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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1999
REGISTRATION NO. 333-82071
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
NEW YORK 13-3253392
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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5 EAST 80TH STREET
NEW YORK, NY 10021
(212) 717-6544
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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WITH A COPY TO:
DARBY S. MACFARLANE JEFFREY E. LAGUEUX, ESQ.
CHAIRPERSON OF THE BOARD PATTERSON, BELKNAP, WEBB &
AND TYLER LLP
CHIEF EXECUTIVE OFFICER 1133 AVENUE OF THE
5 EAST 80TH STREET AMERICAS
NEW YORK, NY 10021 NEW YORK, NY 10036-6710
(212) 717-6544 (212) 336-2000
(ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE 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 being 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. / /
If this form is filed to register additional securities pursuant to
Rule 462(b) under the Securities Act of 1933, please check the following box and
list the Securities Act of 1933 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 of 1933, check the following box and list
the Securities Act of 1933 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. / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 2,265,403 shares $8.4375 $19,114,337.81 $7,603.06
</TABLE>
(1) Represents the total shares of common stock (i) issuable upon conversion of
14% senior convertible debentures issued by Registrant in the principal
amount of $5 million on April 15, 1999 (1,000,000 shares), plus all interest
accrued thereon at maturity on April 15, 2002 (420,000 shares), at a
conversion price of $5.00; (ii) issuable upon conversion of 40,000 shares of
convertible preferred stock issued by Registrant for aggregate proceeds of
$4 million on June 15, 1999 (574,713 shares); and (iii) issuable upon the
exercise of 270,690 warrants issued by Registrant on June 15, 1999 at an
exercise price of $7.92 per share.
(2) Estimated solely for the purpose of calculating the registration fee. Such
estimates have been calculated in accordance with Rule 457(c) under the
Securities Act of 1933 and are based upon the average of the high and low
prices per share of the Registrant's common stock on the Nasdaq SmallCap
Market on June 28, 1999.
(3) Paid on June 30, 1999.
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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.
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The information contained in this prospectus is not complete and may be changed.
These securities may not be sold until the Registration Statement filed with the
Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any State where the offer or
sale is not permitted.
PROSPECTUS
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
2,265,403 SHARES OF COMMON STOCK
The selling stockholders named in this prospectus are offering and selling
shares of our common stock. These shares were acquired by the selling
stockholders upon the exercise of convertible debt securities, convertible
preferred stock and warrants sold by us to the selling stockholders in private
financings.
The selling stockholders may sell the shares of common stock described in this
prospectus in a number of different ways. The prices at which the selling
stockholders may sell the shares of common stock will be determined by
prevailing market prices for the shares or by negotiated transactions. We will
not receive any of the proceeds from the sale of shares, but we will receive the
exercise price of the warrants.
Our common stock is listed on the Nasdaq SmallCap Market under the symbol
"CCSI." On December 28, 1999 the closing sales price of our common stock on the
Nasdaq SmallCap Market was $6.875.
YOU SHOULD READ THE DESCRIPTION OF RISKS UNDER THE CAPTION "RISK FACTORS"
BEGINNING ON PAGE 4 BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED BY THIS
PROSPECTUS.
The shares offered or sold under this prospectus have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is December 29, 1999.
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SUMMARY OF THE OFFERING
We are engaged in the business of researching, developing and
commercializing intellectual property rights, technology and instrumentation we
have developed in the field of color science. Color science involves the
objective, standardized analysis, description and measurement by instrument to a
laboratory standard of accuracy of the colors composing the visual color
spectrum and their related physical properties in relation to each other.
We have incorporated some of these intellectual property rights, technology
and instrumentation into a proprietary color measurement system and software
marketed for various applications known as the ColorMate(Registered) System. We
have developed our intellectual property and the ColorMate(Registered) System
for:
o the color measurement to a laboratory standard of accuracy and
classification of human tissue, fluid, hair and/or teeth color,
o the color coordination of these human skin, tissue, fluid, hair and/or
teeth color classifications in relation to products.
o the color measurement to a laboratory standard of accuracy,
classification and organization based on color of various
color-sensitive consumer products such as cosmetics, hair coloring,
hosiery, clothing, tooth enamel, paint and textiles (chromaticity
studies),
o the color measurement to a laboratory standard of accuracy to monitor
infant jaundice,
o the color measurement in detecting and monitoring certain other diseases
which we believe can be diagnosed or monitored by the coloration of
human skin, tissue and fluids (although these other medical uses would
require extensive clinical testing as well as FDA and foreign market
clearances or approvals, and there is no assurance that such clearances
or approvals would be granted) and
o the color coordination of products in relation to other products.
In July 1997 we received clearance from the U.S. Food and Drug
Administration for commercial marketing of our ColorMate(Registered) System
device for the non-invasive monitoring of newborn bilirubinemia (infant
jaundice) by healthcare professionals in the hospital, institutional,
pediatricians' office or home setting and in June 1999 we entered into an
agreement for the exclusive distribution of this product in the hospital,
pediatricians' office and home healthcare markets in the United States with
Datex-Ohmeda, Inc. and its Ohmeda Medical Division. The current procedure for
the initial screening for infant jaundice is the visual observation of the
yellowing of the skin by professional care providers, which is a subjective
determination prone to errors due to different skin colors. If the initial
clinical assessment suggests the possibility of significant elevated bilirubin
levels, the current procedure requires that a blood sample be obtained from the
infant by lancing the infant. We believe that a non-invasive instrument that
monitors infant jaundice represents a significant improvement in patient care.
The ColorMate(Registered) TLc-BiliTest(Registered) System monitors the
incremental change of the yellow content of the skin color in infants of all
races by non-invasively measuring the color of the skin of the newborn. Color
measurements are obtained by placing the device on different physical sites of
the newborn for five to ten seconds. Accuracy of the color measurements is
ensured by use of the TLc-Lensette(Trademark) calibration standard used prior to
each baby's measurement.
We are currently in the early stages of the commercialization of our
ColorMate(Registered) TLc-BiliTest(Registered) System for the monitoring of
infant jaundice. We will need to generate substantial revenues from the sale of
our products and the financial markets in order to develop other medical and
non-medical applications for our intellectual property rights, technology and
instrumentation and to fund our continuing operations. If we are not successful
in generating adequate revenues, we may be forced to curtail our operations and
seek protection from our creditors under applicable bankruptcy laws.
In order to finance our activities, we recently completed two private
placements of securities with the selling stockholders. In April 1999 we sold
$5 million in principal amount of 14% senior convertible debentures and in June
1999 we sold 40,000 shares of convertible preferred stock and warrants to
purchase 220,690 shares of our common stock for aggregate proceeds of
$4 million. All of these securities are
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convertible into shares of our common stock at the option of their holders at
specified prices ($5 in the case of the senior convertible debentures, $6.96 in
the case of the convertible preferred stock and $7.92 in the case of the
warrants) and are subject to mandatory conversion if the average trading price
of our common stock equals or exceeds specified prices for ten consecutive
trading days (twenty days in the case of the warrants) ($10.29 in the case of
the senior convertible debentures, $10.88 in the case of the convertible
preferred stock and $16.50 in the case of the warrants). In addition, the
conversion price of the convertible preferred stock is subject to downward
adjustment if we issued additional shares of our common stock at less than $6.96
per share. If not sooner converted, the senior convertible debentures mature on
April 15, 2002, the convertible preferred stock is redeemable at $115 per share
on June 15, 2002 (subject to our option to extend this redemption date to
June 15, 2004) and the warrants expire on June 15, 2004. The shares of common
stock into which these securities are convertible are the subject of this
prospectus.
We were incorporated in New York in March 1984. Our principal executive
offices are located at 5 East 80th Street, New York, New York 10021 and our
telephone number at that address is (212) 717-6544.
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RISK FACTORS
Investing in our common stock is very risky. You should be able to bear a
complete loss of your investment. You should carefully consider the following
factors, in addition to the other information in this prospectus, before
investing in our common stock.
WE HAVE A LIMITED OPERATING HISTORY
We have a limited operating history and have generated insignificant
revenues to date. Although we have recently entered into agreements for the
manufacturing and distributing of our ColorMate(Registered) TLc-
BiliTest(Registered) System, to date we have not produced or sold substantial
quantities of this product. We cannot assure you that this product can be
manufactured in commercial quantities or at an acceptable cost or marketed
successfully. We also cannot assure you that we will be successful in our
efforts to commercialize our ColorMate(Registered) System for other
applications.
WE EXPECT TO CONTINUE TO OPERATE AT A LOSS AND WE MAY NEVER ACHIEVE
PROFITABILITY
We cannot be certain that we will ever achieve and sustain profitability.
To date, we have been engaged in research and development activities and have
not generated any significant revenues from product sales. As of September 30,
1999, we had an accumulated deficit of $30,890,300. We expect that we will
continue to incur operating losses for the current and subsequent fiscal years.
