Morningstar® Document Research℠ FORM 10-KCaladrius Biosciences, Inc. - CLBSFiled: March 26, 2003 (period: December 31, 2002)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 December 31, 2002 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 Identification No.) incorporation or organization) 330 South Service Road Suite 120 Melville, New York 11747(Address of principal executive offices) (Zip Code)Registrant's telephone number, including area code: (631) 574 4955Securities registered pursuant to Section 12(b) of the Act: None.Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par valueIndicate by check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired 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 to Item 405of Regulation S-K is not contained herein, and will not be contained, to thebest of Registrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. [ ]Indicate by check mark whether the Registrant is an accelerated filer (asdefined in Rule 12b-2 of the Act). Yes [ ] No [X]The aggregate market price of the voting and nonvoting common equity held bynon-affiliates of the Registrant as of February 28, 2003 was approximately $1.3million. (For purposes of determining this amount, only directors, executiveofficers, and 10% or greater stockholders have been deemed affiliates).On February 28, 2003, 22,648,710 shares of the Registrant's common stock, parvalue $0.001 per share, were outstanding.This Annual Report on Form 10-K and the documents incorporated herein contain"forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements involve known andunknown risks, uncertainties and other factors which may cause the actualresults, performance or achievements of the Company, or industry results, to bematerially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements. When used in thisAnnual Report, statements that are not statements of current or historical factmay be deemed to be forward-looking statements. Without limiting the foregoing,the words "plan", "intend" "may," "will," "expect," "believe", "could,"Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. "anticipate," "estimate," or "continue" or similar expressions or othervariations or comparable terminology are intended to identify suchforward-looking statements. Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the date hereof. Exceptas required by law, the Company undertakes no obligation to update anyforward-looking statements, whether as a result of new information, futureevents or otherwise. PART IITEM 1. BUSINESSCorniche Group Incorporated ("the Company") was a provider of extendedwarranties and service contracts via the Internet at warrantysuperstore.comthrough June 30, 2002.HISTORYThe Company was incorporated under the laws of the State of Delaware inSeptember 1980 under the name Fidelity Medical Services, Inc. On July 28, 1983the Company changed its name to Fidelity Medical, Inc. From its inceptionthrough March 1995, the Company was engaged in the development and sale ofmedical imaging products through a wholly owned subsidiary. As a result of areverse merger on March 2, 1995 with Corniche Distribution Limited and itssubsidiaries the Company was engaged in the retail sale and wholesaledistribution of stationery and related office products in the United Kingdom.Effective March 25, 1995 the Company sold its medical imaging productssubsidiary. On September 28, 1995 the Company changed its name to Corniche GroupIncorporated. In February 1996, the Company's United Kingdom operations wereplaced in receivership by their creditors. Thereafter through March 1998 theCompany was inactive. On March 4, 1998, the Company entered into a StockPurchase Agreement with certain individuals (the "Initial Purchasers") wherebythe Initial Purchasers acquired in aggregate 765,000 shares of a newly createdSeries B Convertible Redeemable Preferred Stock. Thereafter the InitialPurchasers endeavored to establish for the Company new business operations inthe property and casualty specialty insurance and warranty/service contractsmarkets. On September 30, 1998 the Company acquired all of the capital stock ofStamford Insurance Company, Ltd. ("Stamford"). On April 30, 2001 the Companysold Stamford and is no longer involved in property and casualty specialtyinsurance.As previously reported, on January 7, 2002, the Company entered into a StockContribution Exchange Agreement (the "Exchange Agreement") and a SupplementalDisclosure Agreement (together with the Exchange Agreement, the "Agreements")with StrandTek International, Inc., a Delaware corporation ("StrandTek"),certain of StrandTek's principal shareholders and certain non-shareholder loanholders of StrandTek (the "StrandTek Transaction"). The Exchange Agreement wasamended on February 11, 2002. Consummation of the StrandTek Transaction wasconditioned upon a number of closing conditions, including the Company obtainingfinancing via an equity private placement, which ultimately could not be met andas a result, the Agreements were formally terminated by the Company andStrandTek in June 2002.DISCONTINUED OPERATIONSThrough April 2001 the Company operated a property and casualty reinsurancebusiness through its wholly owned subsidiary, Stamford Insurance Company, Ltd.("Stamford"). Stamford is chartered under the laws of, and is licensed toconduct business as an insurance company by, the Cayman Islands. Stamfordprovided reinsurance coverage for one domestic insurance company until thefourth quarter of 2000 when the relationship with the carrier was terminated.Stamford was not able to obtain any additional reinsurance relationships. Inlight of the inability of Stamford to write new business and difficulty inforecasting future claims losses in the run off of its prior reinsurancecontract, on April 30, 2001, the Board of Directors of the Company approved thesale of Stamford to Butler Financial Solutions, LLC for a consideration totaling$372,000. In the six months ended June 30, 2001 the Company recorded a loss ofapproximately $479,000 on the sale of Stamford. The closing and transfer offunds was completed on July 6, 2001.CURRENT BUSINESS OPERATIONSSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 business of the Company today comprises the "run off" of its sale ofextended warranties and service contracts via the Internet and the new businessopportunity it is pursuing as described below under the sub-heading "RecentDevelopments".WarrantySuperstore.com Internet BusinessThe Company's primary business focus, through June 2002, was the sale ofextended warranties and service contracts over the Internet covering automotive,home, office, personal electronics, home appliances, computers and gardenequipment. The Company offered its products and services in the United States instates that permit program marketers to be the obligor on service contracts.This represented approximately 38 states for automobile service contracts andmost states for other product categories. While the Company managed mostfunctions relating to its extended warranty and service contracts, it did notbear the economic risk to repair or replace products nor did it administer theclaims function. The obligation to repair or replace products rested with theCompany's appointed insurance carriers, Great American Insurance Company andAmerican Home Shield. Great American Insurance Company provided contractualliability insurance covering the obligation to repair or replace products underthe Company's automobile and consumer products extended warranties and servicecontracts and American Home Shield covered all home warranty contracts. TheCompany was responsible for the marketing, recording sales, collecting paymentand reporting contract details and paying premiums to the insurance carriers. Inaddition the Company provided information to the insurance carriers' appointedclaims administrators who handle all claims under the Company's contracts,including the payment of claims.The Company commenced operations initially by marketing its extended warrantyproducts directly to the consumer through its web site. During fiscal 2000 theCompany developed enhanced proprietary software to facilitate more efficientprocessing and tracking of online warranty transactions. This provided theCompany with the ability to deliver its products over the Internet through anumber of distribution channels by enabling it to supply a number of differentextended warranty service contracts on a co-branded or private label basis tocorporations, by embedding the Company's suite of products on such corporationsweb sites. This new capability was launched in January 2001. It was anticipatedthat this would result in substantially reduced direct marketing costs for theyears ending December 31, 2001 and thereafter. As a result the Company had fourdistinct distribution channels: (i) direct sales to consumers, (ii) co-brandeddistribution, (iii) private label distribution and (iv) manufacturer/retailerpartnerships.During the first half of fiscal 2001, management became concerned by the slowprogress being made by its warrantysuperstore.com business. Accordingly,alternative strategies for the Company were evaluated by the Board of Directors,including the acquisition of new business operations. As a result the Companyentered into the StrandTek Transaction but, as previously reported, the closingconditions were not met and the Agreements were terminated by written agreementbetween the parties. In June 2002, management determined, in light of continuingoperating losses, to discontinue its warranty and service contract business andto seek new business opportunities for the Company.RECENT DEVELOPMENTSOn February 6, 2003, the Company appointed Mark Weinreb as a member of the Boardof Directors and as its President and Chief Executive Officer. The Company andMr. Weinreb had been exploring business plans for the Company that may involve,under the name "Phase III Medical, Inc.", entering the medical sector byacquiring or participating in one or more biotech and/or medical companies ortechnologies, owning one or more drugs or medical devices that may or may notyet be available to the public, or acquiring rights to one or more of such drugsor medical devices or the royalty streams therefrom. Mr. Weinreb was appointedto finalize and execute the Company's new business plan. The Company will needto recruit management, business development and technical personnel, and developits business model. Accordingly, it will be necessary for the Company to raisenew capital. There can be no assurance that any such business plan developed bythe Company will be successful, that the Company will be able to acquire suchnew business or rights or raise new capital, or that the terms of anytransaction will be favorable to the Company.RISK FACTORSSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 risks described below are not the only risks facing the Company. Additionalrisks that the Company does not yet know of or that it currently thinks areimmaterial may also impair its business operations. If any of the risks occur,its business strategy, financial condition or operating results could beadversely affected.CORNICHE HAS A HISTORY OF OPERATING LOSSES AND A SUBSTANTIAL ACCUMULATEDEARNINGS DEFICIT AND IT MAY CONTINUE TO INCUR LOSSES.Since its inception in 1980, the Company has generated only limited revenuesfrom sales and has incurred substantial net losses of approximately $1.2million, $2.1 million and $2.1 million for the years ended December 31, 2002,2001 and 2000 respectively. At December 31, 2002, the Company had an accumulateddeficit of approximately $9.7 million. The Company expects to incur additionaloperating losses as well as negative cash flow from its new business operations.THE COMPANY HAS LIQUIDITY PROBLEMS.The Company has, as of the date hereof, only one asset in the form of notesreceivable in the principal sum of $1,250,000 which is the subject of legalproceedings to recover. Recovery is being contested. While the Company recentlywas awarded partial summary judgment on its principal claims, no assurances canbe given that the Company will be able to collect on any judgment obtained. TheCompany has effectively no cash and it had current liabilities totalingapproximately $756,000, excluding accrued preferred stock dividends totaling$385,512, as of December 31, 2002. While approximately $524,000 of suchliabilities have been deferred by written agreement dated February 6, 2003against a pledge of the proceeds from the note receivable, the Company still hasliabilities of approximately $232,000 currently due and no cash to settle them.THE COMPANY WILL CONTINUE TO EXPERIENCE CASH OUTFLOWS.The Company continues to incur expenses, including the salary of its newpresident, rent, legal and accounting fees, insurance and general administrativeexpenses. The Company's new business activities are in development stage andwill therefore result in additional cash outflows in the coming period. Whilethe Company commenced a $250,000 debt offering in March 2003 it will needadditional equity to fund its current liabilities and its on-going cash needsfor working capital and to develop its planned business operations. There can beno assurance that it will be successful in such debt offering or in raisingadditional equity or that such financing activities will generate sufficientfunds to satisfy the Company's needs. Additionally, it is not possible at thistime to state when theCompany will achieve a positive cash position, if at all.THE COMPANY'S LIMITED OPERATING HISTORY MAY IMPAIR ITS ABILITY TO PLAN.The Company's limited operating history in its planned business activities mayhinder its ability to evaluate its business and entails risks that the Companymay fail to adequately address business issues with which it has limitedexperience. There is no way to predict when, if ever, the Company will achieveprofitability or positive cash flow.BECAUSE OF ITS FINANCIAL POSITION, THERE IS SUBSTANTIAL DOUBT ABOUT ITS ABILITYTO OPERATE AS A GOING CONCERN.The Company has no cash generating revenues. As of December 31, 2002, theCompany had a capital deficiency of $823,895 and had a working capitaldeficiency of $1,081,843, excluding notes receivable from StrandTek. Althoughthe Company recently raised $50,000 in a debt offering, those funds have beensubstantially spent and the Company's financial condition still raisessubstantial doubt about its ability to operate as a going concern.THE COMPANY WILL NEED ADDITIONAL FINANCING AND IS UNCERTAIN OF ITS ACCESS TOCAPITAL FUNDING.The Company's proposed new business will require substantial capital to identifyand make alliances with one or more pharmaceutical and/or biotechnologycompanies based on the Company's current operating plan for its new