any proceeding in the United States or abroad involving our intellectual
property could be expensive and could result in a significant diversion of
effort by our technical and management personnel. We may resort to litigation
to enforce our patents or protect trade secrets or know-how, as well as to
defend against infringement charges. A negative determination in such
proceedings could subject us to significant liabilities or require us to seek
licenses from third parties. Although patent and intellectual property disputes
in the medical and research device areas have often been settled through
licensing or similar arrangements, costs associated with such arrangements may
be substantial and could include ongoing royalties. Furthermore, we cannot
assure you that necessary licenses would be available to us on satisfactory
terms, if at all. Accordingly, an adverse determination in a judicial or
administrative proceeding or a failure to obtain necessary licenses could
prevent us from manufacturing and selling certain of our products, and could
materially adversely affect us.
THE COMPETITION IN THE LASER BIOTECHNOLOGICAL INDUSTRY IS INTENSE, AND WE MAY BE
UNABLE TO GAIN A COMPETITIVE POSITION IN THE MARKETPLACE.
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 we cannot assure you that discoveries by others will not render our
products obsolete.
There are many companies, both public and private, that are engaged in
developing products that will be used for the same purposes as our products.
Many of those companies have substantially greater resources, research and
development staffs and facilities than we do, and have significantly greater
experience in developing products and marketing them. These companies may
succeed in developing products that are more effective or less costly than any
products we own or that we may develop in the
11
<PAGE>
future. Competition within our industry could result in price reductions for
products. If that occurred, we may not be able to sell our products at a price
that will allow us to realize a return on our investment. Other companies are
developing glucose-testing products based on non-invasive technologies, such as
needle implants, watches with skin patches and non invasive laser products that
are designed to read glucose levels through the skin. 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(R) and
on our business and financial condition.
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.
OUR LICENSE WITH lUCENT tECHNOLOGIES IS COSTLY, AND THERE CAN BE NO ASSURANCE
THAT THE lASERtWEEZERS(r) PRODUCT WILL OBTAIN A LARGE MARKET.
The LaserTweezers(R) application of our Cell Robotics Workstation is based
upon an exclusive patent license from AT&T, which was transferred by AT&T to
Lucent Technologies, Inc. We were in default under this license agreement, and,
in 1999, renegotiated its terms. We paid Lucent the sum of $100,000 in lieu of
all sums due and owing for prior years. Additionally, we agreed to increase the
royalty from five percent (5%) to seven percent (7%) of the value of each
product sold utilizing the patent. Finally, the minimum annual royalties under
the license have been reduced to $35,000 per year for the term of the license.
Even with these changes to the 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 attractive.
Furthermore, at least two European companies have developed and are
marketing products that we believe violate Lucent's patent. To date, Lucent has
elected not to pursue patent infringement claims against these companies and
their distributors and, under the terms of the license, we cannot compel Lucent
to initiate these proceedings.
WE ARE IN AN INDUSTRY IN WHICH THERE ARE RAPID TECHNOLOGICAL CHANGES AND
PRODUCTS CAN QUICKLY BECOME OBSOLETE.
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. We cannot assure you that research and discoveries by
others will not render some or all of our products or potential products non-
competitive, obsolete and/or unmarketable.
WE ARE IN AN INDUSTRY THAT IS HEAVILY REGULATED, AND WE MAY BE UNABLE TO COMPLY
WITH GOVERNMENT REGULATIONS OR WE MAY NEED TO OBTAIN OTHER PRODUCT CLEARANCES OR
APPROVALS.
The testing, manufacture, labeling, distribution, marketing and advertising
of many of our products and our ongoing research and development activities are
subject to extensive regulation by government agencies 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 and other compliance procedures. The cost of
complying with these regulations is significant. Our failure to meet or comply
with existing or future regulations could prevent us from marketing our
products, and would have a material adverse effect on our business, financial
condition and results of operations.
12
<PAGE>
Although some of our products have received FDA clearance, have obtained
the European Community's CE Mark and have met the ISO 9002 requirements for good
manufacturing practices, the time required for completing 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. 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.
We may make modifications to our products to incorporate enhancements to
their functionality and performance based upon new data and design review. We
cannot assure you 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 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. If the supplier fails to maintain the license, our ability to export
that product would be suspended until we can enter into an arrangement with a
new licensed supplier.
Besides being regulated by the FDA, our manufacturing activities are
subject to regulation and control under the Occupational Safety and Health Act
and regulations promulgated under it. If we fail to comply with these
regulations, we could be subject 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.
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.
The Erbium:YAG lasers we use in the Lasette(R) is made from crystals that
are produced and processed in Russia. We derive a competitive advantage from
these products because of the significant cost savings that we realize by having
our crystals manufactured by a Russian supplier. Prices quoted by other crystal
suppliers are from 150% to 200% higher than the prices charged by our Russian
supplier.