In addition, we will record the following charges in connection with the
$5.0 million debt financing in April 1999 and $4.0 million preferred stock
financing in June 1999.
o The April financing will result in an additional interest charge of
approximately $3.5 million, resulting from a below-market conversion
price of the debt. This amount will be expensed over the
twelve-month period ending April 2000.
o The June financing will result in a deemed dividend charge of
approximately $3.0 million, resulting from a below-market conversion
price of the preferred stock, a redemption premium and warrants
issued in connection with the financing. Of this amount,
$1.2 million was charged in June 1999 and $1.8 million will be
charged over the redemption period.
If we raise the additional $4.0 million in preferred stock financing, as noted
above, there will be a similar deemed dividend charge.
IF WE DO NOT SECURE ADDITIONAL FINANCING WE WILL NOT BE ABLE TO DEVELOP AND
MARKET OUR PRODUCTS
We will require substantial additional funds for our research and product
development programs, for contractual obligations, for operating expenses, to
pursue regulatory approvals and to develop and commercialize other applications
of our ColorMate(Registered) System. Adequate funds for these purposes, whether
through the financial markets or other sources, may not be available when
needed. Additionally, under the terms of our manufacturing agreement we must
provide our manufacturing partner with certain component parts to be assembled
into our ColorMate(Registered) System and our ColorMate(Registered)
TLc-BiliTest(Registered) System. Without the funds to provide these component
parts, our products cannot be manufactured and we will be unable to fulfill our
obligations to our distrtibution partner. Lastly, the terms of the convertible
preferred stock that require a downward adjustment in the conversion price if we
issue shares of common stock at a price of less than $7.25 per share will
increase the cost to us of any subsequent equity financing effected at less than
$7.25 per share. If we fail to make any payment required or if we are otherwise
in default under the manufacturing and distribution agreements relating to our
ColorMate(Registered) System and our ColorMate(Registered)
TLc-BiliTest(Registered) System, the other parties will have the right to
terminate the agreements. Termination of any of these agreements would have a
material adverse effect on our business by rendering us unable to manufacture
and distribute our ColorMate(Registered) System and our ColorMate(Registered)
TLc-BiliTest(Registered) System until replacement agreements were entered into.
WE WILL REQUIRE ADDITIONAL FUNDS IF THE CONVERTIBLE DEBENTURES AND CONVERTIBLE
PREFERRED STOCK ARE NOT CONVERTED PRIOR TO MATURITY
We will be obligated to repay the selling stockholders $7,100,000 in cash
on the April 15, 2002 maturity date of the convertible debentures and $4,600,000
on the June 15, 2002 redemption date of the convertible preferred stock (which
may be postponed at our option until June 15, 2004 subject to the accrual of a
8%
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dividend on the convertible preferred stock after June 15, 2002 which will
increase the total redemption amount to $5,240,000) if the selling stockholders
do not elect to convert the convertible debentures or the convertible preferred
stock into shares of our common stock and we are unable to compel such
conversion pursuant to the mandatory conversion provisions described above
relating to the market price of our common stock. The selling stockholders
generally will not elect to convert the convertible debentures unless the market
price of our common stock exceeds $5.00 per share at the time of conversion.
Similarly, the selling stockholders generally will not elect to convert the
convertible preferred stock unless the market price of our common stock exceeds
$6.96 per share at the time of conversion. In addition, if an event of default
occurs with respect to the convertible debentures prior to the stated maturity
date the selling stockholders may elect to accelerate the maturity of the
convertible debentures with the effect that the principal amount and all accrued
but unpaid interest would become immediately due and payable. We cannot assure
you that we would have sufficient funds available to us to satisfy such
obligations. Failure to satisfy such obligations would have a material adverse
effect on our business and could force us to close our operations and seek
protection from our creditors under applicable bankruptcy laws.
WE DO NOT HAVE MANUFACTURING OR MARKETING CAPABILITIES OF OUR OWN AND DEPEND ON
OTHER PARTIES FOR MANUFACTURING AND MARKETING
We currently do not have the resources to manufacture or market
independently on a commercial scale the ColorMate(Registered) System, the
ColorMate(Registered) TLc-BiliTest(Registered) System or any other products that
we may develop. We rely on our corporate partners to manufacture and to market
our ColorMate(Registered) TLc-BiliTest(Registered) System and will continue to
rely on corporate partners to manufacture and to market our
ColorMate(Registered) System for other applications. The amount and timing of
resources to be devoted to these activities by these other parties may not be
within our control. We cannot assure you that these parties will perform their
obligations as expected or that we will derive any revenue from these
arrangements. We have no experience in manufacturing or marketing any products.
The failure of our corporate partners to perform their obligations relating to
the manufacturing and distributing of our ColorMate(Registered) System or
ColorMate(Registered) TLc-BiliTest(Registered) System would have a material
adverse effect on our business by rendering us unable to manufacture and
distribute our ColorMate(Registered) System and our ColorMate(Registered)
TLc-BiliTest(Registered) System until a replacement arrangement was entered
into.
WE MAY NOT BE SUCCESSFUL IN COMMERCIALIZING OUR COLORMATE(REGISTERED)
TLC-BILITEST(REGISTERED) SYSTEM
Our success in commercializing our ColorMate(Registered)
TLc-BiliTest(Registered) System will be dependent upon its acceptance by
healthcare professionals. Their acceptance will largely depend on our ability to
show them its ability to reduce the need for heelsticks in monitoring infant
jaundice as well as its utility compared to other non-invasive methods that
currently exist or that may be developed in the future by others with respect
to:
o safety,
o effectiveness,
o ease of use and
o price.
We cannot assure that our ColorMate(Registered) TLc-BiliTest(Registered)
System will be competitive with respect to these factors.
WE HAVE NOT YET SUCCESSFULLY COMMERCIALIZED OUR COLORMATE(REGISTERED) SYSTEM FOR
OTHER POTENTIAL MEDICAL APPLICATIONS
Although we have received FDA clearance to commercially market our
ColorMate(Registered) TLc-BiliTest(Registered) System for monitoring infant
jaundice, our clinical and research development programs for other medical
applications of our ColorMate(Registered) System are at a very preliminary
stage. Substantial additional research and development and further clinical
trials will be necessary before commercial versions of any additional proposed
products are submitted for FDA marketing clearance or approval and produced for
other medical applications. We cannot assure you that we will be able to
successfully address the problems that may arise during the development, FDA
review process and commercialization of these other medical applications or that
any of our proposed products for these other medical applications will be
successfully developed, proven
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safe and effective in clinical trials, cleared or approved by the FDA for
marketing or meet applicable regulatory standards and requirements.
WE HAVE NOT YET SUCCESSFULLY COMMERCIALIZED OUR COLORMATE(REGISTERED) SYSTEM FOR
NON-MEDICAL APPLICATIONS
To date, we have not achieved commercial market penetration in any
non-medical industry. In order to commercialize our ColorMate(Registered) System
in connection with non-medical applications we will need to develop additional
marketing skills, incur significant expenses on sales and marketing activities,
hire additional employees and consultants and enter into arrangements with third
party distributors. We cannot assure you that we will be successful in our
efforts to commercialize any of these non-medical applications of our
ColorMate(Registered) System.
EXTENSIVE GOVERNMENTAL REGULATION COULD DELAY, RESTRICT OR PREVENT THE MARKETING
OF OUR PRODUCTS
Governmental regulation may significantly delay the marketing of our
products, prevent marketing of products altogether or impose costly requirements
on our activities. The FDA and comparable foreign regulatory authorities
generally require rigorous pre-clinical testing, clinical trials and government
premarket review and clearance or approval for the type of human medical device
we market or contemplate marketing. Numerous regulations govern, among other
things, the manufacturing, safety, labeling, promotion, storage, record keeping,
reporting and marketing of medical devices. A delay in obtaining or failure to
obtain or maintain regulatory clearances or approvals for any of our products
would have an adverse effect on our business. We cannot predict the adverse
effects that existing or future government regulations may have on our business.
Even though our ColorMate(Registered) TLc-BiliTest(Registered) System
received FDA marketing clearance for monitoring infant jaundice, we may still
face difficulties in manufacturing and marketing this product. A marketed
product and its manufacturer's practices are subject to regulatory review and
the manufacturer's facilities are subject to periodic establishment inspections.
The discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on the product or manufacturer, including
withdrawal of the product from the market. The failure to comply with applicable
regulatory requirements can, among other things, result in:
o fines,
o suspended or withdrawn regulatory approvals,
o refusal to clear or approve pending applications,
o refusal to permit exports or to allow imports from the United
States,
o product recalls,
o seizure of products,
o injunctions,
o operating restrictions and
o criminal prosecutions.
WE MAY BE UNABLE TO DEVELOP POTENTIAL INTERNATIONAL MARKETS AND OBTAIN FOREIGN
REGULATORY APPROVALS
Although we believe that sales of our products to customers outside of the
United States represent a significant potential source of growth we may not be
able to obtain agreements with third party distributors for marketing outside of
the United States. We also cannot be certain that we will be able to maintain
our existing ISO 9001/EN46001 certification or that we will obtain any further
regulatory approvals in other countries. In order to market our products outside
of the United States, we must comply with numerous and varying foreign
regulatory requirements implemented by foreign authorities. The approval
procedure varies among countries and can involve additional testing. The time
required to obtain further foreign clearances or approvals may differ from that
required to obtain FDA clearances or approvals for commercial marketing. The
foreign regulatory approval process includes all of the risks associated with
obtaining FDA clearances or approvals set forth above, and clearance or approval
by the FDA does not ensure clearance or approval by the authorities of any other
country.
