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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 2000
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
<TABLE>
<S> <C>
NEW YORK 13-3253392
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
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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:
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<S> <C>
DARBY S. MACFARLANE JEFFREY E. LAGUEUX, ESQ.
CHAIRPERSON OF THE BOARD AND PATTERSON, BELKNAP, WEBB & TYLER LLP
CHIEF EXECUTIVE OFFICER 1133 AVENUE OF THE AMERICAS
5 EAST 80TH STREET NEW YORK, NY 10036-6710
NEW YORK, NY 10021 (212) 336-2000
(212) 717-6544
</TABLE>
(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. [X]
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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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C> <C> <C>
Common Stock, par value $.001... 1,000,000 shares $4.438 $4,438,000 $1,171.63
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(1) Estimated solely for the purpose of calculating the registration fee. These
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 April 14, 2000.
(2) Paid on April 17, 2000.
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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<PAGE> 2
PROSPECTUS
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
1,000,000 SHARES OF COMMON STOCK
This prospectus will allow us to issue common stock over time. This means:
- we may issue the shares offered in this prospectus from time to time,
- we will provide a prospectus supplement each time we issue common stock,
- the prospectus supplement will inform you about the specific terms of the
offering and also may add, update or change information contained in this
document and
- you should read this document and any prospectus supplement carefully
before you invest.
Our common stock is listed on the Nasdaq SmallCap Market under the symbol
"CCSI." On April 14, 2000 the closing sales price of our common stock on the
Nasdaq SmallCap Market was $4.406.
You should read the description of risks under the caption "Risk Factors"
beginning on page 2 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 April 17, 2000.
SUBJECT TO COMPLETION
<PAGE> 3
ABOUT CHROMATICS
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(R) System. We have
developed our intellectual property and the ColorMate(R) System for:
- the color measurement to a laboratory standard of accuracy and
classification of human tissue, fluid, hair and/or teeth color,
- the color coordination of these human skin, tissue, fluid, hair and/or
teeth color classifications in relation to products,
- the color measurement to a laboratory standard of accuracy,
classification and organization based on color of various color-sensitive
consumer products including chromaticity studies of cosmetics, hair
coloring, hosiery, clothing, tooth enamel, paint and textiles,
- the color measurement to a laboratory standard of accuracy to monitor
infant jaundice,
- the color measurement in detecting and monitoring those diseases which we
believe can be diagnosed or monitored by the coloration of human skin,
tissue and fluids and
- 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(R) System device for
the non-invasive monitoring of infant jaundice by healthcare professionals in
the hospital, institutional, pediatricians' office or home setting. 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. This is
a subjective determination prone to errors due to different skin colors. If the
initial clinical assessment suggests the possibility of infant jaundice, the
current procedure requires that a blood sample be obtained by lancing the
infant. We believe that a non-invasive instrument that monitors infant jaundice
represents a significant improvement in patient care.
The ColorMate(R) TLc-BiliTest(R) 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(TM) calibration standard used prior to each baby's measurement.
We are currently in the early stages of the commercialization of our
ColorMate(R) TLc-BiliTest(R) 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.
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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THE OFFERING
COMMON STOCK OFFERED IN THIS
PROSPECTUS.................. 1,000,000 shares
Common stock outstanding after
the offering.................. shares(1)
Use of proceeds............... For product development, capital expenditures,
sales and marketing and for other general
corporate purposes, see "Use of Proceeds."
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1. Based on shares outstanding as of April , 2000. Does not include
shares of common stock issuable upon exercise of outstanding
options, shares of common stock issuable upon conversion of
outstanding preferred stock or share of common stock issuable
upon exercise of outstanding warrants as of April , 2000.
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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 WILL REQUIRE ADDITIONAL FUNDS IF THE CONVERTIBLE DEBENTURES AND CONVERTIBLE
PREFERRED STOCK ARE NOT CONVERTED PRIOR TO MATURITY
In April 1999 we sold $5 million in principal amount of 14% senior
convertible debentures. These securities are convertible into shares of our
common stock at the option of their holders at a conversion price of $5.00 and
are subject to mandatory conversion if the average trading price of our common
stock equals or exceeds $10.29. We will be obligated to repay the holders of
these convertible debentures $7,100,000 in cash on the April 15, 2002 maturity
date unless they elect to convert or we are able to compel conversion.
