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WAVE Life Sciences Ltd. Morningstar® Document Research℠ FORM 10-KCaladrius Biosciences, Inc. - CLBSFiled: July 14, 1998 (period: March 31, 1998)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________ to ________________ Commission file number: 0-10909 CORNICHE GROUP INCORPORATED (Exact name of registrant as specified in its charter) Delaware 22-2343568 (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification No.) 610 South Industrial Boulevard Suite 220 Euless, Texas 76040 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 358-1121 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value (title of class) Indicate by check mark whether registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days Yes ___X____ No _________. Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ___________ $12,604,462 as of June 1, 1998 (Aggregate market value of the voting stock held by non-affiliates of registrant) 6,355,231 shares, $.001 par value, as of June 1, 1998 (Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date) PART IITEM 1. BUSINESSSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. New Business Operations At the 1998 Annual Meeting of Stockholders held on May 18, 1998 (the"Annual Meeting"), stockholders of Corniche Group Incorporated (the"Corporation" or the "Registrant") approved, among other things, a transaction(the "Transaction") whereby 825,000 shares of Series B Convertible RedeemablePreferred Stock, a newly created series of preferred stock with each sharehaving ten votes per share, were issued to certain individuals, including JoelSan Antonio, for the aggregate cash consideration of $76,500. As a result of theTransaction, Mr. San Antonio obtained control of the Corporation. TheCorporation's initial goal will be to complete the development of acomprehensive strategic and operational business plan for the Corporation and tosecure the services of a quality management team to assist Robert H. Hutchins,the newly elected President of the Corporation, in implementing the businessplan. The Corporation plans to enter into insurance and/or insurance-relatedbusinesses. The thrust of the Corporation will be to optimize spread of risk andseek "niche" business opportunities that do not fit what is often referred to inthe industry as "mainstream" business. The Corporation may also exploreopportunities for "fronting" insurance for service contract business and otherproperty and casualty insurance business, whereby all or a portion of the riskof such policies written by the Corporation would be ceded to a reinsurer. Aspart of any such strategy the Corporation anticipates that it will reinsureheavily on a "quote share" or "pro-rata" basis with other operators with whomproposed new management has achieved successful business relationships in thepast. In "quote share" or "pro-rata" reinsurance, one or more reinsurers bearsan agreed upon proportion of the specified risk, rather than a fixed dollaramount of risk or the excess above a fixed dollar amount of risk. In connection with the implementation of these strategies, it maybecome necessary for the Corporation to become licensed in one or more states inorder to enable it to conduct operations or to acquire a company that maintainsappropriate licenses. To further such goal, the Corporation recently has enteredinto a non-binding letter of intent to acquire all of the stock of an existinginsurance company which has had limited operations and revenues for the pastseveral years. The acquisition is subject to due diligence by the Corporationand subject to material conditions, including but not limited to thesatisfaction of capital requirements of regulatory authorities. No assurancescan be given that the Corporation will be able to obtain such licenses or toconsummate any such acquisitions. The acquisition, if consummated, willrepresent the Corporation's entry into the United States insurance market. The Corporation presently anticipates that its marketing efforts inthe property and casualty sectors of the insurance market will focus onoperating on a conservative basis using both facultative and treaty reinsurancesupport to minimize its exposure. Facultative reinsurance generally involves areinsurer agreeing to bear the risk of loss over a specified dollar amount for aspecified risk. Treaty reinsurance generally involves a reinsurer agreeing tobear a portion of the risk associated with a specified category or "book" ofbusiness, and may be done on an excess or quote share basis. As part of thisstrategy, the Corporation may consider direct selling, brokerage and agencyproduced business and may evaluate potential opportunities to participate in thereinsurance sector of commercial property and casualty insurance on both a"quote share" and "excess" basis. The Corporation currently anticipates that business development andfuture market growth will be concentrated on "short tail" casualty business andpackage product lines, primarily focused in the retail/service industrymarketplace. "Short tail" casualty business provides for coverage during theterm of the policy or within a relatively short period, as distinguished from"long-tail" business, such as occurrence-based policies, in which the insurer isobligated to make payment, whether or not the policy has expired, as long as theinsurable injury occurred during the term of the policy. Examples of "long tail"insurance include worker's compensation, medical malpractice and productsliability insurance for products with long lives, such as automobiles and airplanes. The Corporationanticipates that it will seek short tail business because of the relativelygreater availability of reinsurance and lower reinsurance costs, and therelatively greater certainty, predictability and ability to price policies andreinsurance policies associated with short tail business. An example ofSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. short-tail business on which the Corporation might concentrate is retail andwholesale products liability for consumer products that have limited usefullives. In addition the Company anticipates that it will provide package productlines, that is, insure service contracts for products that have a limited usefullife on a claims made basis for a term of no greater than three years. Ifsuccessfully developed, the customer base generated by these segments couldbecome a source to seek out other property and casualty insurance businessopportunities. As part of its overall business plan, the Corporation may pursue otherand different business activities than those described above, but it has nocurrent plans to do so. Since the annual meeting the Corporation has also entered into aninvestment advisory agreement with AIG Global Investment Corporation under whichit will function as investment advisor and manager of all of the Corporation'sinvestable assets. AIG Global provides investment management services todomestic insurance companies seeking to create an investment alternative toletters of credit that, at the same time, meet state statutory insurancerequirements. The preceding description represents the Corporation's current plansfor the Corporation, which are subject to change as business necessities requireduring the course of implementation. No assurances can be given that theCorporation will be successful in implementing his business plan as currentlyenvisioned. The description of the Corporation's proposed new business operationsand intended strategy after the Transaction are forward-looking statements underSection 21E of the Securities Exchange Act of 1934, as amended. Forward-lookingstatements are inherently subject to risks and uncertainties, many of whichcannot be predicted with accuracy or anticipated. Future events and actualresults, financial and otherwise, could differ materially from those set forthin or contemplated by the forward-looking statements herein. Important factorsthat could contribute to such differences include changes in economic and marketconditions, ability to successfully obtain licenses and/or consummateacquisitions, ability to raise capital and meet insurance regulatoryrequirements and regulatory changes in the insurance business, as well as theother factors described herein.History Registrant was incorporated in Delaware on September 18, 1980 underthe name Fidelity Medical Services, Inc. On July 28, 1983 Registrant changed itsname to Fidelity Medical, Inc. From its inception through March 1995 Registrantwas engaged in the development, design, assembly, marketing and sale of medicalimaging products through its wholly-owned subsidiary, Fidelity Medical, Inc., aNew Jersey corporation ("FMI"). On March 2, 1995 Registrant acquired CornicheDistribution Ltd. ("CDL"), a United Kingdom ("UK") corporation established in1992. At such time, CDL was a holding company for two operating subsidiaries,Chessbourne International Ltd. ("Chessbourne"), a distributor/supplier ofstationery products and office furniture, and The Stationery Company Limited("TLCS"), a stationery retailer. The acquisition of CDL resulted in the formershareholders of CDL, Brian J. Baylis and Susan A.M. Crisp, owning a majority ofthe outstanding common shares of Registrant after the acquisition and wastreated as a recapitalization of CDL with CDL being treated as the acquirer.Accordingly, Registrant changed its fiscal year to the last Saturday in March ofeach year in order to conform to the fiscal years of its UK operatingsubsidiaries and, unless otherwise indicated, the financial information and datahereafter contained in Registrant's financial reports relate to the operationsof CDL alone for periods prior to March 2, 1995. At the time of the CDLacquisition, CDL owned 51% of the common stock of Chessbourne, the other 49%being owned by an unrelated entity, Ronatree Limited ("Ronatree"), a propertyinvestment company. In connection with the CDL acquisition, Registrant acquiredthe 49% interest of Ronatree in Chessbourne by issuing to Ronatree 25,000 sharesof its common stock. At such time and in furtherance of the CDL acquisition,Registrant also issued 215,150 shares of its common stock to Chester Holdings, Ltd ("Chester"), a Coloradocorporation, in order to induce Chester to agree to terminate a pre-existingagreement giving Chester the right to acquire CDL and to further induce Chesterto forgive approximately $71,000 of net indebtedness owing to Chester by CDL andits subsidiaries.