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THE MEDICAL COMMUNITY MAY BE RELUCTANT TO ACCEPT OUR TECHNOLOGY
The commercial acceptance of our ColorMate(Registered)
TLc-BiliTest(Registered) System is substantially dependent on its acceptance by
the medical community for the monitoring of infant jaundice. Because the medical
community is relatively slow to adopt new technologies we cannot assure you that
the medical community will perceive a need for, or accept, our
ColorMate(Registered) TLc-BiliTest(Registered) System or be willing to commit
funds to its purchase and use. Widespread acceptance of the
ColorMate(Registered) TLc-BiliTest(Registered) System for monitoring infant
jaundice will require educating the medical community about its advantages,
reliability, cost-effectiveness and utility. In addition, acceptance of the
ColorMate(Registered) TLc-BiliTest(Registered) System may be adversely affected
by competing products which may have more utility, a lower cost or be received
in a better way than our ColorMate(Registered) TLc-BiliTest(Registered) System.
OUR MAIN COMPETITORS GENERALLY HAVE MORE RESOURCES THAN WE HAVE
The medical device industry is characterized by rapid technological
advances, evolving industry standards and technological obsolescence. Our
inability to meet or surpass our competitors' technological advances in this
industry could have a material adverse effect on our business. We have several
competitors in this industry, none of whom we believe to be dominant. We believe
that, in addition to our ColorMate(Registered) TLc-BiliTest(Registered) System
the only other commercially available non-invasive devices for the monitoring of
infant jaundice with FDA marketing clearance in the United States are the
Minolta Jaundice Meter, manufactured by Minolta Co., Ltd. which is distributed
by Air Shields and the SpectRx Bilicheck, manufactured by SpectRx and
Respironics. Both Minolta and Respironics have financial, marketing and other
resources greater than our own. Our competitors in this industry may develop
products which may render our ColorMate(Registered) TLc-BiliTest(Registered)
System obsolete or which have advantages over our ColorMate(Registered)
TLc-BiliTest(Registered) System, such as greater accuracy and precision or
greater acceptance by the medical community.
To the extent that we are able to commercialize our ColorMate(Registered)
System for non-medical applications such as dentistry we will also encounter
competition. In particular, the cosmetics industry and the fashion industry are
particularly sensitive to changing consumer preferences and demands, which are
difficult to predict and beyond our control. Competition in the cosmetics and
dental industries is diverse, but is nevertheless dominated by a number of
large, established, well-known companies having significantly greater financial,
marketing and human resources than we do. These competitors also have an
established presence in the market and manufacturing capabilities. We cannot
assure you that we will be able to compete successfully in these non-medical
markets.
OUR BOARD OF DIRECTORS IS AUTHORIZED TO ISSUE PREFERRED STOCK WITHOUT
STOCKHOLDER AUTHORIZATION WHICH COULD BE USED AS AN ANTI-TAKEOVER DEVICE
Our Board of Directors is authorized to issue from time to time without
stockholder authorization shares of preferred stock. The issuance of preferred
stock could decrease the amount of assets and earnings available for
distribution to our other stockholders. Preferred stockholders could receive
voting rights and rights to payments on liquidation or of dividends or other
rights which are greater than the rights of the holders of our common stock. In
addition, the issuance of preferred stock may make it more difficult for a third
party to acquire, or may discourage a third party from acquiring, voting control
of our stock. This provision could also discourage an unsolicited acquisition
and could make it less likely that stockholders receive a premium for their
shares as a result of any unsolicited acquisition proposal.
OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SIGNIFICANT AMOUNT OF STOCK OF
CHROMATICS AND EXERT CONSIDERABLE CONTROL OVER CHROMATICS
As of December 1, 1999, our directors and executive officers beneficially
owned approximately 18.5% of voting power represented by our outstanding common
and preferred stock. As a result, these stockholders are able to significantly
influence all matters requiring stockholder approval, including the election of
directors and the approval of significant corporate transactions. This
concentration of ownership could also delay or prevent a change in control that
may be favored by other stockholders.
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WE WILL NEED TO HIRE ADDITIONAL PERSONNEL TO MANAGE OUR TRANSITION FROM A
DEVELOPMENT STAGE COMPANY TO AN OPERATING COMPANY
In order to generate and service sales of our medical products we will need
to attract and retain significant additional senior and midlevel personnel
experienced in financial, administrative, marketing, sales and regulatory
matters in the medical industry. We currently only have 41 full-time employees,
of which 20 are medical marketing or regulatory personnel. Our success will
depend in part on our ability to hire, train and retain new and existing
personnel. Competition for qualified personnel is intense and we cannot assure
you that we will be successful in hiring, training or retaining additional
personnel to support our executive, operations, marketing, sales, research and
product development needs and efforts.
WE DEPEND ON THE SERVICES OF KEY PERSONNEL
Our success depends to a significant extent upon the efforts of Darby
Simpson Macfarlane, the Chairperson of our Board of Directors, our Chief
Executive Officer and one of our major stockholders, and David Kenneth
Macfarlane, our Vice President, Research and Development. They are co-inventors
of our ColorMate(Registered) System and possess unique technical knowledge
required in connection with its production. Although we have purchased key-man
life insurance policies in the amounts of $1,000,000 on the lives of each of
Ms. and Mr. Macfarlane, we cannot assure you that the proceeds from such
policies would enable us to retain suitable replacements for them. The loss of
the services of either Ms. Macfarlane or Mr. Macfarlane could adversely affect
our business.
WE ARE A DEFENDANT IN PENDING SECURITIES LITIGATION AND EXPECT TO INCUR
SUBSTANTIAL EXPENSES IN CONNECTION WITH OUR DEFENSE AND COUNTERCLAIMS
We have been named, together with certain of our officers and directors, as
a defendant in three pending legal actions involving allegations that we made
false and misleading statements during the period from July 30, 1997 through
June 8, 1998 regarding:
o the new innovative nature of our ColorMate(Registered)
TLc-BiliTest(Registered) System,
o the market size and revenue potential of our ColorMate(Registered)
TLc-BiliTest(Registered) System and
o the existence and status of negotiations with potential distributors
of our ColorMate(Registered) TLc-BiliTest(Registered) System.
Although we believe that the claims asserted in these suits are without
merit and intend to contest them vigorously, we expect to incur substantial
legal expenses in connection with defending these actions and pursuing our
counterclaims and cannot assure you that the outcome of this litigation will not
have a material adverse effect on our business.
WE FACE THE RISK OF PRODUCT LIABILITY CLAIMS WHICH MAY EXCEED THE SCOPE OR
AMOUNT OF OUR INSURANCE COVERAGE
The manufacture and sale of human medical devices entails significant risk
of product liability claims. In determining the amount of product liability
coverage to obtain we were advised by an insurance broker with knowledge and
experience regarding prevailing insurance practices in the medical device
industry. Although we believe that the amount and scope of coverage obtained is
consistent with prevailing medical device industry practice, we cannot assure
you that our product liability coverage will be adequate to protect us from any
liabilities we might incur in connection with the use or sale of our products.
In addition, we may require increased product liability coverage as additional
products are commercialized. Product liability insurance is expensive and in the
future may not be available on acceptable terms, if at all. A successful product
liability claim or series of claims brought against us in excess of our
insurance coverage could have a material adverse effect on our business and
results of operations. We must indemnify our distribution partner against any
product liability claims brought against it arising out of products developed by
us.
OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO EFFECTIVELY MAINTAIN OUR PATENTS
AND PROPRIETARY RIGHTS RELATING TO OUR COLORMATE(REGISTERED) SYSTEM AND OUR
COLORMATE(REGISTERED) TLC-BILITEST(REGISTERED) SYSTEM, WHICH WE MAY NOT BE ABLE
TO DO
Proprietary technology maintained in our trade secrets and other
proprietary information claimed by our patents is incorporated into the
proprietary software and measurement system used in our ColorMate(Registered)
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System, our ColorMate(Registered) TLc-BiliTest(Registered) System and our
TLc-Lensette(Trademark) calibration standards. Because we are dependent on the
commercialization of these products our success will depend to a significant
degree on our ability to protect our proprietary rights by preserving trade
secrets, to obtain and effectively maintain our patents and to operate without
infringing on the proprietary rights of others. While we are not aware of any
basis for a challenge to our patents or the operation of our business as it
relates to the patents of third parties, we cannot assure you that our existing
patents will not be successfully challenged or circumvented, that we will
otherwise be able to rely on such patents, that such patents will be sufficient
to protect our technologies or that future patents will issue from our pending
patent applications or that any patent will issue on technology arising from
additional research or, if patents do issue, that claims allowed will be
sufficient to protect our technologies. We cannot assure you that our
competitors will not seek to apply for and obtain patents that prevent, limit or
interfere with our ability to make, use and sell our products either in the
United States or in foreign countries. We also cannot assure you that we will
not become subject to patent infringement claims brought by third parties or to
re-examination of previously issued patents or interference proceedings to
determine the priority of inventions.
