1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number 0-21168
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-3253392
--------------------------------------------------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
5 East 80th Street, New York, New York 10021
--------------------------------------------------------------------------------
(Address of principal executive offices)
(212) 717-6544
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by
the court. Yes [ ] No [ ] N/A
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of May 1, 2001: 19,033,308
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
---------------- --------------
(unaudited) (Notes 1 and 3)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 6,700 $ 1,379,000
Accounts receivable 72,900 72,900
Inventories 717,400 747,100
Prepaid expenses and other current assets 402,500 296,900
--------------- --------------
Total Current Assets 1,199,500 2,495,900
PROPERTY AND EQUIPMENT - NET 223,400 244,100
SOFTWARE DEVELOPMENT COSTS - NET 209,100 261,400
PATENT COSTS - NET 556,000 581,100
NET ASSETS OF DISCONTINUED OPERATIONS -- 1,000,000
OTHER ASSETS 331,700 331,700
--------------- --------------
$ 2,519,700 $ 4,914,200
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses:
Attorneys and accountants $ 876,400 $ 458,900
Consultants 237,300 141,700
Trade and other 1,383,800 260,100
--------------- --------------
Total Current Liabilities 2,497,500 860,700
--------------- --------------
LONG TERM DEBT:
Amount payable for purchase of Gordon 653,000 653,000
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Class A, Par Value $.01 per share:
Authorized - 1,400,000 shares
Issued and outstanding - 1,380,000
shares at par value and redemption value 13,800 13,800
SHAREHOLDERS' EQUITY (DEFICIENCY)
Preferred Stock 11,788,800 11,510,800
Common Stock, par value $.001 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 19,033,308 (2001)
and 19,033,308 (2000) shares 19,100 19,100
Capital in excess of par value 45,656,400 45,934,400
Accumulated deficit (58,108,900) (54,077,600)
------------ ------------
Total Shareholders' Equity (Deficiency) (644,600) 3,386,700
------------ -----------
$ 2,519,700 $ 4,914,200
================== ===========
See accompanying notes to consolidated financial statements
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
---------------------------------
2001 2000
--------------- ----------------
Revenues:
Sales $ -- $ 38,700
--------------- ----------------
COSTS AND EXPENSES:
Cost of sales -- 20,800
Sales, marketing and trade show costs 243,800 637,400
Medical regulatory expenses 276,400 196,400
Research and development 305,100 294,700
Patent application costs 136,000 56,100
Compensation costs relating to options
granted to consultants (non cash) -- 240,000
Provision for Estimated Payments for
terminated Employees 1,000,000 --
General and administrative:
Compensation - Officers and employees 271,100 228,400
Consultants 133,200 116,000
Legal fees 154,400 187,400
Accounting fees 40,000 69,900
Rent and storage 92,400 78,100
Insurance 72,500 77,700
Repairs and maintenance 20,900 47,500
Depreciation and amortization 126,000 171,400
Payroll taxes 27,300 20,400
Stock administrative fees 29,700 29,300
Public relations 39,500 59,900
Other 65,800 84,200
----------- ---------------
3,034,100 2,615,600
----------- ---------------
OPERATING LOSS (3,034,100) (2,576,900)
------------ ---------------
OTHER INCOME (EXPENSE):
Interest income 2,800 44,800
Interest expense and non-cash
financing costs including $715,000 in
non-cash OID costs in 2000 -- (896,600)
-------------- ---------------
2,800 (851,800)
-------------- ---------------
LOSS FROM CONTINUING OPERATIONS (3,031,300) (3,428,700)
LOSS FROM DISCONTINUED OPERATIONS (Note 3) (1,000,000) --
-------------- ---------------
NET LOSS $ (4,031,300) $ (3,428,700)
=============== ===============
NET LOSS TO COMMON STOCKHOLDERS:
LOSS FROM CONTINUING OPERATIONS $ (3,031,300) $ (3,428,700)
DEEMED DIVIDEND FOR CLASS B, SERIES 2 AND 3 278,000 703,000
CONVERTIBLE PREFERRED STOCK --------------- ---------------
LOSS FROM CONTINUING OPERATIONS TO COMMON
STOCKHOLDERS (3,309,300) (4,131,700)
LOSS FROM DISCONTINUED OPERATIONS (Note 3) (1,000,000) -
---------------- -------------
NET LOSS TO COMMON STOCKHOLDERS $ (4,309,300) $ (4,131,700)
================ =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 19,033,308 15,630,412
================ =============
BASIC AND DILUTED LOSS PER SHARE:
LOSS FROM CONTINUING OPERATIONS $ (0.18) $ (0.26)
LOSS FROM DISCONTINUED OPERATIONS (0.05) --
-------------- ----------------
NET LOSS TO COMMON STOCKHOLDERS $ (0.23) $ (0.26)
