SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary proxy statement / / Confidential, For Use of the
Commission Only (as permitted
/ / Definitive proxy statement by Rule 14a-6(e)(2))
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Payment of filing fee (Check the appropriate box):
/x/ No fee required
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 15, 2001
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The Special Meeting of Shareholders of Chromatics Color Sciences
International, Inc. (the "Company"), a New York corporation, will be held at the
Legends Hotel & Resort, located at Route 17 North, near the intersection of
Route 94 North, in McAfee, New Jersey 07428, on Wednesday, August 15, 2001, at
10:00 A.M., for the following purposes:
1. To obtain shareholder approval for the issuance of up to 430,000,000 shares
of the Company's common stock pursuant to one or more financing transactions, to
comply with Nasdaq's listing maintenance standards;
2. To obtain shareholder approval for an amendment to the Company's Certificate
of Incorporation to effect a one share for up to thirty shares reverse stock
split of the Company's issued and outstanding shares of common stock;
3. To obtain shareholder approval for an amendment to the Company's Certificate
of Incorporation to increase the number of authorized shares of common stock,
$.001 par value per share, from 50,000,000 to 450,000,000; and
4. To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
The approval and adoption of each matter to be presented to the
shareholders is independent of the approval and adoption of each other matter to
be presented to the shareholders, with the exception that the financing
transactions contemplated by Proposal 1 cannot be consummated without the
approval of Proposal 3. Only shareholders of record at the close of business on
July 6, 2001 are entitled to notice of and to vote at the meeting, including any
adjournments or postponements thereof.
By order of the Board of Directors
Darby S. Macfarlane
Chairperson of the Board of Directors
New York, New York
July 23, 2001
IMPORTANT:
Whether or not you expect to attend in person, we urge you to sign, date,
and return the enclosed Proxy at your earliest convenience. This will ensure the
presence of a quorum at the meeting. PROMPTLY SIGNING, DATING, AND RETURNING THE
PROXY WILL SAVE THE COMPANY THE EXPENSES AND EXTRA WORK OF AN ADDITIONAL
SOLICITATION. An addressed envelope for which no postage is required if mailed
in the United States is enclosed for that purpose. Sending in your proxy will
not prevent you from voting your stock at the meeting if you desire to do so, as
your Proxy is revocable at your option.
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
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PROXY STATEMENT
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FOR SPECIAL MEETING OF SHAREHOLDERS
AUGUST 15, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CHROMATICS COLOR SCIENCES INTERNATIONAL,
INC., a New York corporation (the "Company"), for use at the Special Meeting of
Shareholders of the Company (the "Meeting") which will be held at the Legends
Hotel & Resort, located at Route 517 North, near the intersection of Route 94
North, in McAfee, New Jersey 07428, on Wednesday, August 15, 2001, at 10:00
A.M., including any adjournments or postponements thereof.
Shareholders who execute proxies retain the right to revoke them at any
time by notice in writing to the Secretary of the Company, by revocation in
person at the Meeting or by presenting a later dated proxy. Unless so revoked,
the shares represented by such proxies will be voted at the Meeting in
accordance with the directions given therein. Shareholders vote at the Meeting
by casting ballots (in person or by proxy), which are tabulated by a person who
is appointed by the Board of Directors before the Meeting to serve as inspector
of election at the Meeting and who has executed and verified an oath of office.
Under New York law and the Company's Bylaws, the presence in person or by proxy
of a majority of the outstanding shares of the Company's common stock is
necessary to constitute a quorum at the Meeting. Abstentions and broker
"non-votes" are included in the determination of the number of shares present at
the Meeting for quorum purposes but are not counted in the tabulations of the
votes cast on proposals presented to shareholders. A broker "non-vote" occurs
when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner.
The principal executive offices of the Company are located at 5 East 80th
Street, New York, New York 10021. The approximate date on which this Proxy
Statement and the enclosed form of proxy will first be sent or given to
shareholders is July 23, 2001.
Shareholders of record of the common stock at the close of business on July
6, 2001 shall be entitled to one vote for each share then held. On July 6, 2001,
there were 19,991,952 shares of common stock issued and outstanding.
Only shareholders of record at the close of business on July 6, 2001 are
entitled to notice of and to vote at the meeting, including any adjournments or
postponements thereof.
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PROPOSAL 1 -
FINANCING TRANSACTIONS
Proposal
We are seeking shareholder approval of the issuance by the Company of up to
430,000,000 shares of common stock pursuant to one or more proposed financings,
including a possible private placement, rights offering, and/or other potential
offerings and the previously consummated Gordon Transaction, as hereinafter
defined (collectively, the "Financing").