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 affecting the supplier, such as events flowing from Russia's
political or economic instability, or due to the supplier's non-performance of
his obligations under our agreement, it is likely that alternative sources of
supply would be substantially more expensive. If any of these or other events
beyond our control occurred, we could lose our strategically important source of
supply for laser crystals, which would increase our manufacturing costs and
impair our competitive advantage.
THERE IS NO ASSURANCE THAT OUR PRODUCTS WILL ACHIEVE MARKET ACCEPTANCE OR WILL
COMPETE FAVORABLY WITH ALTERNATIVE PRODUCTS.
We cannot assure you that the marketplace will accept the potential
benefits of our technology or that customers will be willing to pay more for our
products than for existing products. For example, the Lasette(R) will compete
directly with stainless steel lancets, which cost pennies apiece, as well as
with non-invasive procedures and products that are currently being developed by
other companies. Market acceptance of our products will depend, in large part,
upon our ability to educate potential customers, including third-party
distributors, about their distinctive characteristics and benefits. We cannot
assure you that we will be successful in these educational efforts.
13
<PAGE>
WE ARE SUBJECT TO RISKS ASSOCIATED WITH DOING BUSINESS INTERNATIONALLY.
The Company sells its products internationally and purchases some of the
components to make its products from an international supplier. The risks
associated with these activities include, but are not limited to, risks
associated with fluctuating exchange rates and the regulation of fund transfers
by foreign governments, United States and foreign export and import duties and
tariffs and political instability. We cannot assure you that any of the
foregoing will not have a material adverse effect upon the business of the
Company.
WE COULD LOSE THE RIGHT TO EXCLUSIVELY DISTRIBUTE THE CURRENT MODEL OF THE
PROFESSIONAL LASETTE(R).
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 Professional Lasette(R).
We are relying upon Big Sky Laser Technologies, Inc. to manufacture the
first generation of the Professional Lasette(R). 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.
Currently, Big Sky is alleging that we have breached the OEM supplier
agreement and they have given us notice of termination and notice of breach.
Big Sky claims, among other allegations, that:
1. we have failed to take delivery of 1,012 units of the Professional
Lasette(R) product;
2. we have failed to provide laser rods and other components necessary in
the manufacture of 1,000 units ordered by us; and
3. we failed to make the required payment for certain products already
delivered to us.
Although we disagree with the allegations, we are currently in discussions
seeking to restructure our relationship with Big Sky and/or reach an amicable
resolution involving the agreement. There can be no assurance that an
agreeable restructuring will occur or an amicable resolution will be reached.
In the event that the matter should go to litigation, we may incur substantial
costs and will be required to allocate valuable resources to defend our
position. In the event we do not prevail, we my lose our right to exclusively
distribute the Professional Lasette(R). Although we currently manufacture and
distribute the Personal Lasette(R), the loss of the right to distribute the
Professional Lasette(R) may have a material adverse effect on our business and
financial position.
WE DEPEND ON VARIOUS MANUFACTURERS FOR OUR PRODUCT COMPONENTS. IF ANY OF THESE
MANUFACTURERS FAILS TO PROVIDE THE COMPONENTS, IT COULD ADVERSELY AFFECT OUR
BUSINESS.
We are dependent on third parties to produce and manufacture certain
components for our products. Because we generally do not have written
agreements with these third parties, they are not obligated to supply these
components to us on an on-going basis. Consequently, there can be no assurance
that these third parties will commit resources to us when and as we need them.
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 found. There can be no assurance that we would
14
<PAGE>
be successful in finding additional sources of supply on a timely basis, if
ever. Failure to do so could have a material adverse effect on our business,
financial condition, and results of operations.
WE ARE DEPENDENT ON DEVELOPING NEW PRODUCTS, BUT WE ARE NOT CERTAIN THAT THOSE
PRODUCTS WILL BE CLEARED FOR MARKETING OR ACCEPTED IN THE MARKET.
In order to be successful, we will need to continue to develop new products
or enhance our existing products. New products require a significant
investment, including preclinical and clinical testing, before their
commercialization.
From time to time, we have experienced delays or setbacks in the
development of our products. We cannot assure you that we will be able to
successfully address problems that may arise during the development and
commercialization process. In addition, we cannot assure you that any of our
products, their enhancements or our future products can or will be successfully
developed, proved to be safe and effective in clinical trials, meet applicable
regulatory standards, be capable of being manufactured in commercial quantities
at a reasonable cost, be marketed successfully or achieve market acceptance. If
any of our development programs are not successfully completed, required
regulatory approvals or clearances are not obtained, or products for which
approvals or clearances are obtained are not commercially successful, our
business, financial condition and results of operations could be materially
adversely affected.