============== ================
See accompanying notes to consolidated financial statements
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
Common Stock
--------------------------
Number of Capital in
Preferred Shares Excess of Par Accumulated
Stock Outstanding Par Value Value Deficit
--------------- -------------- ----------- --------------- -----------------
Balances, December 31, 2000 $ 11,510,800 19,033,308 $ 19,100 $ 45,934,400 $ (54,077,600)
Three Months Ended March 31, 2001:
Net Loss - - - (4,031,300)
Deemed dividend on Class B,
convertible preferred stock 278,000 (278,000)
----------------- -------------- ----------- --------------- -----------------
Balances, March 31, 2001 $ 11,788,800 19,033,308 $ 19,100 $ 45,656,400 $ (58,108,900)
================= ============== =========== =============== =================
See accompanying notes to consolidated financial statements
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
------------------------------
2001 2000
---------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations $ (3,031,300) $ (3,428,700)
Loss from discontinued operations (1,000,000) --
Adjustments to reconcile net loss to
net cash flows from operating activities:
Non-cash impairment charge and net change
in net assets of discontinued operations 1,000,000 --
Depreciation and amortization 126,000 171,400
Compensation cost relating to options
granted to consultants -- 240,000
Non-cash interest and financing costs -- 715,000
Changes in operating assets and liabilities:
Accounts receivable -- 776,700
Inventories 29,700 (60,900)
Prepaid expenses and other assets (130,600) 15,300
Accrued interest on senior convertible
debentures -- 175,000
Accounts payable and accrued expenses 1,636,800 (88,500)
------------- ------------
Net cash flows from operating activities (1,369,400) (1,484,700)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized patent costs -- (151,300)
Purchase of property and equipment (2,900) (53,300)
------------- ------------
Net cash flows from investing activities (2,900) (204,600)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock,
net of related costs -- 295,200
Proceeds (payments)of amounts payable to
related party -- (11,400)
Net proceeds from the issuance of preferred
stock and warrants, net of costs -- 3,610,000
------------- -----------
Net cash flows from financing activities -- 3,893,800
------------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (1,372,300) 2,204,500
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 1,379,000 2,790,400
------------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 6,700 $ 4,994,900
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest Paid $ -- $ 6,600
============= =============
See accompanying notes to consolidated financial statements
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
Nature of Report - The consolidated balance sheet at the end of the preceding
fiscal year has been derived from the audited consolidated balance sheet
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 and is presented for comparative purposes. All other financial
statements are unaudited. In the opinion of management, all adjustments, which
include only normal recurring adjustments necessary to present fairly the
financial position, results of operations and changes in cash flows, for all
periods presented have been made. The results of operations for interim periods
are not necessarily indicative of the operating results for the full year.
Footnotes - Certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.
Note 2 - Commitments and Contingencies:
Business Risks - Since its formation in 1984, the Company has been principally
engaged in color science technology research and development and licensing
activities, seeking mass market applications for its proprietary technology and
instrumentation. The Company's business encompasses all of the risks inherent in
the establishment of a new business enterprise, including a limited operating
history with significant competition possessing substantially greater resources.
Current and future operations also depend upon the continued employment of
certain key executives, the ability to further commercialize its proprietary
technology and products and the Company's ability to obtain sufficient revenues
and outside financing.
Operating Difficulties - Since 1989, the Company has incurred losses from
operations and net cash outflows from operations. The Company expects to license
its patents and proprietary technology, sell its equipment and market its
related services and products to ultimately overcome these difficulties.