In June 1999 we sold to an Affiliate of Lehman Brothers 40,000 shares of
convertible preferred stock and warrants to purchase 220,690 shares of our
common stock for aggregate proceeds of $4 million. In February 2000 we sold to
the Lehman affiliate 40,000 shares of convertible preferred stock and warrants
to purchase 254,372 shares of our common stock for aggregate proceeds of $4
million. Under the terms of these private placements, will be obligated to repay
the Lehman affiliate $4,600,000 on June 15, 2002 and $4,600,000 on February 11,
2003 unless it elects to convert the convertible preferred stock or we are able
to compel conversion. Each of these redemption dates may be postponed at our
option for two years, subject to the accrual of a 8% dividend. In the event that
we postpone the redemption dates of the convertible preferred stock, we must pay
to the Lehman affiliate $5,240,000 on June 15, 2004 and $5,240,000 on February
11, 2005.
The holders of the debentures 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 Lehman affiliate generally
will not elect to convert the convertible preferred stock unless the market
price of our common stock exceeds $6.29 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 holders of the debentures 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 these obligations. Failure to satisfy these
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 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(R) TLc-BiliTest(R) 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(R)
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 December 31,
1999, we had an accumulated deficit of $34,581,200. We expect that we will
continue to incur operating losses for the current and subsequent fiscal years.
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In addition, we have or will record the following charges in connection
with the $5.0 million debt financing in April 1999 and $4.0 million preferred
stock financings in June 1999 and February 2000.
- The April financing resulted 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.
- The June financing resulted in a deemed dividend charge of approximately
$3.2 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 $2.0 million will be charged over the redemption period.
- The February financing will result in a deemed dividend charge of
approximately $2.5 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, $500,000 was charged in
February 2000 and $2 million will be charged over the redemption period.
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(R) 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 a number of key component parts to be assembled into
our ColorMate(R) System and our ColorMate(R) TLc-BiliTest(R) 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 distribution partner. 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
$6.29 per share will increase the cost to us of any subsequent equity financing
effected at less than $6.29 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(R) System and our ColorMate(R) TLc
BiliTest(R) 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(R) System and our ColorMate(R) TLc-BiliTest(R) System until
replacement agreements were entered into.
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(R) System, the ColorMate(R)
TLc-BiliTest(R)System or any other products that we may develop. We rely on our
corporate partners to manufacture and to market our ColorMate(R) TLc-BiliTest(R)
System and will continue to rely on corporate partners to manufacture and to
market our ColorMate(R) 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(R) System or ColorMate(R)
TLc-BiliTest(R) System would have a material adverse effect on our business by
rendering us unable to manufacture and distribute our ColorMate(R) System and
our ColorMate(R) TLc-BiliTest(R) System until a replacement arrangement was
entered into.
WE MAY NOT BE SUCCESSFUL IN COMMERCIALIZING OUR COLORMATE(R) TLC-BILITEST(R)
SYSTEM
Our success in commercializing our ColorMate(R) TLc-BiliTest(R) System will
be dependent upon its acceptance by healthcare professionals. Their acceptance
will largely depend on our ability to show them its
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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:
- safety,
- effectiveness,
- ease of use and
- price.
We cannot assure that our ColorMate(R) TLc-BiliTest(R) System will be
competitive with respect to these factors.
WE HAVE NOT YET SUCCESSFULLY COMMERCIALIZED OUR COLORMATE(R) SYSTEM FOR OTHER
POTENTIAL MEDICAL APPLICATIONS
Although we have received FDA clearance to commercially market our
ColorMate(R) TLc-BiliTest(R) System for monitoring infant jaundice, our clinical
and research development programs for other medical applications of our
ColorMate(R) 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 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(R) 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(R) 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(R) 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(R) TLc-BiliTest(R) 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
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product from the market. The failure to comply with applicable regulatory
requirements can, among other things, result in:
- fines,
- suspended or withdrawn regulatory approvals,
- refusal to clear or approve pending applications,
- refusal to permit exports or to allow imports from the United States,
- product recalls,
- seizure of products,
- injunctions,
- operating restrictions and
- 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.
THE MEDICAL COMMUNITY MAY BE RELUCTANT TO ACCEPT OUR TECHNOLOGY
The commercial acceptance of our ColorMate(R) TLc-BiliTest(R) 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(R) TLc-BiliTest(R) System or be
willing to commit funds to its purchase and use. Widespread acceptance of the
ColorMate(R) TLc-BiliTest(R) 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(R)
TLc-BiliTest(R) 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(R) TLc-BiliTest(R) 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(R) TLc-BiliTest(R) 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(R) TLc-
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BiliTest(R) System obsolete or which have advantages over our ColorMate(R)
TLc-BiliTest(R) System, including greater accuracy and precision or greater
acceptance by the medical community.