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Effective March 25, 1995, Registrant sold its wholly-owned medicalimaging products subsidiary, FMI, to Chester in exchange for the 215,150 sharesof Registrant's common stock previously issued to Chester in connection withRegistrant's acquisition of CDL and Chester's Promissory Note and OptionAgreement dated as of March 25, 1995 (the "Note and Option Agreement"). The Noteand Option Agreement contained an 8% promissory note from Chester to Registrantin the principal amount of $200,000 due October 1, 1995 (the "Note"). It alsoincluded an option, in favor of Registrant, to apply the unpaid principalbalance and accrued interest due on the Note to the purchase of shares of FMI,Chester or any other parent company to which Chester may have transferred theFMI stock, at the fair market value of such shares. Registrant's medical imagingproducts business had been generating significant losses for a number of yearsresulting in the decision to dispose of the medical imaging products businessand to focus Registrant's business operations on the development and expansionof its stationery operations. The Note was not paid by Chester on its due date.However, during the period May 1996 through July 1996 Chester paid Registrant$125,000 of the principal sum due Registrant under the Note. All accruedinterest due under the Note and the remaining principal balance of $75,000 hasnot been paid as of the date hereof. Registrant does not anticipate any furthercash recoveries against the Note. Registrant does expect however, to exercisethe option applicable to the unpaid balance on the Note to purchase votingshares of Medical Laser Technologies, Inc., the corporate parent of FMI,although no assurance can be given that this will prove to be the case. Following the sale of FMI, Registrant's business operations consistedof the retail stationery operations and brand marketing and stationery wholesaleoperations of TSCL and Chessbourne respectively. Registrant's operations werefunded in large part from loans made by the Bank of Scotland, Registrant'sprimary lender, to each of CDL, TSCL and Chessbourne over a period of severalyears. In accordance with customary UK practice, the Bank of Scotland, whenmaking such loans obtained security for these loans by means of mortgages overfixed assets ("Fixed Assets") and debentures over pools of assets which by theirnature will change from time to time ("Floating Changes"). Registrantexperienced large operating losses and net cash outflows from operatingactivities during fiscal 1996 resulting in severe liquidity problems. Registrantwas unable to secure badly needed interim financing either in the form ofadditional loans or the conversion of bank debt to equity. Consequently, theBank of Scotland had Chessbourne and TSCL placed into receivership in the UK onFebruary 7, 1996 and had CDL placed into receivership in the UK on February 28,1996. The receiverships resulted in the discontinuation of all of Registrant'sbusiness operations. Since such time, until the Transaction, the Registrant hadbeen inactive.Receivership Proceedings It has become effectively impossible for each of CDL, Chessbourne andTSCL to be audited for the year ended March 31, 1996 and subsequent periodsgiven that the respective receivers have possession and control over the books,records and documents of each of the corporations and will not make themavailable to Registrant or any auditor retained on its behalf. Consequently,Registrant has treated each of CDL, Chessbourne and TSCL as no longer beingsubsidiaries of Registrant for periods subsequent to December 31, 1995. Under UK law, Registrant is not liable for the liabilities of CDL,TSCL and Chessbourne absent a guarantee or other enforceable promise byRegistrant to pay such liabilities. Registrant gave no such guarantee or promiseand as such has no liability for the payment thereof. Similarly, the appointmentof an administrative receiver in respect of the assets of CDL. TSCL andChessbourne has no effect on the assets of Registrant. Notwithstanding theforegoing, the receivers for CDL made certain claims against Registrant for sumsallegedly owed to CDL by Registrant in connection with a contested share issue.To resolve such dispute, a Compromise Agreement dated March 4, 1996 betweenRegistrant. CDL and the receivers for CDL was entered into which had the effectof releasing Registrantfrom any and all liability to CDL upon performance by Registrant of itsobligations under that agreement In connection therewith Registrant issued apromissory note to the Bank of Scotland, the secured creditor of CDL, in theprincipal amount of 50,000 pounds sterling ((pound)50,000). On January 30, 1997,Registrant paid off the Note in full, including all interest accrued thereonthrough the date of payment and executed a Mutual Release with the Bank ofScotland.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In connection with the receiverships, Brian J. Baylis and Susan A.M.Crisp, Registrant's then chief executive officer and chief financial officer,who collectively owned approximately 45% of Registrant's outstanding commonstock entered into pledge agreements (the "Pledge Agreements") whereby theypledged their common shares of Registrant to the Bank of Scotland as collateralagainst the shortfall which was to be realized by the Bank of Scotland in thereceivership proceedings. Most of the pledged shares were subsequently sold bythe Bank of Scotland to twelve unrelated persons.ITEM 2. PROPERTIES As of August 1, 1998, the Registrant is leasing offices located at 610South Industrial Boulevard, Euless, Texas. Such lease expires in July, 2001.ITEM 3. LEGAL PROCEEDINGS No material legal proceedings are pending to which Registrant or anyof its property is subject, nor to the knowledge of Registrant are any suchlegal proceedings threatened.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Registrant submitted no matters to a vote of its security holdersduring the fourth quarter of the fiscal year ended March 31, 1998. PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Since October 11, 1995 Registrant's common stock has been listed fortrading on the OTC Bulletin Board, under the symbol "CGII" from October 11, 1995to April 20, 1998 and thereafter under the symbol "CNGI." The following tablesets forth the range of high and low sales prices of Registrant's common stockfor each full quarterly period within the two most recent fiscal years and themost recent quarter. Sales Prices Fiscal 1997 High Low First Quarter $ .44 $ .19 Second Quarter .38 .19 Third Quarter .38 .06 Fourth Quarter .44 .19 Fiscal 1998 High Low First Quarter $ 1.06 $.31 Second Quarter 1.00 .63 Third Quarter .88 .69 Fourth Quarter 2.44 .69 Bid Prices Fiscal 1999 High Low First Quarter $ 2.38 $ 1.16 At June 1, 1998, there were approximately 1,187 record holders ofRegistrant's common stock. Holders of common stock are entitled to dividendswhen, as, and if declared by the Board of Directors out of funds legallyavailable therefor. Registrant has not paid any cash dividends on its commonstock and, for the foreseeable future, intends to retain earnings, if any, tofinance the operations, development, and expansion of its business. Futuredividend policy is subject to the discretion of Registrant's Board of Directors.Securities Offerings In addition to the Series B Preferred Stock sold in connection withthe Transaction, during the fiscal year ended March 31, 1998, Registrantconducted a private placement of securities pursuant to Rule 506 of Regulation Dof the Securities Act of 1933, as amended, which was completed in September,1997. The purpose of such placement was, in part, to provide Registrant with theSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ability to settle and pay off certain of its outstanding liabilities. Suchplacement of 3,690,000 shares of common stock for a total of $1,845,000 wasconducted on a "best-efforts" basis through Robert M. Cohen & Co., Inc., a NewYork based broker dealer ("RMCC"). In connection with the placement, Registrantpaid RMCC a sales commission equal to 10% of the subscription price for eachunit sold. In March 1998, 250,000 shares of common stock were sold in a privateplacement by the Company for a total consideration of $125,000. No salescommission was paid.ITEM 6. SELECTED FINANCIAL DATA The selected statements of operations and balance sheet data set forthbelow are derived from the financial statements of Registrant which wereexamined by Simontacchi & Co. LLP, independent certified public accountants, forthe years ended March 31, 1998, March 31, 1997 and March 31, 1996 and by MahoneyCohen & Company, PC ("Mahoney Cohen"), independent certified public accountants,for each of the two years in the period ended March 25, 1995. Mahoney Cohen didnot audit Registrant's UK subsidiaries, the financial statements of which wereaudited by another auditor whose report was furnished to Mahoney Cohen. Theinformation set forth below should be read in conjunction with the auditedfinancial statements of Registrant and related notes appearing elsewhere in thisReport (See Item 8. Financial Statements and Supplemental Data). March 31, March 31, March 31, March 25, March 27, 1998 1997 1996 1995 1994 ---- ---- ---- ---- ----Statement of Operations: Net Sales.............................. $-0- $-0- $-0- $21,048,151 $7,585,360 Cost of Sales.......................... -0- -0- -0- 15,531,102 5,121,884 Gross Profit........................... -0- -0- -0- 5,517,049 2,463,476 Operating (Loss) Income................ (221,602) (251,583) (257,073) (2,821,339) 207,300 Net (Loss) Income...................... (263,865) (332,604) (323,510) (3,394,652) 1,804 Net (Loss) Income per Common Share:........................ (.05) (.14) (.14) (2.05) -0-Weighted Average Number of Shares Outstanding.................. 5,165,272 2,412,278 2,300,289 1,656,903 1,669,784Dividends per Common Share.................. -0- -0- -0- -0- -0- March 31, 1998 March 31, 1997 March 31, 1996 -------------- -------------- --------------Balance Sheet Data:........................ Working Capital (Deficiency).......... $ 869,567 $(652,456) $(320,240) Total Assets.......................... 1,129,602 14,914 136,201 Current Liabilities................... 259,676 666,623 455,306 (Accumulated Deficit) Retained Earnings (2,713,254) (2,449,389) (2,116,785) Stockholders' Equity (Deficiency)..... 