business. Inaddition, the Company's cash requirements may vary materially from those nowplanned because of results in research, consulting with experts and modelingSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. sales forecasts for the potential products of potential business partners.RISKS RELATING TO THE COMPANY'S PROPOSED NEW BUSINESS:THE COMPANY DOES NOT HAVE ANY BUSINESS PARTNERS TO DATE AND IS UNCERTAIN OF ITSFUTURE PROFITABILITY WITH ITS INTENDED VENTURE TO GENERATE REVENUES FROM SUCHRELATIONSHIPS.The Company's ability to achieve profitability in its new business is dependentin part on the agreements, if any, entered into with business partners. Therecan be no assurance that such agreements will be entered into. The failure toenter into any such necessary agreements could delay or prevent the Company'snew business from achieving profitability and would have a material adverseeffect on the business, financial position and results of operations of theCompany. Further, there can be no assurance that the Company's operations willbecome profitable even if the Company enters into agreements with businesspartners.THERE ARE RISKS RELATING TO POTENTIAL CORPORATE COLLABORATIONS.The Company's new business strategy includes identifying and partnering withvarious pharmaceutical and/or biotechnology companies who are developing a drugor medical device. There can be no assurance the Company will enter into anyrelationships with these business partners and, even if the Company does enterinto such relationships, that the arrangements will be on favorable term or thatour relationship will be successful. In some cases the Company will generateincome from its relationship with these companies only after its potentialbusiness partners' product has achieved significant pre-clinical and/or clinicaldevelopment, has procured requisite regulatory approvals and/or has establishedits manufacturing capabilities.The Company's potential business partners' business strategy may includeentering into collaborations or marketing and distribution arrangements withcorporate partners for the development (including clinical development),commercialization, marketing and distribution of certain of their productcandidates. The Company's potential business partners may be dependent on suchcorporate collaborations to fund clinical testing, to make certain regulatory filings and to manufacture and market products resulting from thecollaboration. There can be no assurance that such arrangements with a corporatecollaboration will be scientifically, clinically or commercially successful. Inthe event that any such arrangements are made and then terminated, such actionscould adversely affect the Company's business partners' ability to develop,commercialize, market and distribute certain of their product candidates.If the Company's potential business partners breach or terminate theiragreements with the Company, or fail to develop or commercialize their productsor fail to develop or commercialize their products in a timely manner, thedevelopment of their products may be adversely affected, and thus not create aneconomic benefit for the Company.There can be no assurance that the Company's potential business partners willnot change their strategic focus or pursue alternative technologies or developalternative products either on their own or in collaboration with others. TheCompany's business will also be affected by the effectiveness of its potentialbusiness partners' corporate partners in marketing their products.THERE ARE COMPANIES, UNIVERSITIES AND RESEARCH INSTITUTIONS THAT MAY BERESEARCHING AND TRYING TO DEVELOP PRODUCTS THAT ARE SIMILAR TO THE PRODUCTS OFTHE COMPANY'S POTENTIAL BUSINESS PARTNERS.Competition in the medical, pharmaceutical and biotechnology industries, thesector in which the Company plans to establish new business operations, isintense. The Company's potential business partners may face competition fromcompanies with far greater financial, marketing, technical and researchresources, name recognition, distribution channels and market presence than theCompany's potential business partners who are marketing existing products ordeveloping new products that are similar to the products developed by theCompany's potential business partners. There can be no assurance that theCompany's potential business partners' products will be able to competesuccessfully with existing products or products under development by othercompanies, universities and other institutions.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 COMPANY'S POTENTIAL BUSINESS PARTNERS MAY DEPEND ON THIRD PARTIES.The Company's potential business partners may rely entirely on third parties fora variety of functions, including certain functions relating to research anddevelopment, manufacturing, clinical trials management, regulatory affairs andsales, marketing and distribution. There can be no assurance that the Company'spotential business partners will be able to establish and maintain any of theserelationships on acceptable terms or enter into these arrangements without unduedelays or expenditures.THERE ARE UNCERTAINTIES ASSOCIATED WITH PRE-CLINICAL AND CLINICAL TESTING.The grant of regulatory approvals for the commercial sale of any of theCompany's potential business partners' potential products will depend in part onthe Company's potential business partners and/or their collaboratorssuccessfully conducting extensive pre-clinical and clinical testing todemonstrate their products safety and efficacy in humans. The results ofpre-clinical studies by the Company's potential business partners and/or theircollaborators may be inconclusive and may not be indicative of results that willbe obtained in human clinical trials. In addition, results attained in earlyhuman clinical trials relating to the products under development by theCompany's potential business partners may not be indicative of results that willbe obtained in later clinical trials. As results of particular pre-clinicalstudies and clinical trials are received, the Company's potential businesspartners and/or their collaborators may abandon projects with which the Companyassisted in developing which they might otherwise have believed to be promising.The Company's potential business partners may be involved in developing drugs onwhich they plan to file investigational new drug applications ("INDs") with theFDA or make equivalent filings outside of the UnitedStates. There can be no assurance that necessary pre-clinical studies on theseproducts will be completed satisfactorily, if at all, or that the Company'spotential business partners otherwise will be able to make their intendedfilings. Clinical testing is very expensive, and the Company's potentialbusiness partners and/or their collaborators will have to devote substantialresources for the cost of clinical trials.The Company's potential business partners may have no experience in conductingclinical trials and may have to rely, in part, on academic institutions and onclinical research organizations to conduct and monitor certain clinical trials.There can be no assurance that such entities will conduct the clinical trialssuccessfully.Failure to commence or complete any planned clinical trials by the Company'spotential business partners would have a material adverse effect on theCompany's new business.THE COMPANY'S POTENTIAL BUSINESS PARTNERS AND THEIR PRODUCTS WILL BE SUBJECT TOGOVERNMENT REGULATIONS AND THERE IS NO ASSURANCE OF REGULATORY APPROVAL.The Company's potential business partners and their products will be subject tocomprehensive regulation by the FDA in the United States and by comparableauthorities in other countries. These national agencies and other federal,state, and local entities regulate, among other things, the pre-clinical andclinical testing, safety, effectiveness, approval, manufacture, labeling,marketing, export, storage, record keeping, advertising, and promotion of theCompany's potential business partners' products.The process of obtaining FDA approvals can be costly, time consuming, andsubject to unanticipated delays and the Company's potential business partnersmay have had only limited experience in filing and pursuing applicationsnecessary to gain regulatory approvals. There can be no assurance that suchapprovals will be granted on a timely basis, or at all.The Company's potential business partners may also be subject to numerous andvarying foreign regulatory requirements governing the design and conduct ofclinical trials and the managing and marketing of their products. The approvalprocedure varies among countries and can involve additional testing, and thetime required to obtain approval may differ from that required to obtain FDAapproval.There can be no assurance that the Company's potential business partners orSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. their partners will qualify for regulatory approvals or receive necessaryapprovals to commercialize product candidates in any market. Delays in receiptof or failure to receive regulatory approvals, or the loss of previouslyreceived approvals, would have a material adverse effect on the Company'spotential business partners' business, and therefore, on the Company's business.COMPETITIONCompetition in the medical, pharmaceutical and biotechnology industries, thesector in which the Company plans to establish new business operations, isintense. The Company's potential business partners may face competition fromcompanies with far greater financial, marketing, technical and researchresources, name recognition, distribution channels and market presence than theCompany's potential business partners who are marketing existing products ordeveloping new products that are similar to the products developed the Company'spotential business partners. There can be no assurance that the Company'spotential business partners' products will be able to compete successfully withexisting products or products under development by other companies, universitiesand other institutions.INTELLECTUAL PROPERTYWARRANTYSUPERSTORE is a registered trademark in the United States. The Company'sInternet business operated using proprietary software developed in-house.EMPLOYEESAs of December 31, 2002, the Company had no employees. As of December 31, 2001,the Company employed three full-time personnel.ITEM 2. PROPERTIESThrough July 31, 2002 the Company leased approximately 4,100 square feet ofoffice space at 610 South Industrial Boulevard, Euless, Texas at an annualrental of approximately $51,144. The lease expired on July 31, 2002. On February21, 2003 the Company leased approximately 200 square feet of serviced officespace at 330 South Service Road, Suite 120, Melville, New York at an annualrental of $18,000. The lease is for a term of approximately 13 months, expiringMarch 31, 2004.ITEM 3. LEGAL PROCEEDINGSAs discussed in Notes 4 and 13 of the accompanying notes to the financialstatements, StrandTek defaulted on the payment of $1,250,000 plus accruedinterest due to the Company on July 31, 2002. The Company ceased accruinginterest as of July 31, 2002 for financial statement purposes. As a result, onAugust 6, 2002, the Company filed a complaint in the Superior Court of NewJersey entitled Corniche Group Incorporated v StrandTek International, Inc., aDelaware corporation, StrandTek International, Inc., a Florida corporation,David M. Veltman, William G. Buckles Jr., Jerome Bauman and Jan Arnett. Thecomplaint seeks recovery of the $1,250,000 loan, plus interest, costs and fees,and seeks recovery against the individual defendants pursuant to their partialguarantees.On or about November 1, 2002, the defendants filed an answer denying liabilityand asserting a counterclaim seeking unspecified damages. The theory of thedefense and counterclaim were the same; defendants asserted that the Company hadmisrepresented its ability to raise the funds necessary to acquire StrandTek,and had promised not to enforce the personal guaranties. As a result, defendantsclaimed, the loans and guaranties are void and they should be entitled todamages caused by their alleged "taking StrandTek off the market" during thetime period before the acquisition failed. The Company took the position thatall of defendants' defenses, as well as their counterclaim, were invalid as amatter of law, and factually unsupportable in any event.On February 28, 2003, the Court issued a ruling granting the Company partialsummary judgment with respect to the principal aspects of its complaint. TheCourt rejected the defenses and agreed with the Company that it was entitled tojudgment against StrandTek and the guarantors. The Company has now filed asecond summary judgment motion to have final judgment entered for the exactamounts due from each defendant and to dismiss the defendants' counterclaims.This motion is presently scheduled to be heard on April 4, 2003.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. No assurances can be given that StrandTek and/or the individual guarantors willnot attempt to appeal the Court's grant of summary judgment, or that the Companywill be able to collect on any judgment.The Company is not aware of any material pending legal proceedings or claimsagainst the Company.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNo matters were submitted to a vote of the Company's stockholders during thefourth quarter of 2002. PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS(a) Market Information. The Company's common stock is traded on the OTC Bulletin Board under the symbol "CNGI." The following table sets forth the high and low bid prices of the Company's common stock for each quarterly period within the two most recent fiscal years and the most recent quarter, as reported by Nasdaq Trading and Market Services. On February 28, 2003, the closing bid price for the Company's common stock was $0.08. Information set forth in the table below represents prices between dealers in securities, does not include retail mark-ups, mark-downs, or commissions, and does not necessarily represent actual transactions. 2002 High Low First Quarter $0.68 $0.35 Second Quarter 0.37 0.06 Third Quarter 0.09 0.05 Fourth Quarter 0.10 0.04 2001 High Low First Quarter $0.63 $0.25 Second Quarter 0.49 0.20 Third Quarter 0.81 0.30 Fourth Quarter 0.73 0.35(b) Holders. As of February 28, 2003, there were approximately 1,050 holders of record of the Company's common stock.