Reasons for the Financing
The Company's common stock is quoted on the Nasdaq SmallCap Market under
our current symbol "CCSI." In order for the common stock to continue to be
quoted on the Nasdaq Stock Market, the Company must satisfy various listing
maintenance standards established by Nasdaq.
Under Nasdaq's listing maintenance standards, if the Company fails to
maintain a minimum net tangible book value, then Nasdaq may delist the Company's
common stock from trading on the Nasdaq Stock Market. If a delisting were to
occur, the Company's common stock would trade on the OTC Bulletin Board or in
the "pink sheets" maintained by the National Quotation Bureau, Inc.
The Company received letters from Nasdaq advising that the Company had not
met Nasdaq's minimum net tangible book value requirement and subsequently
notified the Company that its common stock would be delisted. The Company has,
however, applied to Nasdaq for a hearing, and the delisting is stayed pending
the hearing. The hearing is scheduled for August 16, 2001.
The Company believes that the Financing will increase the net tangible book
value of the Company so that it may comply with the Nasdaq listing standards.
Furthermore, the Company believes that maintaining the Nasdaq SmallCap Market
listing may provide it with a broader market for its common stock and facilitate
the use of the common stock in financing transactions in which the Company may
engage.
In addition, the Company is undertaking the financing to secure additional
capital for its operations. The Company's Board of Directors has considered the
potential harm to it of a delisting from Nasdaq, and has determined that the
Financing is the best way of achieving compliance with Nasdaq's listing
standards. THERE CAN BE NO ASSURANCE, HOWEVER, THAT THE FINANCING WILL HAVE ANY
OF THE FOREGOING EFFECTS.
The proposed Financing will result in substantial dilution of the relative
proportionate voting and economic interests of all shareholders of record.
Reason for Requesting Your Approval
Nasdaq Rule 4350(i)(1)(D)(ii) requires shareholder approval prior to the
issuance by the Company of securities under certain circumstances, including in
connection with a transaction, other than a public offering, involving the sale
or issuance of common stock, or securities convertible into or exercisable for
common stock, equal to 20% or more of our common stock or 20% or more of the
voting power outstanding before the issuance at a price (or in the case of
convertible securities, a conversion price) less than the greater of the book or
market value of our common stock.
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We currently expect the issuance of shares of common stock in the Financing
to exceed 20% of our outstanding common stock. Because the Financing involves
the issuance of shares representing more than 20% of our outstanding common
stock and the purchase price of the shares would be less than the book value of
our common stock, the Company is seeking shareholder approval to ensure
compliance with Nasdaq's 20% rule. Shareholder approval of the Financing is not
otherwise required by New York law or other applicable laws or rules or by our
Certificate of Incorporation or bylaws.
In addition, on July 2, 2001, the Company entered into separate warrant
agreements (the "2001 Warrants") with each of GAC-LABS, LLC ("GAC-LABS") and
Abilene Investments Corp. ("Abilene"), respectively (the "Gordon Transaction").
The warrant agreement with GAC-LABS provides that GAC-LABS may acquire 1,600,000
shares of the Company's common stock upon the exercise of its warrants. If,
however, the Company consummates certain financing transactions within a
specified period, then the total number of shares of common stock that GAC-LABS
may acquire increases from 1,600,000 to 8,960,000 and the total number of shares
of common stock that Abilene may acquire upon the issuance of the 2001 Warrants
increases from 400,000 to 2,240,000. The consummation of the Financing and the
Gordon Transaction will also result in the issuance to Janssen Partners, Inc. of
16,000,000 warrants to purchase the Company's common stock, subject to
shareholder approval of the issuance of such additional shares. In addition, the
consummation of the Financing will decrease the exercise price of the warrants
of both GAC-LABS and Abilene from $.50 per share to $.10 per share. In
connection with the transactions contemplated by the 2001 Warrants, the Company
also agreed to issue warrants to GAC-LABS and Abilene to purchase up to an
aggregate of 4,800,000 shares of common stock, subject to shareholder approval
of the issuance of such shares and the consummation of the Financing.
Furthermore, shareholders should take note that if any number of shares are
sold under the Financing under the terms contemplated, then the holders of
certain outstanding securities of the Company will be entitled to acquire
additional shares of common stock, thus causing additional dilution to the
voting rights and ownership of the existing holders of common stock.
Conditions to the Financing
The Financing is expressly conditioned upon shareholder approval to
increase our authorized shares of common stock from 50,000,000 to 450,000,000
(as described in Proposal 3) and approval of the issuance of up to 430,000,000
shares of common stock in the Financing by our shareholders. Without the
amendment to the Certificate of Incorporation, we would not have enough shares
of common stock authorized for issuance in the maximum amount of the Financing.
