SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ____________________
Commission file number: 0-10909
CORNICHE GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 22-2343568
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
272 Rte 206, Bldg # B1.1 07836
Flanders, NJ 07836 (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code 973-927-7155
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check X whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
6,105,231 shares, $.10 par value as of February 1, 1998
(Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date)
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Page 1 of 11 pages
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CORNICHE GROUP INCORPORATED
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TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements (Unaudited)
Balance Sheet at December 31, 1997
and March 31, 1997.................................... 3
Statement of Operations for the
three and nine months ended
December 31, 1997 and
December 31, 1996..................................... 4
Statement of Cash Flows for the nine
months ended December 31, 1997 and
December 31, 1996..................................... 5
Notes to Unaudited Financial Statements............... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations...................................... 10
Item II. Other Information
Item 6. Exhibits and Reports on Form 8-K................. 11
-------------------
The financial statements are unaudited. However, the management of the
registrant believes that all necessary adjustments (which include only normal
recurring accruals) have been reflected to present fairly the financial position
of the registrant at March 31, 1997 and December 31, 1997, the results of its
operations for the three and nine months ended December 31, 1997 and 1996 and
the changes in its cash flows for the nine months ended December 31, 1997 and
1996.
<PAGE>
<TABLE>
CORNICHE GROUP INCORPORATED
Balance Sheet
ASSETS
<CAPTION>
December 31, March 31,
1997 1997
(unaudited) (audited)
Current assets:
<S> <C> <C>
Cash $1,020,941 $ 13,167
Other receivables and prepaid expenses 2,231 1,000
------------ ----------
Total current assets 1,023,172 14,167
Other assets:
Property and equipment, net 456 747
-------------- --------
Total assets $1,023,628 $14,914
========= ======
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
Notes Payable $ 0 $ 400,000
Trade accounts payable 554 4,929
Dividends payable - preferred stock 193,480 148,397
Accrued liabilities 27,950 113,297
--------- -------
Total current liabilities 221,984 666,623
-------- -------
Stockholders' (deficiency) equity:
Preferred Stock, $0.01 par value,
authorized 5,000,000 shares including
1,000,000 shares of Series A 7% cumulative
convertible preferred stock, issued
and outstanding 896,967 shares of Series A
preferred stock at December 31, 1997
(909,267 shares of Series A preferred
stock at March 31, 1997) 896,967 909,267
Common stock, $0.10 par value,
authorized - 30,000,000 shares,
issued 6,322,743 shares at December 31,
1997 (2,630,378 shares at March 31, 1997) 632,274 263,037
Additional paid-in capital 2,133,649 830,086
Accumulated deficit (2,656,536) (2,449,389)
----------- -----------
1,006,354 ( 446,999)
Treasury stock-at cost, 218,100 shares ( 204,710) ( 204,710)
----------- ------------
Total stockholders' (deficiency) equity 801,644 (651,709)
---------- ------------
Total liabilities and stockholders'
(deficiency) equity $1,023,628 $ 14,914
========= ===========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
CORNICHE GROUP INCORPORATED
Statement of Operations
(UNAUDITED)
<CAPTION>
-- 3 Months Ended-- -- 9 Months Ended --
Dec. 31 Dec. 31 Dec 31, Dec 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $0 $0 $0 $0
Cost of Sales 0 0 0 0
Gross Profit 0 0 0 0
General & administrative expenses (31,268) (44,803) (168,317) (112,663)
-------- -------- --------- ---------
Operating Loss (31,268) (44,803) (168,317) (112,663)
Interest (net) 6,125 ( 3,416) 6,253 (7,516)
----- --------- ----- -------
Net Loss before
Preferred Dividend (25,143) (48,219) (162,064) (120,719)
Preferred dividend (15,697) (15,912) (45,083) (47,736)
-------- -------- -------- --------
Net Loss $(40,840) $(64,131) $(207,147) $(167,915)
========= ========= ========== ==========
Loss per share of
common stock $(0.01) $(0.03) $(0.04) $(0.07)
Weighted average
number of common
shares of outstanding 6,104,643 2,412,278 4,833,849 2,412,278
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
CORNICHE GROUP INCORPORATED
Statement of Cash Flows
(Unaudited)
<CAPTION>
-------- 9 Months Ended -------
Dec 31, Dec 31,
1997 1996
Cash Flows from Operations:
<S> <C> <C>
Net loss $(207,147) $(167,915)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 291 291
Changes in Assets and Liabilities:
(Inc)/(Dec) in notes receivables 0 125,000
(Inc)/(Dec) in other receivables 1,000 10,000
(Inc)/Dec in prepaid expenses (2,231) 0
Inc/(Dec) in accounts payable (4,375) (98,213)
Inc/(Dec) in accrued liabilities (85,347) (6,910)
Increase in dividends payable 45,083 47,736
-------- --------
Net Cash Used in Continuing Operations (252,726) (90,011)
--------- --------
Cash Flows from Financing Activities:
Net proceeds from issuance of
common stock for cash 1,660,500 0
Payment of notes payable (450,00) 0
Additional borrowings 50,000 100,000
---------- -------
Net Cash Provided by Financing Activities 1,260,500 100,000
--------- -------
Net Increase in Cash 1,007,774 9,989
Cash at Beginning of Period 13,167 66
----------- ---------
Cash at End of Period $1,020,941 $10,055
========= ======
See accompanying notes
</TABLE>
<PAGE>
CORNICHE GROUP INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
CORNICHE GROUP INCORPORATED
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 The Company
Corniche Group Incorporated (hereinafter referred to as the "Company" or
"CGI") as a result of a reverse acquisition with Corniche Distribution Limited
and its Subsidiaries ("Corniche"), was engaged in the retail sale and wholesale
distribution of stationery products and related office products, including
office furniture, in the United Kingdom. The operating subsidairies of Corniche
were Chessbourne International Limited (`Chessbourne") and The Stationery
Company Limited ("TSCL").