We also rely on a combination of trade secret and copyright law, employee
and third-party nondisclosure agreements and other protective measures to
protect intellectual property rights pertaining to our products and
technologies. We cannot be certain that these measures will provide protection
of our proprietary information. In addition, the laws of certain foreign
jurisdictions may not protect our intellectual property rights to the same
extent as the laws of the United States.
OUR ASSUMPTIONS REGARDING THE BUSINESS PLAN AND STRATEGY FOR OUR
COLORMATE(REGISTERED) TLC-BILITEST(REGISTERED) SYSTEM MAY PROVE TO BE INACCURATE
Our business plan and strategy for the commercialization of our
ColorMate(Registered) TLc-BiliTest(Registered) System is based upon assumptions
made by our distribution partner in our contract regarding the size of the
infant jaundice monitoring market, our short-term and eventual share of this
market, the price at which we believe we will be able to sell or lease this
product and consumer acceptance of this product. We cannot assure you that these
assumptions will prove to be correct.
OUR STOCK PRICE COULD BE ADVERSELY AFFECTED IF WE WERE DELISTED FROM THE NASDAQ
SMALLCAP MARKET
Our common stock is presently traded on the Nasdaq SmallCap Market. If we
fail to meet the Nasdaq SmallCap Market listing requirements and our common
stock was delisted the market value of our common stock could fall and holders
of common stock would likely find it more difficult to dispose of and to obtain
accurate quotations as to the market value of our common stock. If our common
stock is delisted from the Nasdaq SmallCap Market it could become subject to
rules adopted by the SEC regulating broker-dealer practices in connection with
transactions in "penny stocks." The penny stock rules require a broker-dealer
prior to a transaction in a penny stock not otherwise exempt from the rules to
deliver a standardized risk disclosure document which provides information about
penny stocks and the nature and level of risks in the penny stock market.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to
these penny stock rules. If our common stock becomes subject to the penny stock
rules, you may be unable to readily sell shares of our common stock.
OUR STOCK PRICE MAY BE VOLATILE
The market price of our common stock has historically been volatile as a
result of:
o analyst recommendations,
o announcements of technological innovations or new commercial
products by us or our competitors,
o market conditions relating to the medical device industry,
o sales of substantial amounts of our common stock by existing
stockholders, including short sales,
o adverse publicity related to accusations by short sellers and
o obtaining regulatory clearances in both the U.S. and in foreign
countries.
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A short sale involves the sale of borrowed shares with the expectation that
the market price of the security will decline in the future. If the anticipated
price decline occurs the short seller replaces the borrowed securities with
shares bought in the market at the lower price and realizes a profit equal to
the difference between the price at which the borrowed shares were sold and the
price at which the replacement shares are purchased. From time to time in the
past concentrated periods of short selling of our common stock have created an
imbalance between the number of shares offered to the market for sale and the
willingness of the market to absorb these shares at prevailing price levels
which has resulted in rapid and substantial declines in the market price of our
common stock.
CONVERSION OF THE CONVERTIBLE DEBENTURES AND THE CONVERTIBLE PREFERRED STOCK AND
EXERCISE OF THE RELATED WARRANTS WILL DILUTE THE INTERESTS OF EXISTING
STOCKHOLDERS
The conversion price of the convertible debentures and the convertible
preferred stock issued to the selling stockholders and the exercise price of the
related warrants issued to one of the selling stockholders is expected to be
less than the current market price of our common stock on the date of conversion
or exercise. So long as these securities remain outstanding and unconverted or
unexercised, the terms under which we could obtain additional equity financing
may be adversely affected. To the extent of any conversion or exercise of such
securities, the interests of our existing stockholders will be diluted
proportionately.
COST CONTAINMENT RELATING TO HEALTHCARE REFORM COULD ADVERSELY AFFECT OUR
BUSINESS
Political, economic and regulatory influences are subjecting the healthcare
industry in the United States to fundamental change and are increasing
cost-containment efforts. We anticipate that Congress, state legislatures and
the private sector will continue to review and assess alternative benefits,
controls on healthcare spending through limitations on the growth of private
health insurance premiums and Medicare and Medicaid spending, the creation of
large insurance purchasing groups, price controls on pharmaceuticals and medical
devices and other fundamental changes to the healthcare delivery system. Any
changes of this nature could negatively impact our ultimate profitability. Also,
the trend toward managed healthcare in the United States and the concurrent
growth of organizations like healthcare management organizations, which could
control or significantly influence the purchase of healthcare services and
products, may result in lower prices for our medical product candidates than we
currently expect. We cannot predict what impact the adoption of any federal or
state healthcare reform measures or future private sector reforms may have on
our business.
OUR PRODUCTS MUST BE ACCEPTED FOR REIMBURSEMENT BY THIRD-PARTY PAYORS
Our ability to successfully commercialize our ColorMate(Registered)
TLc-BiliTest(Registered) System and our other medical product candidates will
depend in part on the extent to which appropriate reimbursement codes and
authorized cost reimbursement levels of our products and related treatment are
obtained from governmental authorities, private health insurers and other
organizations, like health maintenance organizations. Third-party payors are
increasingly challenging the prices charged for medical products and services.
American Medical Association CPT codes are generally used to facilitate the
processing of insurance reimbursement claims and to provide a simplified
reporting procedure. However, assignment of a code does not assure that the
insurer will provide reimbursement or that the AMA endorses the medical
procedure at issue. In March 1998, we were assigned AMA CPT Code 82250 for
processing claims for use of the ColorMate(Registered) TLc-BiliTest(Registered)
System. This same code is assigned for the reimbursement of laboratory blood
tests currently used to monitor infant jaundice. Subsequently, the AMA informed
us that CPT Code 84999 ("Unlisted Chemistry Procedure"), not Code 82250, was the
assigned code. However, the AMA indicated that it was reviewing coding in this
area generally. Although we believe that the original code assignment to our
ColorMate(Registered) TLc-BiliTest(Registered) System was correct, we cannot
assure you that our belief will be sustained. Claims for reimbursement under CPT
Code 84999 may not be as readily processed for reimbursement as claims made
under CPT Code 82250.
YEAR 2000 ISSUE RISKS MAY RESULT IN A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
Although we do not presently believe that, with upgrades of existing
software and/or conversion to new software, the year 2000 problem will pose
significant operational problems for our internal computer systems or have a
negative affect on our financial position or results of operations, we are
dependent on third parties for the manufacturing and marketing of our
ColorMate(Registered) TLc-BiliTest(Registered) System and we cannot assure you
that
10
<PAGE>
any year 2000 compliance problems of these third parties will not negatively
affect our financial position or results of operations. If we or any third
parties upon which we rely are unable to address the year 2000 issue in a timely
manner, it could have a materially adverse effect on our financial position and
results of operations. In order to assure that this does not occur, we are in
the process of developing a contingency plan and intend to devote all resources
required to attempt to resolve any significant year 2000 issues in a timely
manner.
WE EXPECT TO ISSUE ADDITIONAL SHARES IN THE FUTURE WHICH WOULD DILUTE THE
OUTSTANDING SHARES
In order to finance the commercialization of our ColorMate(Registered)
TLc-BiliTest(Registered) System and other applications of our
ColorMate(Registered) System, we expect to issue and sell additional shares of
our common stock or securities convertible into our common stock, such as the
securities which we issued to the selling stockholders, in the future. As of
December 1, 1999, a total of 27,132,622 shares of our common stock were
authorized but unissued and unreserved. These shares may be issued in the future
without stockholder approval. The prices at which we sell these securities and
the other terms and provisions related to such securities will depend on
prevailing market conditions and other factors in effect at that time, all of
which are beyond our control. Shares may be issued at prices which are less than
the then-current market price of our common stock and/or at prices which are
less than the prices at which the shares of common stock being offered by the
selling stockholders hereby are sold.
THE TERMS OF THE CONVERTIBLE DEBENTURES AND THE CONVERTIBLE PREFERRED STOCK MAY
ADVERSELY AFFECT THE RIGHTS OF THE COMMON STOCK HOLDERS.
Unless converted the convertible debentures and the convertible preferred
stock will be entitled to priority of payment upon maturity or redemption, as
the case may be, or in the event we are liquidated and dissolved in preference
to any distribution to the holders of our common stock. In addition, for as long
as the shares of convertible preferred stock are outstanding we are prohibited
from issuing any class or series of preferred stock with a priority of payment
superior or equal to the priority of payment of the convertible preferred stock.