To the extent that we are able to commercialize our ColorMate(R) System for
non-medical applications we will also encounter competition. 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.
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 37 full-time employees,
of which 18 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(R) 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 these 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.
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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 five 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:
- the new innovative nature of our ColorMate(R)TLc-BiliTest(R) System,
- the market size and revenue potential of our ColorMate(R)TLc-BiliTest(R)
System and
- the existence and status of negotiations with potential distributors of
our ColorMate(R) TLc-BiliTest(R) 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(R) SYSTEM AND OUR COLORMATE(R)
TLC-BILITEST(R) 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(R) System, our
ColorMate(R) TLc-BiliTest(R) System and our TLc-Lensette(TM) calibration
standards. Because we are dependent on the commercialization of these products
our success will depend to a significant degree on our ability to preserve our
trade secrets, to obtain and maintain our patents and to operate without
infringing the proprietary rights of others. 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 a small number of
foreign jurisdictions may not protect our intellectual property rights to the
same extent as the laws of the United States.
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OUR ASSUMPTIONS REGARDING THE BUSINESS PLAN AND STRATEGY FOR OUR COLORMATE(R)
TLC-BILITEST(R) SYSTEM MAY PROVE TO BE INACCURATE
Our business plan and strategy for the commercialization of our
ColorMate(R) TLc-BiliTest(R) 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. The medical community has thus far not used a non-invasive
device for monitoring infant jaundice as a standard of care. Assumptions made by
our distribution partner about the size of the existing market were based on the
current standard of care (an invasive blood test) and, accordingly, there can be
no assurance that the market size of the ColorMate(R) TLc-BiliTest(R) System
will be the same.
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:
- analyst recommendations,
- announcements of technological innovations or new commercial products by
us or our competitors,
- market conditions relating to the medical device industry,
- sales of substantial amounts of our common stock by existing
stockholders, including short sales,
- adverse publicity related to accusations by short sellers and
- obtaining regulatory clearances in both the U.S. and in foreign
countries.
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 our outstanding convertible debentures is expected
to be less than the current market price of our common stock on the date of
conversion. Similarly, the conversion price of the convertible
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<PAGE> 12
preferred stock issued to the Lehman affiliate and the exercise price of the
related warrants issued to the Lehman affiliate 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 these
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(R) TLc-BiliTest(R)
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(R) TLc-BiliTest(R) 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, 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(R) TLc-BiliTest(R) 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(R) TLc-BiliTest(R) System and we cannot assure you that 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(R)
TLc-BiliTest(R) System and other applications of our ColorMate(R) System, we
expect to issue and sell additional shares of our common stock or
10
<PAGE> 13
securities convertible into our common stock, such as the securities which we
issued to the selling stockholder, 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 other terms and
provisions 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 stockholder 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(R) TLc-BiliTest(R) 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 16
months:
- 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(R) TLc-
BiliTest(R) System. The newly-formed medical division provides sales
support for the ColorMate(R) TLc-BiliTest(R) 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.
- 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(R) TLc-BiliTest(R) System and in
February 1999 we began making limited shipments of this product.
- 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(R) TLc-BiliTest(R) System. The
ColorMate(R) TLc-BiliTest(R) System as currently marketed by our medical
division has a list price of $3,000 to $6,000 depending on the model. It
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(TM) calibration standards at $10 per unit, or minimum
monthly charges of $10 per use or under a managed use program.
- In January, 1999 we applied for ISO 9001/EN46001 certification and the
right to affix the CE mark to our ColorMate(R) TLc-BiliTest(R) 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. 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(R) TLc-BiliTest(R) System.
11
<PAGE> 14
- In June 1999 we entered into an agreement for the exclusive distribution
of the ColorMate(R) TLc-BiliTest(R) 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(R) TLc-BiliTest(R) System and our TLc-Lensette(TM)
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 multiple
purchasers for aggregate proceeds of $5 million. The 14% senior convertible
debentures:
- 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,
- mature on April 15, 2002 if not sooner converted,
- 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
partial conversion,
- 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,
- 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
- 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 this 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. The registration statement covering the
shares of our common stock issuable upon the conversion of the senior
convertible debentures for resale by the holders was declared effective on
January 28, 2000.
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:
- are convertible into shares of our common stock at a price of $6.29 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 a limited number of other
securities excluded under the terms of the agreement with the Lehman
Brothers affiliate) at a price of less than $6.29 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,
- 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,
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<PAGE> 15
- 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 $9.44 per share,
- are not entitled to any voting rights except as otherwise required by
applicable law and
- 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 this placement of convertible preferred stock. The warrants
issued on that date:
- have a five-year term unless sooner exercised,
- are exercisable for shares of our common stock at a price of $6.99 per
share, subject to adjustment in the same circumstances as the shares of
convertible preferred stock described above and
- 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 $13.98.
