<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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 52-2023491
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
610 SOUTH INDUSTRIAL BLVD.
SUITE 220
EULESS, TEXAS 76040
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: 817-283-4250
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the 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 the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 7,031,897 SHARES, $.001 PAR
VALUE, AS OF OCTOBER 31, 1999
<PAGE> 2
CORNICHE GROUP INCORPORATED
SEPTEMBER 30, 1999
(Unaudited)
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Item 1. Consolidated Financial Statements (Unaudited):
Balance Sheets At September 30, 1999 and December 31, 1998.............................2
Statements of Operations For the Nine and Three Months Ended
September 30, 1999 and 1998 ...........................................................3
Statements of Cash Flows For the Nine Months Ended
September 30, 1999 and 1998............................................................4
Notes to Consolidated Financial Statements.............................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk -- Not Applicable.........................................................19
Part II - Other Information:
Item 1. Legal Proceedings -- Not Applicable...................................................20
Item 2. Changes in Securities And Use of Proceeds.............................................20
Item 3. Defaults Upon Senior Securities -- Not Applicable.....................................20
Item 4. Submission of Matters to a Vote of Security
Holders...............................................................................20
Item 5. Other Information -- Not Applicable...................................................21
Item 6. Exhibits and Reports on Form 8-K......................................................21
Signatures.......................................................................................24
</TABLE>
1
<PAGE> 3
CORNICHE GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 207,655 $ 206,313
Marketable securities 33,035 628,175
Prepaid expenses 15,534 --
----------- -----------
Total current assets 256,224 834,488
Property and equipment, net 128,254 40,781
Other assets 13,167 12,525
License, net of accumulated amortization 17,082 17,997
----------- -----------
$ 414,727 $ 905,791
=========== ===========
LIABILITIES, STOCKHOLDERS' EQUITY AND (CAPITAL DEFICIENCY)
Current liabilities:
Dividends payable -- preferred stock $ 274,198 $ 236,981
Accounts payable, accrued expenses
and other current liabilities 399,868 133,941
Current portion of long-term debt 22,052 4,649
----------- -----------
Total current liabilities 696,118 375,571
----------- -----------
Long-term debt:
Note payable bank 76,288 --
Capital lease obligations 5,413 9,262
Deferred revenue 1,350 --
Series A Convertible Preferred Stock:
Series A $0.07 cumulative convertible preferred
stock -- stated value -- $1.00 per share
Issued -- 1,000,000 shares
Outstanding -- 810,054 shares at September 30, 1999
and 828,765 shares at December 31, 1998 810,054 828,765
----------- -----------
Convertible Redeemable Preferred Stock, Common Stock,
Other Stockholders' Equity and (Accumulated Deficit)
Preferred Stock -- authorized 5,000,000 shares
Series B convertible redeemable preferred
stock, $.01 par value:
Authorized, issued and outstanding at September 30, 1999
and December 31, 1998 -- 825,000 shares 8,250 8,250
Common stock $.001 par value
Authorized -- 30,000,000 shares
Issued and outstanding -- 7,091,889 at September 30, 1999
and 6,369,968 at December 31, 1999 7,092 6,370
Additional paid-in capital 3,436,425 2,838,420
Accumulated deficit (4,626,263) (3,160,847)
----------- -----------
Total convertible redeemable preferred
stock, common stock, other stockholders'
equity and (accumulated deficit) (1,174,496) (307,807)
----------- -----------
$ 414,727 $ 905,791
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 4
CORNICHE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
------------------------------- -------------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Earned revenues $ 60 $ -- $ 60 $ --
Costs of earned revenues 5 -- 5 --
----------- ----------- ----------- -----------
Gross margin 55 -- 55 --
General and administrative expenses 1,429,602 315,609 429,839 128,087
----------- ----------- ----------- -----------
Operating loss (1,429,547) (315,609) (429,784) (128,087)
Interest income 7,752 31,157 1,787 6,940
----------- ----------- ----------- -----------