If shareholder approval for the increase in authorized common stock and the
issuance of up to 430,000,000 shares of common stock in the Financing is not
obtained, we will be unable to consummate the Financing in its entirety. The
Company intends to consummate the Financing regardless of the amount of shares
that are sold.
Vote Required and Recommendation of Board
The minimum vote which will constitute shareholder approval of the issuance
of up to 430,000,000 shares of common stock in the Financing shall be a majority
of all votes cast on the proposal in person or by proxy. OUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE ISSUANCE OF UP TO
430,000,000 SHARES OF COMMON STOCK IN THE FINANCING. PROXIES SOLICITED BY THE
BOARD WILL BE VOTED FOR THIS PROPOSAL UNLESS INSTRUCTIONS TO THE CONTRARY ARE
GIVEN. NOTWITHSTANDING THE APPROVAL OF THE PROPOSAL BY THE SHAREHOLDERS OF THE
COMPANY, THE BOARD MAY ELECT NOT TO CONSUMMATE THE FINANCING IF THE BOARD
DETERMINES THAT CONSUMMATING THE FINANCING WOULD NOT BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS SHAREHOLDERS.
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PROPOSAL 2 -
AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO EFFECT REVERSE STOCK SPLIT
Proposal
The Board has unanimously approved, and recommends to the holders of the
common stock that they approve, a one-for-up to thirty reverse stock split of
the common stock (the "Reverse Stock Split"). If approved by the shareholders,
the Reverse Stock Split may be effected in the manner described below at the
sole option of the Board.
Reasons for Proposed Reverse Stock Split
The Company's common stock is quoted on the Nasdaq SmallCap Market under
our current symbol "CCSI." In order for the common stock to continue to be
quoted on the Nasdaq Stock Market, the Company must satisfy various listing
maintenance standards established by Nasdaq.
Under Nasdaq's listing maintenance standards, if the closing bid price of
the Company's common stock is under $1.00 per share for thirty consecutive
trading days and does not thereafter regain compliance with the rule during the
ninety calendar days following notification by Nasdaq, Nasdaq may delist the
Company's common stock from trading on the Nasdaq Stock Market. If a delisting
were to occur, the Company's common stock would trade on the OTC Bulletin Board
or in the "pink sheets" maintained by the National Quotation Bureau, Inc.
The Company received letters from Nasdaq advising that the Company's stock
had not met Nasdaq's minimum bid price closing requirement for thirty
consecutive trading days and that, if the Company were unable to demonstrate
compliance with this requirement during the ninety calendar days ending June 25,
2001, its common stock would be delisted. Nasdaq subsequently notified the
Company that its stock would be delisted. The Company has, however, applied to
Nasdaq for a hearing, and the delisting is stayed pending the hearing. The
hearing is scheduled for August 16, 2001.
The Company believes that the Reverse Stock Split will improve the price
level of the common stock so that it will be able to comply with the Nasdaq
listing standards. The Company also believes that the higher share price that
should result from the Reverse Stock Split will help generate interest among
investors. Furthermore, the Company believes that maintaining the Nasdaq
SmallCap Market listing may provide it with a broader market for its common
stock and facilitate the use of the common stock in financing transactions in
which the Company may engage. The Company's Board of Directors has considered
the potential harm to it of a delisting from Nasdaq, and has determined that the
Reverse Stock Split is the best way of achieving compliance with Nasdaq's
listing standards.
For the reasons set forth above, the Board believes that the Reverse Stock
Split is in the best interests of the Company and its shareholders. The Company
cannot assure you that the Reverse Stock Split will have any of the foregoing
effects. The Company anticipates that, following consummation of the Reverse
Stock Split, the common stock will trade at a price per share that is higher
than the current market price per share of the common stock. HOWEVER, THERE CAN
BE NO ASSURANCE THAT THE TOTAL MARKET CAPITALIZATION AND AGGREGATE VALUE OF THE
PUBLIC FLOAT OF THE common stock AFTER THE PROPOSED REVERSE STOCK SPLIT WILL BE
EQUAL TO THE TOTAL MARKET CAPITALIZATION AND THE AGGREGATE VALUE OF THE PUBLIC
FLOAT BEFORE THE PROPOSED REVERSE STOCK SPLIT OR THAT THE MARKET PRICE OF THE
COMMON STOCK FOLLOWING THE REVERSE STOCK SPLIT WILL EITHER EXCEED OR REMAIN IN
EXCESS OF THE CURRENT MARKET PRICE OF THE COMMON STOCK. IN SOME CASES, THE TOTAL
MARKET CAPITALIZATION OF A COMPANY FOLLOWING A REVERSE STOCK SPLIT IS LOWER, AND
MAY BE SUBSTANTIALLY LOWER, THAN THE TOTAL MARKET CAPITALIZATION OF THE COMPANY
BEFORE THE REVERSE STOCK SPLIT. IN ADDITION, THE FEWER NUMBER OF SHARES THAT
WILL BE AVAILABLE TO TRADE WILL CAUSE THE TRADING MARKET OF THE common stock TO
BECOME LESS LIQUID, WHICH COULD HAVE AN ADVERSE EFFECT ON THE PRICE OF THE
common stock.
