<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from __________________ to ________________
Commission file number 0-21168
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
NEW YORK 13-3253392
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
5 East 80th Street, New York, New York 10021
(Address of principal executive offices)
(212) 717-6544
(Issuer's Telephone Number, Including Area Code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes __ No __
N/A
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes
of common equity, as of the latest practicable date: Common Stock: 5,139,599
Warrants: 3,054,322
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 1,741,700 $ 1,827,400
Accounts receivable, less allowance for doubtful accounts of $17,900
in 1996 and 1995 348,700 315,700
Inventories 292,000 291,600
Prepaid expenses 142,200 98,800
----------- -----------
Total Current Assets 2,524,600 2,533,500
COLORMATE II UNITS, LESS ACCUMULATED
DEPRECIATION OF $19,100 (1996) AND $16,800 (1995) 680,900 683,200
PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED
DEPRECIATION OF $100,800 (1996) AND $86,900 (1995) 213,900 210,600
DEFERRED FINANCING COSTS 18,400 --
OTHER ASSETS 66,300 62,600
----------- -----------
$ 3,504,100 $ 3,489,900
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - collateralized by equipment $ 4,500 $ 4,400
Notes payable to related party 341,700 341,700
Accounts payable and accrued expenses:
Attorneys and Accountants 158,300 107,400
Consultants 40,500 10,100
Trade 133,400 120,100
Accrued interest to related parties 2,400 --
Security deposits 6,000 6,000
----------- -----------
Total Current Liabilities 686,800 589,700
----------- -----------
LONG TERM DEBT:
Notes payable - collateralized by equipment 8,900 10,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE CLASS A PREFERRED STOCK,
PAR VALUE $.01 PER SHARE:
Authorized - 1,400,000 Shares
Issued and outstanding - 1,380,000 Shares
At par and redemption value
13,800 13,800
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common Stock, par value $.001 per share:
Authorized - 25,000,000 shares
Issued and outstanding - 4,877,361 (1996)
and 4,661,936 (1995) shares
Capital in excess of par value 4,900 4,700
Accumulated deficit 8,645,300 7,864,700
Total Stockholders' Equity (5,855,600) (4,993,000)
----------- -----------
2,794,600 2,876,400
----------- -----------
$ 3,504,100 $ 3,489,900
=========== ===========
</TABLE>
See accompanying notes to financial statements.
1
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1996 1995
---------- ----------
REVENUES:
Lease, license and service contracts $ 36,300 $ 53,800
Sale of cosmetics and fashion swatch packs 100 700
Interest income 18,200 20,200
---------- ----------
54,600 74,700
---------- ----------
COSTS AND EXPENSES:
Cost of cosmetics and fashion swatch packs -- 300
Research and Development costs:
Compensation of officers and employees 125,000 44,900
Compensation of consultants 103,000 72,500
Other 2,200 4,100
Selling, General and Administrative:
Compensation of officers and employees 191,700 88,900
Compensation of consultants 44,700 69,400
Legal fees 123,500 67,500
Accounting fees 18,000 22,500
Patent application costs 21,100 10,800
Rent and storage 57,600 33,900
Other:
Insurance 51,700 28,400
Travel & Entertainment 21,200 14,000
Payroll taxes 32,600 11,000
Stock registration fees 7,600 9,700
Depreciation and amortization 17,200 10,500
General and administrative 66,000 48,100
Repairs and maintenance 27,100 21,100
Interest 7,000 7,400
---------- ----------
917,200 565,000
---------- ----------
NET LOSS $ 862,600 $ 490,300
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND EQUIVALENTS OUTSTANDING $4,760,300 $3,477,000
========== ==========
NET LOSS PER SHARE $ 0.18 $ 0.14
========== ==========
See accompanying notes to financial statements.
2
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
------------------------------ Capital
Number of Par in Excess Accumulated
Shares Value of Par Value Deficit
------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1994 4,661,936 $ 4,700 $ 7,864,700 ($4,993,000)
Three Months Ended
March 31, 1996:
Net loss -- -- -- (862,600)
Exercise of options to purchase 55,000
shares at $2.50 per share 55,000 -- 137,500 --
Exercise of options to purchase 20,000
shares at $2.25 per share 20,000 -- 45,000 --
Exercise of warrants to purchase
75,000 shares at $2.50 per share 75,000 100 187,400 --
Exercise of warrants to purchase
65,425 shares at $5.00 per share 65,425 100 327,000 --
Gain on account of "short swing"
profit rules under Section 16 of the
Securities Exchange Act of 1934 -- -- 83,700 --
------------- --------------- ------------ ---------------
Balances, March 31, 1996 4,877,361 $ 4,900 $ 8,645,300 $ (5,855,600)
============= =============== ============ ===============
</TABLE>
See accompanying notes to financial statements.