WE DO NOT HAVE A BROAD RANGE OF PRODUCTS TO SELL.
With the sale of our in vitro fertilization technology to Hamilton Thorne
Research Associates, we are now exclusively focused on laser-based scientific
research instruments and the Lasette(R) product line. Our primary product is
the Lasette(R), a laser skin perforator that is used primarily by diabetics in
place of steel lancets. There is an inherent risk in not having a broad base of
products in development and we cannot assure you that we will be successful with
this narrow line of products.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
The design, development, manufacture and use of our medical products
involve an inherent risk of product liability claims and associated adverse
publicity. Producers of medical products may face substantial liability for
damages in the event of product failure or allegations that the product caused
harm. We currently maintain $2,000,000 of product liability insurance, but this
insurance is expensive and difficult to obtain and may not be available in the
future on acceptable terms. We cannot assure you that we will not be subject to
product liability claims, that our current insurance would cover any claims, or
that adequate insurance will continue to be available on acceptable terms in the
future. In the event we are held liable for damages in excess of the limits of
our insurance coverage, or if any claim or product recall creates significant
adverse publicity, our business, financial condition and results of operations
could be materially adversely affected.
WE HAVE LIMITED EXPERIENCE IN MARKETING, DISTRIBUTING AND SELLING LASER-BASED
MEDICAL AND RESEARCH PRODUCTS.
We have limited experience marketing, distributing or selling our products.
To successfully market, distribute and sell our current products and any
products we may develop, we must either build a more extensive marketing,
distributing and sales force or enter into arrangements with third parties to
market, distribute and sell our products. We cannot assure you that we will be
able to successfully develop a more extensive marketing, distributing and sales
force or that we will enter into acceptable marketing, distributing and sales
agreements with third parties. If we maintain our own marketing, distributing
and sales capabilities, we will compete with other companies that have
experienced and well-funded marketing, distributing and sales operations. If we
enter into a marketing arrangement with a third
15
<PAGE>
party, any revenues we receive will depend on the third party, and we will
likely have to pay a sales commission or similar amount. We may be unable to
successfully commercialize our products. 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 MAY NOT BE ABLE TO RETAIN OR HIRE KEY PERSONNEL.
Our ability to operate successfully and manage our potential future growth
depends upon retaining key scientific, technical, managerial and financial
personnel, and attracting and retaining additional highly qualified scientific,
technical, managerial and financial personnel. We face intense competition for
qualified personnel in these areas, and we cannot assure you that we will be
able to attract and retain qualified personnel. The loss of key personnel or
our inability to hire and retain additional qualified personnel in the future
could adversely affect our business, financial condition and operating results.
We currently have in place employment agreements with Ronald K. Lohrding,
Ph.D., our President and Chief Executive Officer, 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. We do not have key person life insurance covering our management
personnel or other key employees, other than a $500,000 term policy on the life
of Ronald K. Lohrding, Ph.D.
WE MAY NOT MANAGE OUR GROWTH PROPERLY.
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 and financial resources. We cannot assure you that we will be able
to successfully address these additional demands. We cannot assure you 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.
WE MAY BE ADVERSELY AFFECTED BY REFORMS IN THE HEALTH CARE INDUSTRY OR BY
LIMITATIONS IMPOSED ON THIRD PARTY REIMBURSEMENT OF HEALTH CARE COSTS.
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 us,
and there can be no assurance that any reforms will not have a material adverse
effect on our business. 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.
Although some health insurance companies are covering the costs of the
Lasette(R) for its members if a physician provides documentation indicating a
medical necessity, it is unlikely that the cost of the Lasette(R) will qualify
as a reimbursable expense under all health insurance programs. There can be
16
<PAGE>
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.
WE COULD BE ADVERSELY AFFECTED BY A DECREASE OF GOVERNMENT SUPPORT OF SCIENTIFIC
RESEARCH AND DEVELOPMENT.
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.
INVESTORS EXERCISING OUR CLASS A WARRANTS AND OUR PUBLIC WARRANTS WILL INCUR AN
IMMEDIATE AND SUBSTANTIAL DILUTION OF THEIR INVESTMENT.
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 December 31, 1999, we had a net tangible book value of $825,894 or
approximately $.10 per share of common stock outstanding, based upon 8,244,121
shares issued and outstanding. Taking into account Paulson Investment and
Chester L. Paulson exercise of the Placement Agent's Warrants and the Class A
Warrants in February 2000, and assuming the exercise of Lorraine Maxfield's
Placement Agent Warrants and the underlying Class A 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 Warrants, and
assuming further, the exercise of all 920,000 Public Warrants, the number of
shares of common stock will increase to 9,749,121 and the net tangible book
value will increase to $4,085,644 after subtracting the expenses of the
offerings estimated to be $25,000, resulting in a net tangible book value per
share of approximately $.42.