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Procedure for Reverse Stock Split
Upon the approval of this proposal by the shareholders of the Company and
at the election of the Board, the proposed Certificate of Amendment of the
Company's Certificate of Incorporation (the "Certificate of Amendment"), as set
forth in ANNEX A to this Proxy Statement, will be filed with the Secretary of
State of the State of New York to effectuate the Reverse Stock Split. Except for
any changes as a result of the repurchase by the Company of fractional shares,
each shareholder of the Company will hold the same percentage of common stock
outstanding immediately following the Reverse Stock Split as such shareholder
did immediately prior to the Reverse Stock Split. Subject to the receipt of the
requisite shareholder approval, the Reverse Stock Split would be effective on
the date on which the Certificate of Amendment is filed with the Secretary of
State of the State of New York (the "Effective Date"), which is expected to
occur promptly following the Meeting. At the Effective Date, each up to thirty
shares of common stock issued and outstanding will, automatically and without
further action by the Board or shareholders of the Company, be reclassified and
converted into one share of common stock. Fractional shares will not be issued
as a result of the Reverse Stock Split, but will be repurchased by the Company
for cash at the current fair market value of the fractional share interest. The
cash payment for the fractional share interest will be calculated by multiplying
the fractional share by the fair market value per share of common stock, which
will be the closing sale price per share of common stock on the Nasdaq SmallCap
Market (or any other listing or quotation system on which the shares of common
stock are then listed or quoted) on the trading day prior to the Effective Date.
Immediately after the effectiveness of the Reverse Stock Split, each
shareholder would own a fraction (depending on the magnitude of the Reverse
Stock Split) of the aggregate number of shares of common stock such shareholder
owned immediately prior to the Reverse Stock Split, but will own the same
percentage of the outstanding shares of common stock of the Company, except for
the effects of the Company's repurchase of fractional share interests at the
then current fair market value. The number of shares of common stock that may be
purchased upon the exercise or conversion of outstanding options, warrants, and
other securities convertible into or exchangeable for shares of common stock of
the Company (collectively, the "Convertible Securities") and the per share
exercise or conversion price per share will be adjusted appropriately so that,
as of the Effective Date, the aggregate number of shares of common stock
issuable in respect of Convertible Securities immediately following the
Effective Date will be equal to the aggregate number of shares issuable in
respect thereof immediately prior to the Effective Date multiplied by a fraction
the numerator of which is 1 and the denominator of which is the number of
shares which are converted into one share in the Reverse Stock Split, and the
aggregate exercise and conversion prices thereunder will remain unchanged. As a
result of the Reverse Stock Split, certain shareholders may own "odd lots" of
fewer than one hundred (100) shares of common stock. Brokerage commissions and
other costs of transactions for odd lots may be higher than for "round lot"
transactions, particularly on a per-share basis. The par value of the common
stock of $.001 per share will remain unchanged as a result of the Reverse Stock
Split. The aggregate number of outstanding shares of common stock immediately
prior to the Effective Date will be reduced by the aggregate number of shares
converted in the Reverse Stock Split and by such additional number to account
for the repurchase by the Company of fractional share interests that otherwise
would result from the Reverse Stock Split. Accordingly, the aggregate par value
of the issued and outstanding shares of common stock, and therefore the stated
capital associated with the common stock, will be reduced, and the additional
paid-in capital (capital paid in excess of the par value) will be increased in a
corresponding amount for statutory and accounting purposes. If the Reverse Stock
Split is effected, all share and per-share information in the Company's
financial statements will be restated to reflect the Reverse Stock Split for all
periods presented in future filings after the Effective Date with the Securities
and Exchange Commission and the Nasdaq Stock Market.