Loss before preferred dividend (1,421,795) (284,452) (427,997) (121,147)
Preferred dividend 42,706 45,003 13,992 14,376
----------- ----------- ----------- -----------
Net loss $(1,464,501) $ (329,455) $ (441,989) $ (135,523)
=========== =========== =========== ===========
Net loss per share of common stock $ (0.22) $ (0.05) $ (0.06) $ (0.02)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 6,577,012 6,532,727 6,944,924 6,574,773
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 5
CORNICHE GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,464,501) $ (329,455)
----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Series B Preferred shares issued for services rendered -- 6,000
Series A Preferred stock dividends 42,706 45,003
Depreciation 16,145 1,694
Deferred income 1,350 --
Increase (decrease) in cash flows as a result of
changes in assets and liability account balances:
Other receivables -- 2,231
Other assets (642) (12,525)
Prepaid expenses (15,534) --
Accounts payable, accrued expense
and other current liabilities 265,927 73,794
----------- -----------
Total adjustments 309,952 116,197
----------- -----------
Net cash used in operating activities (1,154,549) (213,258)
----------- -----------
Cash flows from investing activities:
(Increase) decrease in marketable securities 595,140 (747,671)
Acquisition of property assets (103,618) (18,275)
Acquisition of Stamford Insurance Company, Ltd. -- (37,000)
----------- -----------
Net cash provided by (used in) investing activities 491,522 (802,946)
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of capital stock-- net 574,527 201,500
Payments of long-term debt (8,817) (2,783)
Proceeds of bank loan 98,659 --
Net cash provided by financing activities 664,369 198,717
----------- -----------
Net increase (decrease) in cash 1,342 (817,487)
Cash balance acquired with purchase of subsidiary -- 18,797
Cash and cash equivalents at beginning of period 206,313 1,020,941
----------- -----------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period
Income taxes $ -- $ --
=========== ===========
Interest $ 2,100 $ --
=========== ===========
Supplemental Schedules of Noncash Transaction:
Series A Preferred Stock and dividends thereon
converted to common stock and additional
paid-in capital upon conversion $ 28,714 $ 3,059
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 6
CORNICHE GROUP INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
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 subsidiaries of
Corniche were Chessbourne International Limited ("Chessbourne")
and The Stationery Company Limited ("TSCL").
Corniche experienced large operating losses and net cash
outflows from operating activities in fiscal 1995 and 1996
resulting in a significant reduction in working capital during the
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. From that time until May 1998 the Company was
inactive.
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 acquired an aggregate of 765,000
shares of a newly created Series B Convertible Redeemable
Preferred Stock, par value $0.01 per share. Thereafter the Initial
Purchasers have been endeavoring to establish for the Company new
business operations in the service contract business and the
insurance industry.
On September 30, 1998, the Company acquired all of the
capital stock of Stamford Insurance Company, Ltd. ("Stamford") for
$37,000 in cash in a transaction accounted for as a purchase.
Stamford was charted under the laws of, and is licensed to conduct
business as an insurance company by, the Cayman Islands. From its
inception through its acquisition by the Company, Stamford did not
generate any revenues but has incurred expenses.
5
<PAGE> 7
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 September 30, 1999 and the results of operations
and cash flows for the nine months ended September 30, 1999 and
1998. The results of operations for the nine months ended
September 30, 1999 and 1998 are not necessarily indicative of the
results to be expected for the full year.
The December 31, 1998 balance sheet has been derived from
the audited financial statements at the 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.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
(b) Cash Equivalents:
Short-term cash investments which have a maturity of ninety
days or less are considered cash equivalents in the statement of
cash flows.
(c) Marketable Securities:
The Company uses an investment advisory company to invest
its funds in highly liquid cash management funds. The market value
of the investment approximates cost.
