<PAGE>


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

(Mark One)

         [X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1996

         [_]    TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
                                  EXCHANGE ACT

                For the transition period from _______ to _______

                         Commission file number 0-21168


                  CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


          NEW YORK                                      13-3253392
--------------------------------------------------------------------------------
(State or Other Jurisdiction of              (I.R.S. Employer Identification 
 Incorporation or Organization)                           Number)


                  5 East 80th Street, New York, New York 10021
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (212) 717-6544
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
                 (Former name, former address and former fiscal
                       year, if changed since last report)


     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes  X  No

                                                                       ---   ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.  Yes ___ No ___ N/A


                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock: 7,621,713
                                                  Warrants:     2,941,215
 

<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

          CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         September 30,   December 31,
                                                             1996            1995
                                                         ------------    ------------
                                                         (unaudited)       (Note 1)
<S>                                                      <C>             <C>         
                                     ASSETS
CURRENT ASSETS:
   Cash and equivalents                                  $  6,513,100    $  1,827,400
   Accounts receivable, less allowance for doubtful
      accounts of $10,000 in 1996 and $17,900 in 1995         232,100         315,700
   Inventories                                                323,600         291,600
   Prepaid expenses and other assets                          105,600          98,800
                                                         ------------    ------------
      Total Current Assets                                  7,174,400       2,533,500

COLORMATE II UNITS, LESS ACCUMULATED
   DEPRECIATION OF $23,700  (1996) AND $16,800 (1995)         676,300         683,200

PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED
   DEPRECIATION OF $137,200  (1996) AND $86,900 (1995)        304,300         210,600

OTHER ASSETS                                                   31,000          62,600
                                                         ------------    ------------
                                                         $  8,186,000    $  3,489,900
                                                         ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Notes payable - collateralized by equipment           $     11,200    $      4,400
   Notes payable to related party                             332,500         341,700
   Accounts payable and accrued expenses:
      Attorneys and Accountants                               271,200         107,400
      Consultants                                             120,300          10,100
      Trade                                                   130,900         120,100
   Security deposits                                           10,500           6,000
                                                         ------------    ------------
      Total Current Liabilities                               876,600         589,700
                                                         ------------    ------------

LONG TERM DEBT:
   Notes payable - collateralized by equipment                   --            10,000

COMMITMENTS AND CONTINGENCIES


REDEEMABLE CLASS A PREFERRED STOCK,
   PAR VALUE $.01 PER SHARE:
     Authorized - 1,400,000  Shares
     Issued and outstanding - 1,380,000  Shares
        At par and redemption value                            13,800          13,800
                                                         ------------    ------------

CLASS B PREFERRED STOCK, NO PAR VALUE
   PER SHARE:
      Authorized - 10,000,000  Shares
      Issued and outstanding - 0  Shares                         --              --

STOCKHOLDERS' EQUITY (DEFICIENCY):
   Common Stock, par value $.001  per share:
      Authorized - 50,000,000  shares
      Issued and outstanding - 7,081,730 (1996)
        and 4,661,936  (1995) shares                            7,100           4,700
   Capital in excess of par value                          15,282,900       7,864,700
   Accumulated deficit                                     (7,994,400)     (4,993,000)
                                                         ------------    ------------
      Total Stockholders' Equity                            7,295,600       2,876,400
                                                         ------------    ------------
                                                         $  8,186,000    $  3,489,900
                                                         ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        1