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Exchange of Stock Certificates; No Fractional Shares
If the Reverse Stock Split is approved by the shareholders of the Company,
the combination and reclassification of shares of common stock pursuant to the
Reverse Stock Split will automatically occur on the Effective Date without any
further action on the part of the shareholders and regardless of the date on
which the certificates representing the share of common stock are physically
surrendered to the Company for exchange. Every up to thirty issued and
outstanding shares of common stock would be converted and reclassified into one
share of common stock in the Reverse Stock Split, and any fractional share
interests resulting from such reclassification and combination would be
repurchased by the Company for cash at a price equal to the fair market value of
the common stock multiplied by such fractional share interest. The "fair market
value" of the common stock means the closing price per share as reported on the
Nasdaq SmallCap Market (or on such other quotation system or exchange on which
the common stock is then quoted or listed for trading) on the business day
immediately preceding the Effective Date. The ownership of a fractional share
interest in a share of common stock will not give the holder thereof any voting,
dividend or other rights except the right to receive payment therefore as
described herein.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of common stock for use in forwarding to the
Company stock certificates for surrender and exchange for certificates
representing the number of shares of common stock to which such holder is
entitled and the cash payment (to be paid by check) for any fractional share
interest. The transmittal forms will be accompanied by instructions specifying
the details of the exchange. Upon receipt of the transmittal form, each
shareholder should surrender the certificates representing shares of common
stock prior to the effectiveness of the Reverse Stock Split, in accordance with
the applicable instructions. Each holder who surrenders certificates will
receive new certificates representing the whole number of shares of common stock
to which such holder is entitled as a result of the Reverse Stock Split, and a
check for the cash payment to which such holder is entitled as a result of the
repurchase by the Company of fractional share interests, if any. SHAREHOLDERS
SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM
FROM THE COMPANY.
As of the Effective Date, each certificate representing shares of common
stock outstanding prior to the Effective Date (an "existing certificate") will
be deemed only to evidence ownership of the number of shares of common
stock into which the shares of common stock evidenced by such existing
certificates have been converted by the Reverse Stock Split.
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Federal Income Tax Consequences
The following is a summary of the material federal income tax consequences
to shareholders of the Company of the Reverse Stock Split. The following summary
discussion is based upon the Internal Revenue Code of 1986 (the "Code"),
treasury regulations thereunder, judicial decisions, and current administrative
rulings and practices, all as in effect on the date hereof and all of which
could be repealed, overruled, or modified at any time, possibly with retroactive
effect. There can be no assurance that such changes will not adversely affect
the matters discussed in this summary. No ruling from the Internal Revenue
Service ("IRS") with respect to the matters discussed herein has been requested,
and there is no assurance that the IRS would agree with the conclusions set
forth in this discussion. This discussion may not address certain federal income
tax consequences that may be relevant to particular shareholders in light of
their personal circumstances or to certain types of shareholders (such as
dealers in securities, insurance companies, foreign individuals and entities,
financial institutions, and tax-exempt entities) who may be subject to special
treatment under the federal income tax laws. This discussion also does not
address any tax consequences under state, local or foreign laws. SHAREHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
THEM OF THE REVERSE STOCK SPLIT.
The Company believes that the Reverse Stock Split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code and as a
stock-for-stock exchange under Section 1036(a) of the Code. As a result, the
Company believes that no gain or loss should be recognized by a shareholder in
the Reverse Stock Split, except with respect to any cash received in lieu of
fractional share interests. The aggregate tax basis of the shares of common
stock held by a shareholder following the Reverse Stock Split will equal the
shareholder's aggregate basis in the common stock held immediately prior to the
Reverse Stock Split. Generally, the aggregate tax basis will be allocated among
the shares of common stock held following the Reverse Stock Split on a pro rata
basis. Shareholders who have used the specific identification method to identify
their basis in shares of common stock combined in the Reverse Stock Split should
consult their own tax advisors to determine their basis in the shares of common
stock received in exchange in the Reverse Stock Split. Shares of common stock
received should have the same holding period as the common stock surrendered.
Each shareholder who receives cash, if any, in lieu of fractional share
interests will recognize capital gain or loss equal to the difference between
the amount of cash received and the shareholder's tax basis allocable to such
fractional shares.
This summary is provided for general information only and does not purport
to address all aspects of the possible federal income tax consequences of the
Reverse Stock Split and is not intended as tax advice to any person. Each
shareholder should consult his or her tax advisor regarding the specific tax
consequences of the proposed transaction to such shareholder, including the
application and effect of state, local and foreign income and other tax laws. It
is the responsibility of each shareholder to obtain and rely on advice from his
or her personal tax advisor with respect to the effect of the Reverse Stock
Split on his or her personal tax situation, the effect of possible future
legislation and regulations, and the reporting of information required in
connection with the Reverse Stock Split on his or her own tax returns. It also
will be the responsibility of each shareholder to prepare and file appropriate
tax returns.
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Vote Required and Recommendation of Board
The proposal for the Reverse Stock Split shall be adopted if approved by a
majority of all outstanding shares of common stock entitled to vote at the
Meeting. If this proposal is approved by the shareholders, it will become
effective if the Company files the Certificate of Amendment with the Secretary
of State of the State of New York. IF THIS PROPOSAL IS NOT APPROVED, THE REVERSE
STOCK SPLIT WILL NOT BE IMPLEMENTED. THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE PROPOSED CERTIFICATE OF AMENDMENT TO
EFFECT THE REVERSE STOCK SPLIT. Notwithstanding the approval of the proposal by
the shareholders of the Company, the Board may elect not to file, or to delay
the filing of, the Certificate of Amendment if the Board determines that filing
the Certificate of Amendment would not be in the best interests of the Company
and its shareholders.