(c) Dividends. Holders of Common Stock are entitled to dividends when, as, and if declared by the Board of Directors out of funds legally available therefor. The Company has not paid any cash dividends on its Common Stock and, for the foreseeable future, intends to retain future earnings, if any, to finance the operations, development and expansion of its business. Future dividend policy is subject to the discretion of the Board of Directors.Series A Preferred StockThe Certificate of Designation for the Company's Series A Preferred Stockprovides that at any time after December 1, 1999 any holder of Series APreferred Stock may require the Company to redeem his shares of Series APreferred Stock (if there are funds with which the Company may legally do so) ata price of $1.00 per share. Notwithstanding the foregoing redemption provisions,if any dividends on the Series A Preferred Stock are past due, no shares ofSeries A Preferred Stock may be redeemed by the Company unless all outstandingshares of Series A Preferred Stock are simultaneously redeemed. The holders ofSeries A Preferred Stock may convert their Series A Preferred Stock into sharesof common stock of the Company at a price of $5.20 per share.On January 29, 2002 notice was given that, pursuant to the Company's RestatedCertificate of Incorporation, as amended, the Company has called for redemptionand will redeem (the "Redemption") on the date of the closing of the StrandTekTransaction (the "Redemption Date"), all shares of the Company's Series AConvertible Preferred Stock outstanding on that date at a redemption price of$1.05, plus accrued and unpaid dividends from July 1, 1995 through and includingthe Redemption Date of approximately $0.47 per share. The Redemption, amongSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. other financial, legal and business conditions, was a condition precedent to theclosing of the StrandTek Transaction. Similarly, completion of the Redemptionwas subject to closing the StrandTek Transaction. Upon termination of theStrandTek Transaction, the Company rescinded the Notice of Redemption.At December 31, 2002, 681,174 shares of Series A Preferred Stock wereoutstanding. If the preferred shareholders do not convert their shares intocommon stock, and if the Company were required to redeem any significant numberof shares of Series A Preferred Stock, the Company's financial condition may bematerially affected.Recent Sales of Unregistered SecuritiesIn September 2002, the Company sold to accredited investors five 60-daypromissory notes in the principal sum of $25,000 each, resulting in net proceedsto the Company of $117,500, net of offering costs. The notes bear interest at15% per annum payable at maturity. The terms of the notes include a defaultpenalty pursuant to which if the notes are not paid on the due date, the holdershall have the option to purchase 25,000 (twenty five thousand) shares of theCompany's common stock for an aggregate purchase price of $125. If the nonpayment continues for 30 days, then on the 30th day, and at the end of eachsuccessive 30-day period until the note is paid in full, the holder has theoption to purchase an additional 25,000 (twenty five thousand) shares of theCompany's common stock for an aggregate purchase price of $125. As of December31, 2002 the Company had reserved 250,000 shares of the Company's common stockfor issuance against exercise of the options granted pursuant to the defaultpenalty. As of February 28, 2002, 150,000 of such options had been exercisedresulting in net proceeds to the Company of $750 and because the notes remainunpaid, options to purchase an additional 250,000 shares at an aggregatepurchase price of $1,250 have been granted pursuant to the default penalty.In February 2003, the Company sold to accredited investors a series of 30-daypromissory notes in the aggregate principal sum of $50,000. The notes bearinterest at 20% per annum payable at maturity.ITEM 6. SELECTED FINANCIAL DATAThe selected statements of operations and balance sheet data set forth below arederived from audited financial statements of the Company. The information setforth below should be read in conjunction with the Company's auditedconsolidated financial statements and notes thereto. See Item 8 "FinancialStatements and Supplemental Data" and Item 7 "Management's Discussion andAnalysis of Financial Condition and Results of Operations". On February 4, 1999the Company changed its fiscal year-end from March 31 each year to December 31each year. The selected financial data set out below has not been retroactivelyrestated to reflect such change in fiscal year-end date and accordingly ispresented as historically reported in the financial statements of the Company.Statement of Operations: Year Ended Year Ended Year Ended Year Ended Nine Months($'000 except net loss per share which is December 31, December 31, December 31, December 31, Endedstated in $) 2002 2001 2000 1999 December 31, 1998 Earned revenues $ 81 $ 107 $ 27 $ -- $ --Direct costs 60 70 33 -- --Gross profit 21 37 (6) -- --Operating loss (1,149) (1,606) (2,516) (1,023) (344)Loss before discontinued operations andpreferred dividends (1,160) (1,792) (2,296) (1,084) (403)Net loss attributable to commonstockholders (1,208) (2,081) (2,075) (1,170) (448)Basic and diluted earnings per share: Loss from continuing operations (0.05) (0.08) (0.16) (0.16) (0.07) Income (loss) from discontinued operations -- (0.01) 0.02 -- --Net loss attributable to common shareholders (0.05) (0.09) (0.14) (0.17) (0.07)Weighted average number of sharesoutstanding 22,344,769 22,284,417 14,902,184 6,905,073 6,367,015Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Balance Sheet Data: As of As of As of As of As of$'000 December 31, December 31, December 31, December 31, December 31, 2002 2001 2000 1999 1998Working Capital $ (82) $ 1,085 $ 2,079 $ 3,192 $ 541Total Assets 1,183 1,836 3,757 4,905 750Current Liabilities 1,141 489 458 868 138(Accumulated Deficit) (9,694) (8,486) (6,397) (4,302) (3,077)Total Stockholders' Equity/(Deficit) (824) 373 2,450 3,140 (324)Selected Quarterly Financial Data$'000 Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter(except net loss per share Ended Ended Ended Ended Ended Ended Ended Endedwhich is stated in$) 12/31/02 9/30/02 6/30/02 3/31/02 12/31/01 9/30/01 6/30/01 3/31/01 Earned Revenues $ 19 $ 20 $ 18 $ 24 $ 42 $ 33 $ 21 $ 11Direct Costs 13 14 14 19 17 31 15 7Gross profit 5 6 5 5 25 2 6 4Operating Loss (357) (225) (201) (366) (449) (386) (353) (418)Net Loss Attributable toCommon Stockholders (389) (231) *(246) (342) *(725) (374) (329) (653)Net loss per share -- (0.01) (0.01) (0.02) (0.03) (0.02) (0.01) (0.03)* Includes write-off of unamortized capitalized software in fiscal 2001 of $305,333 and property and equipment impairment charges of $54,732 in fiscal 2002.ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion should be read in conjunction with the auditedconsolidated financial statements and notes thereto, included in Item 8 of thisreport, and is qualified in its entirety by reference thereto.GeneralDuring the first half of fiscal 2001, management became concerned by the slowprogress being made by its warrantysuperstore.com business. Accordingly,alternative strategies for the Company were evaluated by the Board of Directors,including the acquisition of new business operations. As a result, on January 7,2002 the Company entered into the StrandTek Transaction as previously reported.Consummation of the StrandTek Transaction was conditioned upon certain closingconditions, including the Company obtaining financing via an equity privateplacement, which ultimately could not be met and as a result in June 2002, theAgreements were formally terminated by written agreement between the Company andStrandTek. Also in June 2002, management determined, in light of continuingoperating losses, to discontinue its warranty and service contract business andto seek new business opportunities for the Company.New Business Opportunities.Management had been exploring new business opportunities for the Company and onFebruary 6, 2003, the Company appointed Mark Weinreb as a member of the Board ofDirectors and as its President and Chief Executive Officer. The Company and Mr.Weinreb had been exploring business plans for the Company that may involve,under the name "Phase III Medical, Inc.", entering the medical sector byacquiring or participating in one or more biotech and/or medical companies ortechnologies, owning one or more drugs or medical devices that may or may notyet be available to the public, or acquiring rights to one or more of such drugsor medical devices or the royalty streams therefrom. Mr. Weinreb was appointedto finalize and execute the Company's new business plan. The Company will needto recruit management, business development and technical personnel, and developits business model. Accordingly, it will be necessary for the Company to raisenew capital. There can be no assurance that any such business plan developed bySource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 Company will be successful, that the Company will be able to acquire suchnew business or rights or raise new capital, or that the terms of anytransaction will be favorable to the Company.Results of Continuing OperationsThe Company's "Significant Accounting Policies" are described in Note 2 to theaudited consolidated financial statements and notes thereto, included in Item 8of this report. The Company recognizes revenue from its warranty servicecontracts ratably over the length of the contracts executed. Additionally, theCompany purchased insurance to fully cover any losses under the servicecontracts from a domestic carrier. The insurance premium expense and other costsrelated to the sale are amortized ratably over the life of the contracts.Fiscal 2002 compared to Fiscal 2001The Company generated recognized revenues from the sale of extended warrantiesand service contracts via the Internet of $81,000 in fiscal 2002. The revenuesgenerated in the year were derived almost entirely from revenues deferred overthe life of the contracts sold in prior years. Similarly, direct costs of$61,000 incurred in fiscal 2002, relate to costs previously deferred over thelife of such contracts. Revenues in fiscal 2001 totaled $225,000 of which$107,000 were recognized as earned revenues, the balance deferred over the lifeof the contracts sold. Direct costs in fiscal 2001 totaled $71,000.General and administrative expenses totaled $912,000 during the year endedDecember 31, 2002 as compared to $1,643,000 for fiscal 2001, a decrease of$731,000 or 44.5%. Costs generally were significantly lower as the Company wounddown its operations and closed its office facilities in Texas in July 2002. As aresult, selling, general and administrative expenses in fiscal 2002 are not comparable to fiscal2001 when the Company incurred operating expenses such as advertising andsignificantly higher payroll costs. One time employee termination and generalclosure costs totaling approximately $150,000 were incurred in fiscal 2002 andan impairment charge of $55,000 was recorded in June 2002 to adjust property andequipment to its net realizable value.The Company provided an allowance for the unsecured, un-guaranteed notereceivable from StrandTek of $250,000 plus accrued interest of $8,103.Interest income decreased by $36,000 to $71,000 in fiscal 2002 as compared tofiscal 2001 because interest income from the StrandTek loans, accrued throughJuly 31, 2002 was less than interest earned from investments in marketablesecurities in fiscal 2001. Interest expense increased from $6,000 in the yearended December 31, 2001 to $23,000 in fiscal 2002 primarily due to theshort-term loans secured in September 2002 to fund the Company's operatingexpenses.For the reasons cited above, net loss before preferred stock dividend decreasedby 35.3% to $1,160,000 from the comparable loss of $1,792,000 for fiscal 2001.Fiscal 2001 compared to Fiscal 2000The sale of extended warranties and service contracts via the Internet generatedgross revenues of $225,000 in fiscal 2001 as compared to $124,000 in fiscal 2000of which $107,000 were recognized as earned revenues in the year ended December31, 2001 as compared to $27,000 in fiscal 2000. The balance of these revenues isbeing deferred over the life of the contracts. Similarly, direct costsassociated with the sale of service contracts are being recognized pro rata overthe life of the contracts.General and administrative expenses totaled $1,643,000 during the year endedDecember 31, 2001 as compared to $2,510,000 for fiscal 2000, a decrease of$867,000 or 34.5%. The decrease is primarily due to a decrease in advertisingcosts ($1,027,000), offset by increases in professional fees ($166,000) andstaff costs ($48,000). The reduction in advertising is due to the Companyfocusing on strategic partnerships and co-op advertising programs as compared toInternet banner advertising and media promotions. The increase in professionalfees was due primarily to legal costs associated with the StrandTek Transactionand the additional staff cost was due to the hiring of a Marketing Manager inthe second half of 2001.