<PAGE>

          CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED            NINE MONTHS ENDED
                                                       SEPTEMBER 30,                 SEPTEMBER 30,
                                                --------------------------    --------------------------
                                                   1996           1995           1996            1995
                                                -----------    -----------    -----------    -----------
<S>                                             <C>            <C>            <C>            <C>        
Revenues:
  Lease, license and service contracts          $     1,500    $    32,300    $    66,100    $   119,500
  Sale of cosmetics and fashion swatch packs            700            800            100          1,800
  Interest income                                    82,700         38,100        151,700         89,600
                                                -----------    -----------    -----------    -----------
                                                     84,900         71,200        217,900        210,900
                                                -----------    -----------    -----------    -----------
COSTS AND EXPENSES:
  Costs of cosmetics and fashion swatch packs           400            400            500          1,300
  Research and Development costs:
     Compensation of officers and employees         121,400         87,300        361,600        212,800
     Compensation of consultants                    261,700         74,800        454,600        227,700
     Other                                            1,000          1,800          3,700          8,900
  Selling and Other:
     Compensation of officers and employees         187,900        143,900        578,500        371,600
     Compensation of consultants                     78,100         43,000        177,800        180,100
  Legal fees                                         60,100         33,700        284,200        152,600
  Accounting fees                                     6,800          6,600         46,700         33,800
  Patent application costs                           85,700         46,100        168,700        102,900
  Rent and storage                                   54,000         49,300        164,900        131,800
  Legal Settlement                                  132,000           --          132,000           --
  Other:
     Insurance                                       50,100         48,500        145,800        123,900
     Travel & Entertainment                          33,700         28,300         85,700         64,200
     Payroll taxes                                   14,900         15,400         65,200         44,900
     Stock administrative fees                        6,500          3,400         49,000         22,700
     Depreciation and amortization                   24,800         14,700        156,800         36,500
     General and administrative                      87,200        113,800        286,100        258,000
     Interest                                        42,300          7,300         59,000         22,200
     Gain on sale of asset                             --             --           (1,500)          (400)
                                                -----------    -----------    -----------    -----------
                                                  1,248,600        718,300      3,219,300      1,995,500
                                                -----------    -----------    -----------    -----------
NET INCOME (LOSS)                               $(1,163,700)   $  (647,100)   $(3,001,400)   $(1,784,600)
                                                ===========    ===========    ===========    ===========

WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES AND EQUIVALENTS
  OUTSTANDING                                     5,432,824      4,661,936      5,777,479      4,088,109
                                                ===========    ===========    ===========    ===========

NET INCOME (LOSS) PER SHARE                     $     (0.21)   $     (0.14)   $     (0.52)   $     (0.44)
                                                ===========    ===========    ===========    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                        2

<PAGE>

          CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             Common Stock
                                                  -----------------------------------
                                                      Number of                             Capital in Excess       Accumulated
                                                  Shares Outstanding       Par Value           of Par Value           Deficit
                                                  ------------------      -----------       -----------------      -------------
<S>                                                   <C>                 <C>                 <C>                   <C>         
Balances, December 31, 1995                           4,661,936           $     4,700         $ 7,864,000           $(4,993,000)
                                                                                                                  
  Nine Months Ended September 30, 1996:                                                                           
                                                                                                                  
    Net Loss                                               --                    --                  --              (3,001,400)
                                                                                                                  
    Exercise of stock options and warrants              648,785                   600           3,028,300                  --
                                                                                                                  
    Conversion of debentures into Common                                                                          
    Stock                                             1,771,009                 1,800           4,110,000                  --
                                                                                                                  
    Gain on account of "short swing" profits                                                                      
    under securities laws                                  --                    --               280,600                  --
                                                    -----------           -----------         -----------           -----------
                                                                                                                  
Balances, September 30, 1996                          7,081,730           $     7,100         $15,282,900           $(7,994,400)
                                                    ===========           ===========         ===========           ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        3

<PAGE>

          CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        Nine Months Ended September 30,
                                                        -------------------------------
                                                            1996             1995
                                                         -----------      -----------
<S>                                                      <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:                                   
  Net Income (Loss)                                      $(3,001,400)     $(1,784,600)
  Adjustments to Reconcile Net Loss to Net                              
   Cash Flows From Operating Activities:                                
   Depreciation and Amortization                             158,600           36,500
   Gains on Sale of Equipment                                 (1,500)            (400)
   Changes in Operating Assets and Liabilities:                         
    Accounts Receivable                                       83,600         (105,600)
    Inventories                                              (32,000)         (10,700)
    Prepaid Expenses and Other Assets                         (6,800)          19,800
    Other Assets                                             (31,000)          (6,100)
    Accounts payable and Accrued Expenses                    284,800         (120,900)
    Security deposits and unearned service contract                     
    revenues                                                    --                500
                                                         -----------      -----------
        Net Cash Flows From Operating Activities          (2,545,700)      (1,971,500)
                                                         -----------      -----------
                                                                        