PROPOSAL 3 -
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT
INCREASE IN SHARES OF AUTHORIZED common stock
Proposal
The Board of Directors recommends that the Company increase its shares of
authorized common stock. At present, the Company's Certificate of Incorporation,
as amended, authorizes the issuance of 50,000,000 shares of common stock, par
value $.001 per share. The Board of Directors proposes to amend the Company's
Certificate of Incorporation to authorize the issuance of 450,000,000 shares of
common stock, par value $.001 per share.
Reasons for the Increase in Authorized Common Shares
As described in Proposal 1, the Company plans to conduct a Financing to
issue up to 430,000,000 of shares of the Company's common stock. As of July 6,
2001, there were 19,991,952 shares of common stock issued and outstanding and
30,008,046 shares were authorized but unissued. The primary purposes for
authorizing the additional shares of common stock is to have sufficient shares
of common stock available to consummate the Financing and to reserve additional
shares for the issuance under any options, warrants or convertible securities
which have been issued or will be issued or changed as a result of the
Financing. Accordingly, the Board wishes to increase the Company's authorized
shares of common stock to enable the Company to effectuate the Financing.
In addition to the contemplated Financing, other considerations for
requesting the authorizing of additional shares of our common stock include:
effecting acquisitions of other business or properties, establishing strategic
relationships with other companies, securing additional financing for our
operations through the issuance of additional shares or other equity-based
securities, providing equity incentives to employees, officers or directors, and
additional flexibility to declare stock splits or dividends. By increasing the
authorized shares beyond what is required for the Financing now, we do not have
to obtain further shareholder approval unless required by applicable law or
regulation. The flexibility inherent in having the authority to issue shares of
common stock, will, in the opinion of the Board of Directors, be advantageous to
the Company in any future negotiations involving the issuance of such stock.
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If this proposal is adopted, no additional action or authorization by the
Company's shareholders will be necessary for the issuance of such additional
shares, unless required by applicable law or regulation, or unless deemed
desirable or advisable by the Board of Directors. The increase in the authorized
shares of common stock of the Company will not, in and of itself, affect rights
of holders' shares of common stock that are presently issued and outstanding.
Under the Company's Certificate of Incorporation, as amended, the shareholders
of the Company do not have preemptive rights with respect to common stock. Thus,
if the Board of Directors elects to issue additional shares of common stock,
existing shareholders would not have any preferential rights to purchase such
additional shares of stock.
At present, all outstanding shares of common stock are fully paid and
nonassessable. Each share of the outstanding common stock is entitled to
participate equally in dividends as and when declared by the Board of Directors
and is entitled to participate equally in any distribution of net assets made to
the shareholders upon liquidation of the Company. There are no redemption,
sinking fund, conversion or preemptive rights with respect to the shares of
common stock. All shares of common stock have equal rights and preferences. The
holders of common stock are entitled to one vote for each share held of record
on all matters voted upon by shareholders and may not cumulate votes for the
election of directors. The Company has not declared or paid any cash dividends
on the common stock and does not intend to pay any dividends for the foreseeable
future.
Vote Required and Recommendation of Board
The proposal for the increase in authorized common stock shall be adopted
if approved by a majority of all outstanding shares of common stock entitled to
vote at the Meeting. If this proposal is approved by the shareholders, it will
become effective if the Company files the Certificate of Amendment with the
Secretary of State of the State of New York. IF THIS PROPOSAL IS NOT APPROVED,
THE INCREASE IN AUTHORIZED COMMON STOCK WILL NOT BE IMPLEMENTED. THE BOARD
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE INCREASE
IN AUTHORIZED COMMON STOCK. Notwithstanding the approval of the proposal by the
shareholders of the Company, the Board may elect not to file, or to delay the
filing of, the Certificate of Amendment if the Board determines that filing the
Certificate of Amendment would not be in the best interests of the Company and
its shareholders.
ADDITIONAL DISCLOSURE ITEMS
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of July 6, 2001, the beneficial
ownership of the common stock: (i) by each shareholder known by the Company to
beneficially own more than 5% of the common stock; (ii) by each director of the
Company; (iii) by the Company's Acting Chief Executive Officer; and (iv) by all
executive officers and directors of the Company as a group. Amounts presented
give effect to the February 1998 three-for-two forward stock split (the "1998
Stock Split") (including shares issuable upon the exercise of stock options
and/or warrants). Except as otherwise indicated below, each named beneficial
owner has sole voting and investment power with respect to the shares of common
stock listed.