Although the Company has taken steps to substantially reduce personnel and
ongoing operating expenses, the Company expects that it will continue to incur
costs in connection with the required research and development on its new LED
instrument and technology, complete filings, administration and maintenance for
certain intellectual properties and regulatory requirements; supply updated
products and sales support to its medical distributor; complete FDA filings for
upgrades to its medical products, and explore the possibility of either
renegotiating its current distribution agreement for its medical products or
selling the exclusive rights to its medical products and technology. There can
be no assurance the Company will not continue to incur such losses or will ever
generate revenues at levels sufficient to support profitable operations.
The Company anticipates that it will continue to incur net losses for the
foreseeable future as expenses are incurred in implementing its long-term
business plan.
The Company is currently taking steps to improve operating results and has
initiated a plan to significantly reduce operating costs. The Company is
experiencing a major liquidity crisis and requires an immediate infusion of cash
to continue operations. The Company is seeking additional capital to facilitate
short-term liquidity and is currently reviewing various financing proposals. If
the Company is unable to obtain such short-term financing, or sell its assets to
obtain a cash infusion, it may be forced to seek protection from its creditors
in bankruptcy.
Even if the Company is successful in obtaining this short-term cash infusion,
the Company will require additional future financing to execute its business
plan. If the Company is not able to attract additional future financing,
generate significant revenue from operations and/or successfully market its
products and technologies, it may have to significantly curtail and/or cease
operations and be forced to seek protection from its creditors in bankruptcy.
Legal Proceedings - On January 16, 2001, a lawsuit was commenced against the
Company and Darby Macfarlane in the federal district court for the Southern
District of New York entitled Richard Sommers and Linda Sommers v. Chromatics
Color Sciences International, Inc. and Darby S. Macfarlane. The plaintiffs
allege that certain statements purportedly made by or on behalf of the Company
concerning the Company's success, the extent of use of the ColorMate (Registered
Trademark) System and the Company's cash flow constituted violations of Section
10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated
thereunder and Section 12(a)(2) of the Securities Act of 1933 as well as common
law claims alleging fraudulent misrepresentation, concealment and nondisclosure
and seek unspecified damages in an amount to be proven at trial. On March 1,
2001, the defendants moved to dismiss the complaint for failure to state a claim
upon which relief can be granted, for failure to plead fraud with requisite
particularity and for failure to comply with the statutory requirements for
federal securities fraud claims. No decision has been rendered by the court on
this motion. The defendants believe that the allegations of the complaint are
without merit and intend to vigorously defend this action.
Note 3 - Discontinued Operations:
On June 2, 2000, the Company purchased Gordon Laboratories, Inc. ("Gordon"). Due
to the recent financial results of Gordon and CCSI's inability to continue
funding Gordon, the Company has decided to attempt to sell Gordon. The Company
is currently evaluating proposals related to the sale of Gordon. Accordingly,
results of this operation have been classified as discontinued, and prior
periods have been restated. The net assets of Gordon have been written - down to
zero at March 31, 2001, since the Company cannot predict the ultimate
recoverability of the net assets of Gordon through a sale.
Net sales and loss from the discontinued operation are as follows:
Three months ended March 31, 2001
Net Sales $ 1,167,000
Loss from discontinued operation $ 451,000
Impairment cost $ 549,000
Net Loss from discontinued operation $ 1,000,000
Assets and liabilities from the discontinued operation are as follows:
March 31, 2001 December 31, 2000
Current assets $ 1,883,000 $ 1,821,500
Property and equipment/other assets $ 2,597,000 $ 3,261,100
Current liabilities $ 4,480,000 $ 4,082,600
Long-term liabilities $ 0 $ 0
Net assets of discontinued operation $ 0 $ 1,000,000
Note 4 - Subsequent issuance of Common Stock:
In connection with an "adjustable warrant" issued to a private investor in 2000,
the Company is obligated to issue approximately 936,000 shares of its common
stock to such investor as a result of the first adjustment of such adjustable
warrant which occurred on March 31, 2001. The common shares are expected to be
issued in May 2001.
Note 5 - Employee termination payments
Since March 2001, the Company has terminated many of its employees or has been
unable to pay many of its existing employees. Some of these employees have
employment contracts that provide for severance and other payments upon the
termination of employment or breach in such contracts. Accordingly, the Company
has recorded a $1,000,000 provision for the estimated exposure to these
employees for additional amounts due to them as of March 31, 2001.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company incurred losses from continuing operations of $3,031,300 and
$3,428,700 for the three months ended March 31, 2001 and 2000, respectively.