3
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (862,600) $ (490,300)
Adjustments To Reconcile Net Loss To Net
Cash Flows From Operating Activities:
Depreciation And Amortization 17,200 10,500
Changes In Operating Assets And Liabilities:
Accounts Receivable (33,000) (47,400)
Inventories (400) (10,700)
Prepaid Expenses And Other Assets (43,400) 27,500
Other Assets (4,700) (23,200)
Accounts Payable And Accrued Expenses 97,000 (54,800)
----------- -----------
Net Cash Flows From Operating Activities (829,900) (588,400)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases Of Property And Equipment (17,200) (4,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options 182,500 --
Proceeds from exercise of warrants 514,600 --
Short swing profits 83,700 --
Proceeds From Issuance Of Common Stock Net Of Related
Costs -- 1,880,400
Payments Of Notes Payable And Net Advances From Related
Parties -- (85,000)
Deferred Financing Costs (18,400)
Notes Payable - Collateralization By Equipment (1,000) (900)
----------- -----------
Net Cash Flows From Financing Activities 761,400 1,794,500
----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (85,700) 1,202,100
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 1,827,400 858,300
----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 1,741,700 $ 2,060,400
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid $ 4,500 $ --
=========== ===========
Income Taxes Paid $ -- $ --
=========== ===========
SUPPLEMENTAL NON-CASH FLOW INFORMATION
Loan From Officer Offset Against Due From Officer $ -- $ 17,300
=========== ===========
Deferred Offering Costs Offset To Additional Paid In Capital $ -- $ 111,800
=========== ===========
</TABLE>
4
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Basis of Presentation:
Nature of Report -- The consolidated balance sheet at the end of the
preceding fiscal year has been derived from the audited consolidated
balance sheet contained in the Company's Form 10-KSB for the fiscal year
ended December 31, 1995 and is presented for comparative purposes. All
other financial statements are unaudited. In the opinion of management,
all adjustments, which include only normal recurring adjustments
necessary to present fairly the financial position, results of
operations and changes in financial position for all periods presented
have been made. The results of operations for interim periods are not
necessarily indicative of the operating results for the full year.
Footnotes -- Certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published rules and
regulations of the Securities and Exchange Commission. These
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form
10-KSB for the fiscal year ended December 31, 1995.
Estimates and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results, as determined at a later date, could differ from those
estimates. At March 31, 1996 and December 31, 1995, most of $292,000 and
$291,600, respectively, of inventory of the Company's products is in
excess of current requirements based on the recent level of sales. The
Company has not sold its new line of cosmetics because the manufacturer
has had trouble color matching certain shades to be scientifically
claimable for the Company's scientifically color coordinated cosmetics
line. The Company believes the new cosmetics will be ready to ship in
the fourth quarter of 1996 and is currently seeking a national
distributor to sell its cosmetics. Management believes no loss will be
incurred on the disposition of inventory. No estimate can be made of a
range of amounts of loss that are reasonably possible should
Management's expectations not be met.
Concentration of Credit Risk - The Company maintains its cash balances
in a money market fund and financial institutions insured by the Federal
Deposit Insurance Corporation to a maximum of $100,000. At March 31,
1996, the Company had uninsured cash balances of approximately
$1,605,000. For the quarter ended March 31, 1996, the Company generated
approximately 33% of its revenues from Perfect Look and 23% from IMS.
The net account receivables less the related accounts payable from IMS
at March 31, 1996 is approximately $116,400.
Loss Per Share -- Prior to the closing of the Company's initial public
offering on February 12, 1993, loss per common share was based upon the
number of common shares and equivalents outstanding as of October 28,
1992, since such shares and options were deemed to have been either
outstanding or to have been issued in contemplation of, and at a price
significantly below, the price in the Company's initial public offering.
Subsequent to the closing date of the initial public offering, the
weighted average number of shares are used in computing loss per share
and options and warrants are excluded from the calculation for such
subsequent period, as losses have been incurred. The 900,000 common
shares into which the preferred shares may be convertible are excluded
from primary earnings (loss) per share until either the Company's
earnings before interest, income taxes and extraordinary items exceed
$20,000,000 (excluding the effects of business combinations) for two
consecutive calendar years, or the closing bid price per share of the
Company's common stock exceeds $46.67 for 30 consecutive trading days,
prior to January 1, 1998. Fully diluted earnings per share will be
reported in future years if such conditions are reasonably possible of
occurrence and the effect results in a material dilution of earnings per
share; if non-cumulative preferred dividends are declared, they will
reduce earnings per share.
Colormate II Systems -- Color measurement instruments and related items
("Proprietary Equipment") were funded by Avon Products, Inc. ("Avon")
under a license and were to be returned upon completion of the license
period to protect the Company's rights. See Note 2 of Notes to Financial
Statements. At the inception of the Avon license, no residual value was
attributed to the Proprietary Equipment, due to the lack of an
ascertainable market for such
5
<PAGE>
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
equipment when separated from the rest of the Colormate II Systems. Avon
originally paid the Company approximately $1,600,000 for 2,000 color
measurement instruments components of the Colormate II System. Related
computer and other equipment ("Nonproprietary Equipment") which,
together with the Proprietary Equipment, were used by Avon as units
during the license period, were to be retained by Avon. Avon originally
advanced to the Company approximately $3,000,000 for the nonproprietary
equipment contained in such 2,000 units.
Due to missing and damaged units, Avon and the Company executed mutual
releases on June 24, 1991 with the principal effect that the Company
received 1,947 units of which 1,700 were useable. For accounting
purposes, the $700,000 estimated fair value of the Nonproprietary
Equipment (based upon an independent appraisal of two complete units
with allowances for the lack of a verifiable used equipment market,
varying usage, the need for refurbishment and similar factors) was
considered a gain on receipt of Colormate II units. The 1,700 useable
units of Nonproprietary Equipment were received in the form of (i) 1,400
complete units valued at $500 per unit and (ii) 300 complete units in
need of significant repair that were assigned zero value. The principal
components of each unit are Toshiba-1000 computers and Seiko printers,
which were then three years old. No valuation of the Proprietary portion
of the units or of the 247 unusable units was performed.