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. As a result of the uncertainty over the future of the Company's extendedwarranty service contract business, the Company recorded an impairment charge of$305,333 in the fourth quarter of 2001. This charge represents the unamortizedbalance of capitalized software.Interest income decreased by $29,000 for the fiscal year 2001 as compared tofiscal 2000. The decrease is primarily due to lower cash and cash investmentsbalances in 2001 as a result of cash being applied to funding operating losses.Interest expense decreased from $10,000 in the year ended December 31, 2000 to$6,000 in fiscal 2001.For the reasons cited above, loss before discontinued operations and preferredstock dividend decreased by 21.9% to $1,792,000 from the comparable loss of$2,296,000 for fiscal 2000.LIQUIDITY AND CAPITAL RESOURCESThe following chart represents the net funds provided by or used in operating,financing and investment activities for each period as indicated: Twelve Months Ended ------------------- December 31, 2002 December 31, 2001Cash provided by/(used in)operating activities $ 1,005,376 $ (373,843)Cash (used in)/provided byinvesting activities (1,247,338) 362,939Cash provided by (used in)financing activities 209,949 (23,432)The Company incurred a net loss attributable to common stockholders of$1,208,000 in fiscal 2002. This loss adjusted for non-cash items such asdepreciation, provision for note receivable and accrued interest and propertyand equipment impairment charges $330,000, deferred revenues (net of deferredacquisition costs) ($25,000), sale of marketable securities $1,503,000,preferred stock dividend accrual $48,000 and other non-cash items totaling$10,000, resulted in cash provided by operating activities totaling $1,005,000for the year ended December 31, 2002, net of working capital movements of$347,000.To meet its cash requirement during the twelve months ended December 31, 2002the Company relied on the sale of marketable securities ($1,503,000) and the netproceeds from shareholder advances ($106,000) and the sale of promissory notes($117,500) to fund the Company's operating expenses. The Company's liquidityposition was hurt by the StrandTek loans advanced in the first quarter of fiscal2002 and StrandTek's failure to repay them on the due date.The Company has no contracted capital expenditure commitments in place. As ofDecember 31, 2002 the Company had cash balances totaling $19,000. The Companywill rely on its cash reserves and short-term loans to meet its cash needspending an equity private placement to fund its new business operations untilthey become cash generative. In February 2003, the Company sold to "accreditedinvestors" a series of 30-day promissory notes in the aggregate principal sum of$50,000. The notes bear interest at 20% per annum payable at maturity.Additionally, on February 6, 2003 the Company entered into a deferment agreementwith three major creditors pursuant to which liabilities of approximately$524,000 in aggregate, were deferred, subject to the success of the Company'sdebt and equity financing efforts, until January 15, 2005, against a pledge ofthe loans advanced to StrandTek in the first quarter of fiscal 2002 in the sumof $1,250,000 plus accrued interest. The Company also anticipates havingavailable to it the net proceeds of repayment of the StrandTek loans and thecosts of collection. However, while the Company was recently awarded partialsummary judgment on its claims against StrandTek, there can be no assurance thatthe Company will be able to collect on any judgment obtained.In March 2003, the Company commenced a private placement to "accreditedinvestors" to sell up to $250,000 in promissory notes (the "Notes") in $5,000increments or multiples thereof, each bearing interest at 15% per annum and eachdue 6 months from the date issued (the "Maturity Date"). Principal will beSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. payable at the Maturity Date and interest will be payable monthly in arrears. Inthe event that the Notes are not paid at the Maturity Date, the interest ratewill increase to a default rate of 20% per annum. The Company will pay itsplacement agent an amount equal to 10% of the proceeds of the offering ascommissions for the placement agent's services, in addition to reimbursement ofthe placement agent's expenses and indemnification against customaryliabilities. The offering is a best efforts offering with no required minimumamount to be raised. If the full $250,000 is not raised, the Company's startupactivities will be constrained. There can be no assurance that the offering willbe successful.InflationThe Company does not believe that its operations have been materially influencedby inflation in the fiscal year ended December 31, 2002, a situation which isexpected to continue for the foreseeable future.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKNot Applicable.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATAThis information is submitted in a separate section of this Report. See pagesF-1, et. seq.ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSUREThe Company engaged Weinick Sanders Leventhal & Co., LLP ("Weinick") as itsindependent accountants as of August 12, 1998. The Company had not consultedwith Weinick regarding any matters or events set forth in Item 304(a)(2)(i) and(ii) of Regulation S-K.On May 7, 2001, the Company and Weinick terminated their client/auditorrelationship. The reports of Weinick on the financial statements of the Companyfor the prior two fiscal years contained no adverse opinion or disclaimer ofopinion and were not qualified or modified as to uncertainty, audit scope oraccounting principles. The Company's Audit Committee and its Board of Directorsparticipated in and approved the decision to terminate Weinick as independentauditors. In connection with its audits for the prior two fiscal years andthrough May 7, 2001, there were no disagreements with Weinick on any matter ofaccounting principles or practices, financial statement disclosure or auditingscope or procedure, which disagreements, if not resolved to the satisfaction ofWeinick, would have caused Weinick to make reference thereto in its report onthe financial statements for such years. During the prior two fiscal years andthrough May 7, 2001, there have been no "reportable events" as described in Item304(a)(1)(v) of Regulation S-K.The Company engaged Travis, Wolff & Company, L.L.P. ("Travis") as its newindependent accountants as of May 7, 2001. Such appointment was approved by theCompany's Audit Committee and its Board of Directors. During the two most recentfiscal years and through May 7, 2001, the Company has not consulted with Travisregarding any matters or events set forth in Item 304(a)(2)(i) and (ii) ofRegulation S-K. PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANTThe following table sets forth certain information regarding the directors andexecutive officers of the Company as of February 28, 2003:Name Age PositionMark Weinreb 50 Director, President & Chief Executive OfficerJames J. Fyfe (1)(2) 49 Director and Chairman of the BoardPaul L. Harrison (1)(2) 41 Director--------------------------------------------------------------------------------Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. (1) Member of the Audit Committee(2) Member of the Compensation CommitteeMark WeinrebChief Executive OfficerMr. Weinreb joined the Company on February 6, 2003 as a Director, ChiefExecutive Officer and President. In 1976, Mr. Weinreb joined Bio HealthLaboratories, Inc. a state-of-the-art medical diagnostic laboratory providingclinical testing services for physicians, hospitals, and other medicallaboratories. He progressed to become the laboratory administrator in 1978 andthen an owner and the laboratory's COO in 1982. Here he oversaw all technicaland business facets, including finance, laboratory science technology and allthe additional support departments. He left Bio Health Labs in 1989 when he soldthe business to a NYSE biotechnology company. In 1992, Mr. Weinreb founded BigCity Bagels, Inc., a national chain of franchised upscale bagel bakeries andbecame Chairman and Chief Executive Officer. The company went public in 1995 andin 1999 he redirected the company and completed a merger with an Internetservice provider. In 2000, Mr. Weinreb became the Chief Executive Officer ofJestertek, Inc. a 12-year old software development company pioneering gesturerecognition and control using advanced inter-active proprietary videotechnology. In 2002, he left Jestertek after arranging additional financing. Mr.Weinreb received a Bachelor of Arts degree in 1975 from Northwestern Universityand a Master of Science degree in 1982 in Medical Biology, from C.W. Post, LongIsland University.James J. FyfeDirector and Chairman of the BoardMr. Fyfe is an independent business consultant who has served as a director ofthe Company since May 1995. He became Chairman of the Board in April 2000. FromMay 1995 until May 1998, Mr. Fyfe served as Vice President and Chief OperatingOfficer of the Company. Mr. Fyfe was a director of Machine Vision Holdings,Inc., an intelligent automation technology software company, from January 1998to October 2001 and of Transmedia Asia Pacific, Inc., a member benefit loyaltymarketing company, from October 1999 to August 2002. From August 1996 to August1997, Mr. Fyfe was an outside director of Medical Laser Technologies, Inc.Paul L. HarrisonDirectorMr. Harrison was elected as a director of the Company in June 2000. He has beena director of Transmedia Europe, Inc., a member benefit loyalty marketingcompany, since June 1996 and of Leopard Rock Capital Partners Limited, a UnitedKingdom based private investment bank, since April 2001. Mr. Harrison was alsoPresident, Principal Financial and Accounting Officer and Secretary ofTransmedia Asia Pacific, Inc., also a member benefit loyalty marketing company,until October 1999.ITEM 11. EXECUTIVE COMPENSATIONThe following table sets forth the aggregate compensation paid during the threeyears ended December 31, 2002 to the Company's Chief Executive Officer. No otherexecutive officer of the Company earned in excess of $100,000 for servicesrendered during fiscal 2002. Summary Compensation Table Annual Long-Term Other Compensation Compensation Compensation Name and Principal Position Notes Fiscal Salary Options/SAR's All other Year Compensation Robert F. Benoit (1)(2) 2002 $ 33,077 -- $ 27,000 Chief Executive Officer 2001 109,960 -- 6,000 (Appointed March 1, 2000) 2000 96,154 75,000 5,800 Robert H. Hutchins (3)(4) 2002 - -- -- President and Principal Financial 2001 5,496 -- -- Officer 2000 85,000 -- 4,800Notes:Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. (1) Fiscal 2002 relates to the period ended April 22, 2002, when Mr. Benoit left the Company.(2) All other compensation comprises monthly automobile allowances totaling $2,000 and a compromise and settlement payment of $25,000 in fiscal 2002. All other compensation in fiscal 2001 and 2000 comprises monthly automobile allowances.(3) All other compensation comprises monthly automobile allowances.(4) Fiscal 2001 relates to the period ended January 12, 2001, after Mr. Hutchins retired from the Company.Options/SAR Grants in Last Fiscal YearNoneEmployment AgreementsOn February 6, 2003 Mr. Weinreb was appointed President and Chief ExecutiveOfficer of the Company and the Company entered into an employment agreement withMr. Weinreb. The employment agreement has an initial term of three years, withautomatic annual extensions unless terminated by the Company or Mr. Weinreb atleast 90 days prior to an applicable anniversary date. The Company has agreed topay Mr. Weinreb an annual salary of $180,000 for the initial year of the term,$198,000 for the second year of the term, and $217,800 for the third year of theterm. In addition, he is entitled to an annual bonus in the amount of $20,000for the initial year in the event, and concurrently on the date, that theCompany has received debt and/or equity financing in the aggregate amount of atleast $1,000,000 since the beginning of his service, and $20,000 for eachsubsequent year of the term, without condition.In addition, the Company, pursuant to its newly adopted 2003 EquityParticipation Plan, entered into a Stock Option Agreement with Mr. Weinreb (the"Initial Option Agreement"). Under the Initial Option Agreement, theCompany granted Mr. Weinreb the right and option, exercisable for 10 years, topurchase up to 2,500,000 shares of the Company's common stock at an exerciseprice of $0.03 per share and otherwise upon the terms set forth in the InitialOption Agreement. In addition, in the event that the closing price of theCompany's common stock equals or exceeds $0.50 per share for any five (5)consecutive trading days during the term of the employment agreement (whetherduring initial term or an annual extension), the Company has agreed to grant toMr. Weinreb, on the day immediately following the end of the five (5) dayperiod, an option for the purchase of an additional 2,500,000 shares of theCompany's common stock for an exercise price of $0.50 per share, pursuant to the2003 Equity Participation Plan and a Stock Option Agreement to be entered intobetween the Company and Mr. Weinreb containing substantially the same terms asthe Initial Option Agreement, except for the exercise price and that the optionwould be treated as an "incentive stock option" for tax purposes only to themaximum extent permitted by law (the "Additional Option Agreement"). The Companyhas agreed to promptly file with the Securities and Exchange Commission aRegistration Statement on Form S-8 (the "Registration Statement") pursuant towhich the issuance of the shares covered by the 2003 Equity Participation Plan,as well as the resale of the common stock issuable upon exercise of the InitialOption Agreement, are registered. Additionally, the Company has agreed,following any grant under the Additional Option Agreement, to promptly file apost-effective amendment to the Registration Statement pursuant to which thecommon stock issuable upon exercise thereof shall be registered for resale. Mr.Weinreb has agreed that he will not resell publicly any shares of the Company'scommon stock obtained upon exercise of any Initial Agreement or the AdditionalOption Agreement prior to the first anniversary of the date of the employmentagreement.In connection with the hiring of Mr. Weinreb and the Company's anticipated newbusiness line, the Company intends to call a meeting of stockholders: (1) toelect five directors (including Mr. Weinreb and, if he requests, a persondesignated by him); (2) to ratify the Company's 2003 Equity Participation Planpursuant to which 15,000,000 shares of the Company's common stock are authorizedto be issued; (3) to approve an amendment to the Company's Certificate ofIncorporation to increase the authorized number of shares of common stock to250,000,000; and (4) to approve a change of the Company's name to "Phase IIIMedical, Inc."Director CompensationSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Pursuant to the 1998 Independent Director Compensation Plan, each director whois not an officer or employee of the Company is entitled to receive compensationof $2,500 per calendar quarter plus 500 shares of common stock per calendarquarter of board service, in addition to reimbursement of travel expenses.Outside directors are entitled to be compensated for committee service at $500per calendar quarter plus 125 shares of common stock per calendar quarter.All directors are entitled to receive options to purchase 1,500 shares of commonstock each May under the Company's 1992 Stock Option Plan for Directors. TheCompany deferred the grant of such options that otherwise would have beengranted in May 2000, 2001 and 2002.Section 16 - Beneficial Ownership ComplianceSection 16(a) of the Securities Exchange Act of 1934 requires the Company'sdirectors and officers, and persons who own more than 10% of a registered classof the Company's equity securities, to file initial reports of ownership andreports of changes in ownership with the Securities and Exchange Commission.These persons are required by the Securities and Exchange Commission to furnishthe Company with copies of all Section 16(a) reports that they file. Basedsolely on our review of these reports and written representations furnished tous, we believe that in 2002 each of the reporting persons complied with thesefiling requirements.