-12-
================================================================================
Name and Address of common stock Percent of
Beneficial Owner Number of Shares Class
--------------------------------------------------------------------------------
Darby Simpson Macfarlane 2,611,895(1) 12.01%
10 Old Jackson Avenue, #28
Hastings-on-Hudson, NY 10706
David Kenneth Macfarlane 2,611,895(2) 12.01%
5 East 80th Street
New York, NY 10021
Brian T. Fitzpatrick 199,033(3) *
c/o Gordon Laboratories, Inc.
751 East Artesia Boulevard
Carson, CA 90746
Leslie Foglesong 265,000(4) 1.31%
116 Lafayette Avenue
Brooklyn, NY 11217
Edmund Vimond 50,833(5) *
6967 Country Lakes Circles
Sarasota, FL 34243
Edward Mahoney 50,833(6) *
2044 Palisades Drive
Pacific Palisades, CA 90272
James Berquist 6,000 *
c/o Chromatics Color Sciences
International, Inc.
5 East 80th Street
New York, NY 10021
Robert Shapiro 51,000 *
c/o Chromatics Color Sciences
International. Inc.
5 East 80th Street
New York, NY 10021
Gary W. Schreiner 1,498,967(7) 7.06%
2126 Melvin Drive
Rock Falls, IL 61071
LB I Group, Inc. 2,163,951(8) 9.77%
3 World Financial Center
New York, NY 10285
-13-
TABLE (continued)
================================================================================
Name and Address of common stock Percent of
Beneficial Owner Number of Shares Class
--------------------------------------------------------------------------------
Janssen Partners, Inc. 1,636,250(9) 7.79%
1345 Old Northern Blvd.
Roslyn, NY 11576
Crescent International, Ltd. 1,581,304(10) 7.80%
c/o The Robinson-Humphrey
Company LLC
3333 Peachtree Road, N.E
Atlanta, GA 30326
--------------------------------------------------------------------------------
All directors and executive 5,846,489 24.43%
officers as a group (8 persons)
================================================================================
* Indicates less than 1%.
(1) Includes 861,895 issued and outstanding shares of the common stock
beneficially owned by Mrs. Macfarlane, 1,000,000 warrants which are
currently exercisable, 450,000 shares issuable upon the exercise of options
granted to Mrs. Macfarlane and 300,000 shares issuable upon the exercise of
options granted to Mr. Macfarlane which options are currently exercisable.
As a result of a certain voting agreement between them, Mrs. Macfarlane is
entitled to sole voting power and sole power of disposition over all shares
of common stock held or acquired by Mr. Macfarlane.
(2) Includes 861,895 issued and outstanding shares of common stock and
1,000,000 warrants which are currently exercisable beneficially owned by
Mrs. Macfarlane, 450,000 shares issuable upon the exercise of options
granted to Mrs. Macfarlane and 300,000 shares issuable upon the exercise of
options granted to Mr. Macfarlane which options are currently exercisable.
(3) Includes 83,333 shares of common stock issuable upon the exercise of
options, which are currently exercisable.
(4) Includes 250,000 shares of common stock issuable upon the exercise of
options which are currently exercisable.
(5) Represents 50,833 shares of common stock issuable upon the exercise of
options which are currently exercisable.
(6) Represents 50,833 shares of common stock issuable upon the exercise of
options which are currently exercisable.
-14-
(7) Represents 1,298,167 shares of common stock issuable upon the conversion of
Class B Series 5 Convertible Preferred Stock and 200,000 shares of common
stock issuable upon the exercise of warrants which are currently
exercisable.
(8) Represents 1,388,889 shares of common stock issuable upon the conversion of
Class B Series 2 and Class B Series 3 Convertible Preferred Stock and
775,062 shares of common stock issuable upon the exercise of currently
exercisable warrants.
(9) Represents 636,250 shares of common stock held by Peter Janssen (an
affiliate of Janssen Partners, Inc.), and 1,000,000 warrants which are
currently exercisable.
(10) Includes 270,000 warrants which are currently exercisable.
Other Business
The Board of Directors of the Company does not intend to present, and does
not have any reason to believe that others intend to present, any matter or
business at the Meeting other than that set forth in the accompanying Notice of
Special Meeting of Shareholders. If, however, other matters properly come before
the Meeting, it is the intention of the persons named in the enclosed form of
proxy to vote any proxies in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other materials which may be
sent to shareholders in connection with the solicitation. Solicitation may be
made by mail, telephone and personal interview. The Company may reimburse
persons holding shares in their names or in the names of nominees for their
reasonable expenses in sending proxies and proxy materials to their principals.