RECENT EVENTS
In order to provide the ColorMate(Registered) TLc-BiliTest(Registered)
System to hospitals, the medical community including clinics, pediatricians and
home healthcare providers and physicians and to expedite evaluation of the
product by the medical community we have taken a series of significant steps in
the past 12 months:
o In November 1998, we opened our medical division, supervised by
Sheila Kempf, Vice President Medical Division. Ms. Kempf is a former
Vice President-Marketing of Corometrics, a Marquette Medical Inc.
company, and a former Director of Marketing for sensors and
accessories of Nelcor Puritan Bennet, Inc. and has over 13 years
experience in the medical marketing field. We also hired neonatal
nurse clinical specialists to provide training to hospital staffs
using our ColorMate(Registered) TLc-BiliTest(Registered) System. The
newly-formed medical division provides sales support for the
ColorMate(Registered) TLc-BiliTest(Registered) System delivered to
consumers in the medical community, including hospitals,
pediatricians, clinics and home healthcare agencies, and performs
delivery, training and in-servicing for customers initially
generated by our presentations to the medical community.
o In November 1998, we entered into a manufacturing agreement with an
ISO 9001 certified manufacturer, Nova Biomedical of Waltham,
Massachusetts for the production of our ColorMate(Registered)
TLc-BiliTest(Registered) System and in February 1999 we began making
limited shipments of this product.
o In January 1999, we formed a five-person sales unit to be led by
Dennis A. McClinton, Vice President of Sales. Mr. McClinton has an
18-year background in sales of fetal and neonatal ICU monitoring
products at Marquette Medical Systems and will head a staff that
averages ten years experience in that field. This new unit is
responsible for the initial sales activity for our
ColorMate(Registered) TLc-BiliTest(Registered) System. The
ColorMate(Registered) TLc-BiliTest(Registered) System as currently
marketed by our medical division has a list price of $3,000 to
$6,000 depending on the model and may be leased or used under the
limited time offer for use and evaluation of the system, all with
either purchase of minimum monthly supplies of the
TLc-Lensette(Trademark) calibration standards at $10 per unit, or
minimum monthly charges of $10 per use or under a managed use
program.
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o In January, 1999 we applied for ISO 9001/EN46001 certification and
the right to affix the CE mark to our ColorMate(Registered)
TLc-BiliTest(Registered) System in order to market this product in
the European Union. ISO 9001/EN46001 certification recognizes that
we have established a quality system for the design, development,
manufacturing, servicing and distribution of this product and the CE
mark is a symbol of quality and compliance with applicable European
Union medical device directives. We have received both the ISO
9001/EN46001 certification and the right to affix the CE mark to our
ColorMate(Registered) TLc-BiliTest(Registered) System.
o In June 1999 we entered into an agreement for the exclusive
distribution of the ColorMate(Registered) TLc-BiliTest(Registered)
System in the hospital, pediatricians' offices and home healthcare
markets including clinics related to these markets in the United
States with Datex-Ohmeda, Inc. and its Ohmeda Medical Division. This
agreement provided for a four month transition period before the new
distributor would begin distribution of this product. Revenues will
be generated under this agreement from sales of our
ColorMate(Registered) TLc-BiliTest(Registered) System and our
TLc-Lensette(Trademark) calibration standards directly to
Datex-Ohmeda, Inc., as well as through a percentage of the resale
price received by the distributor for each product.
In order to finance our activities, we recently completed two private
placements of securities. In April 1999, we completed the private placement of
$5 million in principal amount of 14% senior convertible debentures to certain
of the selling stockholders for aggregate proceeds of $5 million. The 14% senior
convertible debentures:
o accrue interest at the annual rate of 14%, payable at our option in
cash or in shares of our common stock upon conversion of the senior
convertible debentures or the maturity date,
o mature on April 15, 2002 if not sooner converted,
o are partially convertible into shares of our common stock prior to
April 14, 2000, at a price of $5.00 per share, subject to adjustment
for stock splits, combinations and similar recapitalizations
affecting our common stock, so long as not more than 200,000 shares
in total are issued upon such partial conversion,
o are fully convertible into shares of our common stock from and after
April 14, 2000, at a price of $5.00 per share, subject to adjustment
for stock splits, combinations and similar recapitalizations
affecting our common stock,
o may be prepaid by us at any time after October 15, 2000 at 100% of
the principal amount plus all accrued but unpaid interest and
o are subject to mandatory conversion into shares of our common stock
at our option at any time after October 15, 2000 if the average
closing bid price of our common stock for ten consecutive trading
days equals or exceeds $10.29.
In connection with this private placement, we agreed to register the shares
of our common stock issuable upon the conversion of the senior convertible
debentures for resale by the holders under the Securities Act of 1933 and to use
our best efforts to maintain the effectiveness of such registration statement
until the earlier of the date that all of the shares of our common stock
issuable upon the conversion of the senior convertible debentures have been sold
and the date that the number of remaining shares of our common stock issued or
issuable upon the conversion may be freely sold pursuant to SEC Rule 144 in any
period of three consecutive months.
In June 1999, we completed a private placement of 40,000 shares of
convertible preferred stock and warrants to purchase 220,690 shares of our
common stock to an affiliate of Lehman Brothers, Inc. for aggregate proceeds of
$4 million. The shares of convertible preferred stock issued on that date:
o are convertible into shares of our common stock at a price of $6.96
per share, subject to adjustment for stock splits, combinations and
similar recapitalizations affecting our common stock and to downward
adjustment if we issue or agree to issue additional shares of our
common stock (excluding options under our option plan and certain
other excluded securities) at a price of less than $6.96 per share
to the price at which we issue or agree to issue the lower-priced
shares of our common stock or securities convertible or exchangeable
for shares of our common stock,
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o are redeemable in cash for an amount equal to $115 per share of
convertible preferred stock on the third anniversary of the date of
initial issuance if not sooner converted unless we elect in our
discretion to extend the redemption date to the fifth anniversary of
the date of initial issuance,
o are subject to mandatory conversion into shares of our common stock
at our option at any time after December 15, 1999 if the average
closing bid price of our common stock for ten consecutive trading
days equals or exceeds $10.88 per share,
o are not entitled to any voting rights except as otherwise required
by applicable law and
o are not entitled to any dividend rights unless we elect to extend
the redemption date to the fifth anniversary of the date of initial
issuance, in which case dividends would accrue at the rate of 8%
from and after the third anniversary of the date of initial issuance
which could be paid in shares of our common stock at our option.
In addition to the shares of convertible preferred stock, on June 15, 1999
we also issued an aggregate of 220,690 warrants to purchase shares of our common
stock to the Lehman Brothers affiliate. An additional 50,000 warrants were
issued to the Lehman Brothers affiliate as compensation for services rendered in
connection with the placement of the convertible preferred stock. The warrants
issued on that date:
o have a five-year term unless sooner exercised,
o are exercisable for shares of our common stock at a price of $7.92
per share, subject to adjustment in the same circumstances as the
shares of convertible preferred stock described above and
o are subject to mandatory exercise into shares of our common stock at
our option at any time after December 15, 1999 if the average
closing bid price of our common stock measured over twenty
consecutive trading days equals or exceeds $16.50.
We also agreed to issue and sell an additional 40,000 shares of convertible
preferred stock and warrants to purchase 270,690 shares of our common stock to
the Lehman Brothers affiliate at a second closing. The second closing is subject
to the satisfaction of several conditions, including the effectiveness of the
registration statement of which this prospectus forms a part. The terms of the
convertible preferred stock to be sold at the second closing would be identical
to the convertible preferred terms described above except that the conversion
price would be equal to the lower of $6.96 per share or 90% of the average
closing bid price of our common stock over the five consecutive trading days
ending on the date prior to the second closing date. The terms of the warrants
to be sold at the second closing would be identical to the warrant terms
described above except that the exercise price would be equal to the lower of
$7.92 per share or 100% of the average closing bid price of our common stock
over the five consecutive trading days ending on the date prior to the second
closing date. We may elect in our discretion not to proceed with the second
closing if the conversion price of the convertible preferred stock to be sold
would be less than $6.96 per share or if the exercise price of the warrants to
be sold would be less than $7.92 per share.
In connection with this private placement, we agreed to register the shares
of our common stock issuable upon the conversion of the convertible preferred
stock and warrants for resale by the Lehman Brothers affiliate under the
Securities Act of 1933 and to use our best efforts to maintain the effectiveness
of such registration statement until the date that all of the shares of our
common stock issuable upon the conversion of the convertible preferred stock and
warrants have been sold.
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WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy these
reports, proxy statements and other information at the SEC's public reference
rooms in Washington, DC, New York, NY and Chicago, IL. You can request copies of
these documents by writing to the SEC and paying a fee for the copying cost.