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe following table sets forth information as to the number of shares of CommonStock beneficially owned, as of February 28, 2003, by (i) each beneficial ownerof more than five percent of the outstanding Common Stock, (ii) each currentnamed executive officer and director and (iii) all current executive officersand directors of the Company as a group. All shares are owned both beneficiallyand of record unless otherwise indicated. Unless otherwise indicated, theaddress of each beneficial owner is c/o Corniche Group Incorporated. Number and Percentage of Shares of Common Stock Owned Percentage # of Shares of Common StockName and Address of Beneficial Owner Notes Beneficially Owned Beneficially Owned (See Note 1) Pictet & Cie NomineesCie 29 Blvd. 2,670,000 11.8%Georges Favon 1204Geneva SwitzerlandJoel San Antonio56 North Stanwich Road 3,752,500 16.6%Greenwich, CT 06831Mark Weinreb (2) 2,540,000 10.1%James J. Fyfe 110,500 0.5%Paul L. Harrison (3) 7,250 See Note 3All current directors and officersas a group (three persons) (2) 2,657,750 10.6%Notes:(1) Based on 22,648,710 shares of common stock outstanding on February 28, 2003.(2) Includes 2,500,000 currently exercisable options to purchase common stock.(3) Less than 0.1%.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Through November 2001 Warrantech Corporation ("Warrantech") acted as claimsadministrator for the Company's extended warranty and service contracts businessand was paid administrative fees of $48,506 and $29,611 in fiscal 2001 and 2000respectively. No administrative fees were paid in fiscal 2002. Joel San Antonio,a former Chairman of the Board of Directors of the Company and a principalstockholder of the Company, is also a significant stockholder and ChiefExecutive Officer, President and Chairman of the Board of Directors ofWarrantech.ITEM 14. CONTROLS AND PROCEDURESBased on their most recent evaluation, which was completed within 90 days of thefiling of this Form 10-K, the Chief Executive Officer and the Chairman of theBoard acting as Chief Financial Officer, have concluded that the Company'sdisclosure controls and procedures are effective to ensure that informationrequired to be disclosed in reports that the Company files or submits under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarized,and reported within time periods specified in Securities and Exchange Commissionrules and forms. There were no significant changes in the Company's internalcontrols or other factors that could significantly affect these disclosurecontrols subsequent to the date of their evaluation, including any correctiveactions with regard to significant deficiencies and material weaknesses. PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KThe following documents are being filed as part of this Report:(a)(1) Financial Statements: Corniche Group Incorporated See "Index to Financial Statements" contained in Part II, Item 8(a)(3) Exhibits:3 (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) 3.8 (j) Amendment to Certificate of Incorporation filed September 28, 1995 (9) 3(j) (k) Certificate of Designation for the Series B Preferred Stock dated May 18, 1998 (10) C3(f) (l) By-laws of the Corporation, as amended on April 25, 1991 (6) (m) Amendment to Certificate of Incorporation dated May 18, 1998 (10) A4 (a) Form of Underwriter's Warrant (6) 4.9.1 (b) Form of Promissory Note - 1996 Offering (9) 4(b) (c) Form of Promissory Note - 1997 Offering (9) 4(c) (d) Form of Common Stock Purchase Warrant - 1996 Offering (9) 4(d) (e) Form of Common Stock Purchase Warrant - 1997 Offering (9) 4(e)10 (a) 1992 Stock Option Plan (8) B (c) Stock Purchase Agreement, dated as of March 4, 1998, between the Company and the Initial Purchasers named therein (10) B (d) 1998 Employees Stock Option Plan (10) D (e) Stock Contribution Exchange Agreement with Stranded International, Inc. dated January 7, 2002, as amended on February 11, 2002 (11) 10(o) (f) Supplemental Disclosure Agreement to Stock Contribution Exchange Agreement with Stranded International, Inc. dated January 7, 2002 (11) 10(p)Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. (g) Employment Agreement dated as of February 6, 2003 by and between Corniche Group Incorporated and Mark Weinreb (12) 99.2 (h) Stock Option Agreement dated as of February 6, 2003 between Corniche Group Incorporated and Mark Weinreb (12) 99.3 (i) Corniche Group Incorporated 2003 Equity Participation Plan (12) 99.4 (j) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (13) 99.1Notes:(1) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-18, File No. 2-69627, which exhibit is incorporated here by reference.(2) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-2, File No. 2-88712, which exhibit is incorporated here by reference.(3) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-2, File No. 33-4458, which exhibit is incorporated here by reference.(4) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended September 30, 1987, which exhibit is incorporated here by reference.(5) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-3, File No. 33-42154, which exhibit is incorporated here by reference. (6) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-1, File No. 33-42154, which exhibit is incorporated here by reference.(7) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended September 30, 1994, which exhibit is incorporated here by reference. (8) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the Company's proxy statement dated March 30, 1992, which exhibit is incorporated here by reference.(9) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended March 31, 1996, which exhibit is incorporated here by reference.(10) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the Company's proxy statement dated April 23, 1998, which exhibit is incorporated here by reference.(11) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended December 31, 2001, which exhibit is incorporated here by reference.(12) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the current report of the Company on Form 8-K, dated February 6, 2003, which exhibit is incorporated here by reference.(13) Filed herewith.Reports on Form 8-KNo reports on Form 8-K were filed by the Company during the fourth quarter offiscal 2002.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Company has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. CORNICHE GROUP INCORPORATED By: /s/ Mark Weinreb ---------------------------------- Mark Weinreb, President Pursuant to the requirements of the Securities Exchange Act of 1934, asamended, this report has been signed below by the following persons on behalf ofthe Company and in the capacities and on the dates indicated:Signatures Title Date---------- ----- ----/s/ Mark Weinreb Director, President and-------------------------- Chief Executive Officer March 24, 2003Mark Weinreb/s/ James J. Fyfe Chairman of the Board March 24, 2003-------------------------- and DirectorJames J. Fyfe/s/ Paul L. Harrison Director March 24, 2003--------------------------Paul L. Harrison CERTIFICATIONI, Mark Weinreb, certify that:1. I have reviewed this Annual Report on Form 10-K of Corniche Group,Incorporated;2. Based on my knowledge, this Annual Report does not contain any untruestatement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this AnnualReport;3. Based on my knowledge, the financial statements, and other financialinformation included in this Annual Report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this Annual Report;4. The registrant's directors and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this Annual Report (the "Evaluation Date"); and c) presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;5. I have disclosed, based on our most recent evaluation, to the registrant'sauditors and the audit committee of registrant's board of directors (or personsperforming the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record,Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and6. I have indicated in this Annual Report whether there were significant changesin internal controls or in other factors that could significantly affectinternal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.Date: March 24, 2003/s/ Mark Weinreb-----------------------Name: Mark WeinrebTitle: Chief Executive Officer of Corniche Group, Inc.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA CORNICHE GROUP INCORPORATED Table of Contents-------------------------------------------------------------------------------- Page -----Report of Independent Certified Public Accountants - Travis, Wolff & Company, L.L.P. 1Independent Auditors' Report - Weinick Sanders Leventhal & Co., LLP 2Financial Statements: Consolidated Balance Sheets at December 31, 2002 and 2001 3 Consolidated Statements of Operations Years Ended December 31, 2002, 2001 and 2000 4 Consolidated Statement of Stockholders' Equity (Deficit) Years Ended December 31, 2002, 2001 and 2000 5 Consolidated Statements of Cash Flows Years Ended December 31, 2002, 2001 and 2000 6 - 7 Notes to Consolidated Financial Statements 8 - 26REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTSTo the Board of Directors ofCorniche Group IncorporatedEuless, TexasWe have audited the accompanying consolidated balance sheets of Corniche GroupIncorporated (the "Company") as of December 31, 2002 and 2001 and the relatedconsolidated statements of operations, stockholders' equity, and cash flows forthe years then ended. These consolidated financial statements are theresponsibility of the Company's management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with auditing standards generally acceptedin the United States of America. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe consolidated financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as wellas evaluating the overall consolidated financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the consolidated financial position ofCorniche Group Incorporated as of December 31, 2002 and 2001 and theconsolidated results of their operations and their cash flows for the years thenended, in conformity with accounting principles generally accepted in the UnitedStates of America.The accompanying consolidated financial statements have been prepared assumingCorniche Group Incorporated will continue as a going concern. As discussed inthe accompanying notes to the consolidated financial statements, the Companysold its insurance subsidiary in July 2001. Additionally, the Companydiscontinued sales of its extended warranty service contracts through its website in December 2001. Accordingly, the Company has no operations nor availablemeans to finance its current expenses and with which to pay its currentliabilities. These factors raise substantial doubt about the Company's abilityto continue as a going concern. Management's plans in regard to these mattersare described in Note 13. The consolidated financial statements do not includeany adjustments that might result from the outcome of this uncertainty./s/TRAVIS WOLFF & COMPANY, L.L.P.Dallas, TexasMarch 11, 2003[LOGO] WSL WEINICK SANDERS 1375 Broadway LEVENTHAL & CO., LLP NEW YORK, N.Y. 10018-7010 ------------------------------------------------------------------ CERTIFIED PUBLIC ACCOUNTANTS 212-869-3333 FAX 212-764-3060 WWW.WSLCO.COM INDEPENDENT AUDITORS' REPORTTo the Stockholders and Board of DirectorsCorniche Group IncorporatedWe have audited the accompanying consolidated statements of operations,redeemable preferred stock, common stock, other stockholders' equity andaccumulated deficit, and cash flows for the year ended December 31, 2000 ofCorniche Group Incorporated and Subsidiary. These consolidated financialstatements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audit.We conducted our audit in accordance with auditing standards generally acceptedin the United States of America. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe consolidated financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as wellas evaluating the overall consolidated financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the results of their operations and their cashflows for the years ended December 31, 2000 of Corniche Group Incorporated andSubsidiary, in conformity with accounting principles generally accepted in theUnited States of America. Also, in our opinion, the related financial statementsschedules for the years ended December 31, 2000, when considered in relation tothe basic financial statements taken as a whole, presents fairly, in allmaterial respects, the information set forth therein. /s/ WEINICK SANDERS LEVENTHAL & CO., LLPNew York, New YorkFebruary 8, 2001 CORNICHE GROUP INCORPORATEDSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Consolidated Balance Sheets-------------------------------------------------------------------------------- December 31, ------------------------ 2002 2001 ---------- ----------ASSETSCurrent assets: Cash and cash equivalents $ 19,255 $ 51,268 Marketable securities -- 1,503,374 Notes receivable, net of allowance of $250,000 1,000,000 -- Prepaid expenses and other current assets, net of allowanceof $8,103 in 2002 40,094 19,734 ---------- ---------- Total current assets 1,059,349 1,574,376Property and equipment, net -- 74,159Deferred acquisition costs 123,835 183,579Other assets -- 4,175 ---------- ---------- $1,183,184 $1,836,289 ========== ==========LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current liabilities: Dividends payable - preferred stock $ 385,512 $ 337,827 Accounts payable 344,279 47,533 Accrued expenses 157,806 83,084 Stockholder advances 106,000 -- Notes payable 125,000 -- Current portion of long-term debt 22,595 21,051 ---------- ---------- Total current liabilities 1,141,192 489,495Unearned revenues 175,200 259,779Long-term debt 9,513 32,108Series A convertible preferred stock: $0.07 cumulative convertible preferred stock; liquidation value, $1.00 per share; authorized, 1,000,000 shares; outstanding, 681,174 shares 681,174 681,174Stockholders' equity (deficit): Preferred stock; authorized, 5,000,000 shares Series B convertible redeemable preferred stock, liquidation value, 10 shares of common stock per share, $.01 par value; authorized, 825,000 shares; issued and outstanding, 10,000 shares at December 31, 2002 and 20,000 shares at December 31, 2001 100 200 Common stock, $.001par value; authorized, 75,000,000 shares; issued and outstanding, 22,398,710 at December 31, 2002 and 22,290,710 shares at December 31, 2001 22,399 22,291 Additional paid-in capital 8,847,573 8,837,687 Accumulated deficit (9,693,967) (8,486,445) ---------- ---------- Total stockholders' equity (deficit) (823,895) 373,733 ---------- ---------- $1,183,184 $1,836,289 ========== ========== The accompanying notes are an integral part of the consolidated financial statements.