(d) Property and Equipment:
Property and equipment are depreciated by the straight-line
method over the estimated useful lives of the assets, which range
principally from three to ten years. Assets held under capital
leases are amortized over the life of the lease which approximates
its useful life.
6
<PAGE> 8
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(e) Income Taxes:
Effective October 1993, the Company adopted SFAS 109,
"Accounting for Income Taxes", which recognizes (a) the amount of
taxes payable or refundable for the current year, and (b) deferred
tax liabilities and assets for the future tax consequences of
events that have been recognized in an enterprise's financial
statement or tax returns. There are no significant differences
between the financial statement and tax basis of assets and
liabilities and, accordingly, no deferred tax provision/benefit is
required. At December 31, 1998, the Company's tax year-end, the
Company had a federal net operating loss carryforward of
approximately $1,038,000, which can be applied against future
income. The future tax benefit of the operating loss carryforward
of $353,000 has been fully reserved as it is not more likely than
not that the Company will be able to use the operating loss in the
future.
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 net operating loss
carryforwards is limited following a change in ownership in excess
of fifty percentage points.
The 825,000 shares of Series B Convertible Redeemable
Preferred Stock, subject to certain conditions, can be converted
into 8,250,000 common shares. Such conversion would trigger a 50%
change in ownership of the Company. The effect would be to limit
the amount of operating loss to be utilized in any tax year.
(f) Fair Value of Financial Instruments:
The Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
The statement requires that the Company recognize and measure
impairment losses of long-lived assets, certain identifiable
intangibles, value long-lived assets to be disposed of and
long-term liabilities. At September 30, 1999, the carrying values
of the Company's other assets and liabilities approximated their
estimated fair values.
(g) Earnings Per Share:
The Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," in the year ended March
31, 1998. 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.
7
<PAGE> 9
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(h) Recently Issued Accounting Pronouncements:
The Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 - "Reporting
Comprehensive Income", No. 131 "Disclosures about Segments of an
Enterprise and Related Information", No. 132 "Employer's
Disclosures about Pension and Other Postretirement Benefits" and
No. 133 - "Accounting for Derivative Instruments and Hedging
Activities". Management does not believe that the effect of
implementing these new standards will be material to the Company's
financial position, results of operations and cash flows.
NOTE 4 - SERIES A $0.07 CONVERTIBLE PREFERRED STOCK.
In connection with the settlement of the securities class
action litigation in 1994, the Company issued 1,000,000 shares of
Series A $0.07 Convertible Preferred Stock (the "Series A
Preferred Stock") with an aggregate value of $1,000,000. The
following summarizes the terms of Series A Preferred Stock as more
fully set forth in the Certificate of Designation relating to the
Series A Preferred Stock. The Series A Preferred Stock has a
liquidation value of $1 per share, is non-voting and convertible
into common stock of the Company at a price of $5.20 per share.
Holders of Series A Preferred Stock are entitled to receive
cumulative cash dividends of $0.07 per year, payable
semi-annually. Until November 30, 1999 the Series A Preferred
Stock is callable by the Company at a price of $1.04 per share,
plus accrued and unpaid dividends, and thereafter at a price of
$1.05 per share, plus accrued and unpaid dividends. In addition,
if the closing price of the Company's common stock exceeds $13.80
per share for a period of 20 consecutive trading days, the Series
A Preferred Stock is callable by the Company at a price equal to
$0.01 per share, plus accrued and unpaid dividends. The
Certificate of Designation for the Series A Preferred Stock also
states that at any time after December 31, 1999 any holder of the
Series A Preferred Stock may require the Company to redeem his
shares of Series A Preferred Stock (if there 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 on the Series A Preferred Stock are past due, no shares
of Series A Preferred Stock may be redeemed by the Company unless
all outstanding shares of Series A Preferred Stock are
simultaneously redeemed. During the nine months ended September
30, 1999, 18,711 shares of Series A Preferred Stock were converted
into 3,591 shares of common stock. At September 30, 1999, 810,054
shares of Series A Preferred Stock were outstanding.