Corniche experienced large operating losses and net cash outflows from
operating activities in fiscal 1995 and 1996 resulting in a significant
reduction in working capital during that period. The Company was unsuccessful in
its efforts to raise interim financing to resolve its liquidity problems.
Additionally, the Company was not able to convert a significant portion of its
bank debt to equity. As a result receivers were appointed to Corniche's
subsidiaries, Chessbourne and TSCL on February 7, 1996 by their primary bankers
and secured lender, Bank of Scotland and Corniche Distribution Limited was
placed in receivership on February 28, 1996. (See Note 2). Since then the
Company has been inactive.
Note 2 Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
financial position as of December 31, 1997, the results of operations for the
three and nine months ended December 31, 1997 and 1996 and the changes in cash
flows for the nine months ended December 31, 1997 and 1996. The results of
operations for the nine months ended December 31, 1997 are not necessarily
indicative of the results to be expected for the full year.
The March 31, 1997 balance sheet has been derived from the audited
financial statements at that date included in the Company's annual report on
Form 10-K. These unaudited financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's annual
report on Form 10-K.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's ability to continue as a
going concern may depend on its ability to obtain outside financing sufficient
to support its attempts to either identify and complete a suitable acquisition
or acquisitions or to commence new business operations. There can be no
assurance given that the Company will obtain such short-term or long-term
outside financing or complete either the acquisition of, or the entry into, new
business operations.
Note 2 Basis of Presentation (continued)
Effective October 1, 1995 the Company declared a one-for-ten reverse stock
split and all numbers of shares and share values stated herein reflect such
reverse split unless otherwise noted.
Note 3 Income Taxes
Effective October 1993, the Company adopted SFAS 109, "Accounting for
Income Taxes", which recognizes (a) the amount of taxes payable or refundable
for the current year and (b) deferred tax liabilities and assets for the future
tax consequences of events that have been recognized in an enterprise's
financial statements or tax returns.
Income tax expense/benefit was calculated on a separate company basis
between CGI and Corniche.
The Tax Reform Act of 1986 enacted a complex set of rules limiting the
utilization of net operating loss carryforwards to offset future taxable income
following a corporate ownership change. The Company's ability to utilize its NOL
carryforwards is limited following a change in ownership in excess of fifty
percentage points. The Company has fully reserved the balance of tax benefits of
its operating losses because the likelihood of realization of the tax benefits
cannot be determined.
Note 4 New Accounting Standards
Effective fiscal 1996 the Company adopted Statement of Financial Accounting
Standards No. 107, "Disclosure About Fair Value of Financial Instruments", and
Statement of Position 94-6, "Disclosure of Certain Significant Risks and
Uncertainties".
Note 5 Notes Payable
The Company was in default on a Note Payable dated January 12, 1995 in the
principle sum of $17,000. In March 1997 the Company entered into a settlement
agreement with the note holder pursuant to which the note holder accepted $5,000
in full satisfaction of all remaining sums due including accrued interest,
payment of which was made in April 1997.
During the period July 1996 through December 1996, the Company engaged in a
private offering of securities pursuant to Rule 506 of Regulation D of the
Securities Act of 1933, as amended. The offering of up to $300,000 was conducted
on a "best efforts" basis through Robert M. Cohen & Co., Inc. ("RMCC"), a New
York based broker-dealer and was offered and sold in the form of $25,000 units.
Each unit consisted on one $25,000 face amount 90-day, 8% promissory note and
one redeemable common stock purchase warrant to purchase 60,000 shares of the
Company's common stock at price of $0.50 per share during a period of three
years from issuance. The offering was terminated in December 1996 upon the sale
of 4 units resulting in $100,000 in gross proceeds. In connection with such
offering, RMCC was paid sales commissions equal to 10% of the aggregate purchase
price of the units sold resulting in aggregate sales commissions of $10,000.
During the period January 1997 through April 30, 1997, the Company engaged
in a private offering of securities pursuant to Rule 506 of Regulation D of the
Securities Act of 1933, as amended. The offering consisted of up to 19 units
being sold at an offering price of $25,000 per unit. Each unit consisted of one
$25,000 face-amount 90-day, 8% promissory note and one redeemable common stock
purchase warrant to purchase 60,000 shares of the Company's common stock at a
price of $0.50 per share during a period of three years from issuance. The
offering of up to $475,000 was conducted on a "best efforts" basis through RMCC.