Please call the SEC at 1-800-SEC-0330 for more information about the operation
of the public reference rooms. Our SEC filings are also available at the SEC's
web site at "http://www.sec.gov." In addition, you can read and copy our SEC
filings at the office of the National Association of Securities Dealers, Inc. at
1735 K Street, N.W., Washington, DC 20006.
The SEC allows us to "incorporate by reference" information that we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
o Annual Report on Form 10-K for the year ended December 31, 1998
filed April 19, 1999, as amended by Form 10-K/A filed April 29,
1999, as further amended by Form 10-K/A filed November 12, 1999 and
Form 10-K/A-2 filed November 15, 1999,
o Current Report on Form 8-K filed April 30, 1999,
o Quarterly Report on Form 10-Q for the three months ended March 31,
1999 filed May 17, 1999, as amended by Form 10-Q/A filed
November 12, 1999,
o Current Report on Form 8-K filed June 18, 1999,
o Current Report on Form 8-K filed June 30, 1999,
o Quarterly Report on Form 10-Q for the three months ended June 30,
1999 filed August 23, 1999,
o Quarterly Report on Form 10-Q for the three months ended
September 30, 1999 filed November 15, 1999,
o The description of the common stock contained in Chromatics Color
Sciences International, Inc. Registration Statement on Form 8-A
filed February 1, 1993,
o The description of the purchase rights for Class B Series 1
preferred stock contained in the Chromatics Color Sciences
International, Inc. Registration Statement on Form 8-A filed
January 5, 1999,
o Registration Statement on Form 8-A/A amending the description of the
common stock filed November 12, 1999,
o Registration Statement on Form 8-A/A amending the description of the
purchase rights for Class B Series 1 preferred stock filed
November 12, 1999 and
o Proxy Statement for 1999 Annual Meeting of Stockholders to be held
on December 20, 1999.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Ms. Leslie Foglesong
Secretary
Chromatics Color Sciences International, Inc.
5 East 80th Street
New York, NY 10021
(212) 717-6544
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USE OF PROCEEDS
We will not receive any proceeds resulting from the sale of the shares of
common stock by the selling stockholders, but we will receive the proceeds from
the exercise of the warrants.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and information about our financial condition, results of
operations and business that are based on our current and future expectations.
The words "believe," "anticipate," "expect," "intend," and words of similar
import are intended to identify these statements as forward-looking statements.
Such forward-looking statements include the following:
o our belief that our existing capital resources will be adequate to
fund our needs for at least the next 12 months,
o our belief that our ColorMate(Registered) System and/or our
ColorMate(Registered) TLc-BiliTest(Registered) System can be
marketed in the medical, dental, biological, cosmetic, industrial,
soil contamination, hair color, beauty-aid or fashion industries,
o our belief that the size of the infant jaundice monitoring market in
the United States is approximately 15,000,000 tests annually and
approximately the same size in Europe and in Asia, South America and
Australia combined and that non-invasive monitoring could
potentially increase the amount of annual tests performed,
o our belief that our ColorMate(Registered) System can be successfully
commercialized for other applications,
o our belief that we will be successful in attracting and retaining
additional qualified personnel,
o our belief that the medical community will accept our
ColorMate(Registered) TLc-BiliTest(Registered) System,
o our belief that we can successfully mass manufacture our
ColorMate(Registered) TLc-BiliTest(Registered) System, our TLc
Lensette(Trademark) calibration standards and protective liners and
our ColorMate(Registered) System,
o our belief that we can successfully generate revenues from the
commercialization of our intellectual property,
o our belief that we can successfully contract with a third party to
distribute our ColorMate(Registered) TLc-BiliTest(Registered) System
for the international markets or the parents market or expand our
sales into these markets through our own medical division (although
marketing our ColorMate(Registered) TLc- BiliTest(Registered) System
for the parents' use would require more product testing as well as
FDA marketing clearances and international and other marketing
clearances or approvals, and there is no assurance that such
clearances or approvals would be granted) and
o our belief that our distribution partner, Datex-Ohmeda, Inc., will
be successful in penetrating its targeted markets within the
projected time periods.
Forward-looking statements necessarily involve risks and uncertainties, and
our actual results could differ materially from those anticipated in the
forward-looking statements, including those set forth under "Risk Factors" and
elsewhere in this prospectus. We caution you that no forward-looking statement
is a guarantee of future performance. You should not place undue reliance on
these forward-looking statements, which speak only of the date of this
prospectus. We do not undertake any obligation to publicly release any revisions
to these forward-looking statements to reflect events or circumstances after the
date of this prospectus or to reflect the occurrence of unanticipated events
which may cause our actual results to differ from those expressed or implied by
the forward-looking statements contained in this prospectus. The factors set
forth under "Risk Factors" and other cautionary statements made in this
prospectus should be read and understood as being applicable to all related
forward-looking statements wherever they appear in this prospectus.
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<PAGE>
SELLING STOCKHOLDERS
In private placements concluded in April 1999 and June 1999 we sold to the
selling stockholders convertible debt securities, convertible preferred stock
and warrants to purchase our common stock, and agreed to register the shares of
common stock issuable upon the conversion of these convertible debt securities
and convertible preferred stock and the exercise of warrants for resale of such
securities by the selling stockholders. We also agreed to use our commercially
reasonable best efforts to maintain the effectiveness of the registration
statement until all of the shares are sold under the registration statement or
until such date as they may be sold by the selling stockholders without
registration. Our registration of the shares of common stock does not
necessarily mean that the selling stockholders will sell all or any of the
shares.
The following table sets forth certain information regarding the beneficial
ownership of the common stock, as of September 30, 1999, of each of the selling
stockholders. The information provided in the table below with respect to each
selling stockholder has been obtained from such selling stockholder. Except as
otherwise disclosed below, none of the selling stockholders has, or within the
past three years has had, any position, office or other material relationship
with us. Because the selling stockholders may sell all or some portion of the
shares of common stock beneficially owned by them, we cannot estimate the number
of shares of common stock that will be beneficially owned by the selling
stockholders after this offering. In addition, the selling stockholders may have
sold, transferred or otherwise disposed of, or may sell, transfer or otherwise
dispose of, at any time or from time to time since the date on which they
provided the information regarding the shares of common stock beneficially owned
by them, all or a portion of the shares of common stock beneficially owned by
them in transactions exempt from the registration requirements of the Securities
Act of 1933. The following table assumes that all of the shares of common stock
being registered will be sold by the selling stockholders.
Beneficial ownership is determined in accordance with
Rule 13d-3(d) promulgated by the SEC under the Securities Exchange Act of 1934,
as amended. Shares of common stock issuable pursuant to options, warrants and
convertible securities, to the extent such securities are currently exercisable
or convertible within 60 days of September 30, 1999, are treated as outstanding
for computing the percentage of the person holding such securities but are not
treated as outstanding for computing the percentage of any other person. Unless
otherwise noted, each person identified possesses sole voting and investment
power with respect to the shares. Shares not outstanding but deemed beneficially
owned by virtue of the right of a person to acquire them within 60 days are
treated as outstanding only for purposes of determining the number of and
percent owned by such person.
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<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES PERCENTAGE
NAME OF SELLING BENEFICIALLY OWNED REGISTERED FOR SALE BENEFICIALLY OWNED OWNERSHIP
STOCKHOLDER(12) AS OF SEPTEMBER 30, 1999 HEREUNDER AFTER OFFERING AFTER OFFERING
- --------------------------------------- ------------------------ ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
LB I Group Inc. ...................... 822,414(1) 910,690(2) 0 0%
3 World Financial Center
New York, New York 10285
B.J.S. Trust .......................... 40,000(3) 284,000(4) 0 0%
c/o P.O. Box 400
Sterling, IL 61081
G.W.S. Trust .......................... 40,000(5) 284,000(4) 0 0%
c/o P.O. Box 400
Sterling, IL 61081
S.M.S. Trust .......................... 40,000(6) 284,000(4) 0 0%
c/o P.O. Box 400
Sterling, IL 61081
L.B.P. Trust .......................... 40,000(7) 284,000(4) 0 0%
c/o P.O. Box 400
Sterling, IL 61081
G. W. Schreiner Trust ................. 36,000(8) 255,600(9) 0 0%
c/o P.O. Box 400
Sterling, IL 61081
G.A.P. Trust .......................... 4,000(10) 28,400(11) 0 0%
c/o P.O. Box 400
Sterling, IL 61081
</TABLE>
- ------------------
(1) Represents 551,724 shares of common stock which may be acquired within
60 days of September 30, 1999 upon the conversion of the convertible
preferred stock held by the selling stockholder and 270,690 shares of
common stock which may be acquired within 60 days of September 30, 1999
upon the exercise of the warrants issued to the selling stockholder.
Mr. Frederick Frank, Vice Chairman of Lehman Brothers, Inc., has been an
advisor to us since December 1, 1997, providing financial, strategic and
business advisory services. The consulting agreement with Mr. Frank expired
December 1, 1998 but was renewed by mutual agreement of Mr. Frank and us.
Lehman Brothers Holdings Inc. is the sole stockholder of LB I Group Inc.
and, as such, is deemed to be the beneficial owner of these shares in
accordance with Rule 13d-3(d) promulgated by the SEC under the Securities
Exchange Act of 1934, as amended. Lehman Brothers Holdings Inc. and LB I
Group Inc. are affiliates of Lehman Brothers, Inc., a registered
broker-dealer. LB I Group Inc. purchased the shares of convertible
preferred stock and will purchase the shares of our common stock issuable
upon conversion of its shares of convertible preferred stock in the
ordinary course of its business and at the time of such purchase and
conversion it did not and will not have any agreements or understandings,
directly or indirectly, with any person to distribute such securities.