Loss per share from continuing operations was ($.18) for 2001 and ($.26) for
2000.
The Company incurred losses from Discontinued Operations of $1,000,000 or ($.05)
per share in 2001 due to the decision to dispose of the Gordon operation (See
Note 3).
Sales, marketing and trade show costs were $243,800 for the three months ended
March 31, 2001 as compared to $637,400 in the prior period as the Company has
substantially reduced its medical sales force in 2001. Medical regulatory
expenses were $276,400 for the three months ended March 31, 2001 as compared to
$196,400 in the prior period due to FDA filing costs for upgrades to medical
products and other regulatory requirements.
Research and development costs were $305,100 for the three months ended March
31, 2001 as compared to $294,700 in the prior period. The increase in the
current period is primarily a result of the continuing implementation of the
Company's long-term business plan to seek commercial applications of its
intellectual properties and technologies.
The Company recorded a provision for estimated payments for terminated employees
of $1,000,000.
Compensation - Officers and employees were $271,100 for the three months ended
March 31, 2001 as compared to $228,400 in the prior period. The increase in
these costs is a result of the addition of executive and senior level personnel
to implement the Company's business plan.
Total General and administrative costs were $1,072,800 for the three months
ended March 31, 2001 as compared to $1,170,200 in the prior period. The decrease
is primarily a result of cost reductions initiated by the Company in the last
few weeks of the current period.
Interest and non-cash financing costs were $0 in the three months ended March
31, 2001 as compared to $896,600 in the prior period. The decrease is due to
amortization of original issue discount on senior convertible debentures, which
was fully amortized in prior periods.
Deemed dividend on preferred stock was $278,000 in the three months ended March
31, 2001 as compared to $703,000 in the prior period. The decrease is due to
additional deemed dividend from a new financing in the prior period, which did
not occur in the current period.
Although the Company has substantially reduced personnel and ongoing operating
expenses, the Company expects that if it is successful in raising the necessary
financing to continue operations, it will continue to incur costs in connection
with the required research and development on its new LED instrument and
technology, complete filings, administration and maintenance for certain
intellectual properties and regulatory requirements; supply updated products and
sales support to its medical distributor; complete FDA filings for upgrades to
its medical products, and explore the possibility of either renegotiating its
current distribution agreement for its medical products or selling the exclusive
rights to its medical products and technology.
The Company anticipates that it will continue to incur net losses for the
foreseeable future as expenses are incurred in implementing its long-term
business plan.
LIQUIDITY AND CAPITAL RESOURCES
Current Assets were $1,199,500 at March 31, 2001 as compared to $2,495,900 at
December 31, 2000. This decrease is primarily attributable to a decrease in cash
due to the operating losses.
As indicated in the Consolidated Statement of Cash Flows, the Company continues
to experience significant negative net cash flows from operating activities. The
2001 net cash outflow from operating activities is primarily attributed to the
Company's net loss (partially offset by depreciation and amortization expense
and increases in accounts payable).
The Company lacks funds to continue material aspects of its operations and
business plan, including funds and necessary personnel to complete research and
development on its new LED instrument and technology recently required during
its first mass manufacturing process; complete filings, administration and
maintenance for certain intellectual properties and regulatory requirements;
supply upgraded products and sales support to its medical distributor; and
complete FDA regulatory filings for upgrades to its medical products.
The Company's current objective with regard to its medical business is to arrive
at acceptable revised terms of the existing agreement with the distributor or to
identify a strategic partner in the medical industry to whom the Company could
sell, for an up-front fee and ongoing royalty, the exclusive market rights to
the ColorMate TLc-BiliTest System.
The Company's subsidiary, Gordon, has a note payable to a finance Company
totaling $2,714,700 at December 31, 2000, which is secured by substantially all
of the assets of Gordon. The failure by Gordon to make regularly scheduled
payments in 2001, as well as the failure to pay other amounts due constitutes an
event of default under the loan agreement. The lender has requested full payment
of the loan, which Gordon cannot afford to pay without additional financing.