Note 2 -- Commitments and Contingencies:
Business Risks -- The Company's business encompasses all of the risks
inherent in the establishment of a new business enterprise, including a
limited operating history with significant competition possessing
substantially greater resources. Current and future operations also
depend upon the continued employment of certain key executives, the
ability to further commercialize its proprietary technology and products
and the Company's ability to obtain adequate revenues and/or outside
financing.
Possible Impairment -- Depreciation on a straight-line basis over 5
years commences upon initial rental of the Colormate II System units.
The Company continually evaluates the life and carrying amount of such
equipment in light of current conditions. Given present conditions, it
is reasonably possible that the Company's estimate that it will recover
the carrying amount from future operations may change in the near term,
but the Company currently believes it is more likely than not that
writedown for impairment will not be necessary. For assessing whether a
writedown is necessary, management compares the greater of the estimated
undiscounted net future revenues and a current appraisal with the
carrying amount of this specialized equipment.
Operating Difficulties -- Since 1989, the Company has incurred losses
from operations and net cash outflows from operations, and has owned
Colormate II units since June 1991 whose ultimate recoverability depends
upon the Company's future marketing success. The Company expects to
license its patents and proprietary technology, rent its equipment and
market its related services and products to ultimately overcome these
difficulties.
In order to successfully lease Colormate II units and market related
beauty products and services as well as license its proprietary
technology in the future, the Company has obtained substantial
financing. Without giving effect to the proceeds of the 1996 Debenture
Offering discussed below, management expects the Company will have
sufficient liquidity for at least one year, even if no revenue from
operations are generated. If the Company is able to profitably market
its Intellectual Properties, Colormate II System and Products, the
Company would use any cash flow obtained from operations, and may seek
additional debt or equity financing, to further support and expand its
operations. If the Company is not able to successfully market its
products and technologies, it may ultimately be unable to continue in
business.
In the event the Colormate II units and related proprietary technology
are not successfully leased/licensed and/or the products are not
successfully marketed in the future, the principal effect may be a
substantial writedown of the book value of such units.
6
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 -- Commitments and Contingencies (continued):
In October 1987, the Company granted an exclusive license in the United
States of certain technology and related software to Avon in certain
defined markets with a right of first refusal in other markets. As part
of this license and based upon its proprietary technology, the Company
performed laboratory studies to develop the Avon color cosmetic line for
Avon and developed a new prototype of its Colormate System. The Company
researched, developed, engineered, and manufactured through
subcontractors 2,000 Colormate II System units for lease by Avon during
the license period. To protect its rights to its proprietary technology
at the end of the term, the use of the equipment was structured as a
lease and the use of the proprietary technology, including the
laboratory studies and software, was structured as a license. During the
term of the license, the Company was required to provide certain related
technical services, including developing, constructing, programming and
operating the units. Revenues from Avon ceased in October 1990.
Litigation - In May 1994, the Company entered into a five year
distributorship agreement beginning in July 1994 with Perfect Look
Distribution, Ltd., ("Perfect Look") under which Perfect Look was to act
through June 1996 as the exclusive distributor (subject to certain
exceptions) in the United Kingdom of the Company's Colormate II System
units and Products; thereafter the arrangement is non-exclusive although
the Company has agreed not to grant other distributors terms more
favorable than those provided to Perfect Look. On January 10, 1995, the
Company sued Perfect Look and its two principals (collectively "Perfect
Look") in New York State Supreme Court for breach of contract, seeking
monetary damages and injunctive relief. The parties have discussed
settlement of such litigation on a sporadic basis. Perfect Look's
minimum purchase obligations under the contract are guaranteed by a
principal of Perfect Look, which guarantee is secured by a $150,000 cash
escrow. Revenues from lease, license and service contracts and Accounts
Receivable for the three months ended and as at March 31, 1996 include
recognition of $18,000 of amounts held in the escrow to which the
Company believes it is entitled. There can be no assurances that the
Company will actually receive the amount held in escrow to which it
believes it is entitled, that any settlement will be entered into or
that if it is that the Company will receive additional revenue from
Perfect Look in the future, that the Company will be successful in its
litigation against Perfect Look if no settlement is reached, or that
Perfect Look will not bring litigation against the Company in respect of
Perfect Look's alleged claims against the Company.
Related Party Transactions - Ms. MacFarlane's employment agreement
entitles her to receive a bonus payment of 33% of the first million of
the Company's net recovery from the Avon lawsuit over $2,000,000. In
connection with the Avon Settlement and her employment agreement, Ms.
MacFarlane is to receive $361,200, of which $98,800 has been paid. The
remaining $262,400 is currently payable and is due with interest of 10%
per annum. In addition, Ms. MacFarlane is due $12,100 for unpaid salary
which is currently payable without interest. Royalties and notes payable
to related party also include unpaid royalties of $67,200 incurred
through December 31, 1990.
On April 10, 1995 the Company hired Arthur Guiry, its new president, at
an annual salary of $200,000 through April 10, 2000. In addition, Mr.
Guiry received an aggregate of 200,000 incentive stock and non-qualified
options at an exercise price of $3.375 expiring April 10, 2000. The
options vest at the rate of 66,666 per year commencing April 10, 1996
and may not be exercisable in whole or in part until April 10, 1996. The
shares underlying such options are subject to a two-year lockup which
expires January 6, 1997.