869,926 (651,709) (319,105)ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSResults of Operations The Corporation has not generated any operating revenues sinceFebruary 1996 when its then operating subsidiaries were placed into receivershipin the UK. The receiverships resulted in the loss of all of the Corporation'soperations and operating assets and eliminated most liabilities. Accordingly theoperating activities of the UK subsidiaries were classified as a discontinuedoperation and the excess of the UK subsidiary's cumulative losses over TheSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Corporation's investment was included in the income statement for the year endedMarch 31, 1996. In addition, the UK subsidiaries were removed from the balancesheet for periods subsequent to December 30, 1995. At the 1998 Annual Meeting of Stockholders, stockholders of theCorporation approved the Transaction, which was consummated on May 18, 1998. As a result of the Transaction, the Corporation plans to enter intoinsurance and/or insurance related businesses. To further such goal, theCorporation has entered into a non-binding letter of intent to acquire all ofthe stock of an existing insurance company which has had limited operations andrevenues for the past several years. The acquisition is subject to due diligenceby the Company and is subject to material conditions. No assurances can be giventhat the Corporation will consummate such acquisition. The acquisition, ifconsummated, will represent the Company's entry into the United States insurancemarket. The Corporation recorded losses in the year ended March 31, 1998 of$221,602, before interest expense and preferred stock dividend accrual ($251,583in 1997). Such losses arose from general and administrative expenses whichprincipally comprise professional fees, travel expenses and general officecosts.Liquidity and Capital Resources During the year ended March 31, 1998 the Corporation relied on the netproceeds of the securities offerings described in Item 5 of this report and cashreceived against a note receivable and other sundry receipts to meet its cashneeds. The Corporation does not expect to generate any operating revenuesuntil, at the earliest, the licensing of the Corporation to conduct theactivities described in Item 1 - New Business Operations or the acquisition of acompany with such licenses. No assurance can be given however that theCorporation will successfully consummate such a business acquisition or obtainsuch licenses or that the Corporation will derive any material revenues orprofits therefrom. To enter into the insurance industry, whether through consummation ofthe acquisition described in the above letter of intent or otherwise, theCorporation will need to satisfy regulatory capital requirements. TheCorporation is currently discussing with investment bankers certain financingalternatives for raising additional equity capital in amounts at leastsufficient to permit it to have the regulatory capital needed to consummate theacquisition. As it becomes licensed or acquires operations in otherjurisdictions, the capital requirements of the Corporation will increaseaccordingly. No assurance can be given that the Corporation will be able toraise all required regulatory capital or capital needed for its operations.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The financial statements of the Corporation, itemized in the subtopic,"Financial Statements" under Item 14 hereof, are set forth at the end of thisReport.ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On July 20, 1995, the Corporation appointed Mahoney Cohen as TheCorporation's independent auditors responsible for the audit of theCorporation's financial statements. This action was recommended by theCorporation's Audit Committee and approved by its Board of Directors. TheCorporation had not consulted Mahoney Cohen regarding any accounting orfinancial reporting issues prior to that firm being retained by the Corporation. In connection with its audit of the Corporation's financial statementsfor the fiscal year ended March 25, 1995, and in the subsequent interim periodthrough on or about April 17, 1997 when the relationship was formally terminatedand it resigned as the Corporation's independent auditors, there were nodisagreements between Mahoney Cohen and the Corporation on any matters ofaccountingSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. principles or practices, financial statement disclosure or auditing scope andprocedures which, if not resolved to the satisfaction of Mahoney Cohen, wouldhave caused Mahoney Cohen to make reference to such matters in their reportMahoney Cohen's report on the Corporation's financial statements for the fiscalyear ended March 25, 1995 expressed an unqualified opinion on those financialstatements based upon their audit but included a paragraph noting a "substantialdoubt about the Corporation's ability to continue as a going concern" based uponthe several matters summarized in such report. In February 1997 the Corporation appointed Simontacchi & Company, P.A.("Simontacchi") as the Corporation's independent auditors responsible for theaudit of the Corporations financial statements. This action was approved by theCorporation's board of directors. The Corporation had not consulted Simontacchiregarding any accounting or financial reporting issues prior to that firm beingretained by the Corporation. Simontacchi has audited the Corporation's financial statements for thefiscal years ended March 31, 1996, 1997 and 1998. Simontacchi's report on theCorporation's financial statements for the fiscal years ended March 31, 1996 and1997 expressed an unqualified opinion on those financial statements based upontheir audits, but included paragraphs noting a "substantial doubt about theCorporation's ability to continue as a going concern" based upon the severalmatters summarized in such reports. PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANTDirectors The following sets forth, as of March 31, 1998, the director of theCorporation, his age, the year in which he was first elected or appointed adirector, and any other office in the Corporation held by him. Each directorholds office until the next annual meeting of shareholders and until theirsuccessors have been elected and qualified. Other Offices DirectorName Held Age SinceJames J. Fyfe Vice President, Chief 43 1995 Operating Officer At the Annual Meeting, stockholders of the Corporation elected JoelSan Antonio, age 45, as Chairman of the Board of the Corporation and three otherdirectors, Robert H. Hutchins, age 69, Ronald Glime, age 53, and Glenn Aber, age49.Executive Officers The following sets forth, as of March 31, 1998 the executive officerof the Corporation, his age, the year in which he was first appointed anexecutive officer of the Corporation and all positions and offices in theCorporation held by such person. Other Offices DirectorName Held Age SinceJames J. Fyfe Vice President 43 May 1995 Following the Annual Meeting, Mr. Hutchins was appointed President ofthe Corporation. Mr. Aber was appointed acting Treasurer and Mr. Fyfe wasappointed acting Secretary, until other officers could be employed. At thattime, Mr. Fyfe resigned his position as Vice President.Family Relationships Mr. Aber, a newly elected director, is the brother-in-law of Mr. SanAntonio. No other family relationship exists between any director, executiveofficer of the Corporation or any person contemplated to become such.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Business Experience The following summarizes the occupation and business experience duringat least the five years preceding March 31, 1998 of each person who served as adirector and/or executive officer of the Corporation at March 31, 1998. James Fyfe. Mr. Fyfe became a director and Vice President and ChiefOperating Officer of the Corporation in May 1995. From January 1991 to May 1995,he was an independent business consultant. During the period from May 1995through February 1996 he was an employee of the Corporation's U.K holdingcompany, CDL. In March 1996, he resumed his activities as an independentbusiness consultant. From May 1996 through August 1997 he was an outsidedirector of Medical Laser Technologies, Inc. Pursuant to the terms of the Stock Purchase Agreement relating to theTransaction and the issuance of the Series B Convertible Redeemable PreferredStock, the Initial Purchasers of the Series B Convertible Redeemable PreferredStock are required to continue to nominate Mr. Fyfe or his nominee to serve asdirector through June 30, 2000, the date when the right to redeem the Series BConvertible Redeemable Preferred Stock will expire. The following summarizes the occupation and business experience duringat least the five years preceding March 31, 1998 of each person who was electedat the Annual Meeting as a director and/or executive officer of the Corporation. Joel San Antonio. Mr. San Antonio founded Warrantech Corporation(Nasdaq Symbol: WTEC) in 1983. Warrantech is a business services company with acore business in the administration of warranties and service contracts. He wasa Director, Chief Executive Officer and President of Warrantech Corporation fromincorporation through February 1988. Since February 1988, Mr. San Antonio hasbeen a Director, Chief Executive Officer and Chairman of the Board of Directorsof Warrantech. On February 2, 1998, Mr. San Antonio resumed responsibilities asPresident of Warrantech. Since October 27, 1989, he has also been Chairman andChief Executive Officer of Warrantech's principal operating subsidiaries. Robert H. Hutchins. Mr. Hutchins began his insurance career with theGreat American Indemnity Insurance Co. in 1951. He joined the American CasualtyInsurance Co. in 1958. American Casualty Insurance Co. was bought by ContinentalCasualty Insurance Co. in 1964, and is now known as CNA Insurance. At CNA heserved as Branch Manager, Regional Vice President, Vice President of FieldOperations and ultimately Senior Vice President of the Liability, Property andSurety Division. Since 1975, he has served in executive positions with INA, GulfInsurance, and American Hardware Mutual Insurance Co. He was a consultant to theWarranty Division of AIG for 18 months and for the past 2-1/2 years has beenemployed by Warrantech Automotive, Inc. as National Claims Manager. Mr. Hutchinshas served as President of the Corporation since May 1998. Ronald Glime. Mr. Glime is currently President of WarrantechAutomotive, Inc., a position he has held since October 1992. Glenn Aber. Mr. Aber was president of his own company, GFA Industries,Inc. ("GFA"), a corporation engaged in the design, merchandising and sale ofimported fabrics to manufacturers of children's, ladies' and men's clothing until July 1997 when GFA ceasedoperations. Since July 1997 Mr. Aber has been managing his personal investmentportfolio. In November 1997, after GFA ceased operations, certain creditors ofGFA, whose claims against GFA were disputed, filed an involuntary bankruptcypetition in federal bankruptcy court against GFA. In March 1998, such creditorsconsented to an order dismissing the petition pursuant to an agreement theyreached with GFA, for a settlement of $40,000.ITEM 11. EXECUTIVE COMPENSATIONCompensation of Officers For Mr. Fyfe's service to the Corporation and his role in bringing theTransaction to fruition, the Corporation issued to Mr. Fyfe 10,000 shares ofSeries B Convertible Redeemable Preferred Stock. The Corporation has nototherwise paid