CASH FLOWS FROM INVESTING ACTIVITIES:                                   
  Sales of Property and Equipment                               --                200
  Purchases of Property and Equipment                       (144,000)        (108,300)
                                                         -----------      -----------
        Net Cash Flows From Investing Activities            (144,000)        (108,100)
                                                         -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:                                   
  Proceeds From Issuance of Common Stock Net of                         
   Related costs                                           7,387,800        3,864,100
  Payments of Notes Payable From Related Parties              (9,200)         (97,300)
  Notes Payable - Collateralized by Equipment                 (3,200)          (2,900)
                                                         -----------      -----------
        Net Cash Flows From Financing Activities           7,375,400        3,763,900
                                                         -----------      -----------
                                                                        
NET CHANGE IN CASH AND EQUIVALENTS                         4,685,700        1,684,300
                                                                        
CASH AND EQUIVALENTS, BEGINNING OF                                      
  PERIOD                                                   1,827,400          858,300
                                                         -----------      -----------
                                                                        
CASH AND EQUIVALENTS, END OF PERIOD                      $ 6,513,100      $ 2,542,600
                                                         ===========      ===========

                                                                        
SUPPLEMENTAL CASH FLOW INFORMATION                                      
  Interest Paid                                          $    59,000      $    28,100
                                                         ===========      ===========
  Income Taxes Paid                                      $      --        $      --
                                                         ===========      ===========
                                                                        
SUPPLEMENTAL NONCASH FLOW                                               
  INFORMATION                                                           
  Loan From Officer Offset Against Due From                             
   Officer                                                      --        $    21,300
                                                         ===========      ===========
  Deferred Offering Costs Offset to Additional Paid                     
   in Capital                                                554,903      $   111,800
                                                         ===========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        4

<PAGE>

          CHROMATICS COLOR SCIENCES INTERNATIONAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 -- Basis of Presentation:

     Nature of Report -- The consolidated balance sheet at the end of the
     preceding fiscal year has been derived from the audited consolidated
     balance sheet contained in the Company's Form 10-KSB for the fiscal year
     ended December 31, 1995 and is presented for comparative purposes. All
     other financial statements are unaudited. In the opinion of management, all
     adjustments, which include only normal recurring adjustments necessary to
     present fairly the financial position, results of operations and changes in
     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 Form 10-KSB for the
     fiscal year ended December 31, 1995.

     Estimates and Uncertainties - The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results, as determined at a later date, could differ from those estimates.

     The Company's inventories are in excess of current requirements based on
     the recent level of sales. The Company has not sold its new line of
     cosmetics because the manufacturer has experienced difficulties in color
     matching certain shades to be scientifically claimable for the Company's
     scientifically color coordinated cosmetics line. The Company believes the
     new cosmetics will be ready to ship in the fourth quarter of 1996 and is
     currently seeking a national distributor to sell its cosmetics. Management
     believes no loss will be incurred on the disposition of inventory. No
     estimate can be made of a range of amounts of loss that are reasonably
     possible should Management's expectations not be met.

Note 2 -- Commitments and Contingencies:

     Business Risks -- The Company's business encompasses all of the risks
     inherent in the establishment of a new business enterprise, including a
     limited operating history with significant competition possessing
     substantially greater resources. Current and future operations also depend
     upon the continued employment of certain key executives, the ability to

     further commercialize its proprietary technology and products and the
     Company's ability to obtain adequate revenues and/or outside financing.

     Possible Impairment -- Depreciation on a straight-line basis over 5 years
     commences upon initial rental of the Colormate II System units. The Company
     continually evaluates the life and carrying amount of such equipment in
     light of current conditions. Given present conditions, it is reasonably
     possible that the Company's estimate that it will recover the carrying
     amount from future operations may change in the near term, but the Company
     currently believes it is more likely than not that writedown for impairment
     will not be necessary. For assessing whether a writedown is necessary,
     management compares the greater of the estimated undiscounted net future
     revenues and a current appraisal with the carrying amount of this
     specialized equipment.

     Operating Difficulties -- Since 1989, the Company has incurred losses from
     operations and net cash outflows from operations, and has owned Colormate
     II units since June 1991 whose ultimate recoverability


                                        5

<PAGE>

     Note 2 -- Commitments and Contingencies (continued):


     depends upon the Company's future marketing success. The Company expects to
     license its patents and proprietary technology, rent its equipment and
     market its related services and products to ultimately overcome these
     difficulties.