On August 21, 1995 the Company entered into employment contracts with
two new engineering employees for salaries aggregating $130,000
annually, through August 21, 1998; the Company has agreed to deposit in
escrow an aggregate of $150,000 to secure its payment obligations for
the second and third years under one such agreement.
Note 3 -- Subsequent Events:
1996 Debenture Financing - On April 2, 1996, the Company received $2.5
million gross proceeds (before deduction of transaction costs including
$325,000 of finder's fees and expenses) from the sale of its 3%
convertible debentures due April 1, 1998 ("Debentures"). The sale was
made to foreign investors pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended. The Company
could receive, at its option exercisable at any time on or prior to June
7, 1996, up to an additional $2.5 million gross proceeds from the sale
of
7
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
an additional $2.5 million Debentures (before deduction of comparable
costs, fees and expenses) pursuant to this transaction. The Company has
filed a registration statement covering the shares issuable upon
conversion of the Debentures, which registration statement was declared
effective on May 6, 1996.
The Debentures are convertible in $250,000 increments into Common Stock
at any time prior to April 1, 1998. The conversion price per share is
equal to 80% of the average of the closing bid prices of the Common
Stock as reported by NASDAQ over the five consecutive trading days
ending on the trading day immediately preceding the date the Company
receives the Debenture for conversion provided, (i) the conversion price
per share with respect to the shares issuable upon conversion of the
first $2.5 million of Debentures will not exceed $9.00 per share and
(ii) the conversion price per share with respect to the shares issuable
upon conversion of the second $2.5 million of Debentures, if any, will
not exceed $12.275 per share (pursuant to a formula which set the price
as the greater of $9.00 or the average of the closing bid prices of the
Common Stock as reported by NASDAQ over the five consecutive trading
days ending immediately prior to the effective date of the Registration
Statement). If the holders of the Debentures have not effected
conversion thereof into Common Stock by September 30, 1996, the Company
can force conversion on notice to the holders thereof and thereafter the
Debentures will be void and reflect only the right to receive such
Common Stock upon conversion.
An "Event of Default" under the Debentures is defined as (i) default in
the payment of principal or interest on the Debentures not cured for
five business days, (ii) material misrepresentations in connection with
the Debentures and the related Subscription Agreement, (iii) material
breach of the Company's obligations under the Debentures and/or
Subscription Agreement which remain uncured for five business days
following notice thereof, (iv) the Company shall make an assignment for
the benefit of creditors or the Company shall apply for or consent to
the appointment of a trustee or liquidator or a trustee or liquidator
shall be appointed and not discharged in 60 days, (v) the Company shall
initiate bankruptcy, reorganization, liquidation or insolvency
proceedings (or such proceeding brought against the Company is not
dismissed in 60 days), (vi) the Common Stock shall be delisted by or
suspended from trading on NASDAQ, and not relisted or restored to
trading within 15 days, (vii) the Company shall default on the payment
of any material indebtedness for borrowed money beyond any applicable
grace period, (viii) a judgment in excess of $100,000 is rendered
against the Company and not dismissed, bonded, stayed or discharged
within 30 days or (ix) the Company shall be a party to a merger or
consolidation in which it is not the surviving party or shall dispose of
all or substantially all of its assets or redeem more than a de minimus
amount of its outstanding shares of capital stock.
Upon an Event of Default, the holders of the Debentures may demand
immediate payment thereof in an amount equal to twice the principal
amount of the Debentures purchased by the holder, together with accrued
and unpaid interest thereon. In the event the Company becomes obligated
to effect such payment following an Event of Default, the Company will
not have sufficient funds to make such payment, and if it is unable to
raise such funds, will be forced to cease operations and seek protection
from its liabilities under applicable bankruptcy laws.
The Company received on April 4, 1996 a $176,681 gain on account of
"short swing" profits under Section 16 of the Securities Exchange Act of
1934. This gain is in addition to $83,700 received by the Company during
the three months ended March 31, 1996 under the same "short swing"
profit rules. In April and May 1996, the Company received an additional
$898,765 from the exercise of public Warrants and $576,000 from the
exercise of 96,000 underwriters' unit purchase options granted to the
underwriter of the IPO.
Item 2. Management's Discussion and Analysis
The following is intended to update the information contained in the
Company's Form 10-KSB for the year ended December 31, 1995 and presumes that
readers have access to, and will have read, Management's Discussion and Analysis
contained in Form 10-KSB for the year ended December 31, 1995.
Overview
8
<PAGE>
Since inception, the Company has been principally engaged in the research
and development of the Intellectual Properties and the Colormate II System for
the application of scientific color measurement principles to the classification
of human skin and the classification and color-oriented organization of various
color sensitive consumer products such as cosmetics, hair color, hosiery,
fashion, print and textiles. The Company has also been engaged in test marketing
the Intellectual Properties, Colormate II System and Products in the beauty aid
and fashion industries, and marketing them in the cosmetics industry, and, in
cooperation with Mt. Sinai Hospital, New York, New York, has conducted research
and clinical tests of the Company's technologies for the detection and
monitoring of infant jaundice (the "Bilirubin Project").
In 1995, the Company commenced implementation of its long-range plans to
exploit potential medical applications for its technology. In this regard, the
Company hired a new president, retained consultants and counsel in connection
with the preparation of FDA applications, and continued work on the mass
manufacture prototype for such medical applications.