salary, wages or other compensation to any of its executiveSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. officers since February 1996 when the Corporation's then operating subsidiarieswere placed into receivership in the United Kingdom and all business operationsceased. Summary Compensation Table Long-Term Compensation ----------------------------------- Annual Compensation Awards Payouts ---------------------------------- -------------- ------------- AllName Otherand Options/ Compen-Principal Salary SARs sationPosition Year ($) (#) ($)- -------- -------- ------- --- --- James J. Fyfe(1) 1998 -0- 1,500 -0- 1997 -0- 1,500 -0- 1996 $76,000 -0- -0-- -----------------(1) Mr. Fyfe became sole officer on March 6, 1996 following the resignations of Brian J. Baylis and Susan A.M. Crisp. His 1996 salary was paid to Mr. Fyfe by the former U.K. subsidiary. All officers hold office until the meeting of the Board following thenext annual meeting of stockholders or until the earlier of their resignation orremoval. OPTION/SAR Grants in Last Fiscal Year Individual Grants- ------------------------ ------------------ -------------------- ----------------- ----------------------- Number of % of Shares of Total Common Stock Options/ Underlying SARs Options/ Granted to Exercise SARs Employees or Base Granted in Fiscal Price ExpirationName (#) Year ($/Sh) Date James J. Fyfe 1,500 100% $.3125 May 2002 Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Options/SAR /Values Value of Number of Unexercised Unexercised In-the-Money Options/SARs Options/SARs At FY-End (#) At FY-End ($) Shares Acquired Exercisable/ Exercisable/ Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable ---- --------------- ------------------ ------------- ------------- James J. Fyfe -0- -0- 0/3,000 0/0Compensation of Directors Each director who is not an officer or employee of the Corporation isentitled to receive compensation of $2,500 per calendar quarter plus 500 sharesof Common Stock per calendar quarter of board service, in addition toSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. reimbursement of travel expenses.. Outside directors would be compensated forcommittee service at $500 per calendar quarter plus 125 shares of Corporationstock per calendar quarter. Such directors are also compensated for specialassignments from time to time. No compensation for special assignments was paidin fiscal 1997 or 1998. No directors' fees are payable to employees of theCorporation who serve as directors. All directors receive options to purchase 1,500 shares of theCorporation's common stock each May under the Corporation's 1992 Stock OptionPlan for Directors.Section 16 Beneficial Ownership Compliance Section 16(a) of the Securities Exchange Act of 1934 requires theCorporation's directors, executive officers and 10% stockholders to file withthe Securities and Exchange Commission ("SEC") certain reports regarding suchpersons' ownership of the Corporation's securities. Mr. Baylis and Ms. Crispwere required to file reports on Form 4 in connection with the reduction oftheir respective ownership interests in the Corporation resulting from the saleof shares pledged by them following a default in the obligations of theCorporation's former U.K. subsidiaries to the Bank of Scotland in 1996. Mr.Baylis and Ms. Crisp, each of whom resides in the U.K., were not fully aware oftheir obligations to file a Form 4 following the sale of pledged shares but havebeen notified regarding such obligations. Bruce Paul became a 10% stockholder inMay 1997. By June 1997, his ownership interest was below 10% due to additionalstock issuances by the Corporation. To the Corporation's knowledge, Mr. Paul didnot file a Form 3 upon becoming a 10% stockholder. The Corporation is not awareof any other late filings of reports under Section 16 this past year.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTVoting Securities of Certain Beneficial Owners and Management The following table sets forth, as of June 1, 1998, informationconcerning the beneficial ownership of (a) Common Stock and (b) voting power ofthe Corporation by virtue of holding shares of Common Stock, which have one voteper share, and shares of Series B Convertible Redeemable Preferred Stock, whichhave ten votes per share ("Voting Power") (i) by each person which is known bythe Corporation to own beneficially more than 5% of its outstanding Common Stockor Voting Securities, (ii) by each director, (iii) by each of the currentexecutive officers named in the compensation table and (iv) by all directors andexecutive officers as a group. Common Stock VotingPower(1) Amount and Nature of Name and Address of Beneficial Percentage Beneficial Owner(2) Ownership of Class Amount Percentage James Fyfe............................... 3,000(3) (4) 103,000 0.7% Joel San Antonio(5)...................... -0- -0- 6,850,000 46.9% Robert Hutchins.......................... -0- -0- 150,000 1.0% Ronald Glime............................. 50,000 0.8% 550,000 3.8% Glen Aber................................ -0- -0- 150,000 1.0% Bruce H. Paul............................ 500,000 7.9% 500,000 3.4% Alan Zuckerman........................... -0- -0- 500,000 3.4% All directors and executive officers as a group (5 persons)............................ 53,000 0.9% 7,803,000 53.4%(1) Includes Common Stock and Class B Preferred Stock at 10 votes per share.(2) All addresses are c/o the Corporation except as noted.(3) Represents exercisable options.(4) Less than 0.1%.(5) Includes 110,000 preferred shares (with 1,100,000 votes) held by family members of Mr. San Antonio's. (6) Mr. Paul's address is 1 Hampton Road, Purchase, NY, to the best knowledge of the Corporation. (7) Mr. Zuckerman's address is 415 Bull Mill Road, Chester, NY to the best Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. knowledge of the Corporation.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSTransactions With Management and Others Other than the consummation of the Transaction, and the issuance of10,000 shares of Series B Preferred Stock to Mr. Fyfe in connection therewith,during the fiscal year ended March 31,1998 and all subsequent periods there havebeen no material transactions between the Corporation and any member ofmanagement or any principal shareholder of the Corporation.PART IVITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KFinancial Statements The financial statements filed as a part of this report are asfollows: Report of independent accountants Balance Sheets - March 31, 1998 and March 31, 1997 Statements of Operations - Years ended March 31, 1998, March 31, 1997 and March 31, 1996 Statement of Changes in Stockholders' (Deficiency)/Equity -Years ended March 31, 1998, March 31, 1997 and March 31, 1996 Statements of Cash Flows - Years ended March 31, 1998, March 31, 1997 and March 31, 1996 Notes to financial statementsFinancial Statement Schedules The financial statement schedule filed as a part of this report is asfollows: Valuation and Qualifying Accounts for the years ended March 31, 1998,March 31, 1997 and March 31, 1996. Other financial statement schedules have been omitted for the reasonthat they are not required or are not applicable, or the required information isshown in the financial statements or notes thereto.Exhibits The exhibits filed as a part of this report are as follows: Exhibit No. of incorporated report specified below3 (a) Certificate of Incorporation filed September 18, 1980(1) 3 (b) Amendment to Certificate filed September 29, 1980(1) 3 (c) Amendment to Certificate of Incorporation filed July 28, 1983(2) 3(b) (d) Amendment to Certificate of Incorporation filed February 10, 1984(2) 3(d) (e) Amendment to Certificate of Incorporation filed March 31, 1986(3) 3(e) (f) Amendment to Certificate of Incorporation filed March 23, 1987(4) 3(g) (g) Amendment to Certificate of Incorporation filed June 12, 1990(5) 3.8 (h) Amendment to Certificate of Incorporation filed September 27, 1991(6) 3.9 (i) Certificate of Designation filed November 12, 1994(7) 3.8Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (j) Amendment to Certificate of Incorporation filed September 28, 1995(10) 3(j) (k) Certificate of Designation for the Series B Preferred Stock dated May 18, 1998(12) C 3(f) (l) By-laws of the Corporation, as amended on April 25, 1991(6) (m) Amendment to Certificate of Incorporation dated May 18, 1998(12) A4 (a) Form of Underwriter's Warrant(6) 4.9.1 (b) Form of Promissory Note - 1996 Offering(10) 4(b) (c) Form of Promissory Note - 1997 Offering(10) 4(c) (d) Form of Common Stock Purchase Warrant - 1996 Offering(10) 4(d) (e) Form of Common Stock Purchase Warrant - 1997 Offering(10) 4(e)10 (a) 1986 Stock Option Plan, as amended(7) 10.6 (b) 1992 Stock Option Plan(8) B (c) Stock Purchase Agreement dated as of January 30, 1997 by and among the Corporation, the Bank of Scotland and 12 buyers(10) 10(m) (d) Mutual Release dated as of January 30, 1997 by and among the Corporation, James Fyfe and the Bank of Scotland(10) 10(n) (e) Stock Purchase Agreement, dated as of March 4, 1998, between the Corporation and the Initial Purchasers named therein(12) B (f) 1998 Employees Stock Option Plan(12) D16 (a) Letter of Mahoney Cohen & Company, CPA, PC regarding their concurrence with the statements made by the Corporation concerning their resignation as the Corporation's principal accountant(11) 16(a)Notes:(1) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the registration statement of the Corporation on Form S-18, File No. 2-69627, which exhibit is incorporated herein by reference.(2) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the registration statement of the Corporation on Form S-2, File No. 2-88712, which exhibit is incorporated herein by reference.(3) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the registration statement of the Corporation on Form S-2, File No. 33-4458, which exhibit is incorporated herein by reference.(4) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the annual report of the Corporation on Form 10-K for the year ended September 30, 1987, which exhibit is incorporated herein by reference.(5) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the registration statement of the Corporation on Form S-3, File No. 33-42154, which exhibit is incorporated herein by reference.(6) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the registration statement of the Corporation on Form S-1, File No. 33-42154, which exhibit is incorporated herein by reference.(7) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the annual report of the Corporation on Form 10-K for the year ended September 30, 1994, which exhibit is incorporated herein by reference.(8) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the proxy statement of the Corporation dated March 30,Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1992, which exhibit is incorporated herein by reference.