     In order to successfully lease Colormate II units and market related beauty
     products and services as well as license its proprietary technology in the
     future, the Company has obtained substantial financing. Management expects
     the Company will have sufficient liquidity for at least one year, even if
     no revenues from operations are generated. If the Company is able to
     profitably market its Intellectual Properties, Colormate II System and
     Products, the Company would use any cash flow obtained from operations, and
     may seek additional debt or equity financing, to further support and expand
     its operations. If the Company is not able to successfully market its
     products and technologies, it may ultimately be unable to continue in
     business.

     In the event the Colormate II units and related proprietary technology are
     not successfully leased/licensed and/or the products are not successfully
     marketed in the future, the principal effect may be a substantial writedown
     of the book value of such units.

     Colormate II Systems -- Color measurement instruments and related items
     ("Proprietary Equipment") were funded by Avon Products, Inc. ("Avon") under
     a license and were to be returned upon completion of the license period to
     protect the Company's rights. At the inception of the Avon license, no
     residual value was attributed to the Proprietary Equipment, due to the lack

     of an ascertainable market for such equipment when separated from the rest
     of the Colormate II Systems. Avon originally paid the Company approximately
     $1,600,000 for 2,000 color measurement instruments components of the
     Colormate II System. Related computer and other equipment ("Nonproprietary
     Equipment") which, together with the Proprietary Equipment, were used by
     Avon as units during the license period, were to be retained by Avon. Avon
     originally advanced to the Company approximately $3,000,000 for the
     nonproprietary equipment contained in such 2,000 units.

          Due to missing and damaged units, Avon and the Company executed mutual
     releases on June 24, 1991 with the principal effect that the Company
     received 1,947 units of which 1,700 were useable. For accounting purposes,
     the $700,000 estimated fair value of the Nonproprietary Equipment (based
     upon an independent appraisal of two complete units with allowances for the
     lack of a verifiable used equipment market, varying usage, the need for
     refurbishment and similar factors) was considered a gain on receipt of
     Colormate II units. The 1,700 useable units of Nonproprietary Equipment
     were received in the form of (i) 1,400 complete units valued at $500 per
     unit and (ii) 300 complete units in need of significant repair that were
     assigned zero value. The principal components of each unit are Toshiba-1000
     computers and Seiko printers, which were then three years old. No valuation
     of the Proprietary portion of the units or of the 247 unusable units was
     performed.


                                        6

<PAGE>

Item 2.  Management's Discussion and Analysis

     The following is intended to update the information contained in the
Company's Form 10-KSB for the year ended December 31, 1995 and presumes that
readers have access to, and will have read, Management's Discussion and Analysis
contained in Form 10-KSB for the year ended December 31, 1995 (the "Form
10-KSB").

     Except for the historical information contained herein, certain of the
matters discussed are forward-looking statements that involve material risks to
and uncertainties in the Company's business which may cause actual results to
differ materially from those anticipated by the statements made below. Such
risks and uncertainties include, among other things, the availability of any
needed financing, the Company's ability to implement its long range business
plan for various applications for its technologies, the impact of competition,
the obtaining of and compliance with regulatory approvals applicable to proposed
applications of the Company's technology, the management of growth, and other
risks and uncertainties that may be detailed from time to time in the Company's
reports filed with the Securities and Exchange Commission, including those set
forth in the Form 10-KSB.

Overview

     Since inception, the Company has been principally engaged in the research
and development of the Intellectual Properties and the Colormate II System for

the application of scientific color measurement principles to the classification
of human skin and the classification and color-oriented organization of various
color sensitive consumer products such as cosmetics, hair color, hosiery,
fashion, print and textiles. The Company has also been engaged in test marketing
the Intellectual Properties, Colormate II System and Products in the beauty aid
and fashion industries, and marketing them in the cosmetics industry, and, in
cooperation with Mt. Sinai Hospital, New York, New York, has conducted research
and clinical tests of the Company's technologies for the detection and
monitoring of infant jaundice (the "Bilirubin Project"), as described below.

     In 1995, the Company commenced implementation of its long-range plans to
exploit potential medical applications for its technology. In this regard, the
Company hired a new president, retained consultants and counsel in connection
with the preparation of FDA marketing clearance applications, and continued work
on the mass manufacture prototype for such medical applications.