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."
WE HAVE NOT PAID DIVIDENDS TO OUR SHAREHOLDERS IN THE PAST, AND WE DO NOT
ANTICIPATE PAYING DIVIDENDS TO OUR SHAREHOLDERS IN THE NEAR FUTURE.
We have not declared or paid cash dividends on our common stock. 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 near future.
STOCK THAT CANNOT CURRENTLY BE TRADED MAY BECOME ELIGIBLE FOR TRADING IN THE
FUTURE.
and outstanding. Of this amount, 2,138,763 are "restricted securities" and are
not currently traded. However, these restricted securities will be available
for trading in the future, so long as all the requirements of Rule 144,
promulgated under the Securities Act of 1933, are met.
No prediction can be made as to the effect, if any, that the availability
of these shares for sale, or the sale of these shares, will have on the market
prices prevailing from time-to-time. If the number of shares offered for sale
is greater than the number of shares sought to be purchased, then the price of
our
17
<PAGE>
stock would decline. The market price of our securities could be adversely
affected by future sales of these securities.
THERE ARE A LARGE NUMBER OF SHARES UNDERLYING OUR WARRANTS AND OPTIONS THAT MAY
BE AVAILABLE FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY DEPRESS THE MARKET
PRICE OF OUR COMMON STOCK.
The issuance of shares of common stock upon the exercise of our outstanding
options and warrants will result in dilution to the interests of our
stockholders and you as an investor in the offerings, and may have an adverse
effect on the trading price and market for our common stock.
As of December 31, 1999, we have options and warrants outstanding which may
be exercised to acquire 3,496,949 shares of our common stock at various times.
The future sale of these shares may adversely affect the market price of our
common stock. Shares issued upon exercise of our outstanding warrants and
options will also cause immediate and substantial dilution to our existing
stockholders. In addition, as long as these warrants and options remain
outstanding, our ability to obtain additional capital through the sale of our
securities might be adversely affected.
WE MAY CONTINUE TO SELL STOCK OR OTHER SECURITIES TO RAISE MONEY. IF WE DO SO,
THESE SALES COULD SUBSTANTIALLY DILUTE THE INVESTMENT OF OUR SECURITY HOLDERS.
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. Furthermore, we may authorize the issuance of our
preferred stock with rights preferential to the rights of investors in these
offerings without shareholder approval. Our ability to issue additional
securities without shareholder approval could have the effect of substantially
diluting the investment made by our existing stockholders as well as investors
in this Offering.
TRADING IN OUR SECURITIES IS LIMITED AND SPORADIC, THEREFORE YOU MAY NOT BE ABLE
TO LIQUIDATE YOUR INVESTMENT WITHOUT CONSIDERABLE DELAY, OR AT ALL.
A public trading market for our Class A Warrants does not currently exist.
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 paid
for our securities and the amount of securities traded are volatile. We cannot
assure you that these markets will improve in the future. We cannot assure you
that you will be able to liquidate your investment without considerable delay,
if at all.
OUR SECURITIES MAY BE REGULATED BY THE SECURITIES ENFORCEMENT AND PENNY STOCK
REFORM ACT OF 1990, AND THE TRADING MARKET IN OUR SECURITIES IS LIMITED.
Since our common stock and Public Warrants are not listed or quoted on any
exchange or on NASDAQ, and no other exemptions currently apply, trading in our
common stock and Public Warrants on the OTC Bulletin Board is subject to the
"penny stock" rules of the SEC. These rules require, among other things, that
any broker engaging in a transaction in our securities provide its customers
with a risk disclosure document, disclosure of market quotations, if any,
disclosure of the compensation of the broker and its salespersons in the
transaction, and monthly account statements showing the market values of our
securities held in the customer's accounts. The bid and offer quotations and
compensation information must be provided before effecting the transaction and
must be contained on the customer's confirmation. Generally, brokers subject to
the "penny stock" rules when effecting transactions in our securities may be
less willing to do so. This may make it more difficult for investors to dispose
of our common stock or Public Warrants. In addition, the information provided
to the broker's customer is prepared by the broker, not the Company. We cannot
assure you that such information is accurate, complete or current.
18
<PAGE>
YOU MAY NOT TRADE OUR SECURITIES IF THEY ARE NOT PROPERLY REGISTERED OR
QUALIFIED IN THE STATE IN WHICH YOU RESIDE OR IF THE PROSPECTUS PURSUANT TO
WHICH THEY ARE SOLD IS NOT KEPT CURRENT.
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 states in which the securities may be traded. Maintaining a current
effective registration statement and prospectus could be expensive, and we
cannot assure you that a current registration statement and prospectus will be
in effect when you decide 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, we cannot assure you
that the required qualification will occur. The warrants may become valueless
if a prospectus covering the shares issuable upon their exercise is not kept
effective and current, or if the underlying shares are not, or cannot be,
registered in the applicable states.