(9) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Corporation on Form 8-K, dated April 5, 1995, which exhibit is incorporated herein by reference.(10) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the annual report of the Corporation on Form 10-K for the year ended March 31, 1996, which exhibit is incorporated herein by reference.(11) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the annual report of the Corporation on Form 10K/A for the year ended March 31, 1996, which exhibit is incorporated herein by reference. (12) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the proxy statement of the Corporation dated April 23, 1998, which exhibit is incorporated herein by reference.REPORTS ON FORM 8-K The Company filed no reports on Form 8-K during the fourth quarter offiscal 1998.SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Corporation has duly caused this report to be signedon its behalf by the undersigned, "hereunto duly authorized. CORNICHE GROUP INCORPORATED By: /s/Robert H. Hutchins -------------------------- Robert H. Hutchins, President Pursuant to the requirements of the Securities Exchange Act of 1934,as amended, this report has been signed below by the following persons on behalfof the Corporation and in the capacities and on the dates indicated:Signatures Title DatePrincipal Executive Officer:/s/Robert H. Hutchins President July 14, 1998- --------------------------------------ROBERT H. HUTCHINSPrincipal Financial and Accounting Officer:/s/Glenn Aber Treasurer July 14, 1998- --------------------------------------GLENN ABERA Majority of the board of directors:/s/Joel San Antonio Chairman of the Board July 14, 1998- --------------------------------------JOEL SAN ANTONIO/s/Robert H.Hutchins July 14, 1998- --------------------------------------Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ROBERT H. HUTCHINS/s/Ronald Glime July 14, 1998- --------------------------------------RONALD GLIME/s/Glenn Aber July 14, 1998- --------------------------------------GLENN ABER/s/James J. Fyfe July 14, 1998- --------------------------------------JAMES J. FYFE CORNICHE GROUP INCORPORATED FINANCIAL STATEMENTS MARCH 31, 1998 AND 1997To The Stockholders and Board of DirectorsCorniche Group IncorporatedWayne, New Jersey INDEPENDENT AUDITOR'S REPORTWe have audited the accompanying balance sheets of Corniche Group Incorporatedas of March 31, 1998 and 1997 and the related statements of operations,stockholders' equity (deficiency), and cash flows for the years ended March 31,1998, 1997 and 1996. Our audits also included the financial statement schedulefor the years ended March 31, 1998, 1997 and 1996. These financial statementsand the financial statement schedule are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financialstatements based on our audit. We did not audit the financial statements and thefinancial statement schedule of Corniche Distribution Limited and Subsidiaries,a former consolidated subsidiary, as of March 31, 1996 and for the year thenended. These statements and schedules were not audited as the corporations werein receivership in the United Kingdom (see Note 2 of the Financial statements),and the records are unavailable for audit.We conducted our audit in accordance with generally accepted auditing standards.Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.In our opinion, based on our audit the financial statements referred to abovepresent fairly, in all material respects, the financial position of CornicheGroup Incorporated as of March 31, 1998 and 1997, and the results of theiroperations and their cash flows for the years ended March 31, 1998, 1997 and1996 in conformity with generally accepted accounting principles. Also, in ouropinion, the related financial statement schedule, when considered in relationto the basic financial statements taken as a whole, presents fairly, in allmaterial respects, the information set forth therein./s/Simontacchi & Company, LLPSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Fairfield, New JerseyJuly 10, 1998 CORNICHE GROUP INCORPORATED BALANCE SHEETS ASSETS- --------------------------------------------------------------------- --------------------------- -------------------------- March 31, March 31, 1998 1997 ---- ----Current Assets: Cash and Equivalents $1,129,064 $ 13,167Other Receivable 0 1,000Prepaid Expenses 179 0 ------------- ----------- Total Current Assets 1,129,243 14,167Other Assets:Property and Equipment, net 359 747 ------------ ---------- Total Assets $1,129,602 $ 14,914 ========== ======== See Accompanying Notes CORNICHE GROUP INCORPORATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) March 31, March 31, 1998 1997 - ---- - ----Current Liabilities: Notes Payable $ 0 $ 400,000Trade Accounts Payable 21,362 4,929Dividends Payable - Preferred Stock 208,464 148,397Accrued Liabilities 29,850 113,297 ---------- ---------- Total Current Liabilities 259,676 666,623 --------- ----------Stockholders' Equity (Deficiency):Preferred stock, 5,000,000 shares authorized Series A $0.07 convertible preferred stock and issued 1,000,000 shares, and outstanding 893,908 shares March 31, 1998 and 909,267 March 31,1997. 893,908 909,267Common Stock, $0.10 par value, authorized - 30,000,000 shares, issued 6,355,231 March 31, 1998 and 2,630,378 March 31, 1997. 635,522 263,037Additional Paid-In Capital 2,053,750 830,086(Accumulated Deficit) Retained Earnings (2,713,254) (2,449,389) ---------- ---------- 869,926 (446,999)Treasury Stock - at cost, 218,100 shares at March 31, 1997 0 (204,710)Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -------------- ----------- Total Stockholders' Equity (Deficiency) 869,926 (651,709) ----------- -----------Total Liabilities and Stockholders' Equity (Deficiency) $1,129,602 $ 14,914 ========== ============ See Accompanying Notes CORNICHE GROUP INCORPORATED STATEMENT OF OPERATIONS March 31, March 31, March 31, 1998 1997 1996 ---- ---- ---- Net Sales $ 0 $ 0 $ 0 Cost of Sales 0 0 0 ------------- ------------ -----------Gross Profit 0 0 0 Selling, General and Administrative Expenses 221,602 251,583 257,073 --------- ---------- -----------Operating Loss (221,602) (251,583) (257,073) (Loss) on Sale of Assets 0 0 (3,042) Interest (Net) 17,804 (17,373) (600) ---------- ----------- -----------(Loss) Income before Income Tax (203,798) (268,956) (260,715) Income Tax Benefit (Expense) 0 0 0 ------------- ------------ -----------Net (Loss) Income from Continuing Operations (203,798) (268,956) (260,715) Preferred Stock Dividend (60,067) (63,648) (62,795) ---------- ---------- -----------Net (Loss) Income After Preferred Dividends (263,865) (332,604) (323,510) Loss from Discontinued Operations 0 0 (3,432,032) Excess of UK Subsidiary Cumulative Losses over Investment 0 0 5,466,636 ------------ ------------ ----------Net Income (Loss) $ (263,865) $ (332,604) $1,711,094 ========== =========== ==========Profit / (Loss) per share of Common StockIncome (Loss) from Continuing Operations (0.05) (0.14) (0.14)Income (Loss) from Discontinued Operations 0.00 0.00 0.88 ----------- ----------- -------------Net Income (Loss) per share $ (0.05) $ (0.14) $ 0.74 =========== ============ =============Weighted Average Number of Common Shares Outstanding 5,165,272 2,412,278 2,300,289 ========= ========= ========= See Accompanying Notes CORNICHE GROUP INCORPORATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) Common Stock Additional Cumulative Preferred Number of Paid-In Accumulated Translation Treasury Stock Shares Amount Capital Deficit Adjustment Stock Total ----- ------ ------ ------- ------- ---------- ----- ----- Balance - March 25, 1995 $ 946,069 2,119,857 $ 211,985 - $(3,827,879) $(4,630) $ (204,710) $(2,879,165)Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Conversion of Preferred Stock (36,802) 7,077 708 - - - - - Adjustment to Common Stock - (156) (16) - - - - - Issuance of Common Stock - 478,600 47,860 36,094 - - - 957,200 Costs Related to Sale of Common Stock - - - 16 - - - (162,864) Issuance of Common Stock - 25,000 2,500 909,340 - - - 50,000 Preferred Stock Dividends - - - (162,864) (62,795) - - (62,795) Elimination of UK Subsidiaries - - - 47,500 2,034,604 - - 2,039,234 Net Loss - - - - (260,715) 4,630 - (260,715) ----------- ---------- --------- --------- ---------- -------- --------- ---------- Balance - March 31, 1996 $909,267 2,630,378 263,037 830,086 (2,116,785) - (204,710) (319,105) Preferred Stock Dividends - - - - (63,648) - - (63,648) Net Loss - - - (268,956) (268,956) - - (268,956) ---------- --------- --------- --------- ----------- --------- ---------- ---------- Balance - March 31, 1997 $ 909,267 2,630,378 $263,037 (830,086) $(2,449,389) $ 0 $(204,710) $ (651,709) Issuance of Common Stock for Cash - 3,940,000 394,000 - - $ 1,970,000 Costs related to Sale of Common Stock - - - - 0 - (184,500) Conversion of Preferred Stock (15,359) 2,953 295 $830,086 - - - Retirement of Treasury Stock - (218,100) (21,810) - - - - Preferred Stock Dividends - - - 1,576,000 (60,067) - 204,710 (60,067) Net Loss - - - (184,500) (203,798) - - (203,798) ----------- ---------- -------- --------- ---------- -------- ---------- ---------- Balance - March 31, 1998 $ 893,908 6,355,231 635,522 (182,900) $(2,713,254) $ 0 $ 0 $ 869,926 ======== ========= ========= ======== =========== ======== ========== ======== See Accompanying Notes CORNICHE GROUP INCORPORATED STATEMENT OF CASH FLOWS March 31, March 31, March 31, 1998 1997 1996 ----- ----- ---- Cash Flows from Operation Activities: Net Loss from Continuing Operations $(203,798) $(268,956) $(260,715) Adjustments to reconcile Net Loss from Continuing Operations to Net Cash used in Operating Activities: Depreciation 388 388 1,749 Loss on Sale of Property and Equipment - - 3,042 Changes in Assets and Liabilities Net of Effects from Acquisitions: Decrease in Notes Receivable - 125,000 75,000 Decrease (Increase) in Prepaid Expenses and Other Receivables 821 9,000 8,422 (Decrease) Increase in Notes Payable - - (11,292) (Decrease) Increase in Trade Accounts Payable 16,433 (178,194) 127,757 Increase (Decrease) in Accrued Liabilities (83,447) 8,493 (451,070) --------- ---------- --------- Net Cash used in Operating Activities (269,603) (304,269) (507,107) Net Cash used in Discontinued Operations - - (331,337) ------------- ----------- --------- Net Cash used in Operating Activities (269,603) (304,269) (838,444) --------- --------- --------- Cash Flows from Investing Activities: Payments to Acquire Fixed Assets - - (8,926) Proceeds from Sale of Equipment - - 3,000 ------------- ---------------- --------- Net Cash used in Investing Activities - - (5,926) ------------- --------------- --------- Balance Carried Forward $(269,603) $(304,269) $(844,370) -------------- --------------- ---------- See Accompanying Notes CORNICHE GROUP INCORPORATED STATEMENT OF CASH FLOWSSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. March 31, March 31, March 31, 1998 1997 1996 ---- ---- ---- Balance Brought Forward $(269,603) $(304,269) $(844,370) --------- --------- ---------Cash Flows from Financing Activities: Net Proceeds from Issuance of Common Stock for Cash 1,785,500 - 794,336 Net Proceeds from Issuance of Common Stock for Services - - 50,000 Payment of Notes Payable (400,000) (77,630) - Additional Borrowings - 395,000 - --------- ------- ----------- Net Cash Provided by Financing 1,385,500 317,370 844,336 --------- -------- ---------Net Increase (Decrease) in Cash 1,115,897 13,101 (34)Cash at Beginning of Period 13,167 66 100 --------- -------- ----------Cash and Equivalents at End of Period $1,129,064 $ 13,167 $ 66 ========== ========== ===========Supplemental Disclosures of Cash Flow InformationCash Paid during the Year for: Interest Income Taxes $ 4,181 $ 17,373 $ 600 $ - $ - $ - See Accompanying Notes CORNICHE GROUP INCORPORATED STATEMENT OF CASH FLOWS (CONCLUDED) Supplemental Schedule of Non-Cash Investing and Financing ActivitiesDuring the year ended March 31, 1998 and 1997, the Company accrued preferredstock dividends of $60,067 and $63,648, respectively.During the year ended March 31, 1998 holders of 15,359 shares of preferred stockconverted such shares into 2,953 shares of CGI=s common stock.On February 27, 1998, the Company retired the treasury stock of 218,100 shares,reducing the value of common stock outstanding by $21,810; additional paid incapital by $182,900 and removing treasury stock of $204,710.In March 1996 holders of 36,802 shares of preferred stock converted such sharesinto 7,077 shares of Chi's common stock. See Accompanying Notes CORNICHE GROUP INCORPORATED NOTES TO FINANCIAL STATEMENTSNOTE 1 THE COMPANY Corniche Group Incorporated, formerly Fidelity Medical, Inc.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (hereinafter referred to as the "Company" or "CGI") as result of a reverse acquisition with Corniche Distribution Limited and its Subsidiaries ("Corniche") (see "Reverse Acquisition" below), was engage in the retail sale and wholesale distribution of stationery products and related office products, including office furniture, in the United Kingdom. The operating subsidiaries of Corniche were Chessbourne International Limited ("Chessbourne") and The Stationery Company Limited ("TSCL"). Corniche experienced large operating losses and net cash outflows from operating activities in fiscal 1995 and 1996 resulting in a significant reduction in working capital during that period. The Company was unsuccessful in its efforts to raise interim financing to resolve its liquidity problems. Additionally, the Company was not able to convert a significant portion of its bank debt to equity. As a result, receivers were appointed to Corniche's subsidiaries Chessbourne and TSCL on February 7, 1996 by their primary bankers and secured lender, Bank of Scotland. Corniche Distribution Limited was placed in receivership on February 28, 1996 (See Note 2). New Business Operations - See Note 8.NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reverse Acquisition On March 2, 1995, the stockholders of Corniche exchanged all of their common stock for 1,097,250 shares of CGI. Since the former stockholders' of Corniche owned a majority of the outstanding stock of CGI after the acquisition, such purchase transaction was accounted for as a reverse acquisition. The acquired company (Corniche) was deemed to have acquired the acquiring company (CGI). Historical stockholders' equity of Corniche has been retroactively restated to give effect to the recapitalization. The historical financial statements prior to March 2, 1995 are those of Corniche. Further, on March 2, 1995, CGI acquired a 49% interest in the outstanding shares of Chessbourne. UK Receivership Proceeding Significant losses were incurred during the forty weeks to December 30, 1995, and in the fiscal year ended March 25, 1995, resulting in a working capital and a stockholders deficiency as of December 30, 1995 and March 25, 1995. Management of Corniche had taken several steps to reduce the amount of cash used by operations, including relocation of its corporate facilities and reduce staffing levels and other operating expenses. However, a receivership proceeding involving the operating subsidiaries of the Company was commenced on February 7, 1996 and the UK holding company, Corniche Distribution Limited, was placed in receivership on February 28, 1996. The receiverships resulted in the loss of all of the Company's operations and operating assets and eliminated most liabilities. Accordingly, the operating activities of the UK subsidiaries have been classified as a discontinued operation and the excess of the UK subsidiary's cumulative losses over the Company's investment was included in the income statement for the year ended March 31, 1996. Cash Equivalents Short term cash investments which have a maturity of ninety days or less are considered cash equivalents in the statement of cash flows. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires managementSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Office Furniture and Equipment Office furniture and equipment are depreciated by the straight-line method over the estimated useful lives of the assets, which range principally from three to ten years. Income Taxes Effective October 1993, the Company adopted SFAS 109, "Accounting for Income Taxes", which recognizes (a) the amount of taxes payable or refundable for the current year and, (b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an enterprise's financial statement or tax returns. There is no difference as to financial and tax reporting; as such, there are no deferred taxes.NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) New Accounting Standards Effective fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 107, "Disclosure About Fair Value of Financial Instruments", and Statement of Position 94-6, "Disclosure of Certain Significant Risks and Uncertainties". Per Share Information Per share information has been computed based on the weighted average number of shares and dilutive common stock equivalents outstanding during each respective period.NOTE 3 PROPERTY AND EQUIPMENT Property and Equipment consists of the following: March 31, March 31, 1998 1997 ---- ---- Furniture and Fixtures $1,426 $1,426 Less: Accumulated Depreciation 1,067 679 ----- ----- $ 359 $ 747 ===== =====NOTE 4 NOTES PAYABLE During the period July 1996 through December 1996, the Company engaged in a private offering of securities pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended. The offering of up to $300,000 was conducted on a "best efforts" basis through Robert M. Cohen & Co., Inc. ("RMCC"), a New York based broker-dealer and was offered and sold in the form of $25,000 units. Each unit consisted of one $25,000 face amount 90-day, 8% promissory note and one redeemable common stock purchase warrant to purchase 60,000 shares of the Company's common stock at a price of $.50 per share during a period of three years from issuance. The offering was terminated in December 1996 upon the sale of 4 units resulting in $100,000 in gross proceeds. In connection with such offering, RMCC was paid sales commissions equal to 10% of the aggregate purchase price of the units sold resulting in aggregate sales commissions of $10,000.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. During the period January 1997 through April 30, 1997, the Company engaged in a private offering of securities pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended. The offering consists of up to 19 units being sold at an offering price of $25,000 per unit. Each unit consists of one $25,000 face amount 90-day, 8% promissory note and one redeemable common stock purchase warrant to purchase 60,000 shares of the Company's common stock at a price of $.50 per share during a period of three years from issuance. The offering of up to $475,000 was conducted on a "best efforts" basis through RMCC. In connection with such offering, RMCC was paid sales commissions equal to 10% of the purchase price for each unit sold or $2,500 per unit. RMCC sold 17 units. The Notes Payable of $400,000 at March 31, 1997 relating to the above offering were paid in full during the year ended March 31, 1998 with funds generated from the sale units of stock (see Note 5).NOTE 5 STOCKHOLDERS' EQUITY Effective October 1, 1995 the Company declared a one-for-ten reverse stock split and all numbers of shares and share values stated herein reflect such reverse split unless otherwise noted. In connection with the settlement of the securities class action litigation (see Note 6), the Company issued 1,000,000 shares of 7% cumulative convertible preferred stock with an aggregate value of $1,000,000. The preferred stock has a liquidation value of $1 per share, is non-voting and convertible into common stock of the Company at a price of $5.20 per share. Preferred stockholders are entitled to receive a cash dividend of 7% paid semi-annually. The preferred shares are callable by the Company at any time after the first anniversary of issuance, at prices ranging from 101% to 105% of face value. In addition, if the closing price of the Company's common stock exceeds $13.80 per share for a period of 20 consecutive trading days, the preferred shares are callable by the Company at a price equal to 1% of face value. In March 1995, the holders of 53,931 shares of preferred stock exercised their rights to convert and, accordingly, 10,371 shares of common stock were issued. During the year ended March 31, 1996, holders of 36,802 shares of preferred stock converted such shares into 7,077 shares of CGI's common stock. During the year ended March 31, 1998, holders of 15,359 shares of preferred stock converted such shares into 2,953 shares of CGI's Common Stock. In March 1995, the Company issued a total of 1,312,400 shares of common stock to acquire all of the issued and outstanding stock of Corniche. Brian J. Baylis was issued 877,800 shares of common stock and Susan A.M. Crisp was issued 219,450 shares of common stock in exchange for their holdings representing 100% of the issued common stock of Corniche, and the balance of 215,150 shares were issued to Chester in connection with the acquisition. In addition, the Company issued 25,000 shares of the Company's common stock to Ronatree in exchange for the remaining 49% Of the common shares of Chessbourne. Simultaneous with the Company's acquisition of Corniche on March 2, 1995, NWCM Limited ("NWCM"), a Hong Kong investment banker, agreed on a staggered basis, to