The Company has incurred significant losses from operations since 1990 and
until the summer of 1994 was involved in significant litigation. The Company has
incurred research and development and marketing expenses as well as significant
operating losses and, prior to consummation of its initial public offering (the
"IPO") in February 1993 discussed below, had negative shareholders' equity. The
Company has not achieved significant operating revenues since the conclusion of
the Avon Project. The Company has owned Colormate II System Units since June
1991 which ultimate recoverability depends on the Company's future marketing
success. See Note 1 of Notes to Consolidated Financial Statements.
The Company has financed its operations through (i) private placements of
its securities, which generated an aggregate of $1,167,500 (including $620,400
from Darby Simpson Macfarlane) from 1988 through 1992 (excluding $775,000 in a
bridge financing effected in September and October 1992 (the "Bridge Financing")
which was repaid with proceeds of the IPO), (ii) collaborative research and
development arrangements with licensees, (iii) cash receipts from lease and
licensing agreements, which generated in the aggregate $8,386,200 from inception
through December 31, 1992, including $6,944,200 in the period from January 1,
1988 to December 31, 1992 (primarily attributable to the Avon Project), (iv)
loans from private investors and certain shareholders which aggregated $549,000
in 1991 and 1992 (excluding the Bridge Financing), (v) the IPO, (vi) the 1995
Private Placement discussed below (which has generated gross proceeds of
$4,500,000, and net proceeds of $3,729,800) and (vii) the 1996 Debenture
Offering described below. During the first quarter of 1996, the Company received
an aggregate of $514,625 from exercise of its publicly traded Warrants and other
warrants and $182,500 from the exercise of stock options. In April and May 1996,
the Company received an additional $898,765 from the exercise of public Warrants
and $576,000 from the exercise of 96,000 underwriters' unit purchase options
granted to the underwriter of the IPO.
In February 1993, the Company completed the IPO consisting of 1,150,000
units, each unit consisting of one share of common stock, par value $.001 (the
"Common Stock"), and one redeemable Common Stock purchase warrant ("Warrant"),
each Warrant entitling the holder thereof to purchase one share of Common Stock
for $5.00 per share. The Company received aggregate gross proceeds of $5,750,000
and aggregate net cash proceeds of approximately $4,475,800 from the IPO. Such
net proceeds have been applied in full by the Company on marketing, licensing
and sales activities, including those through beauty salons, to acquire
inventory, to hire sales representatives and retain marketing consultants and to
commence other related operations.
From October 1994 to June 1995, the Company effected a private placement
offering (the "1995 Private Placement") of 1,800,000 shares of its Common Stock.
The Common Stock was sold at a price of $2.50 per share. The Company issued to
the placement agent warrants to purchase an additional 1,800,000 shares at an
exercise price of $2.50 per share. A registration statement covering the shares
sold in the 1995 Private Placement and such warrant shares was declared
effective on May 6, 1996. See "Liquidity and Capital Resources" below for a
discussion of the use of proceeds from the 1995 Private Placement.
On April 2, 1996, the Company received $2.5 million gross proceeds (before
deduction of transaction costs including $325,000 of finder's fees and expenses)
from the sale of its 3% convertible debentures due April 1, 1998 ("Debentures")
(the "1996 Debenture Offering"). The sale was made to foreign investors pursuant
to an exemption from the registration requirements of the Securities Act of
1933, as amended. The Company could receive, at its option (exercisable at any
time on or prior to June 7, 1996), up to an additional $2.5 million gross
proceeds from the sale of an additional $2.5 million Debentures (before
deduction of comparable costs, fees and expenses). The registration statement
("Registration Statement") covering the shares issuable upon conversion of the
Debentures was declared effective on May 6, 1996.
The Debentures are convertible in $250,000 increments into Common Stock at
any time prior to April 1, 1998. The conversion price per share is equal to 80%
of the average of the closing bid prices of the Common Stock as reported by
NASDAQ over the five consecutive trading days ending on the trading day
immediately preceding the date the Company
9
<PAGE>
receives the Debenture for conversion provided, however, that (i) the conversion
price per share with respect to the shares issuable upon conversion of the first
$2.5 million of Debentures will not exceed $9.00 per share and (ii) the
conversion price per share with respect to the shares issuable upon conversion
of the second $2.5 million of Debentures, if any, will not exceed $12.275 per
share (pursuant to a formula which set the price as the greater of $9.00 or the
average of the closing bid prices of the Common Stock as reported by NASDAQ over
the five consecutive trading days ending immediately prior to the effective date
of the Registration Statement). If the holders of the Debentures have not
effected conversion thereof into Common Stock by September 30, 1996, the Company
can force conversion on notice to the holders thereof and thereafter the
Debentures will be void and reflect only the right to receive such Common Stock
upon conversion.
An "Event of Default" under the Debentures is defined as (i) default in the
payment of principal or interest on the Debentures uncured for five business
days, (ii) material misrepresentations in connection with the Debentures and the
related Subscription Agreement, (iii) material breach of the Company's
obligations under the Debentures and/or Subscription Agreement which remain
uncured for five business days following notice thereof, (iv) the Company shall
make an assignment for the benefit of creditors or the Company shall apply for
or consent to the appointment of a trustee or liquidator, or a trustee or
liquidator shall be appointed and not discharged within 60 days, (v) the Company
shall initiate bankruptcy, reorganization, liquidation or insolvency proceedings
(or such proceeding brought against the Company is not dismissed within 60
days), (vi) the Common Stock shall be delisted by or suspended from trading on
NASDAQ, and not relisted or restored to trading within 15 days, (vii) the
Company shall default on the payment of any material indebtedness for borrowed
money beyond any applicable grace period, (viii) a judgment in excess of
$100,000 is rendered against the Company and not dismissed, bonded, stayed or
discharged within 30 days, or (x) the Company shall be a party to a merger or
consolidation in which it is not the surviving party or shall dispose of all or
substantially all of its assets or redeem more than a de minimus amount of its
outstanding shares of capital stock.