     The Company has incurred significant losses from operations since 1990 and
until the summer of 1994 was involved in significant litigation. The Company has
incurred research and development and marketing expenses as well as significant
operating losses and, prior to consummation of its initial public offering (the
"IPO") in February 1993 discussed below, had negative shareholders' equity. The
Company has not achieved significant operating revenues since the conclusion of
the Avon Project. The Company has owned Colormate II System Units since June
1991 the ultimate recoverability of which depends on the Company's future
marketing success. See Note 2 of Notes to Consolidated Financial Statements.

     The Company has financed its operations through (i) private placements of
its securities, which generated an aggregate of $1,167,500 (including $620,400
from Darby Simpson Macfarlane) from 1988 through 1992 (excluding $775,000 in a
bridge financing effected in September and October 1992 (the "Bridge Financing")
which was repaid with proceeds of the IPO), (ii) collaborative research and
development arrangements with licensees, (iii) cash receipts from lease and
licensing agreements, which generated in the aggregate $8,386,200 from inception
through December 31, 1992, including $6,944,200 in the period from January 1,
1988 to December 31, 1992 (primarily attributable to the Avon Project), (iv)
loans from private investors and certain shareholders which aggregated $549,000
in 1991 and 1992 (excluding the Bridge Financing), (v) the IPO, (vi) the 1995
Private Placement discussed below and (vii) the 1996 Debenture Offering
described below. During the quarter ended September 30, 1996, the Company
received an aggregate of $25,000 from the exercise of warrants granted to the
Placement Agent of the 1995 Private Placement.

     In February 1993, the Company completed the IPO consisting of 1,150,000
units, each unit consisting of one share of common stock, par value $.001 (the
"Common Stock"), and one redeemable Common Stock purchase warrant ("Warrant"),
each Warrant entitling the holder thereof to purchase one share of Common Stock
for $5.00


                                        7
<PAGE>


per share. The Company received aggregate gross proceeds of $5,750,000 and
aggregate net cash proceeds of approximately $4,475,800 from the IPO. Such net
proceeds have been applied in full by the Company to marketing, licensing and
sales activities, including those through beauty salons, to acquire inventory,
to hire sales representatives and retain marketing consultants and to commence
other related operations.

     From October 1994 to June 1995, the Company effected a private placement
offering (the "1995 Private Placement") of 1,800,000 shares of its Common Stock
(which has generated gross proceeds of $4,500,000, and net proceeds of
$3,729,800). The Common Stock was sold at a price of $2.50 per share. The
Company issued to the placement agent warrants to purchase an additional
1,800,000 shares at an exercise price of $2.50 per share. A registration
statement covering the resale of the shares sold in the 1995 Private Placement
and such warrant shares was declared effective on May 6, 1996. See "Liquidity
and Capital Resources" below for a discussion of the use of proceeds from the
1995 Private Placement.

     On April 2, 1996, the Company received $2.5 million gross proceeds (before
deduction of transaction costs including $325,000 of finder's fees and expenses)
from the sale of its 3% convertible debentures due April 1, 1998 ("Debentures")
(the "1996 Debenture Offering"). The sale was made to foreign investors pursuant
to an exemption from the registration requirements of the Securities Act of
1933, as amended. On June 14, 1996, the Company received an additional $2.5
million gross proceeds (before deduction of transaction costs, fees and
expenses) from the sale of additional Debentures. The registration statement
("Registration Statement") covering the shares issuable upon conversion of the
Debentures was declared effective on May 6, 1996. No Debentures remain
outstanding, as all have been converted into Common Stock.

     Substantially all of the Company's revenues in 1988, 1989 and 1990 were
derived under the Avon Agreement. The Company's total revenues decreased from
$963,700 to $480,000 to $12,600 in the fiscal years 1989, 1990 and 1991,
respectively. This decrease is primarily attributable to the cessation of
licensing and consulting fees and of orders for related swatch packs and
Chromaticity Studies in 1990 following commencement of the Avon litigation.