Part of the proceeds were used to pay the promissory notes and redeem the common
stock purchase warrants issued in the prior offering. In connection with such
offering, RMCC was paid sales commissions equal to 10% of the purchase price for
each unit sold or $2,500 per unit. RMCC sold 17 units. The notes issued in this
offering were paid and the common stock purchase warrants issued in this
offering were redeemed during the quarter ended June 30, 1997.
Note 6 Commitments and Contingencies
Legal Proceedings
In the opinion of management there are no lawsuits or claims pending
against the Company.
Note 7 Stockholders Equity
Effective October 1, 1995 the Company declared a one-for-ten reverse stock
split. All numbers of shares and share values stated herein reflect such reverse
split unless otherwise noted.
Equity Offering
On May 15, 1997, the Company commenced a private securities offering
pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended.
The offering consisted of up to 400 units, each unit consisting of 10,000 shares
of common stock being offered at a price of $5,000 per unit. RMCC was the
placement agent for such offering and received a sales commission equal to 10%
of the offering price for each unit sold. The first 50 units were offered on a
"best efforts, all or none" basis. The remaining 350 units were offered on a
"best efforts" basis. The offering closed on September 30, 1997 upon the sale of
369 units resulting in gross proceeds to the Company of $1,845,000. The proceeds
of such offering are intended to be utilized to enable the Company to attempt to
effect the acquisition of an operating business entity for commence new business
operations, for working capital and to pay off the promissory notes and to
redeem the common stock purchase warrants issued in the Company's private
securities
Note 7 Stockholders Equity (continued)
Equity Offering (continued)
offering which was completed on April 30, 1997. The proceeds raised have, to
date, been utilized for working capital and to pay off the above described notes
and redeem the above described common stock purchase warrants.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the Unaudited
Financial Statements and notes thereto.
Results of Operations
This Company has not engaged in any operating activities nor generated any
operating revenues since February 1996 when its then operating subsidiaries were
placed in receivership in the UK.
During the period March 1996 through the date hereof, the Company's primary
activities have been to engage in three private securities offerings and to
settle and pay off certain of its outstanding liabilities thereby making it a
more desirably acquisition candidate.
The Company recorded losses in the three and nine months ended December 31,
1997 of $31,268 and $168,317 respectively, before interest and preferred stock
dividend accrual. Such losses arose from general and administrative expenses,
which principally comprise professional fees, travel expenses and general office
costs. Compared to the corresponding period in 1996 such costs were $13,535
lower in the three months ended December 31, 1997 and $55,654 higher in the nine
months then ended. The year on year reductions in three three month period were
primarily in the area of professional fees and general corporate costs. The year
on year increase in the nine months ended December 31, 1997 is due to the cost
of redeeming common stock purchase warrants ($76,500) only being partially
offset by expense decreases in the areas of professional fees and general
corporate costs.
Liquidity and Capital Resources
During the nine months ended December 31, 1997 the Company relied on the
net proceeds of its securities offering which was completed on April 30, 1997
(see Note 5 of the Company's unaudited financial statements included in Part I-
Item 1) and the securities offering described below and in Note 7 of the
Company's unaudited financial statements included in Part I - Item 1 hereof to
meet its cash needs.
On May 15, 1997 the Company commenced a private securities offering which
was completed on September 30, 1997. The proceeds raised in such offering have
been used as working capital and to pay off the promissory notes, and redeem the
common stock purchase warrants issued in the private securities offering which
was completed on April 30, 1997. Additional proceeds raised in such offering are
intended to be utilized for working capital and to enable the Company to attempt
to effect the acquisition of an operating business entity or commence new
business operations. The Company does not expect to generate any operating
revenues until, at the earliest, the consummation of an acquisition or
commencement of new business operations. No assurance can be given however, that
the Company will successfully consummate a business acquisition or commence new
business operations or, if consummated, that the Company will derive any
material revenues or profits therefrom.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits filed herewith:
None
(b) Forms 8-K filed during quarter:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNICHE GROUP INCORPORATED
(Registrant)
By /s/ James J. Fyfe
-------------------------------------
JAMES J. FYFE, Vice President and
Principal Financial Officer
Date: February 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,020,941
<SECURITIES> 0
<RECEIVABLES> 77,231
<ALLOWANCES> (75,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,023,172
<PP&E> 1,426
<DEPRECIATION> (844)
<TOTAL-ASSETS> 1,023,628
<CURRENT-LIABILITIES> 221,984
<BONDS> 0
0
896,967
<COMMON> 632,274
<OTHER-SE> (727,597)
<TOTAL-LIABILITY-AND-EQUITY> 1,023,628
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 168,317
<OTHER-EXPENSES> 45,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,253)
<INCOME-PRETAX> (207,147)
<INCOME-TAX> 0
<INCOME-CONTINUING> (207,147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (207,147)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