Upon an Event of Default, the holders of the Debentures may demand
immediate payment thereof in an amount equal to twice the principal amount of
the Debentures purchased by the holder, together with accrued and unpaid
interest thereon. In the event the Company becomes obligated to effect such
payment following an Event of Default, the Company will not have sufficient
funds to make such payment, and if it is unable to raise such funds, will be
forced to cease operations and seek protection from its liabilities under
applicable bankruptcy laws.
Substantially all of the Company's revenues in 1988, 1989 and 1990 were
derived under the Avon Agreement. The Company's total revenues decreased from
$963,700 to $480,000 to $12,600 in the fiscal years 1989, 1990 and 1991,
respectively. This decrease is primarily attributable to the cessation of
licensing and consulting fees and of orders for related swatch packs and
Chromaticity Studies in 1990 following commencement of the Avon litigation.
Since 1990 limited revenues have been derived from licenses, leases,
service contracts and Product sales to several beauty-related businesses,
testing and laboratory fees from potential licensees evaluating the Company's
technology, and from an exclusive licensing and lease contract with IMS
Cosmetics Inc. In fiscal year 1995 and for the quarter ended March 31, 1996, the
Company generated approximately 17% and 23%, respectively, of its revenues from
IMS. From December 31, 1990 until the IPO, the Company had been primarily
engaged in (a) pursuing the Company's litigation against Avon, (b) developing
and testing further applications of the Intellectual Properties and Colormate II
Systems, such as the clinical research studies for medical applications, and (c)
obtaining additional financing to support marketing of the Company's
Intellectual Properties, systems, Products and related services. In 1991, during
the Company's pursuit of the Avon litigation, the Company negotiated the return
from Avon of 1,947 of the 2,000 Colormate II Systems originally leased to Avon.
The Company's existing Colormate II Systems were mass manufactured for Avon at a
manufacturing cost for parts of $4,600,000 (an average per unit cost for parts
of approximately $2,300) pursuant to the Avon Agreement; of such amount
$3,000,000 was applied to obtaining parts of the nonproprietary components and
$1,600,000 was applied to obtaining parts of the proprietary components of the
Colormate II System Units. However, there can be no assurance the Company will
be able to arrange for the mass manufacture of additional units at such cost,
and manufacture of limited quantities of the Colormate II System would be
significantly more expensive. The Company believes based on discussions with a
supplier of the components of its existing Colormate II System and published
price lists that the components of the Colormate II System can be purchased in
quantities of 1,000 or more at a significant discount to the individual part
price currently quoted by the suppliers, although there can be no assurance the
Company will be able to obtain such terms or order in such quantities.
The Company's ability to generate revenues in the future will depend on its
success in marketing its Intellectual Properties, the related Chromaticity Study
capabilities, the Colormate II System and its Products. If such marketing is not
successful in the future, the principal effect may be a substantial write-down
of the book value of the Colormate II System Units and a substantial impairment
of the Company's capital resources and ability to obtain any future financing,
which would result in a substantial diminution in the value of an investment in
the Company. There can be no assurance the Company
10
<PAGE>
will be able to timely place such units or identify alternative markets. See
Notes 1 and 2 of Notes to Financial Statements.
Results of Operations
The Company incurred net losses of $862,600 and $490,300 for the
three-month periods ended March 31, 1996 and 1995 respectively, as revenues
received have not been significant relative to the Company's expenses incurred
in implementing its business plan. The increase in such losses in the 1996
period as compared to the 1995 period is primarily attributable to the increase
in costs and expenses regarding compensation of officers and employees,
compensation of consultants for research and development activities, patent
applications, legal fees (relating to the Company's financing activities and a
proposed acquisition transaction) and to the establishment of its Spokane,
Washington engineering office. These expense increases are primarily
attributable to the Company commencing implementation of its long range business
plan to seek commercial applications of its intellectual properties and
technologies in the medical field.
The Company estimates that research and development expenses (excluding
compensation expenses for officers, employees and long term consultants) for
fiscal 1996 will approximate $600,000 although there can be no assurance that
such expenses will not exceed that amount. Of such amount, approximately
$100,000 will be applied to completing the mass manufacture housing prototype
for the medical application of the Company's technology in the detection and
monitoring of infant jaundice and $200,000 will be applied to developing a
smaller prototype version for such medical application, approximately $100,000
will be applied to completing the hand-held, less expensive version of the
Colormate II system, $100,000 will be applied to fabricate molds for each of the
foregoing prototypes, and $100,000 will be applied to the Company's ongoing
research and development efforts. There can be no assurance that such amounts
will be sufficient to accomplish completion of such projects.