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. -3- CORNICHE GROUP INCORPORATED Consolidated Statements of Operations---------------------------------------------------------------------------------------------- Years ended December 31, -------------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Earned revenues $ 81,348 $ 107,447 $ 27,175Direct costs (60,565) (70,674) (33,339) ------------ ------------ ------------ Gross profit 20,783 36,773 (6,164)Selling, general and administrative (911,950) (1,642,874) (2,510,492)Provision for uncollectible note receivable and accrued interest (258,103) -- -- ------------ ------------ ------------ Operating loss (1,149,270) (1,606,101) (2,516,656)Other income (expense): Unrealized gain on marketable securities -- 18,779 37,710 Realized loss on marketable securities (3,490) -- 56,307 Property and equipment impairment charge (54,732) -- -- Capitalized software impairment charge -- (305,333) -- Interest income 70,676 107,183 136,353 Interest expense (23,022) (6,212) (10,136) ------------ ------------ ------------ (10,568) (185,583) 220,234 ------------ ------------ ------------Loss before discontinued operations and preferred dividend (1,159,838) (1,791,684) (2,296,422)Discontinued operations: Income from operations -- 237,898 269,257 Loss on disposal -- (479,244) -- ------------ ------------ ------------ -- (241,346) 269,257 ------------ ------------ ------------Net loss (1,159,838) (2,033,030) (2,027,165)Preferred dividend (47,684) (47,684) (48,211) ------------ ------------ ------------Net loss attributable to common stockholders $ (1,207,522) $ (2,080,714) $ (2,075,376) ============ ============ ============Basic earnings per shareLoss before discontinued operations $ (0.05) $ (0.08) $ (0.16)Income (loss) from discontinued operations -- (0.01) 0.02 ------------ ------------ ------------Net loss attributable to common stockholders $ (0.05) $ (0.09) $ (0.14) ============ ============ ============Weighted average common shares outstanding 22,344,769 22,284,417 14,902,184 ============ ============ ============ The accompanying notes are an integral part of the consolidated financial statements. -4- CORNICHE GROUP INCORPORATED Consolidated Statements of Stockholders' Equity (Deficit)Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. ---------------------------------------------------------------------------------------------------------------------------------- Series B Convertible Preferred Stock Common Stock Additional ------------------- ---------------------- Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total ------- ------- ---------- ------- ---------- ----------- ----------- Balance at December 31, 1999 825,000 $ 8,250 12,513,217 $ 12,513 $7,421,944 $(4,330,355) $ 3,112,352 Issuance of common stock for cash, net of offering costs -- -- 1,676,250 1,676 1,205,094 -- 1,206,770 Issuance of common stock for services -- -- 16,000 16 28,194 -- 28,210 Conversion of Series B convertible preferred stock into common stock (805,000) (8,050) 8,050,000 8,050 -- -- -- Conversion of Series A convertible preferred stock into common stock -- -- 24,743 25 175,257 -- 175,282 Compensatory effect of stock options -- -- -- -- 2,667 -- 2,667 Series A convertible stock dividends -- -- -- -- -- (48,211) (48,211) Net loss -- -- -- -- -- (2,027,165) (2,027,165) ----------- ----------- ----------- ----------- ----------- ----------- -----------Balance at December 31, 2000 20,000 $ 200 22,280,210 $ 22,280 $8,833,156 $(6,405,731) $ 2,449,905 Issuance of common stock to directors -- -- 10,500 11 4,531 -- 4,542 Series A convertible stock dividends -- -- -- -- -- (47,684) (47,684) Net loss -- -- -- -- -- (2,033,030) (2,033,030) ----------- ----------- ----------- ----------- ----------- ----------- -----------Balance at December 31, 2001 20,000 $ 200 22,290,710 $ 22,291 $8,837,687 $(8,486,445) $ 373,733 Issuance of common stock to directors -- -- 8,000 8 1,113 -- 1,121 Conversion of Series B convertible preferred stock into common stock (10,000) (100) 100,000 100 -- -- -- Series A convertible stock dividends -- -- -- -- -- (47,684) (47,684) Stock options granted with debt -- -- -- -- 8,773 -- 8,773 Net loss -- -- -- -- -- (1,159,838) (1,159,838) ----------- ----------- ----------- ----------- ----------- ----------- -----------Balance at December 31, 2002 10,000 $ 100 22,398,710 $ 22,399 8,847,573 (9,693,967) $ (823,895) =========== =========== =========== =========== =========== =========== =========== The accompanying notes are an integral part of the consolidated financial statements. -5- CORNICHE GROUP INCORPORATED Consolidated Statements of Cash Flows----------------------------------------------------------------------------------------------------- Years ended December 31, -------------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Cash flows from operating activities: Net loss $(1,159,838) $(2,033,030) $(2,027,165) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Net income from discontinued operations -- (237,898) (269,257) Loss on sale of subsidiary -- -- 479,244 Property and equipment impairment charge 54,732 -- -- Capitalized software impairment charge -- 305,333 Common shares and Series B preferred shares issued and stock options granted for interest expense and for services rendered 9,894 4,542 30,877 Depreciation 16,766 155,436 154,421 Unearned revenues (84,579) 144,971 104,093 Deferred acquisition costs 59,744 (106,629) (70,572) Provision for uncollectible note receivable and accrued interest 258,103 -- -- Changes in operating assets and liabilities: Marketable securities 1,503,374 872,840 169,071 Prepaid expenses and other current assets (28,463) 55,557 (3,669)Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Other assets 4,175 - 8,350 Accounts payable and accrued expenses 371,468 (14,209) (423,195) ----------- ----------- ----------- Net cash provided by (used in) operating activities 1,005,376 (373,843) (2,327,046)Cash flows from investing activities: Acquisition of property and equipment (1,133) (9,061) (25,285) Notes receivable advances (1,250,000) -- -- Proceeds from sale of property and equipment 3,795 -- -- Proceeds from sale of subsidiary -- -- 372,000 -- ----------- ----------- ----------- Net cash (used in) provided by investing activities (1,247,338) 362,939 (25,285)Cash flows from financing activities: Net proceeds from issuance of capital stock -- -- 1,206,770 Stockholder advances 106,000 -- -- Net proceeds from notes payable 125,000 -- -- Repayment of long-term debt (21,051) (23,432) (23,459) ----------- ----------- ----------- Net cash provided by (used in) financing activities 209,949 (23,432) 1,183,311 ----------- ----------- -----------Net decrease in cash and cash equivalents (32,013) (34,336) (1,169,020)Cash and cash equivalents at beginning of year 51,268 85,604 1,254,624 ----------- ----------- -----------Cash and cash equivalents at end of year $ 19,255 $ 51,268 $ 85,604 =========== =========== =========== The accompanying notes are an integral part of the consolidated financial statements. -6- CORNICHE GROUP INCORPORATED Consolidated Statements of Cash Flows - continued------------------------------------------------------------------------------ Years ended December 31, ----------------------------- 2002 2001 2000 ------- ------- -------Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes $ -- $ -- $ -- ======= ======= ======== Interest $ 8,804 $ 6,212 $ 10,136 ======= ======= ========Supplemental schedule of non-cash investing and financing activities Issuance of preferred stock and common stock for services rendered $ 1,121 $ 4,542 $ 28,210 ======= ======= ======== Compensatory element of stock options $ 8,773 $ -- $ 2,667 ======= ======= ======== Net accrual of dividends on Series A preferred stock $47,684 $47,684 $ 48,211 ======= ======= ======== Series A preferred stock and dividends thereon converted to common stock and additional paid-in capital upon conversion $ -- $ -- $175,282 ======= ======= ======== The accompanying notes are an integral part of the consolidated financial statements.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. -7- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 1 - The CompanyCorniche Group Incorporated (hereinafter referred to as the "Company" or "CGI")was incorporated in Delaware on September 18, 1980 under the name FidelityMedical Services, Inc. From its inception through March 1995, the Company wasengaged in the development, design, assembly, marketing, and sale of medicalimaging products. As a result of a reverse merger with Corniche DistributionLimited and its Subsidiaries ("Corniche") the Company was engaged in the retailsale and wholesale distribution of stationery products and related officeproducts, including office furniture, in the United Kingdom. Effective March 25,1995, the Company sold its wholly-owned medical imaging products subsidiary. OnSeptember 28, 1995 the Company changed its name to Corniche Group Incorporated.In February 1996, the Company's United Kingdom operations were placed inreceivership by their creditors. Thereafter, through May 1998, the Company hadno activity. On March 4, 1998, the Company entered into a Stock PurchaseAgreement ("Agreement"), approved by the Company's stockholders on May 18, 1998,with certain individuals (the "Initial Purchasers") whereby the InitialPurchasers acquired an aggregate of 765,000 shares of a newly created Series BConvertible Redeemable Preferred Stock, par value $0.01 per share. Thereafterthe Initial Purchasers endeavored to establish for the Company new businessoperations in the property and casualty specialty insurance and the servicecontract markets. On September 30, 1998, the Company acquired all of the capitalstock of Stamford Insurance Company, Ltd. ("Stamford") from WarrantechCorporation ("Warrantech") for $37,000 in cash in a transaction accounted for asa purchase. On April 30, 2001, the Company sold Stamford for a consideration of$372,000. During 2001, the Company recorded a loss of approximately $479,000 onthe sale of Stamford. The closing was effective May 1, 2001 and transfer offunds was completed on July 6, 2001. -8- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 1 - The Company - (Continued)At April 30, 2001, Stamford's total net assets consisted of the following: ASSETS: Cash and equivalents $ 836,979 Restricted cash 493,451 Deferred acquisition costs 56,074 Licenses, net of accumulated amortization 15,150 ---------- 1,401,654 LIABILITIES: Current liabilities 24,572 Loss reserve 77,247 Unearned premiums 448,592 ---------- 550,411 ---------- Net assets $ 851,243 ==========Cash and restricted cash of $1,072,431 were on deposit in a United Statesdomestic bank at April 30, 2001.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 January 7, 2002, the Company entered into a Stock Contribution ExchangeAgreement (the "Exchange Agreement") and a Supplemental Disclosure Agreement(together with the Exchange Agreement, the "Agreements") with StrandtekInternational, Inc., a Delaware corporation ("Strandtek"), certain ofStrandtek's principal shareholders and certain non-shareholder loan holders ofStrandtek (the "StrandTek Transaction"). The Exchange Agreement was amended onFebruary 11, 2002. Had the transactions contemplated by the Agreements closed,StrandTek would have become a majority owned subsidiary of the Company and theformer shareholders of StrandTek would have controlled the Company. Consummationof the StrandTek Transaction was conditioned upon a number of closingconditions, including the Company obtaining financing via an equity privateplacement, which ultimately could not be met and, as a result, the Agreementswere formally terminated by the Company and StrandTek in June 2002. See Note 13. -9- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 2 - Summary of Significant Accounting Policies(a) Basis of consolidation: The accompanying consolidated financial statements include the accounts of the Company and its subsidiary through April 30, 2001. All intercompany amounts and balances have been eliminated in consolidation.(b) Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.(c) Cash Equivalents: Short-term cash investments, which have a maturity of ninety days or less when purchased, are considered cash equivalents in the statement of cash flows.(d) Concentrations of Credit-Risk: Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and marketable securities. The Company places its cash accounts with high credit quality financial institutions, which at times may be in excess of the FDIC insurance limit. The Company's marketable securities primarily comprised investments in U. S. Treasury Bills and Federal Home Loan Mortgage notes.(e) Marketable Securities: Marketable securities are classified as trading securities and are reported at market value. At December 31, 2001, marketable securities are comprised of U.S. Treasury Bills and Federal Home Loan Mortgage notes whose cost approximated their market value.(f) Property and Equipment: The cost of property and equipment is depreciated over the estimated useful lives of the related assets of 3 to 5 years. The cost of computer software programs is amortized over their estimated useful lives of five years. Depreciation is computed on the straight-line method. Repairs and maintenance expenditures that do not extend original asset lives are charged to income as incurred.(g) Income Taxes: 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. -10- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Note 2 - Summary of Significant Accounting Policies(h) Accounting for Long-Lived Assets: The Company adopted Statement of Financial Accounting Standards No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets". This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends ARB No. 51, "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. This Statement retains the requirements of Statement 121 to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. At December 31, 2001, the Company recognized as impaired, the book value of certain capitalized software costs resulting in an impairment charge of $305,333. During the quarter ended June 30, 2002, the Company recognized as impaired, the book value of property and equipment assets resulting in an impairment charge of $54,732.(i) Advertising Costs: The Company expenses advertising costs as incurred. Advertising costs amounted to $107,117 and $1,133,987 for the years ended December 31, 2001, and 2000, respectively. There were no advertising costs in 2002.