WE HAVE RIGHTS TO REDEEM THE CLASS A WARRANTS AND THE PUBLIC WARRANTS. IF WE
EXERCISE OUR REDEMPTION RIGHTS, YOU MAY BE FORCED TO EXERCISE THE WARRANTS
SOONER THAN YOU WOULD LIKE.
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. If you fail to exercise
the Class A Warrants or the Public Warrants by the close of the business day
preceding the date fixed for redemption, you will be forced to sell us these
securities at the redemption price, even though you may wish to hold them or
even though the redemption price is substantially lower than their fair value.
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.
WE STILL MAY BE SUBJECT TO PROBLEMS WITH YEAR 2000 COMPLIANCE.
Prior to December 31, 1999, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally and
the compliance and remediation work accomplished during the years leading up to
2000 was effective to prevent any problems. To date, the Company has not
experienced any such computer difficulty; however, computer experts have warned
that there may still be residual consequences of the change in centuries. Any
such difficulties, including but not limited to those listed below, may,
depending upon their pervasiveness and severity, have a material adverse effect
on our business, financial condition and results of operations:
. a failure to fully identify all year 2000 dependencies in the Company's
systems;
. a failure to fully identify all year 2000 dependencies in the systems of
third parties with whom the Company does business;
19
<PAGE>
. a failure of any third party with whom the Company does business to
adequately address their year 2000 issues;
. the failure of any contingency plans developed by the Company to protect
its business and operations from year 2000-related interruptions; and
. delays in the implementation of new systems resulting from year 2000
problems.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered by
the Selling Securityholders, or the resale of our Class A and Public Warrants.
We will, however, receive proceeds if any of the following occurs:
1. If Loraine Maxfield exercises her Placement Agent's Warrants, we will
receive gross proceeds of $12,938. Additionally, if Ms. Maxfield
exercises her Class A Warrants issuable to her upon the exercise of the
Placement Agent's Warrants, then we will receive additional gross
proceeds of up to $9,056 .
2. If Paulson Investment and certain of its officers exercise their
Representative's Warrants, 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
Investment and certain of its officers upon their exercise of the
Representative's Warrants, 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.
If we were to receive proceeds from any of the foregoing, we anticipate that the
proceeds will be used as working capital in our day-to-day operations. While we
regularly evaluate possibilities for the acquisition of other businesses,
technologies and products, we do not have any arrangements, agreements or
understandings with respect to any such acquisitions. At this time, we do not
anticipate the proceeds we receive from the exercise of the Placement Agent's
Warrants, the Representative's Warrants, or the Public Warrants will be used to
discharge debt.
DETERMINATION OF OFFERING PRICE
The price of the underlying common stock we are offering pursuant to the
exercise of the Class A Warrants and Public Warrants is $1.75 and $2.40
respectively. The exercise price was determined by negotiation with Paulson
Investment in connection with the initial public offering. In determining the
offering price with Paulson Investment, 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.
Selling Securityholders may sell shares covered by this Prospectus at prices
relating to prevailing market prices or at negotiable prices entered into
between the Selling Securityholder and a purchaser.
20
<PAGE>
DILUTION
At December 31, 1999, we had a net tangible book value of $825,894 or
approximately $.10 per share. This determination was made based upon 8,244,121
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. Net tangible book value is equal to total assets less
total liabilities and intangible assets.
The above calculation does not reflect the occurrence of the following events:
1. The exercise of the Representative's Warrant or the exercise of the
Public Warrants to be issued as part of the public units purchased
upon exercise of the Representative's Warrant; or
2. The exercise of the Placement Agent's Warrants or the exercise of the
Class A Warrants issued or to be issued upon exercise of the Placement
Agent's Warrants; or
3. The 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,
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.
At the same time, 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 all our outstanding warrants and taking
into account the shares issued to the Selling Securityholders, our net tangible
book value would increase to $4,085,644 after subtracting the expenses of the
offerings estimated to be $25,000, resulting in an adjusted net tangible book
value per share of approximately $.42 per share based on 9,749,121 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 $1.33 per share, or
approximately 76% of the Class A Warrant exercise price.
As an investor exercising Public Warrants you will incur immediate and
substantial dilution of your investment of approximately $1.98 per share, or
approximately 83% of the Public Warrant exercise price.
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.
21
<PAGE>
SELLING SECURITYHOLDERS
The holders of our Representative Warrants, Placement Agent's Warrants and those
who have exercised the Placement Agent's Warrants, all of whom we refer
collectively as the Selling Securityholders, are offering to sell their
securities under this Prospectus.