A decrease in the Company's revenue from lease, license and service
contracts, the sale of cosmetics and swatch packs and laboratory fees also
contributed to the increase in the 1996 net loss as compared to the 1995 net
loss. Revenues from the sale of the Company's products has decreased
significantly during the Company's attempt to transition its business strategy
from selling its Products directly through commissioned sales representatives to
selling its Products through third party distributors (which third party
distribution has not yet effectively commenced), and as the Company has begun
implementation of its long range business plan for medical applications of its
technologies. The Company has also conducted and continues to conduct market
studies and pilot tests (and incur related additional expenses) in connection
with the Company's marketing efforts. The Company believes that sales in the
1996 period were also adversely affected by ongoing delays in manufacturing
certain color shades of the Company's new line of cosmetic products for its
Colormate II system (which delays were attributable to finalizing color
formulations). The Company anticipates the new cosmetics will be ready to ship
in the fourth quarter of 1996. In the quarter ended March 31, 1996, revenues
from lease, license and service contracts includes $18,000 recognized from
amounts held in escrow for the Company's benefit under its arrangements with
Perfect Look Distribution, Ltd. Approximately 31% and 33% of the Company's
revenues in fiscal 1995 and for the first quarter of 1996 were attributable to
recognition of such escrow funds. There can be no assurance that the Company
will actually receive any of the funds held in escrow. See Note 2 of notes to
Financial Statements for a discussion of the Company's litigation with Perfect
Look.
The Company receives payments from licensees, distributors or other sources
at various times during the year. Accordingly, these payments have had, and
payments that may be received in the future will have, a significant impact on
quarter-to-quarter comparisons inasmuch as the Company has not developed stable
sources of repeat revenues.
The Company anticipates that it will continue to incur substantial and
increasing net losses for the foreseeable future as increased expenses are
incurred in implementing its long-range business plan for medical applications
of its technologies and as revenues from the Company's existing activities in
the cosmetics, beauty aid and fashion areas are anticipated to continue to be
insignificant relative to its anticipated expenses in the foreseeable future.
Liquidity and Capital Resources
Assets were flat in the first quarter of 1996 as compared to fiscal 1995.
Current liabilities increased by $97,000 in the first quarter of 1996 compared
to fiscal 1995, primarily attributable to increased accounts payable to
attorneys and accountants in connection with the Company's financing activities
and consultants' compensation for research and development.
As indicated in the Company's Statements of Cash Flows, the Company
continued to experience significant negative net
11
<PAGE>
cash flows from operating and investing activities in the quarter ended March
31, 1996. The 1996 increase in cash outflows from operating activities is
primarily attributable to the increase in the Company's net loss. Cash flows
from financing activities during the quarter ended March 31, 1996 principally
represent the receipt of proceeds from the exercise of Warrants and certain of
the Company's outstanding options and the proceeds of "short swing" profits paid
to the Company in accordance with the Securities Exchange Act of 1934; cash flow
from financing activities in the 1995 period primarily reflects the 1995 Private
Placement proceeds. In addition, in April 1996 the Company received an
additional $898,765 from the exercise of warrants, and on May 13, 1996 the
Company received $576,000 from the issuance of 96,000 Units (each Unit
consisting of one share of Common Stock and one Warrant to purchase Common Stock
at an exercise price of $5.00 per share) pursuant to the exercise of
underwriters unit purchase options issued in the IPO.
The Company has applied a substantial portion of the proceeds of the 1995
Private Placement to begin implementation of its long-range business plan for
commercialization of its technologies for medical applications in diagnosing
certain diseases. In this regard, the Company has hired FDA and governmental
regulatory consultants (in addition to legal counsel) to assist in obtaining
hospital and regulatory clearances for such medical applications and is
currently compiling its applications for FDA clearance and foreign regulatory
approvals of commercial use of its technology for the diagnosis and monitoring
of Bilirubin disease.
To date, the net proceeds of the 1995 Private Placement have been or are
expected to be applied as follows:
Net Proceeds $3,729,800
Repayment of Related Party Debt(1) 262,400
Placement Agent Consulting Fees(2) 150,000
Demand Registration Expenses(3) 30,000
Development of Medical Applications
and Prototypes; Working Capital(4) 3,260,200
- - -----------------
(1) Reflects remaining payment of a promissory note in the original principal
amount of $361,200 issued to Darby Macfarlane, the Company's chief
financial officer and principal stockholder, in respect of the settlement
of the Avon Litigation, pursuant to the terms of her employment agreement.
Of such amount, $98,800 was paid in 1995. The remaining $262,400 is
currently payable and accrues interest at the rate of 10% per annum; the
total amount is reflected as a current liability on the Company's
financial statements.
(2) Pursuant to a three year consulting agreement, $62,500 of which has
already been applied.
(3) These expenses relate to the demand registration rights granted to
investors in the 1995 Private Placement, and include estimated legal,
accounting, SEC and Blue Sky filing fees, printing and miscellaneous
expenses.
(4) Proceeds applied to development of mass manufacture prototype for medical
applications and development of mass manufacture prototype for hand-held
Colormate II System Unit are not expected to exceed the original $250,000
estimate, due to certain cost savings anticipated to be provided by the
Company's own research and development facility, rather than the use of
outside consultants. Application of proceeds for salaries of new personnel
including a new president and governmental regulatory consultants in
connection with possible medical applications, salespersons and support
staff have been $500,000. $200,000 of proceeds have been applied towards
marketing expenses. Any proceeds remaining in excess of such uses have
been and/or will be used for working capital, additional prototype
research and development and personnel, and to fund ongoing operations.