(j) Earnings Per Share: The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is based on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented as it is anti-dilutive in all periods presented. -11- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 2 - Summary of Significant Accounting Policies - (Continued)(k) Revenue Recognition: Stamford's reinsurance premiums are recognized on a pro rata basis over the policy term. The deferred policy acquisition costs are the net cost of acquiring new and renewal insurance contracts. These costs are charged to expense in proportion to net premium revenue recognized. The provisions for losses and loss-adjustment expenses include an amount determined from loss reports on individual cases and an amount based on past experience for losses incurred but not reported. Such liabilities are necessarily based on estimates, and while management believes that the amount is adequate, the ultimate liability may be in excess of or less than the amounts provided. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and any adjustments are reflected in earnings currently. The Company had sold via the Internet through partnerships and directly to consumers, extended warranty service contracts for seven major consumer products. The Company recognizes revenue ratably over the length of the contract. The Company purchased insurance to fully cover any losses under the service contracts from a domestic carrier. The insurance premium and other costs related to the sale are amortized over the life of the contract.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Note 3 - Property and EquipmentProperty and equipment consisted of the following: December 31, --------------------- 2002 2001 -------- --------- Computer equipment $ -- $131,014 Furniture and fixtures -- 23,829 Equipment under capital lease -- 17,806 Computer software 602,014 602,014 -------- -------- -- 774,663 Less: Accumulated depreciation 602,014 700,504 -------- -------- $ -- $ 74,159 ======== ======== -12- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 4 - Notes ReceivableIn January 2002, the Company advanced to StrandTek a loan of $1 million on anunsecured basis, which is personally guaranteed by certain of the principalshareholders of StrandTek and a further loan of $250,000 on February 19, 2002 onan unsecured basis. Such loans bear interest at 7% per annum and were due onJuly 31, 2002 following termination of the Agreements (as discussed in Note 1)in June 2002. StrandTek failed to pay the notes on the due date and the Companycommenced legal proceedings against StrandTek and the guarantors to recover theprincipal, accrued interest and costs of recovery. The Company ceased accruinginterest on July 31, 2002. Subsequent to July 31, 2002, the notes accrueinterest at the default rate of 12% per annum. The Company has provided anallowance for the $250,000 unsecured loan and interest of $8,103 at December 31,2002. See Note 13.Note 5 - Accrued ExpensesAccrued expenses are as follows: December 31, --------------------- 2002 2001 -------- --------- Professional fees $ 28,500 $37,730 Director fees -- 12,500 Payroll and related -- 13,850 Travel and subsistence -- 15,000 Interest on notes payable 5,446 -- Employment contract termination 120,000 -- Other 3,860 4,004 --------- ------- $157,806 $83,084 ======== ======= -13- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial StatementsSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. --------------------------------------------------------------------------------Note 6 - Notes PayableIn September 2002, the Company sold to accredited investors five 60-daypromissory notes in the principal sum of $25,000 each, resulting in net proceedsto the Company of $117,500, net of offering costs. The notes bear interest at15% per annum payable at maturity. The notes include a default penalty pursuantto which if the notes are not paid on the due date the holder shall have theoption to purchase twenty five thousand shares of the Company's common stock foran aggregate purchase price of $125. If the non payment continues for 30 days,then on the 30th day, and at the end of each successive 30-day period until thenote is paid in full, the holder shall have the option to purchase an additionaltwenty five thousand shares of the Company's common stock for an aggregatepurchase price of $125. At December 31, 2002, the Company had reserved 250,000shares of the Company's common stock for issuance against exercise of theoptions granted pursuant to the default penalty and recognized $8,773 as acharge to interest expense. See Note 13.Note 7 - Long-Term DebtLong-term debt consists of the following: December 31, --------------------- 2002 2001 ------ -------Capital lease obligations $ -- $ 343Bank note payable in equal monthly installments of $2,043 including interest at 8.75% 32,108 52,816 ------- ------- 53,159Less current maturities 22,595 21,051 ------- ------- $ 9,513 $32,108 ======= =======The aggregate scheduled future maturities of the obligations are as follows: Years Ending December 31, ------------ 2003 $22,595 2004 9,513 ------- $32,108 ======= -14- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 8 - Series A Convertible Preferred StockIn connection with the settlement of a securities class action litigation in1994, the Company issued 1,000,000 shares of Series A $0.07 ConvertiblePreferred Stock (the "Series A Preferred Stock") with an aggregate value of$1,000,000. The following summarizes the terms of Series A Preferred Stock asmore fully set forth in the Certificate of Designation. The Series A PreferredStock has a liquidation value of $1 per share, is non-voting and convertibleinto common stock of the Company at a price of $5.20 per share. Holders ofSeries A Preferred Stock are entitled to receive cumulative cash dividends of$0.07 per share, per year, payable semi-annually. The Series A Preferred Stockis callable by the Company at a price of $1.05 per share, plus accrued andunpaid dividends. In addition, if the closing price of the Company's commonstock exceeds $13.80 per share for a period of 20 consecutive trade days, theSeries A Preferred Stock is callable by the Company at a price equal to $0.01per share, plus accrued and unpaid dividends.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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 Certificate of Designation for the Series A Preferred Stock also states thatat any time after December 1, 1999 the holders of the Series A Preferred Stocksmay require the Company to redeem their shares of Series A Preferred Stock (ifthere are funds with which the Company may do so) at a price of $1.00 per share.Notwithstanding any of the foregoing redemption provisions, if any dividends onthe Series A Preferred Stock are past due, no shares of Series A Preferred Stockmay be redeemed by the Company unless all outstanding shares of Series APreferred Stock are simultaneously redeemed. During the years ended December 31,2000 and 1999, 128,880 and 18,711, respectively, shares of Series A PreferredStock were converted into 24,743 and 3,586, respectively, shares of commonstock. At December 31, 2002 and 2001, 681,174 shares of Series A Preferred Stockwere outstanding, and accrued dividends on these outstanding shares were$385,512 and $337,827 respectively.On January 29, 2002, notice was given that, pursuant to the Company's RestatedCertificate of Incorporation, as amended, the Company called for redemption onthe date of closing the StrandTek Transaction, all shares of Series A PreferredStock outstanding on that date at a redemption price of $1.05, plus accrued andunpaid dividends of approximately $0.47 per share. The redemption, among otherfinancial, legal and business conditions, was a condition of closing theStrandTek Transaction. Similarly, the redemption was subject to closing theStrandTek Transaction. Upon termination of the StrandTek Transaction, theCompany rescinded the notice of redemption. -15- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 9 - Stockholders' Equity(a) Series B Convertible Redeemable Preferred Stock: On March 4, 1998, the Company entered into a Stock Purchase Agreement ("Agreement"), approved by the Company's stockholders on May 18, 1998, with certain individuals (the "Initial Purchasers") whereby the Initial Purchasers and two other persons acquired an aggregate of 825,000 shares of a newly created Series B Convertible Redeemable Preferred Stock ("Series B Stock"), par value $0.01 per share. Pursuant to the Agreement and subsequent transactions, the Initial Purchasers acquired 765,000 shares of Series B Stock for $76,500 in cash. The Company incurred certain legal expenses of the Initial Purchasers equaling approximately $50,000 in connection with the transaction. In addition, the Company issued 50,000 shares of Series B Stock to a consultant as compensation valued at $5,000 for his assistance to the Company in the identification and review of business opportunities and this transaction and for his assistance in bringing the transaction to fruition. Additionally, the Company issued 10,000 shares of Series B Stock to James Fyfe as compensation valued at $1,000 for his work in bringing the transaction to fruition. These issuances diluted the voting rights of the then existing stockholders by approximately 57%. The total authorized shares of Series B Convertible Redeemable Preferred Stock is 825,000. The following summarizes the terms of the Series B Stock whose terms are more fully set forth in the Certificate of Designation. The Series B Stock carries a zero coupon and each share of the Series B Stock is convertible into ten shares of the Company's common stock. The holder of a share of the Series B Stock is entitled to ten times any dividends paid on the common stock and such stock has ten votes per share and votes as one class with the common stock. 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 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 is subject to adjustment as stipulated in the Agreement. Upon liquidation, the Series B Stock would be junior to the Company's Series A Preferred Stock and would share ratablySource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. with the common stock with respect to liquidating distributions. During the year ended December 31, 2000, holders of 805,000 shares of the Series B Preferred Stock converted their shares into 8,050,000 shares of the Company's common stock. During the year ended December 31, 2002, the holders of 10,000 shares of the Series B Preferred Stock -16- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 9 - Stockholders' Equity (Continued)(a) Series B Convertible Redeemable Preferred Stock: converted their shares into 100,000 shares of the Company's common stock. At December 31, 2002, 10,000 Series B Preferred Shares were issued and outstanding (2001 - 20,000 shares). The Company's right to repurchase or redeem shares of Series B Stock was eliminated in fiscal 1999 pursuant to the terms of the Agreement and the Certificate of Designation.(b) Common Stock: At the 2000 annual meeting, the stockholders approved an amendment increasing the authorized common stock to 75 million shares from 30 million shares. From January 1, 2000 through February 15, 2000, accredited investors purchased 1,676,250 shares of the Company's common stock for approximately $1,206,000, net of offering costs. The Company in 2000 issued 3,000 shares of its common stock whose fair value was $7,688 to a consultant for promotional activities. The Company also issued 13,000 shares of its common stock whose fair value was $20,522 to its past and present board members for director's fees from the second quarter of 1998 through the fourth quarter of 2000. The Company issued in 2001 10,500 shares of its common stock whose fair value was $4,542 and in 2002 8,000 shares of its common stock whose fair value was $1,121 to its board members for director's fees.(c) Warrants: 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 were reserved for issuance upon exercise of warrants as of December 31, 1998. Of these outstanding warrants, warrants for 9,375 common shares at $46.40 per share expired in April 1999. -17- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 9 - Stockholders' Equity (Continued)(c) Warrants (Continued): The remaining warrants to acquire 91,933 common shares at exercise prices ranging from $3.20 to $8.10 per share were granted in March 1995 to certain directors, officers and employees who converted previously outstanding stock options under the 1986 Plan into warrants on substantially the same terms as the previously held stock options, except the warrants were immediately vested. During fiscal 1999, warrants to acquire 22,308 common shares at prices ranging from $3.90 to $46.40 per share expired. During fiscal 2002, warrants to acquire 35,000 common shares at an exercise price of $27.50 per share expired. No warrants wereSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. exercised during any of the periods presented. A total of 44,000 shares of common stock are reserved for issuance upon exercise of outstanding warrants as of December 31, 2002 at prices ranging from $3.20 to $8.10 and expiring through October 2004. At December 31, 2002, warrants for 34,625 shares of common stock were outstanding at exercise prices ranging from $3.20 to $8.10.(d) Stock Option Plans: The 1998 Employee Incentive Stock Option Plan provides for the granting of options to purchase shares of the Company's common stock to employees. Under the 1998 Plan, the maximum aggregate number of shares that 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. Options are exercisable at the fair market value of the common stock on the date of grant and have five-year terms. The exercise price of each option is 100% of the fair market value of the underlying stock on the date the options are 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 Company or any subsidiary unless (a) at the time the options are granted, the option exercise price is at least 110% of the fair market value of the shares of common stock subject to the options and (b) the option by its terms is not exercisable after the expiration of five years from the date such option is granted. The Board of Directors' Compensation Committee administers the 1998 Plan. 