None of the Selling Securityholders has, or within the past three years has had,
any position, office or other material relationship with us or any of our
predecessors or affiliates, except as noted.
The following table sets forth certain information as of May 8, 2000, to the
best of our knowledge, regarding the ownership of our common stock and warrants
by the Selling Securityholders and as adjusted to give effect to the sale of all
the common stock and warrants offered by the Selling Securityholder pursuant to
this Prospectus.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Selling Ownership before Securities being Ownership after Percentage after
Securityholder the offering/(1)/ offered the offering the offering
- -------------------------------------------------------------------------------------------------------------------------
Common Common Common Common
Stock Warrants Stock Warrants Stock Warrants stock Warrants
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paulson Investment
Company, Inc./(2)/ 468,639 141,880 427,225/(4)/ 64,400/(8)/ 41,414 77,480 .42% .79%
-------------------------------------------------------------------------------------------------------------------------
Chester L. 45,450 7,200 45,450/(5)/ 7,200/(8)/ 0 0 0% 0%
Paulson/(3)/
- -------------------------------------------------------------------------------------------------------------------------
Lorraine 17,550 8,775 17,550/(6)/ 8,775/(6)/ 0 0 0% 0%
Maxfield/(3)/
- -------------------------------------------------------------------------------------------------------------------------
Tracy Parker/(3)/ 4,200 1,600 3,200/(7)/ 1,600/(8)/ 1,000 0 .01% 0%
- -------------------------------------------------------------------------------------------------------------------------
Glen Davis/(3)/ 3,200/(7)/ 1,600/(8)/ 3,200/(7)/ 1,600/(8)/ 0 0 0% 0%
- -------------------------------------------------------------------------------------------------------------------------
Trent Davis/(3)/ 3,200/(7)/ 1,600/(8)/ 3,200/(7)/ 1,600/(8)/ 0 0 0% 0%
- -------------------------------------------------------------------------------------------------------------------------
TOTAL 499,825 85,175
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
__________________________
(1) The number of shares indicated includes shares acquired directly from us by
the Selling Securityholders as well as shares that are issuable upon the
exercise of the Representative and/or the Placement Agent's Warrants held by the
Selling Securityholders.
(2) Paulson Investment Company, Inc. is an investment banking firm that has
served as our underwriter in both of our private and public offerings. For
their services as our underwriter and placement agent, we have paid to Paulson
Investment Company, Inc. various fees as well as issued to them our securities
including shares of common stock and warrants.
22
<PAGE>
(3) Serves as an officer of Paulson Investment Company, Inc.
(4) Represents 298,425 shares acquired from the exercise of the Placement
Agent's Warrants and the exercise of the Class A Warrants and 128,800 shares
issuable upon the exercise of the Representative Warrants.
(5) Represents 31,050 shares acquired from the exercise of the Placement
Agent's Warrants and the exercise of the Class A Warrants and 14,400 shares
issuable upon the exercise of the Representative Warrants.
(6) Common stock represents 10,350 shares issuable upon the exercise of the
Placement Agent's Warrants and 7,200 shares issuable upon the exercise of the
Representative Warrants. Warrants represents 5,175 Class A Warrants issuable
upon the exercise of the Placement Agent's Warrants and 3,600 Public Warrants
issuable upon the exercise of the Representative Warrants.
(7) Represents common stock issuable upon the exercise of the Representative
Warrants.
(8) Represents Public Warrants issuable upon the exercise of the Representative
Warrants.
We will pay all expenses to register the shares, except that the Selling
Securityholders will pay any underwriting and brokerage discounts, fees and
commissions, specified attorneys' fees and other expenses to the extent
applicable to them.
We have agreed to indemnify the Selling Securityholders and certain affiliated
parties against specified liabilities, including liabilities under the
Securities Act, as amended, in connection with this offering. The Selling
Securityholders have agreed to indemnify us and our directors and officers, as
well as any persons controlling our Company, against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification for
liabilities under the Securities Act may be permitted to our directors or
officers, or persons controlling our Company, we have been advised that in the
opinion of the SEC this kind of indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
PLAN OF DISTRIBUTION
Representative's Warrants
This prospectus relates to our offering of 160,000 shares of common stock and
80,000 Public Warrants issuable to Paulson Investment and certain of its
officers upon their exercise of the Representative's Warrants. The
Representative's Warrants were issued as partial compensation for the services
provided in connection with our public offering completed during the first
quarter of 1998. The common stock, Public Warrants and the underlying 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.
Placement Agent's Warrants
This prospectus relates to our offering of 10,350 shares of common stock and
5,175 Class A Warrants issuable to Lorraine Maxfield. The common stock, Class A
Warrants and the underlying shares of common stock to be issued upon exercise of
these Class A Warrants are offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act.