(2) Represents 551,724 shares of common stock which may be acquired within
60 days of September 30, 1999 upon the conversion of the convertible
preferred stock held by the selling stockholder, 270,690 shares of common
stock which may be acquired within 60 days of September 30, 1999 upon the
exercise of the warrants issued to the selling stockholder and 88,276 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of dividends that may accrue on the shares of convertible
preferred stock during the period June 15, 2002 through June 15, 2004.
(3) Represents shares of common stock which may be acquired within 60 days of
September 30, 1999 upon the conversion of the convertible debenture held by
the selling stockholder. Does not include up to an additional 160,000 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of the entire outstanding principal amount of the convertible
debenture held by the selling stockholder at any time after April 15, 2000.
Does not include up to an additional 84,000 shares of common stock which may
be acquired by the selling stockholder upon the conversion of all interest
(Footnotes continued on next page)
17
<PAGE>
(Footnotes continued from previous page)
accrued through April 15, 2002 with respect to the convertible debenture
held by the selling stockholder. Bradley J. Schreiner, as trustee of the
B.J.S. Trust, is deemed to be the beneficial owner of these shares in
accordance with Rule 13d-3(d) promulgated by the SEC under the Securities
Exchange Act of 1934, as amended.
(4) Represents 200,000 shares of common stock which can be acquired by the
selling stockholder upon the conversion of the entire principal amount of
convertible debenture held by the selling stockholder and 84,000 shares of
common stock which can be acquired by the selling stockholder upon the
conversion of all accrued interest on the convertible debenture held by the
selling stockholder on the maturity date of the convertible debenture.
(5) Represents shares of common stock which may be acquired within 60 days of
September 30, 1999 upon the conversion of the convertible debenture held by
the selling stockholder. Does not include up to an additional 160,000 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of the entire outstanding principal amount of the convertible
debenture held by the selling stockholder at any time after April 15, 2000.
Does not include up to an additional 84,000 shares of common stock which may
be acquired by the selling stockholder upon the conversion of all interest
accrued through April 15, 2002 with respect to the convertible debenture
held by the selling stockholder. Gregory W. Schreiner, as trustee of the
G.W.S. Trust, is deemed to be the beneficial owner of these shares in
accordance with Rule 13d-3(d) promulgated by the SEC under the Securities
Exchange Act of 1934, as amended.
(6) Represents shares of common stock which may be acquired within 60 days of
September 30, 1999 upon the conversion of the convertible debenture held by
the selling stockholder. Does not include up to an additional 160,000 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of the entire outstanding principal amount of the convertible
debenture held by the selling stockholder at any time after April 15, 2000.
Does not include up to an additional 84,000 shares of common stock which may
be acquired by the selling stockholder upon the conversion of all interest
accrued through April 15, 2002 with respect to the convertible debenture
held by the selling stockholder. Steven M. Schreiner, as trustee of the
S.M.S. Trust, is deemed to be the beneficial owner of these shares in
accordance with Rule 13d-3(d) promulgated by the SEC under the Securities
Exchange Act of 1934, as amended.
(7) Represents shares of common stock which may be acquired within 60 days of
September 30, 1999 upon the conversion of the convertible debenture held by
the selling stockholder. Does not include up to an additional 160,000 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of the entire outstanding principal amount of the convertible
debenture held by the selling stockholder at any time after April 15, 2000.
Does not include up to an additional 84,000 shares of common stock which may
be acquired by the selling stockholder upon the conversion of all interest
accrued through April 15, 2002 with respect to the convertible debenture
held by the selling stockholder. James M. Bergman, as trustee of the L.B.P.
Trust, is deemed to be the beneficial owner of these shares in accordance
with Rule 13d-3(d) promulgated by the SEC under the Securities Exchange Act
of 1934, as amended.
(8) Represents shares of common stock which may be acquired within 60 days of
September 30, 1999 upon the conversion of the convertible debenture held by
the selling stockholder. Does not include up to an additional 144,000 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of the entire outstanding principal amount of the convertible
debenture held by the selling stockholder at any time after April 15, 2000.
Does not include up to an additional 75,600 shares of common stock which may
be acquired by the selling stockholder upon the conversion of all interest
accrued through April 15, 2002 with respect to the convertible debenture
held by the selling stockholder. Gary W. Schreiner, as trustee of the G. W.
Schreiner Trust, is deemed to be the beneficial owner of these
(Footnotes continued on next page)
18
<PAGE>
(Footnotes continued from previous page)
shares in accordance with Rule 13d-3(d) promulgated by the SEC under the
Securities Exchange Act of 1934, as amended.
(9) Represents 180,000 shares of common stock which can be acquired by the
selling stockholder upon the conversion of the entire principal amount of
convertible debenture held by the selling stockholder and 75,600 shares of
common stock which can be acquired by the selling stockholder upon the
conversion of all accrued interest on the convertible debenture held by the
selling stockholder on the maturity date of the convertible debenture.
(10) Represents shares of common stock which may be acquired within 60 days of
September 30, 1999 upon the conversion of the convertible debenture held by
the selling stockholder. Does not include up to an additional 16,000 shares
of common stock which may be acquired by the selling stockholder upon the
conversion of the entire outstanding principal amount of the convertible
debenture held by the selling stockholder at any time after April 15, 2000.
Does not include up to an additional 8,400 shares of common stock which may
be acquired by the selling stockholder upon the conversion of all interest
accrued through April 15, 2002 with respect to the convertible debenture
held by the selling stockholder. Gary W. Schreiner, as trustee of the
G.A.P. Trust, is deemed to be the beneficial owner of these shares in
accordance with Rule 13d-3(d) promulgated by the SEC under the Securities
Exchange Act of 1934, as amended.
(11) Represents 20,000 shares of common stock which can be acquired by the
selling stockholder upon the conversion of the entire principal amount of
convertible debenture held by the selling stockholder and 8,400 shares of
common stock which can be acquired by the selling stockholder upon the
conversion of all accrued interest on the convertible debenture held by the
selling stockholder on the maturity date of the convertible debenture.
(12) The original purchaser of the convertible debentures was Gary W. Schreiner.
Pursuant to an Assignment Agreement, dated as of October 21, 1999,
Mr. Schreiner assigned portions of his interest in the convertible
debentures to (i) B.J.S. Trust, for the benefit of his son, Bradley J.
Schreiner, (ii) G.W.S. Trust, for the benefit of his son, G. W. Schreiner,
(iii) S.M.S. Trust, for the benefit of his son, Steven M. Schreiner,
(iv) G.W. Schreiner Trust, for his personal benefit, (v) L.B.P. Trust, for
the benefit of an unrelated third party and (vi) G.A.P. Trust, for his
personal benefit. With the exception of the relationship which is disclosed
in the Prospectus between Chromatics and Frederick Frank of Lehman Brothers
Holdings, Inc., which is an affiliate of LBI Group, Inc., none of the
selling stockholders has any prior relationship with Chromatics.
PLAN OF DISTRIBUTION
The selling stockholders or their transferees may, from time to time, sell
all or a portion of the shares of common stock being registered pursuant to this
prospectus in privately negotiated transactions or otherwise, at fixed prices
that may be changed, at market prices prevailing at the time of sale, at prices
related to such market prices or at negotiated prices. The shares may be sold by
the selling stockholders by one or more of the following methods, without
limitation:
o block trades in which the broker or dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction,
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus,
o an exchange distribution in accordance with the rules of the
applicable exchange,
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers,
o privately negotiated transactions,
o short sales,
19
<PAGE>
o a combination of any such methods of sale and
o any other method permitted pursuant to applicable law.
From time to time, the selling stockholders may engage in short sales,
short sales against the box (in which the seller owns shares of our common stock
at the time of the sale but borrows other shares of our common stock to sell in
the short sale), puts and calls and other transactions in our securities or
derivatives of such securities, and may sell and deliver the shares in
connection therewith or in settlement of securities loans. From time to time,
the selling stockholders may pledge their shares pursuant to the margin
provisions of their customer agreements with their brokers. Upon a default by
the selling stockholders, the broker may offer and sell the pledged shares from
time to time.
In effecting sales, brokers and dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate in these sales. Brokers
or dealers may receive commissions or discounts from the selling stockholders
(or, if any broker-dealer acts as agent for the purchaser of the shares, from
that purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the selling stockholders to sell a specified number of shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a selling stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
the selling stockholders.
Broker-dealers who acquire shares as principal may thereafter resell the
shares from time to time in transactions (which may involve block transactions
and sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
these resales, may pay to or receive from the purchasers of the shares
commissions as described above. The selling stockholders may also sell the
shares in accordance with Rule 144 under the Securities Act of 1933, rather than
pursuant to this prospectus.
The selling stockholders and any broker-dealers or agents that participate
with the selling stockholders in sales of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with these sales. If so, any commissions received by these broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act of
1933.
We have agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act of 1933.