raise up to $5,000,000 of new equity capital on a "best efforts" basis. This offer was limited to experienced, sophisticated investors who are "non-U.S. persons" under Regulation S of the United States Securities Act of 1933. An initial tranche of 600,000 shares was offered at a price of $2.00 per share. Pursuant to the transaction, the Company paid NWCM a fee of $50,000. In addition, NWCM was paid a sales commission of 10% and a non-accountable expense allowance equal to 2% ofSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the total dollars raised, a total of $162,864. The offering was closed on September 8, 1995 and the Company raised a total of $957,200 gross, $794,336 net of sales commission and expense allowance in the year ended March 31, 1996 and $100,000 March 25, 1995. The Company has agreed to indemnify NWCM for certain liabilities arising from the transaction. During the year ended March 31, 1996, the Company issued 25,000 shares of common stock to Trisec Holdings, Ltd. for consulting services in connection with the "Reverse Acquisition" (see Note 2) of Corniche on March 2, 1995. Effective January 30, 1997, the Company entered into a Stock Purchase Agreement with the Bank of Scotland and twelve unrelated persons whereby 1,042,250 of the 1,097,250 shares of the Company's common stock pledged to the bank of Scotland by Brian J. Baylis and Susan A.M. Crisp to secure certain debts of Corniche Distribution Limited and subsidiaries to the Bank of Scotland were sold by the bank of Scotland following a default in the obligation secured by the pledge to such twelve persons for an aggregate consideration of $125,070. On May 15, 1997, the company commenced a private securities offering pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended. The offering of up to 400 units, each unit consisting of 10,000 shares of common stock being offered at a price of $5,000 per unit. RMCC was the placement agent for such offering and is entitled to receive a sales commission equal to 10% of the offering price for each unit sold. The first 50 units were offered on a "best efforts, all or none" basis. The remaining 350 units were offered on a "best efforts" basis. In connection with the offering, 369 units were sold for gross receipts of $1,845,000. RMCC was paid a commission $184,500 for net of $1,660,500 to the Company. The proceeds of such offering are intended to be utilized to enable the Company to attempt to effect the acquisition of an operating business entity, for working capital and to pay off the promissory notes and to redeem the common stock purchase warrants issued in the Company's private securities offering which was completed on April 30, 1997. In March 1998 the Company sold 250,000 shares of common stock at $.50 per share realizing $125,000. The Company has issued common stock purchase warrants from time to time to investors in private placements, certain vendors, underwriters, and directors and officers of the Company. A total of 101,308 shares of common stock are reserved for issuance upon exercise of warrants as of March 31, 1998. Warrants issued and outstanding are summarized as follows:NOTE 5 STOCKHOLDER'S EQUITY (Cont'd)- ---------------- ------------------------------- ----------------- ------------------------ ---------------------- Shares Issuable on Exercise Expiration Exercise Price Date- ---------------- ------------------------------- ----------------- ------------------------ ----------------------- ---------------- ------------------------------- ----------------- ------------------------ ---------------------- September 1993 9,375 $46.40 4/99 March 1995 91,933 $3.20 - $8.10 1/99 - 11/03 In March 1995, as a result of the sale by the Company of itsSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. medical imaging subsidiary, stock options held by certain directors, officers and employees under the Company's 1986 Stock Option Plan were converted to warrants on substantially the same terms as the previously held stock options, except these warrants were immediately vested. Stock Option Plans CGI has two stock option plans. The 1986 Stock Option Plan provides for the grant of options to purchase shares of the Company's common stock to employees. The 1992 Stock Option Plan provides for the grant of options to directors. The 1986 Stock Option Plan allows for the grant of incentive stock options (ISO), non-qualified stock options (NQSO) and stock appreciation rights (SAR). The maximum number of shares of the Company's common stock that may be granted, as amended in April 1993, is 140,000 shares. The terms of the plan provide that options are exercisable for a period of up to ten years from the date of grant or a period of five years with respect to incentive stock options if the holder owns more that 10% of the Company's outstanding common stock. The exercise price and grantees of options are established by the Stock Option Committee. The exercise price of ISO's must be at least 100% of the fair market value of the common stock at the time of grant. For holders of more than 10% of the Company's outstanding common stock, the exercise price must be at least 110% of fair market value. The exercise price of NQSO's must be not less than 80% of the fair market value of the common stock at the time of grant. An option is exercisable not earlier than six months from the date of grant. In April 1992, the Company adopted the 1992 Stock Option Plan to provide for the granting of options to directors. According to the terms of this plan, each director is granted options to purchase 1,500 shares each year. The maximum amount of the Company's common stock that may be granted under this plan is 20,000 shares. Options are exercisable at the fair market value of the common stock on the date of grant and have five year terms. Information with respect to options under the 1986 and 1992 Stock Option Plans is summarized as follows:- ----------------- --------------------------- ---------------- ---------------- ------------------ ----------------- March 31, March 31, March 31, 1998 1997 1996 ---- ---- ----- ----------------- --------------------------- ---------------- ---------------- ------------------ ------------------ ----------------- --------------------------- ---------------- ---------------- ------------------ ----------------- Outstanding, Beginning of Year 1,500 7,500 28,980 Granted 1,500 3,000 9,000 Converted 0 0 0 Expired 0 (9,000) (30,480) Exercised 0 0 0 ------- ------- -------- Outstanding, End of Year 3,000 1,500 7,500 ===== ===== =====- ----------------- --------------------------- ---------------- ---------------- ------------------ Outstanding options expire 90 days after termination of holder's status as employee or director. At March 31, 1998, there were 1,500 exercisable outstanding options and 158,500 shares available for grant. The exercise price of outstanding options was $0.40625.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On May 1, 1997, 1,500 options were granted at an exercise price of $.3125 per share. Options were granted at an exercise price equal to the fair value of thecommon stock at the grant date. Therefore, in accordance with the provisions ofAPB Opinion No. 25 related to fixed stock options, no compensation expense isrecognized with respect to options granted or exercised. Under the alternativefair-value based method defined in SFAS No. 123, the fair value of all fixedstock options on the grant date would be recognized as expense over the vestingperiod. As the number of options granted in 1998 is immaterial, recognizing theexpense would not have a material effect on the Company's 1998 financialstatements.NOTE 6 COMMITMENTS, CONTINGENCIES AND OTHER Legal Proceedings During fiscal 1994, the Company disclosed irregularities in its revenue recognition practices which led to the restatement of the Company's financial statements for fiscal years ended September 30, 1989, 1990, and 1991, and the first quarter of fiscal 1992. As a result, nine class action securities complaints (the "lawsuits") were filed against the Company and certain other persons which were settled in January 1994. Pursuant to the settlement, the Company paid $2,560,000 in cash in 1995 and issued $1,000,000 in 7% cumulative convertible preferred stock. The preferred stock is convertible into common stock at a price of $5.20 per share, and is callable for five years. Stockholders who purchased CGI's shares between January 3, 1989 and May 7, 1992 were included within the plaintiff class for purposes of the settlement. CGI and certain of its former officers and directors were involved in a shareholders' derivative action filed in Delaware Chancery Court. The causes of action asserted included breach of fiduciary duty, breach of duty of care and trust of the Company's shareholders, gross negligence and mismanagement, as well as common law conspiracy and aiding and abetting. The Court granted the Company's motion to dismiss by Opinion and Order dated May 2, 1995. The Company instituted its own action in State Court in New Jersey against its former chief executive officer, Efriam Landa. The complaint was filed on May 4, 1995. Mr. Landa answered on October 16, 1995 and asserted counterclaims seeking (a) reimbursement of defense costs in the derivative action and related investigations by the Securities and Exchange Commission ("SEC") and the United States Attorney for the District of New Jersey and (b) damages for breach of his employment contract. This matter was settled by exchange of mutual releases on December 5, 1996.In the opinion of management, there are no other lawsuits or claims pendingagainst the Company.NOTE 7 INCOME TAXES There were no significant differences between the financial statement and tax basis of assets and liabilities that were expected to give rise to taxable income in the future in view of the Company's substantial tax losses available for carryforward. Earnings (loss) before income taxes and preferred stock dividend is attributable to the following sources: Years Ended In- ----------------- --------------------------------- -------------------- -------------------- ------------- 1998 1997 1996 ---- ---- ----- ----------------- --------------------------------- -------------------- -------------------- ----------------------- ----------------- --------------------------------- -------------------- -------------------- ---------------------- $(203,798) $(268,956) $(260,715)Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ========= ========= =========- ----------------- --------------------------------- -------------------- -------------------- ---------------------- The Tax Reform Act of 1986 enacted a complex set of rules limiting the utilization of net operating loss carryforwards to offset future taxable income