Gordon is currently negotiating with the lender in an attempt to renegotiate the
loan. The failure of Gordon to successfully renegotiate this financing could
force Gordon to seek protection from its creditors in bankruptcy. The Company is
not responsible for payment of this loan.
The Independent Accountants' Report on the December 31, 2000 financial
statements indicates the Company has incurred recurring losses for the last
several years, including $19,464,400 in 2000 and has experienced significant
problems and delays exploiting its primary technology (medical equipment). In
addition, the Company's subsidiary, Gordon, has defaulted on its debt services
obligations and the lender has demanded payment of the entire debt, which
totaled $2,714,700 at December 31, 2000. The Independent Accountants' Report
states that these matters raise substantial doubt about the Company's ability to
continue as a going concern.
The Company is experiencing a major liquidity crisis and requires an immediate
infusion of cash to continue operations. In addition, the Company's subsidiary
-Gordon, continues to experience cash flow losses. The Company is seeking
additional capital to facilitate short-term liquidity and is currently reviewing
various financing proposals and has taken steps to significantly reduce costs.
If the Company is unable to obtain such short-term financing, or sell its assets
to obtain a cash infusion, it may be forced to seek protection from its
creditors in bankruptcy.
Even if the Company is successful in obtaining this short-term cash infusion,
the Company will require additional future financing to execute its business
plan. If the Company is not able to attract additional future financing,
generate significant revenue from operations and/or successfully market its
products and technologies, it may have to significantly curtail and/or cease
operations and be forced to seek protection from its creditors in bankruptcy.
The Company is currently negotiating proposals for financing the Company. Such
proposals require negotiation of warrants to purchase CCSI's stock and are
subject to satisfactory completion of due diligence, negotiation, execution and
delivery of definitive agreements by and between the parties, and compliance
with NASDAQ listing requirements.
Some of the information presented in or incorporated by reference in this report
constitutes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions, within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include, among other things:
(I) the inability of the Company to resolve the current liquidity crisis, (ii)
the inability of the Company to secure additional financing, (iii) the failure
of the Company to implement its business plan for various applications of its
technologies, including medical and industrial technologies, (iv) government
regulation and (v) the loss of key personnel.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No disclosure is required under this Item 3.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 16, 2001, a lawsuit was commenced against the Company and Darby
Macfarlane in the federal district court for the Southern District of New York
entitled Richard Sommers and Linda Sommers v. Chromatics Color Sciences
International, Inc. and Darby S. Macfarlane. The plaintiffs allege that certain
statements purportedly made by or on behalf of the Company concerning the
Company's success, the extent of use of the ColorMate (Registered Trademark)
System and the Company's cash flow constituted violations of Section 10(b) of
the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder
and Section 12(a)(2) of the Securities Act of 1933 as well as common law claims
alleging fraudulent misrepresentation, concealment and nondisclosure and seek
unspecified damages in an amount to be proven at trial. On March 1, 2001, the
defendants moved to dismiss the complaint for failure to state a claim upon
which relief can be granted, for failure to plead fraud with requisite
particularity and for failure to comply with the statutory requirements for
federal securities fraud claims. No decision has been rendered by the court on
this motion. The defendants believe that the allegations of the complaint are
without merit and intend to vigorously defend this action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company's subsidiary, Gordon, has a note payable to a finance Company
totaling $2,714,700 at December 31, 2000, which is secured by substantially all
of the assets of Gordon. The failure by Gordon to make regularly scheduled
payments in 2001, as well as the failure to pay other amounts due constitutes an
event of default under the loan agreement. The lender has requested full payment
of the loan, which Gordon cannot afford to pay without additional financing.
Gordon is currently negotiating with the lender in an attempt to renegotiate the
loan. The failure of Gordon to successfully renegotiate this financing could
force Gordon to seek protection from its creditors in bankruptcy. The Company is
not responsible for payment of this loan.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
Date: May 21, 2001 By: /s/ Darby S. Macfarlane
---------------------------
Darby S. Macfarlane
Chairman and Chief Technology Officer
Date: May 21, 2001 By: /s/ Frank Marchese
---------------------------
Frank Marchese
Chief Financial and Principal
Accounting Officer