In February 2000, we completed a private placement of 40,000 shares of
convertible preferred stock and warrants to purchase 254,372 shares of our
common stock to the Lehman Brothers affiliate for aggregate proceeds of $4
million. The terms of the convertible preferred stock and warrants issued on
that date are identical to the convertible preferred terms described above. An
additional 50,000 warrants were issued to the Lehman Brothers affiliate as
compensation for services rendered in connection with this placement of
convertible preferred stock. 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 this 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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<PAGE> 16
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:
- Registration Statement on Form S-3 filed February 23, 2000, as amended by
Form S-3/A filed March 31, 2000,
- Annual Report on Form 10-K for the year ended December 31, 1999 filed
March 30, 2000, as amended by Form 10-K/A No. 1 filed March 31, 2000,
- The description of the common stock contained in Chromatics Color
Sciences International, Inc. Registration Statement on Form 8-A filed
February 1, 1993,
- 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,
- Registration Statement on Form 8-A/A amending the description of the
common stock filed November 12, 1999,
- 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,
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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<PAGE> 17
USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering.
We intend to use the net proceeds of this offering, if any, for product
development, capital expenditures, sales and marketing and for other general
corporate purposes. The amounts actually expended for each purpose may vary
significantly depending upon numerous factors, including the amount and timing
of the proceeds from this offering, the market acceptance of our products and
the status of competitive products. In addition, expenditures will also depend
on the establishment of strategic partnerships with other companies, the
availability of other financing and other factors.
We may also use a portion of the proceeds, if any, to acquire or invest in
complementary businesses or technologies.
FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents incorporated by
reference are forward-looking statements. These forward-looking statements are
subject to certain risks and uncertainties, including, among others, those
listed under "Risk Factors" above and in the documents incorporated by
reference.
PLAN OF DISTRIBUTION
We may offer the common stock:
- directly to purchasers,
- to or through underwriters,
- through dealers, agents or institutional investors, or
- through a combination of such methods.
Regardless of the method used to sell the common stock, we will provide a
prospectus supplement that will disclose:
- the identity of any underwriters, dealers, agents or investors who
purchase the common stock,
- the material terms of the distribution, including the number or shares
sold and the consideration paid,
- the amount of any compensation, discounts or commissions to be received
by the underwriters, dealers or agents,
- the terms of any indemnification provisions, including indemnification
from liabilities under the federal securities laws and
- the nature of any transaction by an underwriter, dealer or agent during
the offering that is intended to stabilize or maintain the market price
of the common stock.
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<PAGE> 18
DILUTION
The net tangible book value of Chromatics at April 17, 2000 was $
million or approximately $
per share of common stock. Net tangible book value per share represents the
amount of Chromatics' tangible assets less total liabilities, divided by
shares of common stock.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of common stock in the
offering made hereby and the pro forma net tangible book value per share of
common stock immediately after completion of the offering. After giving effect
to the sale of 1,000,000 shares of common stock in this offering at an assumed
offering price of $4.438 per share and the application of the estimated net
proceeds therefrom (after deducting estimated offering expenses) the pro forma
net tangible book value of Chromatics as of April 17, 2000 would have been
$ million or $ per share, an immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution in
net tangible book value of $ per share to purchasers of common stock in the
offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed public offering price per share $
Net tangible book value per share at April 17, 2000 $
Increase per share attributable to new investors $
Pro forma net tangible book value per share after offering $
Net tangible book value dilution per share to new investors $
===========
</TABLE>
Net tangible book value does not include $ million related to
mandatorily redeemable preferred stock outstanding as of April 17, 2000. To the
extent that outstanding options, preferred stock and warrants are exercised or
converted, there will be further dilution to new investors.
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.
EXPERTS
Our financial statements as of December 31, 1999 and December 31, 1998 and
for the years then ended 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 10, 2000 and are included in
reliance upon the authority of BDO Seidman LLP as experts in accounting and
auditing. Our financial statements for the year ended December 31, 1997
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.