following a corporate ownership change. The Company's ability to utilize its NOL carryforwards is limited following a change in ownership in excess of fifty percentage points. The Company has fully reserved the balance of tax benefits of its operating losses because the likelihood of realization of the tax benefits cannot be determined.NOTE 8 SUBSEQUENT EVENTS The following actions of the Board of Directors were approved by a vote of the Corporation's stockholders at the annual meeting on May 18, 1998. A. Amendment to the Corporation's Certificate of Incorporation to reduce the par value of the Common Stock. The par value of the Common Stock will be reduced from $0.10 per share to $0.001 per share. The par value is being reduced to $0.001 per share to conform with the new Series B Convertible Redeemable Preferred Stock, as each share of the Series B Convertible Redeemable Preferred Stock par value $0.01 per share, is convertible into ten (10) shares of Common Stock (see B below).NOTE 8 SUBSEQUENT EVENTS (Cont'd) B. Issuance of Series B Convertible Redeemable Preferred Stock, change in control and new business operations. On March 4, 1998, the Corporation entered into a Stock Purchase Agreement ("Agreement"), approved by the Corporation=s stockholders on May 18, 1998, with Mr. Joel San Antonio and certain other individuals (the "Initial Purchasers") whereby the Initial Purchasers acquired an aggregate of 765,000 shares of a newly created Series B Convertible Redeemable Preferred Stock, par value $0.01 per share. Thereafter the Initial Purchasers have been endeavoring to establish for the Corporation new business operations in the insurance sector, more specifically the property and casualty specialty insurance markets. Mr. San Antonio, who has many years experience in these sectors, is in the process of exploring a number of specialty insurance opportunities for the development of new business operations. In connection with the implementation of these strategies, it may become necessary for the Corporation to become licensed in one or more states in order to enable it to conduct operations or to acquire a company that maintains appropriate licenses. To further such goal, the Corporation recently has entered into a non-binding letter of intent to acquire all of the stock of an existing insurance company which has had limited operations and revenues for the past several years. The acquisition is subject to due diligence by the Corporation and subject to material conditions, including satisfaction of capital requirements of regulatory authorities. No assurances can be given that the Corporation will be able to obtain such licenses or to consummate any such acquisitions. The acquisition, if consummated, will represent the Corporation's entry into the United States insurance market. Pursuant to Agreement and subsequent transactions Mr. San Antonio acquired 685,000 shares of Series B Convertible Redeemable Preferred Stock at $68,500 and Messrs. Glime, Hutchins and Aber acquired 50,000, 15,000 and 15,000 shares, respectively, of Series B Convertible Redeemable Preferred Stock at the same price per share. Pursuant to the Agreement, the Corporation will pay certain expenses of the Initial Purchasers in connection with the Transaction, which expenses are currently estimated to be approximately $50,000, for legalSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. expenses. In addition, the Corporation issued 50,000 shares of Series B Convertible Redeemable Preferred Stock to Alan Zuckerman as compensation for his assistance to the Corporation in the identification and review of business opportunities and this Transaction and for his assistance in bringing the Transaction to fruition. Additionally, the Corporation issued 10,000 shares of Series B Convertible Redeemable Preferred Stock to James Fyfe for his work in bringing this Transaction to fruition. These issuances diluted the voting rights of existing stockholders by approximately 57%. The total authorized shares of Series B Convertible Redeemable Preferred Stock are 825,000. Terms of Preferred Stock The following summarizes the terms of the Series B Convertible Redeemable Preferred Stock, which terms are more fully set forth in the Certificate of Designation. The Series B Convertible Redeemable Preferred Stock carries a zero coupon and each share of the Series B Convertible Redeemable Preferred Stock is convertible into ten shares of the Corporation=s Common Stock. The holder of a share of the Series B Convertible Redeemable Preferred Stock is entitled to ten times any dividends paid on the Common Stock. Mr. San Antonio assumed control of the Corporation as the holder of such 685,000 shares of Series B Convertible Redeemable Preferred Stock, since the Series B Convertible Redeemable Preferred Stock has ten votes per share and votes as one class with the Common Stock. Accordingly, Mr. San Antonio, with approximately 47% of the voting power, will by himself almost have sufficient voting power to elect all of the Board of Directors. However, the Initial Purchasers of the Series B Convertible Redeemable Preferred Stock, including Mr. San Antonio, are required to vote in favor of Mr. Fyfe or his designee as a director of the Corporation through June 30, 2000. Pursuant to the terms of the Agreement and the Certificate of Designation, from March 31, 2000 to June 30, 2000, the Corporation has the right to repurchase or redeem such shares of Series B Convertible Redeemable Preferred Stock from the holders for a total consideration of $0.10 per share ($76,500 in the aggregate) unless, during the period from the date of the closing of the Transaction through March 31, 2000; (i) the Corporation's shares of common stock maintain a minimum closing bid price of not less than $2 per share on a public market during a period of any 10 consecutive trading days, and eitherNOTE 8 SUBSEQUENT EVENTS (Cont'd) (ii) the Corporation raises a minimum of $2.5 million of new equity capital through a placement of Common Stock, or (iii) the Corporation has net revenues of at least $1 million in any fiscal quarter through the fiscal quarter ending March 31, 2000 (collectively, the "Trigger Conditions"). B. Issuance of Series B Convertible Redeemable Preferred Stock, change in control and new business operations. Terms of Preferred Stock (cont=d) Mr. Fyfe or the director designated by Mr. Fyfe will have the ability to determine if the Corporation will elect to exercise this redemption right on behalf of the Corporation. Each Series B Convertible Redeemable Preferred Share is convertible into ten shares of Common Stock. Upon liquidation, the Series B Convertible Redeemable Preferred Stock would be junior to the Corporation=s Series A Preferred Stock and would share ratably with the Common Stock with respect to liquidating distributions.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Conversion The holder of any share of Series B Convertible Redeemable Preferred Stock has the right, at such holder's option (but not if such share is called for redemption), exercisable on or after September 30, 2000, to convert such share into ten (10) fully paid and non-assessable shares of Common Stock (the "Conversion Rate"). The Conversion Rate shall be subject to adjustment as stipulated in the Agreement. C. 1998 Employee Incentive Stock Option Plan Under the 1998 Plan, the maximum aggregate number of shares which may be issued under options is 300,000 shares of Common Stock. The aggregate fair market value (determined at the time the option is granted) of the shares for which incentive stock options are exercisable for the first time under the terms of the 1998 Plan by any eligible employee during any calendar year cannot exceed $100,000. The option exercise price of each option is 100% of the fair market value of the underlying stock on the date the options granted, except that no option will be granted to any employee who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or any subsidiary unless (a) at the time the options granted, the option exercise price is at least 110% of the fair market value of the shares of Common Stock subject to the option and (b) the option by its terms is not exercisable after the expiration of five years from the date such option is granted. At least one-half of the shares issued upon exercise of any option granted pursuant to the 1998 Plan must be retained by the optionee for at least one year. C. 1998 Employee Incentive Stock Option Plan (cont=d) The Plan will be administered by a committee of disinterested directors of the Board of Directors of the Corporation ("Option Committee"). D. Independent Directors Compensation Plan In order to be able to attract qualified independent directors in the future, the Corporation has adopted the Independent Directors Compensation Plan, pursuant to which each director who is not an officer or employee would receive compensation of $2,500 plus 500 shares of the Corporation=s Common Stock each quarter. The Plan was effective as of April 30, 1998. Independent directors will also continue to be eligible to receive stock options each year under the Director Option Plan at the rate of 1,500 options per year at fair market value. Lease of New Office Space As of August 1, 1998, the Corporation has entered into a three year lease for business offices of 4,100 square feet in Euless, Texas. Investment Contract The Corporation has entered into an investment advisory agreement with AIG Global Investment Corporation under which it will function as investment advisor and manager of all of the Corporation's investable assets. AIG Global provides investment management services to domestic insurance companies seeking to create an investment alternative to letters of credit that, at the same time, meet state statutory insurance requirements. CORNICHE GROUP INCORPORATEDSource: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED MARCH 31, 1998 MARCH 31, 1997 AND MARCH 31, 1996 COL. A COL. B COL. C COL. D COL. E ------ ------ ------ ------ ------ ADDITIONS Balance at Beginning Charged to Costs Acquisition Deductions Balance at Description of Period and Expenses of Subsidiaries Describe End of Period ----------- --------- ---------------- ---------------- -------- ------------- Allowance for Doubtful Account 1996 $345,108 $ 0 $ 0 $345,108 (1) $ 0 1997 0 0 0 0 0 1998 0 0 0 0 0 Reserve against Notes Receivable in Default 1996 0 75,000 0 0 75,000 1997 75,000 0 0 0 75,000 1998 75,000 0 0 0 75,000 Inventory Reserve 1996 40,224 0 0 40,224(1) 0 1997 0 0 0 0 0 1998 0 0 0 0 0(1) Elimination of UK subsidiary following receivership proceeding.Source: Caladrius Biosciences, Inc., 10-K, July 14, 1998Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
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