NOTE 5 - STOCKHOLDER'S 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.
8
<PAGE> 10
NOTE 5 - STOCKHOLDER'S EQUITY. (Continued)
(a) Series B Convertible Redeemable Preferred Stock:
(Continued)
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 has paid 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 Alan Zuckerman 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 this transaction to fruition. These issuances
diluted the voting rights of existing stockholders by
approximately 57%. The total number of authorized shares of Series
B Preferred Stock is 825,000.
The following summarizes the terms of the Series B Stock,
the terms of which are more fully set forth in the Certificate of
Designation relating to the Series B Stock. 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.
Accordingly, the Initial Purchasers have sufficient voting power
to elect all of the Board of Directors. However, the Initial
Purchasers are required to vote in favor of Mr. Fyfe or his
designee as a director of the Corporation through June 30, 2000.
The holder of any share of Series B Stock has the right, at
such holder's option (but not if such share is called for
redemption), exercisable on or after September 30, 2000, to
convert such share into ten (10) fully paid and non-assessable
shares of common stock (the "Conversion Rate"). The Conversion
Rate is subject to adjustment as stipulated in the Agreement. Upon
liquidation, the Series B Stock would be junior to the
Corporation's Series A Preferred Stock and would share ratably
with the common stock with respect to liquidating distributions.
Pursuant to the terms of the Agreement and the Certificate
of Designation relating to the Series B Stock, from March 31, 2000
to June 30, 2000, the Company has the right to repurchase or
redeem such shares of Series B Stock from the holders for total
consideration of $0.10 per share ($82,500 in the aggregate)
unless, during the period from the date of the closing of the
transaction through March 31, 2000, the Company's shares of common
stock maintain a minimum closing bid price of not less than $2 per
share on a public market during a period of any 10 consecutive
trading days, and either
(i) the Company raises a minimum of $2,500,000 of new
equity capital through a placement of common stock,
or
(ii) the Company has net revenues of at least $1,000,000
in any fiscal quarter through the fiscal quarter
ending March 31, 2000.
9
<PAGE> 11
NOTE 5 - STOCKHOLDER'S EQUITY. (Continued)
(a) Series B Convertible Redeemable Preferred Stock:
(Continued)
Mr. Fyfe or the director designated by Mr. Fyfe will have
the ability to determine if the Company will elect to exercise
this redemption right on behalf of the Company.
(b) Common Stock:
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. The Company used a
placement agent for such offering who received a sales commission
equal to 10% of the offering price of each unit sold. In
connection with the offering, 369 units were sold for gross
receipts of $1,845,000 from which the agent was paid a commission
of $184,500 for net proceeds of $1,660,500 to the Company. The
proceeds of such offering were intended to be utilized to enable
the Company to attempt to effect the acquisition of an operating
business entity, for working capital and to pay off the promissory
notes and to redeem the common stock purchase warrants issued in
the Company's private securities offering which was completed on
April 30, 1997.
In March 1998, the Company sold 250,000 shares of common
stock at $.50 per share realizing proceeds of $125,000.
At the Company's annual meeting of stockholders held on May
18, 1998, the stockholders approved the reduction of the par value
of the common stock from $0.10 per share to $0.001 per share. The
par value was reduced to $0.001 per share to conform with the new
Series B Stock, as each share of the Series B Stock is convertible
into ten (10) shares of common stock.
(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 are reserved for
issuance upon exercise of warrants as of September 30, 1999.
10
<PAGE> 12
NOTE 5 - STOCKHOLDER'S EQUITY. (Continued)
(d) 1998 Employee Incentive Stock Option Plan:
Under the Company's 1998 Employee Incentive Stock Option
Plan (the "1998 Plan"), the maximum aggregate number of shares
which may be issued under options is 300,000 shares of common
stock. The aggregate fair market value (determined at the time the
option is granted) of the shares for which incentive stock options
are exercisable for the first time under the terms of the 1998
Plan by any eligible employee during any calendar year cannot
exceed $100,000. The option exercise price of each option is 100%
of the fair market value of the underlying stock on the date the
option is 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 option and (b) the option by its terms is not
exercisable after the expiration of five years from the date such
option is granted.