23
<PAGE>
Selling Securityholder Shares
Selling Securityholders may sell up to 329,475 shares of common stock either
directly or through a broker-dealer or other agent at prices related to
prevailing market prices or negotiated prices, in one or more of the following
kinds of transactions:
* Transactions in the over-the-counter market;
* Transactions negotiated between Selling Securityholders and purchasers.
Broker-dealers or agents may purchase shares directly from a Selling
Securityholder or sell shares to someone else on behalf of a Selling
Securityholder. In addition to any other applicable laws or regulations,
Selling Securityholders must comply with regulations relating to distributions
by Selling Securityholders, including Regulation M under the Securities Exchange
Act of 1934, as amended.
Some states may require that registration, exemption from registration or
notification requirements be met before Selling Shareholders may sell their
common stock and warrants. Some states may also require Selling Securityholders
to sell their common stock only through broker-dealers.
Public Warrants
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 or
purchased from the secondary trading markets. 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.
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.
Compensation
We are offering the shares of common stock underlying the Class A Warrants and
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 shares of common stock issuable upon exercise of
the Class A Warrants and 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. Sales may be made 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 and Public 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.
Broker-dealer compensation may be received 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).
DESCRIPTION OF SECURITIES TO BE REGISTERED
24
<PAGE>
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.
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 September 18, 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. The Election to Purchase must be 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 alternatively, in our sole determination,
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. 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, 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.
25
<PAGE>
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 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. The Election to Purchase must be 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 alternatively, in our sole determination,
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. 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 there from, can
26
<PAGE>
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.
No Right to Compel Exercise.
We do not have the right to compel the exercise of any of our warrants currently
outstanding and no one has committed to exercise any of our outstanding
warrants. Whether any 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 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 our
outstanding warrants. We intend to maintain a current prospectus until the
Class A Warrants and 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 Class
A Warrants and/or Public Warrants. We may also reduce the exercise price of the
Class A Warrants and/or Public Warrants, provided written notice of an intended
extension or reduction is given to the registered holders of the warrants in
question before the expiration date then in effect.
Warrant Solicitation Fees
We have no agreement or 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
27
<PAGE>
We intend to furnish annual reports to shareholders, which will include
certified financial statements reported on by our certified public accountants.
In addition, we will issue unaudited quarterly or other interim reports to
shareholders as we deem appropriate.
INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the common stock offered hereby will be passed on for us by
Pollet Law, a California corporation, 10900 Wilshire Blvd., Los Angeles,
California 90024. Pollet Law, is the beneficial owner of 50,000 shares of our
common stock.
MATERIAL CHANGES
On March 9, 2000, GEM Edwards, Inc., exercised a warrant to purchase 100,000
common shares of our capital stock at a aggregate exercise price of $225,000.
We are currently in discussions with GEM Edwards to rescind the exercise of the
warrant which will result in the cancellation of the 100,000 common shares and
the refund of the aggregate exercise price. If the transaction is rescinded,
GEM Edwards' warrant will be reinstated and it will have the right to exercise
the warrant during the exercise period or any extensions granted. We do not
have the right to compel the exercise of the warrant and whether the warrant
will be 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 GEM Edwards.
EXPERTS
Our consolidated financial statements as of December 31, 1999 and 1998 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.
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. Pre-Effective Amendment No. 3 to our Registration Statement on
Form S-3, filed with the Commission on January 20, 1999 (SEC No.
333-55951);
3. Our Annual Report on Form 10-KSB for the year ended December 31,
1999; and
4. Our definitive Proxy Statement.
28
<PAGE>
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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange 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.
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.
29
<PAGE>
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 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.
30
<PAGE>
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any representation
other than those contained in this prospectus, and if made such information or
representation must not be relied upon as having been given or authorized. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the Securities offered by this prospectus or an
offer to sell or a solicitation of an offer to buy the Securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
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>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary.................................... 1
Risk Factors.......................................... 10
Use of Proceeds....................................... 20
Determination of Offering Price....................... 20
Dilution.............................................. 21
Selling Securityholders............................... 22
Plan of Distribution.................................. 23
Description of Securities to be Registered............ 24
Interest of Named Experts and Counsel................. 28
Material Changes...................................... 28
Experts............................................... 28
Incorporation of Certain Documents by Reference....... 28
Where You Can Find More Information................... 29
Indemnification....................................... 30
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CELL ROBOTICS INTERNATIONAL, INC.
1,505,000 Shares of Common Stock
80,000 Redeemable Public Warrants
5,175 Redeemable Class a Warrants
- -------------------------------------------------------------------------------
PROSPECTUS
- -------------------------------------------------------------------------------
May 9, 2000
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering, all of which are to be borne by the
Company, are as follows:
SEC Filing Fee $ 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
Total* $25,000.00
_______________________
* Estimated
Item 15. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
a. Sections 7-109-101 through 7-109-110 of the Colorado Corporation
Code provide for the indemnification of a corporation's officers and directors
under certain circumstances.