We have informed the selling stockholders that the anti-manipulation
provisions of Regulation M under the Securities Exchange Act of 1934 may apply
to the sales of their shares offered hereby. We have also advised the selling
stockholders of the requirement for delivery of this prospectus in connection
with any sale of the shares offered hereby.
Certain selling stockholders may from time to time purchase shares of
common stock in the open market. These selling stockholders have been notified
that they should not commence any distribution of shares unless they have
terminated their purchasing and bidding for common stock in the open market as
provided in applicable securities regulations.
There is no assurance that the selling stockholders or their transferees
will sell any or all of the shares offered by them in this prospectus.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Patterson, Belknap, Webb & Tyler LLP, 1133 Avenue of the
Americas, New York, New York.
20
<PAGE>
EXPERTS
Our financial statements as of December 31, 1998 and for the year ended
December 31, 1998 incorporated by reference in this prospectus and registration
statement have been audited by BDO Seidman LLP, independent auditors, as set
forth in their report dated March 15, 1999, except for note 6, which is dated
April 15, 1999 and are included in reliance upon the authority of BDO
Seidman LLP as experts in accounting and auditing. Our financial statements as
of December 31, 1997 and for the years ending December 31, 1997 and 1996
incorporated by reference in this prospectus and registration statement have
been audited by Wiss & Company, independent auditors, as set forth in their
report dated February 17, 1998 and are included in reliance upon the authority
of Wiss & Company as experts in accounting and auditing.
21
<PAGE>
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS. DO NOT RELY ON ANY INFORMATION
OR REPRESENTATION NOT CONTAINED IN HEREIN. THIS PROSPECTUS IS NOT AN OFFER TO
SELL ANY OF THE SECURITIES OFFERED HEREBY IN THOSE JURISDICTIONS WHERE SUCH AN
OFFER WOULD BE UNLAWFUL.
------------------------
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of the Offering........................ 2
Risk Factors................................... 4
Recent Events.................................. 11
Where You Can Get More Information............. 14
Use of Proceeds................................ 15
Forward-Looking Statements..................... 15
Selling Stockholders........................... 16
Plan of Distribution........................... 19
Legal Matters.................................. 20
Experts........................................ 21
</TABLE>
2,265,403 SHARES OF
COMMON STOCK
CHROMATICS COLOR
SCIENCES
INTERNATIONAL, INC.
------------------------
PROSPECTUS
------------------------
DECEMBER 29, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various estimated amount of fees and
expenses payable in connection with this offering other than sales commissions.
All such expenses will be borne by the registrant.
<TABLE>
<CAPTION>
ITEM AMOUNT OF EXPENSES
- ------------------------------------------------------ ------------------
<S> <C>
SEC Registration Fee.................................. $ 7,603.06
Printing Expenses..................................... 60,000*
Accounting Fees and Expenses.......................... 10,000*
Legal Fees and Expenses............................... 60,000*
Miscellaneous Expenses................................ 1,000*
------------
Total............................................... $ 138,603.06*
</TABLE>
- ------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 722 of the Business Corporation Law of the State of New York and
Article X of Chromatics' Certificate of Incorporation contain provisions for the
indemnification of officers and directors of Chromatics. The Certificate of
Incorporation requires Chromatics to indemnify such persons to the full extent
permitted by New York Law. Each person will be indemnified in any proceeding if
he or she acted in good faith and in a manner which he or she reasonably
believed to be in, or not opposed to, the best interests of Chromatics.
Indemnification would cover judgments, fines, amounts paid in settlement and
reasonable expenses, including attorney's fees.
Chromatics has directors' and officers' liability insurance. Such insurance
may cover liabilities asserted against any present or past director or officer
incurred in the capacity of director or officer arising out of such status,
whether or not Chromatics would have the power to indemnify such person.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
- --------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Restated Articles of Incorporation of Chromatics (incorporated by reference to
Exhibit 3.1 to Chromatics' Quarterly Report on Form 10-Q, filed on August 23, 1999).
3.2 -- By-Laws of Chromatics (incorporated by reference to Exhibit 3.2 to Chromatics'
November 5, 1992 Registration Statement).
4.1 -- Restated Articles of Incorporation of Chromatics (incorporated by reference to
Exhibit 3.1 to Chromatics' Quarterly Report on Form 10-Q, filed on August 23, 1999).
4.2 -- Subscription Agreement, dated April 15, 1999 between Chromatics and Gary W. Schreiner
(incorporated by reference to Exhibit 4.1 to Chromatics' Current Report on Form 8-K,
filed on April 30, 1999).
4.3 -- 14% Senior Convertible Debenture, due April 15, 2002, in the original principal amount
of $5,000,000 (incorporated by reference to Exhibit 4.2 to Chromatics' Current Report
on Form 8-K, filed on April 30, 1999).
4.4 -- Preferred Stock Purchase Agreement, dated as of June 11, 1999, by and between
Chromatics and LB I Group Inc. (incorporated by reference to Exhibit 4.1 to Chromatics'
Current Report on Form 8-K, filed on July 1, 1999).
4.5 -- Warrant Agreement, dated as of June 11, 1999, by and between Chromatics and LB I Group
Inc. (incorporated by reference to Exhibit 4.2 to Chromatics' Current Report on
Form 8-K, filed on July 1, 1999).
</TABLE>
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
- --------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
5.1+ -- Opinion Regarding Legality.
23.1 -- Consent of BDO Seidman, LLP.
23.2 -- Consent of Wiss & Company, LLP.
23.3+ -- Consent of Patterson, Belknap, Webb & Tyler LLP (included in Exhibit 5.1).
24.1+ -- Power of Attorney.
</TABLE>
- ------------------
+ Filed previously.
ITEM 17. UNDERTAKINGS.
(a) 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, represents 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 this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (i) and (ii) do not apply to this
registration statement if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section 15 (d) of the
Securities Exchange Act of 1934 and incorporated by reference in this
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.
(b) the undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13 (a) or Section 15 (d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) 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 provisions described in the first paragraph of Item
15 above, or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in said
Securities Act of 1933 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 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in New York, State of New York, on December 29, 1999.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
Date: December 29, 1999 By: /s/ DARBY S. MACFARLANE
---------------------------------
Darby S. Macfarlane
Chairperson of the Board
and Chief Executive Officer
IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, THIS REPORT HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES
AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------------- ---------------------------------------------- -----------------
<S> <C> <C>
/s/ DARBY S. MACFARLANE Chairperson of the Board and Chief Executive December 29, 1999
Darby S. Macfarlane Officer (Principal Executive Officer)
* Director, Secretary and Treasurer (Principal December 29, 1999
Leslie Foglesong Financial and Accounting Officer)
* Director, Vice-President--Research and December 29, 1999
David Kenneth Macfarlane Development
* Director December 29, 1999
Edmund Vimond
* Director December 29, 1999
Edward Mahoney
By: /s/ DARBY S. MACFARLANE
Darby S. Macfarlane
Attorney-In-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
- ---------- --------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Restated Articles of Incorporation of Chromatics (incorporated by reference to
Exhibit 3.1 to Chromatics' Quarterly Report on Form 10-Q, filed on August 23, 1999).
3.2 -- By-Laws of Chromatics (incorporated by reference to Exhibit 3.2 to Chromatics'
November 5, 1992 Registration Statement).
4.1 -- Restated Articles of Incorporation of Chromatics (incorporated by reference to
Exhibit 3.1 to Chromatics' Quarterly Report on Form 10-Q, filed on August 23, 1999).
4.2 -- Subscription Agreement, dated April 15, 1999 between Chromatics and Gary W. Schreiner
(incorporated by reference to Exhibit 4.1 to Chromatics' Current Report on Form 8-K,
filed on April 30, 1999).
4.3 -- 14% Senior Convertible Debenture, due April 15, 2002, in the original principal amount
of $5,000,000 (incorporated by reference to Exhibit 4.2 to Chromatics' Current Report
on Form 8-K, filed on April 30, 1999).
4.4 -- Preferred Stock Purchase Agreement, dated as of June 11, 1999, by and between
Chromatics and LB I Group Inc. (incorporated by reference to Exhibit 4.1 to
Chromatics' Current Report on Form 8-K, filed on July 1, 1999).
4.5 -- Warrant Agreement, dated as of June 11, 1999, by and between Chromatics and LB I Group
Inc. (incorporated by reference to Exhibit 4.2 to Chromatics' Current Report on
Form 8-K, filed on July 1, 1999).
5.1+ -- Opinion Regarding Legality.
23.1 -- Consent of BDO Seidman, LLP.
23.2 -- Consent of Wiss & Company, LLP.
23.3+ -- Consent of Patterson, Belknap, Webb & Tyler LLP (included in Exhibit 5.1).
24.1+ -- Power of Attorney.
</TABLE>
- ------------------
+ Filed previously.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Chromatics Color Sciences International, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statement on Form S-3 of our report
dated March 15, 1999, except for Note 6 which is as of April 15, 1999, relating
to the financial statements of Chromatics Color Sciences International Inc.,
appearing in the Company's Annual Report on Form 10-K and Form 10-K/A for the
year ended December 31, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
New York, New York
December 23, 1999