The 1998 Plan is administered by a committee of
disinterested directors of the Board of Directors of the Company
("Option Committee"). On February 15, 1999, the Company's Chief
Operating Officer was granted an option under the 1998 Plan to
acquire 75,000 shares of common stock at an exercise price of
$1.097 per share. On September 27, 1999, the Company's Chief
Operating Offer was granted an option under the 1998 Plan to
acquire 100,000 shares of common stock at an exercise price of
$1.00 per share.
(e) Independent Directors Compensation Plan:
In order to be able to attract qualified independent
directors in the future, the Company has adopted the Independent
Directors Compensation Plan, pursuant to which each director who
is not an officer or employee of the Company would receive
compensation of $2,500 plus 500 shares of the Company's common
stock each quarter. The Independent Directors Compensation Plan
became effective as of April 30, 1998.
Independent directors also continue to be eligible under
the Director Option Plan to receive stock options to purchase
1,500 shares of common stock each year at an exercise price equal
to fair market value.
NOTE 6 - OTHER EVENTS.
(a) Lease of New Office Space:
As of August 1, 1998, the Company has entered into a three
year lease for business offices of 4,100 square feet in Euless,
Texas at an annual rental of $50,000.
11
<PAGE> 13
NOTE 6 - OTHER EVENTS. (Continued)
(b) Investment Contract:
The Company entered into an investment advisory agreement
with AIG Global Investment Corporation ("AIG") under which AIG
will function as investment advisor and manager of all the
Company's investable assets. AIG provides management services to
all affiliated insurance companies of American International Group
and other third-party institutions on a world-wide basis.
(c) Year 2000.
The Company has only recently returned to actively
conducting business operations. The Company's
WarrantySuperstore.com web site became operational with a limited
product offering in April. Additional product offerings have been
periodically added and the web site is now fully operational.
Because the Company's business plan was implemented after
there was wide-spread public awareness of the potential for
problems with Year 2000 compliance, the Company was able to
address Year 2000 compliance issues during all stages of
developing its operations. The Company's operations and the
WarrantySuperstore.com web site utilize computer hardware and
software purchased from third party vendors and the Company's own
proprietary software. Substantially all of the software utilized
in the WarrantySuperstore.com web site was developed internally by
the Company. The Company's ability to plan in advance for Year
2000 compliance before establishing its operational systems
allowed it to avoid purchasing any hardware or software or
developing any software that would not be Year 2000 compliant.
At the time that the Company purchased its hardware and
software from third party vendors, it obtained assurances from the
vendors that such hardware and software is Year 2000 compliant.
The Company's proprietary software was also developed to be Year
2000 compliant. The Company has tested all of its hardware and
software for Year 2000 compliance and is satisfied that its
hardware and software will continue to operate after December 31,
1999 and will be able to accurately process data containing dates
occurring before, on and after December 31, 1999.
The Company has also contacted its suppliers, banks,
investment advisors, and other third parties with which it does
business to coordinate Year 2000 conversion, and it intends to
continue such communications through the end of the year and into
early 2000. The Company is satisfied that the third-party service
providers upon which it relies to conduct its operations have
adequately addressed their own Year 2000 compliance issues. The
Company has not been required to incur any costs specifically
related to establishing Year 2000 compliance with its third-party
service providers.