* * *
b. Article XII of Registrant's Articles of Incorporation provide that
the corporation may indemnify each director, officer, and any employee or agent
of the corporation, his heirs, executors and administrators, against expenses
reasonably incurred or any amounts paid by him in connection with any action,
suit or proceeding to which he may be made a party by reason of his being or
having been a director, officer, employee or agent of the corporation to the
extent permitted by the law as recited above in subparagraph (a).
c. Article XII of Registrant's Articles of Incorporation provides, in
part:
"e. To the maximum extent permitted by law or by public policy,
directors of this Corporation are to have no personal liability
for monetary damages for breach of fiduciary duty as a director."
d. The Company currently pays for and maintains an insurance policy
for $1,000,000 that covers directors and officers' liability.
Item 16. Exhibits.
II-1
<PAGE>
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B:
Exhibit No. Title
- ---------- -----
* 1.0 Underwriting Agreement
** 4.1 Specimen Common Stock Certificate
** 4.2 Specimen Redeemable Class A Common Stock Purchase Warrant
** 4.3 Specimen Public Warrant Certificate
** 4.4 Class A Common Stock Purchase Warrant Agreement
** 4.5 Public Warrant Agreement
*** 5.1 Opinion of Pollet & Richardson
*** 23.1 Consent of KPMG LLP
*** 23.2 Consent of Pollet & Richardson
____________________
* 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. 1 to Registration Statement on Form SB-2, which was
declared effective by the Commission on February 14, 1996 SEC File
No. 33-80347.
*** Filed with this Registration Statement.
II-2
<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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the 1933 Securities Act, 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. 5 on Form S-3 to Form SB-2 Registration Statement and Post-
Effective Amendment No. 3 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 9th of May, 2000.
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 1933 Securities Act, this Post-
Effective Amendment No. 5 on Form S-3 to Form SB-2 Registration Statement and
Post-Effective Amendment No. 3 on Form S-3 to Form SB-2 Registration Statement
has been signed by the following persons in the capacities with Cell Robotics
International, Inc. and on the dates indicated.
Dated: May 9, 2000 /s/ Ronald K. Lohrding
--------------------------------------
Ronald K. Lohrding, Chairman of the Board,
President, and Chief Executive Officer
(Attorney in fact)
Dated: May 9, 2000 /s/ Jean Scharf
--------------------------------------
Jean Scharf, Chief Financial Officer, Chief
Accounting Officer and Controller
Dated: May 9, 2000 /s/ Mark Waller
-------------------------------------
Mark Waller, Director
Dated: May 9, 2000 /s/ Raymond Radosevich
--------------------------------------
Raymond Radosevich, Director
Dated: May 9, 2000 /s/ Debra Bryant
-------------------------------------
Debra Bryant, Director
Dated: May 9, 2000 /s/ Ron Ainsworth
-------------------------------------
Ron Ainsworth, Director
Dated: May 9, 2000 /s/ Oton Tisch
-------------------------------------
Oton Tisch, Director
II-4
<PAGE>
EXHIBIT 5.1
POLLET & RICHARDSON
a Law Corporation
10900 Wilshire Blvd.
Suite 500
Los Angeles, California 90024
Tel (310) 208-1183
Fax (310) 208-1154
May 9, 2000
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) 5,175 Redeemable
Class A Warrants ("Class A Warrants"), (ii) 80,000 Redeemable Public Warrants
("Public Warrants"), (iii) 329,475 shares of common stock offered by the Selling
Securityholders, and (iv) 1,175,525 shares of the Company's common stock offered
by the Company 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 5,175 Class A Warrants, 80,000 Public Warrants, and 1,175,525
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-
<PAGE>
assessable shares of the Company's Common Stock. The 329,475 shares of common
stock offered by the Selling Securityholders, are duly and validly authorized,
legally issued, fully paid and non-assessable.
Very truly yours,
POLLET & RICHARDSON
a Law Corporation
<PAGE>
EXHIBIT 23.1
The Board of Directors
Cell Robotics International, Inc.
We consent to the use of our report incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
Albuquerque, New Mexico
May 9, 2000
<PAGE>
EXHIBIT 23.2
POLLET & RICHARDSON
a Law Corporation
10900 Wilshire Blvd.
Suite 500
Los Angeles, California 90024
Tel (310) 208-1183
Fax (310) 208-1154
May 9, 2000
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 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) 5,175 of the Company's Redeemable Class
A Warrants ("Class A Warrants"), (ii) 80,000 Redeemable Public 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.
Very truly yours,
POLLET & RICHARDSON
a Law Corporation