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<PAGE> 19
- ------------------------------------------------------
- ------------------------------------------------------
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>
About Chromatics...................... 1
The Offering.......................... 2
Risk Factors.......................... 3
Recent Events......................... 11
Where You Can Get More Information.... 14
Use of Proceeds....................... 15
Forward-Looking Statements............ 15
Plan of Distribution.................. 15
Dilution.............................. 16
Legal Matters......................... 16
Experts............................... 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,000,000 SHARES OF
COMMON STOCK
CHROMATICS
COLOR SCIENCES
INTERNATIONAL, INC.
------------------
PROSPECTUS
------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 20
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 of these expenses will be borne by the registrant.
<TABLE>
<CAPTION>
ITEM AMOUNT OF EXPENSES
- ---- ------------------
<S> <C>
SEC Registration Fee........................................ $ 1,171.63
Printing Expenses........................................... 10,000.00*
Accounting Fees and Expenses................................ 1,000.00*
Legal Fees and Expenses..................................... 5,000.00*
Miscellaneous Expenses...................................... 1,000.00*
----------
Total............................................. $18,171.63*
==========
</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 officers and directors 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. This insurance
may cover liabilities asserted against any present or past director or officer
incurred in the capacity of director or officer arising out of his or her
status, whether or not Chromatics would have the power to indemnify this 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 for the Quarter Ended June 30,
1999.
3.2 -- Certificate of Amendment to Articles of Incorporation of
Chromatics, (incorporated by reference to Exhibit 3.1.1 to
Chromatics' 1999 Annual Report on Form 10-K).
3.3 -- By-Laws of Chromatics (incorporated by reference to Exhibit
3.2 to Chromatics' 1999 Annual Report on Form 10-K).
4.1 -- Restated Articles of Incorporation of Chromatics
(incorporated by reference to Exhibit 3.1 to Chromatics'
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1999).
4.2 -- Certificate of Amendment to Articles of Incorporation of
Chromatics, filed on February 10, 2000 (included in Exhibit
3.2)
5.1 -- Opinion Regarding Legality (to come).
23.1 -- Consent of BDO Seidman, LLP (to come).
23.2 -- Consent of Wiss & Company, LLP (to come).
23.3 -- Consent of Patterson, Belknap, Webb & Tyler LLP (included in
Exhibit 5.1).
24.1 -- Power of Attorney (see page II-3).
</TABLE>
II-1
<PAGE> 21
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> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, State of New York, on April 17, 2000.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
Date: April 17, 2000 By: /s/ DARBY S. MACFARLANE
------------------------------------
Darby S. Macfarlane
Chairperson of the Board
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Darby Simpson Macfarlane and Leslie Foglesong,
jointly and severally, his or her true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and all
amendments to this registration statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each of said attorneys-in-fact and agents, or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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, President April 17, 2000
- ------------------------------------------ and Chief Executive Officer (Principal
Darby S. Macfarlane Executive Officer)
/s/ FRANCIS MARCHESE Chief Financial Officer (Principal April 17, 2000
- ------------------------------------------ Financial and Accounting Officer)
Francis Marchese
/s/ LESLIE FOGLESONG Director April 17, 2000
- ------------------------------------------
Leslie Foglesong
/s/ DAVID KENNETH MACFARLANE Director, Vice-President -- Research April 17, 2000
- ------------------------------------------ and Development
David Kenneth Macfarlane
/s/ EDMUND VIMOND Director April 17, 2000
- ------------------------------------------
Edmund Vimond
/s/ EDWARD MAHONEY Director April 17, 2000
- ------------------------------------------
Edward Mahoney
</TABLE>
II-3
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<C> <C> <S>
3.1 -- Restated Articles of Incorporation of Chromatics
(incorporated by reference to Exhibit 3.1 to Chromatics'
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1999.
3.2 -- Certificate of Amendment to Articles of Incorporation of
Chromatics, (incorporated by reference to Exhibit 3.1.1 to
Chromatics' 1999 Annual Report on Form 10-K).
3.3 -- By-Laws of Chromatics (incorporated by reference to Exhibit
3.2 to Chromatics' 1999 Annual Report on Form 10-K).
4.1 -- Restated Articles of Incorporation of Chromatics
(incorporated by reference to Exhibit 3.1 to Chromatics'
Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1999).
4.2 -- Certificate of Amendment to Articles of Incorporation of
Chromatics, filed on February 10, 2000 (included in Exhibit
3.2)
5.1 -- Opinion Regarding Legality (to come).
23.1 -- Consent of BDO Seidman, LLP (to come).
23.2 -- Consent of Wiss & Company, LLP (to come).
23.3 -- Consent of Patterson, Belknap, Webb & Tyler LLP (included in
Exhibit 5.1).
24.1 -- Power of Attorney (see page II-3).
</TABLE>