12
<PAGE> 14
NOTE 6 - OTHER EVENTS. (Continued)
(c) Year 2000. (Continued)
Based upon information currently available, the Company
does not anticipate that, in the aggregate, costs associated with
Year 2000 issues will have a material financial impact. However,
there can be no assurances that, despite steps taken by the
Company to assure that its operations, its suppliers and others
with whom it does business are free of Year 2000 issues, that the
Year 2000 rollover will not result in any disruptions in the
Company's operations. If, despite the Company's efforts under its
Year 2000 planning, there are Year 2000 related failures affecting
the Company from outside sources, management does not believe that
the impact will be substantial. However, given the importance of
the internet to the Company's operations, if there are Year 2000
related failures, whether localized or widespread, affecting the
infrastructure that supports the internet, customer access to the
WarrantySuperstore.com web site may be limited or completely
eliminated and the Company's revenues would be adversely affected
until such problems were resolved. There can be no assurances that
the Company will not encounter non-compliance issues, whether
related to the internet or otherwise, that could have a material
adverse impact on its financial condition and results of
operations.
NOTE 7 - PRIVATE OFFERING.
In May 1999, the Company entered into an agreement with a
broker-dealer to sell 3,500,000 shares of its common stock to
accredited investors in a private offering that was exempt from
the registration requirements of the Securities Act. The offering
terminated on August 24, 1999. The Company received $574,527 from
the sale of 688,335 shares of common stock, net of offering costs
of $44,973.
NOTE 8 - NOTE PAYABLE TO BANK.
The note payable to a bank is payable in 59 monthly
installments of $2,043 including interest at 8.75% per annum
beginning in June 1999 and a final payment of approximately
$1,533. The note is collateralized by the Company's computer
hardware and software. Interest expense amounted to $2,100 for the
nine months ended September 30, 1999.
Annual maturities are as follows:
<TABLE>
<CAPTION>
Year Ended Maturity
September 30, Amount
------------- -------
<S> <C>
2000 $17,020
2001 18,570
2002 20,262
2003 22,108
2004 15,348
-------
$93,308
=======
</TABLE>
13
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the financial statements and notes thereto
elsewhere in this Form 10-Q. Certain statements under this caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" constitute "forward-looking statements"
under the Private Securities Litigation Reform Act of 1995.
CHANGES IN BOARD OF DIRECTORS AND MANAGEMENT
On September 14, 1999, immediately after the Company's 1999
annual meeting of stockholders, Joel San Antonio and Ronald Glime
resigned their positions as directors of the Company. Immediately
after the resignations, the remaining members of the Company's
Board of Directors appointed Robert Benoit, the Company's
Executive Vice President, Chief Operating Officer and Secretary,
to the Company's Board of Directors. On September 28, 1999, Glenn
Aber resigned his position as the Company's Treasurer. Mr. Aber
remains a director of the Company.
PLAN OF OPERATION
Through February 28, 1996, the Company was engaged in the
retail sale and wholesale distribution of stationery products and
related office products, including office furniture, in the United
Kingdom through its two subsidiaries. As a result of large
operating losses and cash outflows in 1995 and 1996, receivers
were appointed to these subsidiaries in February 1996. From the
liquidation of the subsidiaries by the receivers through May 1998,
the Company was inactive.
At the 1998 Annual Meeting of Stockholders held in May
1998, the Company's stockholders approved the terms of a Stock
Purchase Agreement (the "Agreement") among the Company, Mr. Joel
San Antonio and certain other individuals. Pursuant to the
Agreement, Mr. San Antonio and the other individuals purchased
765,000 shares of the Company's newly created Series B Preferred
Stock for $76,500. An additional 60,000 shares of Series B
Preferred Stock were issued to two individuals for services
rendered to the Company in connection with the Agreement.
The Series B Preferred Stock has 10 votes per share and
votes as a class with the common stock on all matters submitted to
a vote of the Company's stockholders. Each share of Series B
Preferred Stock is convertible into 10 shares of common stock and
is entitled to ten times any dividends paid on the common stock.
The Series B Preferred Stock carries a zero coupon.