     Since 1990 limited revenues have been derived from licenses, leases,
service contracts and Product sales to several beauty-related businesses,
testing and laboratory fees from potential licensees evaluating the Company's
technology, and from an exclusive licensing and lease contract with IMS
Cosmetics Inc. In fiscal year 1995 and for the nine months ended September 30,
the Company generated approximately 17% and 19%, respectively, of its revenues
from IMS. From December 31, 1990 until the IPO, the Company had been primarily
engaged in (a) pursuing the Company's litigation against Avon, (b) developing
and testing further applications of the Intellectual Properties and Colormate II
Systems, such as the clinical research studies for medical applications, and (c)
obtaining additional financing to support marketing of the Company's
Intellectual Properties, systems, Products and related services. In 1991, during
the Company's pursuit of the Avon litigation, the Company negotiated the return
from Avon of 1,947 of the 2,000 Colormate II Systems originally leased to Avon.
The Company's existing Colormate II Systems were mass manufactured for Avon at a
manufacturing cost for parts of $4,600,000 (an average per unit cost for parts
of approximately $2,300) pursuant to the Avon Agreement; of such amount

$3,000,000 was applied to obtaining parts of the nonproprietary components and
$1,600,000 was applied to obtaining parts of the proprietary components of the
Colormate II System Units. However, there can be no assurance the Company will
be able to arrange for the mass manufacture of additional units at such cost,
and manufacture of limited quantities of the Colormate II System would be
significantly more expensive. The Company believes based on discussions with a
supplier of the components of its existing Colormate II System and published
price lists that the components of the Colormate II System can be purchased in
quantities of 1,000 or more at a significant discount to the individual part
price currently quoted by the suppliers, although there can be no assurance the
Company will be able to obtain such terms or order in such quantities.

     The Company has applied a substantial portion of the proceeds from the 1995
Private Placement and a portion of the proceeds from the 1996 Debenture
Financing to begin implementation of its long range business plan to
commercialize its technologies for medical applications in diagnosing certain
diseases. Over the past year, the Company's Food and Drug Administration ("FDA")
and governmental regulatory consultants (in addition to legal counsel) have
developed and prepared a formal application, known as ss. 510(k) notification,
for submission to FDA requesting marketing clearance for the Company's Colormate
III(TM), a transcutaneous bilirubinometer. The Company's 510(k) notification was
filed with FDA on November 14, 1996.

                                        8
<PAGE>
     The Company is seeking FDA marketing clearance for use of the Colormate
III(TM) in the noninvasive monitoring of bilirubinemia in newborn babies. The
Company has conducted clinical trials of the Colormate III(TM)'s measurement
correlation with serum bilirubin concentration levels and clinicians' visual
estimates in babies of all races. The results of these trials, which in the
Company's opinion demonstrate a statistically significant correlation between
the Colormate III(TM)'s results and serum bilirubin concentration levels and
superior sensitivity at clinical decision levels to that of visual estimates,
have been submitted to FDA to support the 510(k) notification. Since the
Colormate III(TM) is noninvasive, the Company believes the device has the
ability to provide more frequent, enhanced clinical decision assistance without
subjecting neonates to traumatic invasive procedures. While the Company believes
that FDA will issue marketing rights to the Colormate III(TM) pursuant to its
510(k) notification, there can be no assurances that such marketing rights will
be granted by FDA. The Company is aware of competitors who have and are
marketing non-invasive procedures to measure bilirubin, and there can be no
assurance the Company will be successful in marketing the Colormate III(TM).

     The Company's ability to generate revenues in the future will depend on its
success in marketing its Intellectual Properties, the related Chromaticity Study
capabilities, the Colormate II System and its Products. If such marketing is not
successful in the future, the principal effect may be a substantial write-down
of the book value of the Colormate II System Units and a substantial impairment
of the Company's capital resources and ability to obtain any future financing,
which would result in a substantial diminution in the value of an investment in
the Company. There can be no assurance the Company will be able to timely place
such units or identify alternative markets. See Notes 1 and 2 of Notes to

Financial Statements.