Darby S. Macfarlane
Chairperson of the Board of Directors
New York, New York
July 23, 2001
-15-
PROXY
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
This Proxy Is Solicited on Behalf of the Board of Directors
The undersigned shareholder of Chromatics Color Sciences International,
Inc. (the "Company") hereby appoints Darby S. Macfarlane and Leslie Foglesong,
or either of them, attorneys and proxies, with full power of substitution, to
represent the undersigned and vote all shares of the common stock of the Company
which the undersigned is entitled to vote, with all powers the undersigned would
possess if personally present, at the Special Meeting of Shareholders of the
Company to be held at the Legends Hotel & Resort, located at Route 517 North,
near the intersection of Route 94 North, in McAfee, New Jersey 07428, at 10:00
A.M., on Wednesday, August 15, 2001, with respect to the proposals hereinafter
set forth and upon such other matters as may properly come before the Meeting
and any adjournments thereof.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 THROUGH
3, AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS WHICH
MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF. THE
UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING PROXY STATEMENT.
PROPOSAL 1. Financing. The issuance of up to 430,000,000 shares of the
Company's common stock pursuant to one or more financing transactions, to
comply with Nasdaq's listing maintenance standards.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 2. Reverse Stock Split. Amendment of the Company's
Certificate of Incorporation to effect a one share for up to thirty shares
reverse stock split of the Company's issued and outstanding shares of
common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3. Increase Shares of Authorized common stock. Amendment of
the Company's Certificate of Incorporation to increase the number of
authorized common stock to 450,000,000 shares of common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
-16-
PROPOSAL 4. All Other Business. To vote, in the discretion of the
Proxies, on such other matters as might properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
IF SHARES ARE HELD BY JOINT TENANTS, BOTH HOLDERS
SHOULD SIGN.
Dated: , 2001
-------------------------------------------
Signature:
-------------------------------------------
Print Name:
-------------------------------------------
Signature if held jointly:
-------------------------------------------
NOTE: When shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee, custodian,
guardian or corporate officer, please give
your full title as such. If a corporation,
please sign full corporate name by
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY
-17-
ANNEX "A"
Certificate of Incorporation
-18-
CERTIFICATE OF INCORPORATION
OF
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
-------------------------------------
Under Section 805 of the Business Corporation Law
It is hereby certified that:
FIRST: The name of the corporation (the "Corporation") is CHROMATICS COLOR
SCIENCES INTERNATIONAL, INC.
SECOND: The Certificate of Incorporation of the Corporation was filed by
the Department of State on March 30, 1984. The Corporation was formed under the
name Chromatics International, Inc.
THIRD: The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby further amended to effect a one share for ____ shares reverse
stock split of the Company's issued and outstanding shares of common stock, par
value $0.001 per share.
FOURTH: To accomplish the foregoing, Paragraph A of Article FOURTH of the
Certificate of Incorporation of the Corporation shall be amended to read in full
as follows:
"A. Authorization. The Corporation shall have the authority to issue
(i) 450,000,000 shares of common stock (the "common stock"), par value
$0.001 per share and (ii) 11,400,000 shares of preferred stock (the
"Preferred Stock"), of which 1,400,000 shares shall be designated as Class
A Preferred Stock, having a par value of $0.01 per share, and 10,000,000
shares shall be designated as Class B Preferred Stock, having no par value.
Each ____ shares of common stock issued and outstanding immediately
prior to the effective date of the filing of this Certificate of Amendment
of the Corporation's Certificate of Incorporation is hereby reclassified
and changed into one fully paid and nonassessable share of common stock,
$0.001 par value, of the Corporation, and each holder of record of a
certificate for ____ or more shares of common stock as of the close of
business on the effective date of the filing of this amendment to the
Corporation's Certificate of Incorporation shall be entitled to receive, as
soon as practicable, upon surrender of such certificate, a certificate or
certificates representing one share of common stock for each ____ shares of
common stock represented by the certificate of such holder, and any
fractional shares resulting will be rounded up to the next whole share.
Until such time as the certificates representing the common stock to be
reverse split pursuant hereto shall have been surrendered, the certificates
representing the common stock shall represent the shares of common stock
issuable upon the reverse stock split of such common stock.
The relative rights, preferences and limitations of the shares of
common stock, Class A Preferred Stock and Class B Preferred Stock shall be
as hereinafter provided in Article FOURTH."
FIFTH: The foregoing Amendment of the Certificate of Incorporation of the
Corporation was authorized by unanimous consent of the Board of Directors of the
Corporation, followed by the affirmative vote of a majority of the outstanding
shares of common stock of the Corporation entitled to vote thereon.
Signed on:
-------------- ---------------------------
Date Darby S. Macfarlane
Chairperson of the Board
-19-