As a result of the issuances of the Series B Preferred
Stock pursuant to the Agreement, Mr. San Antonio has control of
the Company, as he holds approximately 47% of the Company's voting
power. However, Mr. San Antonio and the other individuals who
acquired Series B Preferred Stock pursuant to the Agreement are
required to vote in favor of Mr. James Fyfe or his designee as a
director of the Company through June 30, 2000.
Since May 1998, the Company has been developing a
comprehensive strategic and operational business plan and
assembling a quality management team. Following the
14
<PAGE> 16
Company's change of control, the Company's management has sought
to put in place a new strategic and operational business plan for
the Company that involves the Company's entry into the service
contract business and the insurance industry.
The Company has developed a web site on the Internet to market
service contracts on automobiles, homes, and consumer products.
The Company's web site is called WarrantySuperstore.com. Through
the WarrantySuperstore.com web site, the Company sells its
products and services directly to consumers. The Company does not
intend currently to have any other distribution channels for its
products and services other than the internet.
The first product line offered through the
WarrantySuperstore.com web site was the Vehicle Service Contract
Program, which includes automobile service contracts for new and
used vehicles. The Company went online with its Vehicle Service
Contracts during the last week of April 1999. In July 1999 the
Company added its Home Warranty Program. The Company has since
added new product lines to the web site and now has its Home
Office, Lawn and Garden, Computer, Home Electronics and Appliance
Warranty Superstores open.
The Company has received from Reliance National Insurance
Company a Contractual Liability Policy providing coverage for the
Company as the obligor under the aforementioned Vehicle Service
Contracts.
The Company uses the WarrantySuperstore.com site to generate
advertising revenues by selling banner page advertisements on its
web site on a preferred client list basis, although such revenues
have been immaterial to date.
Stamford Reinsurance Activities
On September 30, 1998, the Company acquired all of the capital
stock of Stamford Insurance Company Ltd. ("Stamford"), Stamford
was chartered under the laws of the Cayman Islands in 1991.
Stamford has not generated any revenues since its inception.
Stamford is licensed by the Cayman Islands to conduct business as
an insurance company, but only in the Cayman Islands. Stamford can
provide reinsurance to domestic insurance companies in the United
States.
When Stamford is sufficiently capitalized, the Company intends
to request the insurance carriers who provide contractual
liability coverage to the Company on its service contracts to
share (via reinsurance) a portion of the risk with Stamford. The
Company's ability to influence the insurance carriers to direct
reinsurance business to Stamford will depend on the success of the
WarrantySuperstore.com program. Stamford's ability to reinsure the
Company's internet business will largely depend on the primary
insurance carrier's willingness to cede reinsurance to Stamford.
The Company's long range plans for Stamford depend on
Stamford's growth and development of greater financial stability.
If Stamford's operations are successful, the Company plans to have
Stamford seek reinsurance opportunities that are not related to
the Company. Stamford may use reinsurance brokers to identify
other reinsurance opportunities.
15
<PAGE> 17
Domestic Licensing Plans
As an offshore insurance company, Stamford is permitted to
function as a reinsurance company in the United States. As such,
it can reinsure U.S. insurance companies. The Company's long range
strategy is to identify and acquire a property and casualty
insurance carrier that holds state licenses. If the Company
acquires a domestic insurance carrier, it will use the carrier to
act as a specialty insurer in niche commercial markets that are
under served by standard insurance carriers.
RESULTS OF OPERATIONS
During the period March 1996 through March 1998, the Company's
primary activities were to engage in three private securities
offerings, and to settle and pay off certain of its outstanding
liabilities. In May 1998, the stockholders approved the Agreement
and related issuance of the Series B Preferred Stock, and change
in control of the Company.
Nine Months Ended September 30, 1999 vs. September 30, 1998
The losses before net interest income and preferred dividend
accrual during the nine month periods ended September 30, 1999 and
1998 were $1,430,000 and $316,000, respectively, which is an
increase of $1,114,000 (352.5%). The increase arose from increases
in general and administrative costs, primarily consulting and
professional fees, web site costs and general office costs.