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. -18- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 9 - Stockholders' Equity - (Continued)(d) Stock Option Plans: - continued The maximum amount of the Company's common stock that may be granted under this plan is 20,000 shares. In 1999, an option to acquire 100,000 common shares at $1.00 per share was granted to an officer and an option to acquire 25,000 common shares at $0.6875 per share was issued to a consultant under the 1998 Plan. In fiscal 2000, options to acquire 75,000 common shares at $1.097 per share, 100,000 common shares at $1.88 per share and 100,000 common shares at $1.94 per share were granted to officers. In Fiscal 2001, options to acquire 75,000 and 100,000 common shares at $0.37 and $1.88, respectively, were cancelled. Stock option activity under the 1992 and 1998 Stock Option Plans is as follows: Weighted Average Number of Exercise Shares Price ---------- ---------Balances at December 31, 1999 128,000 $0.92Granted 275,000 1.69Cancelled -- -- ------- ------Balances at December 31, 2000 403,000 1.45Granted 75,000 0.37Expired (1,500) 0.31Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Cancelled (175,000) 1.23 ------- ------Balances at December 31, 2001 301,500 1.30Granted -- --Expired (1,500) 0.41Cancelled (300,000) 1.31 ------- ------Balances at December 31, 2002 -- $ -- ======= ====== -19- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 9 - Stockholders' Equity - (Continued)(d) Stock Option Plans: - continued Outstanding options expire 90 days after termination of the holder's status as employee or director. All options were granted at an exercise price equal to the fair value of the common stock at the grant date. Therefore, in accordance with the provisions of APB Opinion No. 25 related to fixed stock options, no compensation expense is recognized with respect to options granted or exercised. Under the alternative fair-value based method defined in SFAS No. 123, the fair value of all fixed stock options on the grant date would be recognized as expense over the vesting period. Financial Accounting Standards Board Interpretation No. 44 is an interpretation of APB Opinion No. 25 and SFAS No. 123 which requires that effective July 1, 2000, all options issued to non-employees after January 12, 2000 be accounted for under the rules of SFAS No. 123. Options granted to non-employees after December 15, 1998 through January 12, 2000 are also required to follow SFAS No. 123 prospectively from July 1, 2000. The effect of adoption of the Interpretation was a charge to operations in 2000 of 2000 2002 2001 $2,667 and an increase in additional paid in capital in the same amount. Assuming the fair market value of the stock at the date of grant to be $.3125 per share in May 1996, $.40625 per share in May 1997, $.6875 in January 1999 and $1.00 per share in September 1999, $1.94 in June 2000 and $1.097 in September 2000, the life of the options to be from three to ten years, the expected volatility at 200%, expected dividends are none, and the risk-free interest rate of 10%, the Company would have recorded compensation expense of $43,593, $59,129 and $57,842, respectively, for the years ended December 31, 2002, 2001 and 2000 as calculated by the Black-Scholes option pricing model. -20- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 9 - Stockholders' Equity - (Continued)(d) Stock Option Plans: - continued As such, proforma net loss and net loss per share would be as follows: 2002 2001 2000 ----------- ----------- -----------Net loss as reported $(1,159,838) $(2,033,030) $(2,027,165)Additional compensation (43,593) (59,129) (57,842) ----------- ----------- -----------Adjusted net loss $(1,203,431) $(2,092,159) $(2,085,007)Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. =========== =========== ===========Net loss per share as reported $ (0.05) $ (0.09) $ (0.14) =========== =========== ===========Adjusted net loss per share $ (0.05) $ (0.09) $ (0.14) =========== =========== ===========See Note 13.Note 10 - Income TaxesDeferred tax assets consisted of the following as of December 31: 2002 2001 2000 ----------- ----------- -----------Net operating loss carryforwards $ 2,068,000 $ 1,828,000 $ 1,416,000Depreciation and amortization 62,000 126,000 48,000Capital loss carryforward 166,000 166,000 --Deferred revenue 60,000 88,000 --Deferred legal and other fees 158,000 -- --Allowance for notes receivable 88,000Other, net -- -- 14,000 ----------- ----------- -----------Net deferred tax assets 2,602,000 2,208,000 1,517,000Deferred tax asset valuation allowance (2,602,000) (2,208,000) (1,517,000) ----------- ----------- ----------- $ -- $ -- $ -- =========== =========== =========== -21- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 10 - Income Taxes - (Continued)The provision for income taxes is different than the amount computed using theapplicable statutory federal income tax rate with the difference for each yearsummarized below: 2002 2001 2000 ----- ----- -----Federal tax benefit at statutory rate (34.0%) (34.0%) (34.0%)Change in valuation allowance 34.0% 33.0% 34.0%Permanent difference -- 1.0% -- ----- ----- -----Provision for income taxes 0.00% 0.00% 0.00% ===== ===== =====The Tax Reform Act of 1986 enacted a complex set of rules limiting theutilization of net operating loss carryforwards to offset future taxable incomefollowing a corporate ownership change. The Company's ability to utilize its NOLcarryforwards is limited following a change in ownership in excess of fiftypercentage points during any three-year period.Upon receipt of the proceeds from the last foreign purchasers of the Company'scommon stock in January 2000, common stock ownership changed in excess of 50%during the three-year period then ended. The utilization of the Company's netoperating loss carryforwards at December 31, 2002 of approximately $6,100,000has been limited by this ownership change. The future tax benefit of the netoperating loss carryforwards aggregating approximately $2,068,000 at December31, 2002 has been fully reserved as it is not more likely than not that theCompany will be able to use the operating loss in the future.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Note 11 - Segment InformationUntil April 30, 2001, the Company operated in two segments; as a reinsuror andas a seller of extended warranty service contracts through the Internet. Thereinsurance segment has been discontinued with the sale of Stamford (see Note1), and the Company's remaining operations are now one segment. -22- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 12 - Related Party TransactionsThe Company processes claims on its warranty contracts through WarrantechCorporation (Warrantech), in which a principal shareholder of the Company isalso a significant shareholder and Chief Executive Officer, President andChairman of the Board of Directors. Warrantech receives an administration fee of$50 per contract for processing the claim. Total administrative fees paid toWarrantech in 2002, 2001 and 2000 totaled $0, $48,506 and $29,611, respectively.Note 13 - Subsequent Events(a) New Business Operations: On February 6, 2003, the Company appointed Mark Weinreb as a member of the Board of Directors and as its President and Chief Executive Officer. The Company and Mr. Weinreb have been exploring business plans that may involve, under the name "Phase III Medical, Inc.", entering the medical sector by acquiring or participating in one or more biotech and/or medical companies or technologies, owning one or more drugs or medical devices that may or may not yet be available to the public, or acquiring one or more such drugs or medical devices or the royalty streams therefrom. Mr. Weinreb has been appointed to finalize and execute the Company's new business plan. The Company will need to recruit management, business development and technical personnel, and develop its business model. Accordingly, it will be necessary to raise new capital. To secure Mr. Weinreb's services as President and Chief Executive Officer, the Company entered into an employment agreement with Mr. Weinreb. The employment agreement has an initial term of three years, with automatic annual extensions unless terminated by the Company or Mr. Weinreb at least 90 days prior to an applicable anniversary date. The Company has agreed to pay Mr. Weinreb an annual salary of $180,000 for the initial year of the term, $198,000 for the second year of the term and $217,800 for the third year of the term. In addition, he is entitled to an annual bonus in the amount of $20,000 for the initial year in the event, and concurrently on the date, that the Company has received debt and/or equity financing in the aggregate amount of at least $1,000,000 since the beginning of his service. He is also to receive a bonus of $20,000 for each subsequent year of the term, without condition. -23- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 13 - Subsequent Events - (Continued)(a) New Business Operations: - continued In addition, the Company has adopted a 2003 Equity Participation Plan and pursuant to such plan entered into a Stock Option Agreement with Mr. Weinreb (the "Initial Option Agreement"). Under the Initial Option Agreement, the Company granted Mr. Weinreb the right and option, exercisable for 10 years, to purchase up to 2,500,000 shares of theSource: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Company's common stock at an exercise price of $0.03 per share. Additionally, in the event that the closing price of the Company's common stock equals or exceeds $0.50 per share for any five consecutive trading days during the term of the employment agreement (whether during the initial term or an annual extension), the Company has agreed to grant Mr. Weinreb, on the day immediately following the end of the five day period, an option to purchase an additional 2,500,000 shares of the Company's common stock at an exercise price of $0.50 per share, pursuant to the 2003 Equity Participation Plan. Mr. Weinreb has agreed that he will not sell any shares of the Company's common stock obtained upon exercise of the Initial Option Agreement or Additional Option Agreement prior to the first anniversary of the date of the employment agreement. In connection with the hiring of Mr. Weinreb and the Company's anticipated new business line, the Company intends to call a meeting of stockholders: (1) to elect five directors (including Mr. Weinreb and, if he requests, a person designated by him); (2) to ratify the Company's 2003 Equity Participation Plan pursuant to which 15,000,000 shares of the Company's common stock are authorized to be issued; (3) to approve an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of common stock to 250,000,000; and (4) to approve a change of the Company's name to "Phase III Medical, Inc.". -24- CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 13 - Subsequent Events - (Continued)(b) Private Placement of Promissory Notes: On February 11, 2003, the Company commenced a private placement offering to raise up to $100,000 in 30-day promissory notes in increments of $5,000 bearing interest at 20% per annum. Only selected investors which qualify as "accredited investors" as defined in Rule 501(a) under the Securities Act of 1933, as amended, are eligible to purchase these promissory notes. As of March 11, 2003, the Company had raised $50,000 through the sale of such promissory notes. The promissory notes are being offered to enable the Company to raise short-term funds to settle outstanding liabilities and meet operating expenses in connection with the commencement its new business plan. On February 6, 2003, the Company entered into a deferment agreement with three major creditors, a professional advisor, an ex-employee and a shareholder lender pursuant to which liabilities of approximately $523,887 in aggregate, were deferred, subject to the success of the Company's debt and equity financing efforts, until January 15, 2005, against a pledge of the StrandTek note receivable (see Note 4.). In addition, in consideration for the deferral, the Company agreed to issue 100,000 restricted shares of the Company's common stock.(c) Notes Receivable: As described in Note 4, StrandTek defaulted on the payment of $1,250,000 plus accrued interest due to the Company on July 31, 2002. As a result, on August 6, 2002, the Company filed a complaint in the Superior Court of New Jersey entitled Corniche Group Incorporated v StrandTek International, Inc., a Delaware corporation, StrandTek International, Inc., a Florida corporation, David M. Veltman, William G. Buckles Jr., Jerome Bauman and Jan Arnett. The complaint seeks recovery of the $1,250,000 loan, plus interest, costs and fees, and seeks recovery against the individual defendants pursuant to their partial guarantees. -25-Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements--------------------------------------------------------------------------------Note 13 - Subsequent Events - (Continued)(c) Notes Receivable (Continued): On February 28, 2003, the Court issued a ruling granting the Company partial summary judgment with respect to the principal aspects of its complaint. The Court rejected the defenses of StrandTek and agreed with the Company that it was entitled to judgment against StrandTek and the guarantors. The Company has now filed a second summary judgment motion to have final judgment entered for the exact amounts due from each defendant and to dismiss defendants' counter claim. This motion is presently scheduled to be heard on April 4, 2003. No assurances can be given that StrandTek and/or the individual guarantors will not attempt to appeal the Court's grant of summary judgment, or that the Company will be able to collect on any judgment.(d) Stockholders' Equity: As described in Note 6, the Company granted purchasers of the Company's September 2002 60-day promissory notes, options to purchase shares of common stock if the Company defaulted on the payment of principal or interest on such promissory notes. In February 2003, two holders of such promissory notes exercised their options and purchased 150,000 shares of common stock resulting in net proceeds to the Company of $750.(e) Properties: On February 14, 2003, the Company leased approximately 200 square feet of serviced offices at 330 South Service Road, Suite 120, Melville, New York at an annual rental of $18,000. The lease is for a term of approximately 13 months expiring on March 31, 2004. -26-Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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. Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Corniche Group Incorporated (the"Company") on Form 10-K for the year ended December 31, 2002 filed with theSecurities and Exchange Commission (the "Report"), I, Mark Weinreb, ChiefExecutive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the dates presented and the result of operations of the Company for the periods presented.Dated: March 24, 2003 /s/Mark Weinreb ------------------------- Mark Weinreb Chief Executive OfficerThis certification has been furnished solely pursuant to Section 906 of theSarbanes-Oxley Act of 2002 and has not been filed as part of the Report or as aseparate disclosure document.Source: Caladrius Biosciences, Inc., 10-K, March 26, 2003Powered 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.