Management believes that if its proposed marketing plans for
non-medical applications of its technology are successful, then it will generate
revenues from fees from the licensing of the Intellectual Properties and leasing
of the Colormate II System Units, sales of swatch packs, consulting fees, and
sales of cosmetics, although there can be no prediction or assurance as to which
or any of these potential revenue sources will be successful. Since consummation
of the IPO, the Company has commenced expanded marketing of its Intellectual
Properties, Products and Colormate II Systems in the beauty aid industry; but to
date immaterial revenues from such marketing have been realized. In 1995 such
licensing, leasing and sales yielded an immaterial level of sales revenue,
primarily because the Company devoted its resources primarily to the Bilirubin
Project.
In August 1995, the Company established a research and development
facility in Spokane, Washington. This office is staffed, in addition to support
personnel, by two engineers who are former principals of R.B.H. Electronics, one
of the companies which originally engineered and manufactured the Company's
original Colormate II System Units. These engineers are engaged in developing
the Company's rehousing of existing medical systems and mass manufacture
prototypes for medical applications and for a less expensive Colormate II System
Unit, as well as servicing the existing Colormate II System Units. The Company
anticipates that initial penetration of the medical marketplace will be
accomplished through the use of specialized distributors, rather than a direct
sales force.
Without giving effect to the proceeds of the 1996 Debenture Offering,
Management expects the Company will have sufficient
12
<PAGE>
liquidity for at least one year, even if no revenues from operations are
generated. If the Company is able to profitably market its Intellectual
Properties, Colormate II System and Products, the Company would use any cash
flow obtained from operations, and may seek additional debt or equity financing,
to further support and expand its operations. There can be no assurance that the
Company will not require additional funding. If the Company has not been able to
attract additional future financing at such point in time and/or successfully
market its products and technologies, it may have to cease operations.
The Company does not anticipate that the principal amount of the
Debentures or interest thereon will have any material adverse impact on its
financial condition, inasmuch as the Company expects, pursuant to the terms of
the transaction, that such Debentures (and interest) will be converted to Common
Stock prior to the maturity date of the Debentures. However, upon an Event of
Default under the Debentures (see "Overview" for a list of such Events of
Default) the holders thereof may demand immediate payment in an amount equal to
twice the principal amount of the Debentures purchased by such holder, together
with accrued and unpaid interest thereon. In the event the Company becomes
obligated to effect such payment following an Event of Default, the Company will
not have sufficient funds to make such payment, and if it is unable to raise
such funds will be forced to cease operations and seek protection from its
liabilities under applicable bankruptcy laws.
13
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Litigation -- The Company entered into a distribution agreement on May
6, 1994 with Perfect Look Distributors, Ltd. relating to leasing the
Company's Colormate II System units and distributing the Company's
Products in the United Kingdom. On January 10, 1995, the Company sued
Perfect Look Distributors, Ltd. and two of its principals (collectively
"Perfect Look") in New York State Supreme Court for breach of contract,
seeking monetary damages and injunctive relief. The parties have
discussed settlement of such litigation on a sporadic basis. There can
be no assurances any settlement will be entered into or that if a
settlement is reached that the Company will receive additional revenue
from Perfect Look in the future, that the Company will be successful in
its litigation against Perfect Look if no settlement is reached, or
that Perfect Look will not bring litigation against the Company in
respect of Perfect Look's alleged claims against the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) 15 - Letter on unaudited interim financial information
(b) Reports on Form 8-K The Company's Current Reports on Form 8-K dated
March 22, 1996, April 9, 1996 and May 14, 1996 heretofore filed by the Company
with the Commission, are incorporated by reference in this Form 10-QSB.
14
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Page
----------- -------- ----
15 Letter on Unaudited Interim Financial Information
27 Financial Data Schedule
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
Date: May 15, 1996 /s/ Darby S. Macfarlane
-----------------------
Darby S. Macfarlane
Chief Executive Officer
Date: May 15, 1996 /s/ Leslie Foglesong
-----------------------
Leslie Foglesong
Treasurer and Chief Financial and
Principal Accounting Officer
16
<PAGE>
Exhibit No. 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CHROMATICS COLOR
SCIENCES INTERNATIONAL, INC.
We have reviewed the consolidated balance sheet of Chromatics Color Sciences
International, Inc. and subsidiary as of March 31, 1996 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the three-month periods ended March 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the year then ended, and in our report dated February 15,
1996, we expressed an unqualified opinion on those consolidated financial
statements, indicating that the financial statements were prepared on a going
concern basis that might not be appropriate due to significant operating losses.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 1995, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
WISS & COMPANY, LLP
Livingston, New Jersey
April 30, 1996
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,741,700
<SECURITIES> 0
<RECEIVABLES> 366,600
<ALLOWANCES> (17,900)
<INVENTORY> 292,000
<CURRENT-ASSETS> 2,524,600
<PP&E> 1,014,700
<DEPRECIATION> (119,900)
<TOTAL-ASSETS> 3,504,100
<CURRENT-LIABILITIES> 686,800
<BONDS> 0
13,800
0
<COMMON> 4,900
<OTHER-SE> 2,789,700
<TOTAL-LIABILITY-AND-EQUITY> 3,504,100
<SALES> 100
<TOTAL-REVENUES> 54,600
<CGS> 0
<TOTAL-COSTS> 0<F2>
<OTHER-EXPENSES> 910,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,000
<INCOME-PRETAX> (862,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (862,600)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0<F1>
<FN>
<F1>
Effect would be antidilutive
<F2>
Amounts are not material
</TABLE>