Results of Operations

     The Company incurred net losses of $3,001,400 and $1,784,600 for the nine
month periods ended September 30, 1996 and 1995 respectively, as revenues
received have not been significant relative to the Company's expenses incurred
in implementing its business plan. The increase in such losses in the 1996
period as compared to the 1995 period is primarily attributable to the increase
in costs and expenses regarding regulatory applications, consulting fees for
proposed strategic alliances, compensation of officers, employees and
consultants, including in respect of research and development activities, patent
applications, legal fees (relating to the Company's financing activities,
regulatory applications and proposed strategic alliances) depreciation and
amortization relating principally to amortization of deferred financing costs
relating to the 1996 Debenture Financing, settlement of the Perfect Look
litigation and to the establishment of its Spokane, Washington engineering
office. These expense increases are primarily attributable to the Company
commencing implementation of its long range business plan to seek commercial
applications of its intellectual properties and technologies in the medical
field; the loss was partially offset by interest income attributable to proceeds
of the 1996 Debenture financing.

     The Company estimates that research and development expenses (excluding
compensation expenses for officers, employees and long term consultants) for
fiscal 1996 will approximate $600,000 although there can be no assurance that
such expenses will not exceed that amount. Of such amount, approximately
$100,000 will be applied to completing the mass manufacture housing prototype
for the medical application of the Company's technology in the detection and
monitoring of infant jaundice and approximately $200,000 will be applied to
developing a smaller prototype version for such medical application,
approximately $100,000 will be applied to completing the hand-held, less
expensive version of the Colormate II system, approximately $100,000 will be
applied to fabricate molds for each of the foregoing prototypes, and
approximately $100,000 will be applied to the Company's ongoing research and
development efforts. There can be no assurance that such amounts will be
sufficient to accomplish completion of such projects.

     A decrease in the Company's revenue from lease, license and service
contracts and the sale of cosmetics and swatch packs also contributed to the
increase in the 1996 nine month period net loss as compared to the 1995 nine
month period net loss. Such revenues decreased significantly as the Company has
begun implementation of its long range business plan for medical applications of
its technologies and during the Company's attempt to transition its business
strategy from selling its Products directly through commissioned sales
representatives to selling its Products through third party distributors (which
third party distribution has not yet effectively commenced). The Company has
also conducted and continues to conduct market studies and pilot tests (and
incur related additional expenses) in connection with the Company's marketing
efforts. The Company believes that sales in the 1996 nine month period were also
adversely affected by ongoing delays in manufacturing certain color shades of
the Company's



                                        9
<PAGE>

new line of cosmetic products for its Colormate II system (which delays were
attributable to finalizing color formulations). The Company anticipates the new
cosmetics will be ready to ship in the first quarter of 1997 although there can
be no assurance of this.

     Litigation - In May 1994, the Company entered into a five year
distributorship agreement beginning in July 1994 with Perfect Look Distribution,
Ltd. under which Perfect Look was to act through June 1996 as the exclusive
distributor (subject to certain exceptions) in the United Kingdom of the
Company's Colormate II System units and Products. On January 10, 1995, the
Company sued Perfect Look and its two principals (collectively "Perfect Look")
in New York State Supreme Court for breach of contract, seeking monetary damages
and injunctive relief. On September 26, 1996, the parties entered into a
Settlement Agreement whereby the Company received $7,513.00 and three Colormate
II units and related materials were returned to the Company. In connection with
the settlement of the Perfect Look litigation, the remaining escrow balance
recorded by the Company of $132,000 was eliminated, representing the $132,000
change in the income statement (the "Legal Settlement").

     The Company receives payments from licensees, distributors or other sources
at various times during the year. Accordingly, these payments have had, and
payments that may be received in the future will have, a significant impact on
quarter-to-quarter comparisons inasmuch as the Company has not developed stable
sources of repeat revenues.

     The Company anticipates that it will continue to incur substantial and
increasing net losses for the foreseeable future as increased expenses are
incurred in implementing its long-range business plan for medical applications
of its technologies and as revenues from the Company's existing activities in
the cosmetics, beauty aid and fashion areas are anticipated to continue to be
insignificant relative to its anticipated expenses in the foreseeable future.

Liquidity and Capital Resources

     Assets increased by $4,640,900 in the first three quarters of 1996 as
compared to fiscal 1995. This increase is primarily attributed to an increase in
cash and cash equivalents attributable to the 1996 Debenture Financing and from
cash received from the exercise of the Company's publicly traded warrants.
Current liabilities increased by $286,900 in the first three quarters of 1996
compared to the comparable period in 1995, primarily attributable to increased
accounts payable to attorneys, accountants and consultants in connection with
the Company's financing, regulatory and strategic activities and consultants'
compensation for research and development.

     As indicated in the Company's Statements of Cash Flows, the Company
continued to experience significant negative net cash flows from operating and
investing activities in the quarter ended September 30, 1996. The 1996 increase
in cash outflows from operating activities is primarily attributable to the
increase in the Company's net loss. Cash flows from financing activities during
the first three quarters of 1996 principally represent the receipt of $5,000,000
proceeds from the issuance of the Debentures, $3,028,300 from the exercise of

Warrants and certain of the Company's outstanding options and $260,600 of "short
swing" profits paid to the Company in accordance with the Securities Exchange
Act of 1934; cash flow from financing activities in the 1995 period primarily
reflects the 1995 Private Placement proceeds. In addition, in the quarter ended
September 30, 1996, the Company received $25,000 from the exercise of warrants
granted to the Placement Agent of the 1995 Private Placement.

     The Company has applied a substantial portion of the proceeds from the 1995
Private Placement and a portion of the proceeds from the 1996 Debenture
Financing to begin implementation of its long range business plan to
commercialize its technologies for medical applications in diagnosing certain
diseases.


                                       10

<PAGE>

In addition, the Company has applied such proceeds to the development of a mass
manufacture prototype for medical applications and development of a mass
manufacture prototype for hand-held Colormate II System Unit, salaries of new
personnel including a new president, salespersons and support staff marketing
expenses, working capital, additional prototype research and development and to
fund ongoing operations.

     Management believes that if its proposed marketing plans for nonmedical
applications of its technology are successful, then it will generate revenues
from fees from the licensing of the Intellectual Properties and leasing of the
Colormate II System Units, sales of swatch packs, consulting fees, and sales of
cosmetics, although there can be no prediction or assurance as to which or
whether any of these potential revenue sources will be successful. Since
consummation of the IPO, the Company has commenced expanded marketing of its
Intellectual Properties, Products and Colormate II Systems in the beauty aid
industry; but to date immaterial revenues from such marketing have been
realized. In 1995 and for the first nine months of 1996 such licensing, leasing
and sales yielded an immaterial level of sales revenue, primarily because the
Company devoted its resources primarily to the Bilirubin Project. The Company
anticipates that initial penetration of the medical marketplace will be through
the use of specialized distributors, rather than a direct sales force.

     If the Company is able to profitably market its Intellectual Properties,
Colormate II System and Products, the Company would use any cash flow obtained
from operations, and may seek additional debt or equity financing, to further
support and expand its operations. There can be no assurance that the Company
will not require additional funding. If the Company has not been able to attract
additional future financing at such point in time and/or successfully market its
products and technologies, it may have to cease operations.


                                       11

<PAGE>

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

     Litigation -- In May 1994, the Company entered into a five year
     distributorship agreement beginning in July 1994 with Perfect Look under
     which Perfect Look was to act through June 1996 as the exclusive
     distributor (subject to certain exceptions) in the United Kingdom of the
     Company's Colormate II System units and Products. On January 10, 1995, the
     Company sued Perfect Look in New York State Supreme Court for breach of
     contract, seeking monetary damages and injunctive relief. On September 26,
     1996, the parties entered into a Settlement Agreement whereby the Company
     received $7,513.00 and was three Colormate II units and related materials
     were returned to the Company.

Item 2. Changes in Securities

     None.

Item 3. Defaults Upon Senior Securities

     None.

Item 4. Submission of Matters to a Vote of Security Holders

     None.

Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

     (a)  15 - Letter on unaudited interim financial information

     (b)  Reports on Form 8-K

          None 


                                       12

<PAGE>

                                  EXHIBIT INDEX

    Exhibit No.    Document                                                Page
    -----------    --------                                                ----

    15             Letter on Unaudited Interim Financial Information       15
    27             Financial Data Schedule                                 16




                                       13

<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                  CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.


Date:  November 11, 1996                       /s/ Darby S. Macfarlane
                                               -----------------------
                                               Darby S. Macfarlane
                                               Chief Executive Officer


Date:  November 11, 1996                       /s/Leslie Foglesong
                                               -----------------------
                                               Leslie Foglesong
                                               Treasurer and Chief Financial and
                                               Principal Accounting Officer


                                       14