Interest income decreased to $8,000 in the current period from
$31,000 in the nine months ended September 30, 1998. The decrease
is the result of sales of marketable securities.
The accrual of the preferred dividend remained relatively
constant in each period.
Net loss in the nine months ended September 30, 1999 increased
by $1,136,000 (345.3%) to $1,465,000 from $329,000 in 1998,
principally from the increased general and administrative costs.
Three Months Ended September 30, 1999 vs. September 30, 1998
The losses before interest income and preferred dividend
accrual during the three month periods ended September 30, 1999
and 1998 were $430,000 and $128,000, respectively, which is an
increase of $302,000 (236.0%). The increase arose from increases
in general and administrative costs, primarily consulting and
professional fees, web site costs and general office costs.
Interest income decreased to $2,000 in the current period from
$7,000 in the three months ended September 30, 1998. The decrease
is the result of sales of marketable securities.
The accrual of the preferred dividend remained relatively
constant in each period.
Net loss in the current quarter increased by $306,000 (225.0%)
to $442,000 from $136,000 in 1998, principally from the increased
general and administrative costs.
16
<PAGE> 18
FINANCIAL CONDITION
The Company's cash condition increased by $2,000 to $208,000
at September 30, 1999 from $206,000 at December 31, 1998, due to
the net proceeds of the issuance of capital stock of $575,000,
decrease in marketable securities of $595,000 and the proceeds of
bank debt of $99,000, offset by the acquisition of property and
equipment of $104,000, payments of debt of $8,000 and cash used in
operations by $1,155,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company relied solely on the proceeds from the sales of
its securities in October 1997 and May 1998 and during the nine
months ended September 30, 1999 for the sources of its funds. In
October and November 1999, the Company continued to raise capital
from private investors to finance the Company's operations through
loans and sales of its common stock. The Company will need
additional capital to implement its business plan.
The Company had negative working capital of $440,000 at
September 30, 1999 and working capital of $459,000 at December 31,
1998. The deterioration of working capital of approximately
$899,000 primarily results from the net loss incurred during the
nine months ended September 30, 1999.
The Company has primarily funded its operations since December
31, 1998 by issuances of capital stock and liquidating the
Company's marketable securities. The Company's planned primary
uses for cash are to advertise the WarrantySuperstore.com web site
and to pay general and administrative costs. Because the web site
has progressed through the development stage and is now fully
operational, the developmental costs for the web site going
forward will be considerably less than during the first nine
months of 1999. The Company expects that the use of cash to
operate and maintain the web site will be substantially less on an
ongoing basis than the historic use of cash to develop the web
site. However, the Company expects that the use of cash to
advertise and market the site will increase. However, the
Company's cash flow from operations since the inception of the
WarrantySuperstore.com web site have not been sufficient to
satisfy the Company's known demands for cash.
The Company's cash and cash equivalents plus its marketable
securities totaled approximately $240,000 at September 30, 1999.
If the Company's cash flow from operations does not increase, it
will have to secure additional sources of capital, possibly from
borrowings or additional issuances of equity, in order to fund its
operations.
If the Company is unable to satisfy its cash requirements from
internal and external sources, the Company will be required to
limit its operations or cease operations altogether. In addition,
the Company's liabilities exceed its assets. If the Company is
unable to satisfy its financial obligations to its creditors, the
Company will be forced to seek protection under applicable
bankruptcy laws. The financial statements included in this Form
10-Q do not include any adjustments that might result from these
uncertainties.
17
<PAGE> 19
INFLATION
Inflation has not had a significant effect on the Company's
operations or financial position and management believes that the
future effects of inflation on the Company's operations and
financial position will be insignificant.
YEAR 2000 COMPLIANCE
The Company has only recently returned to actively conducting
business operations. The Company's WarrantySuperstore.com web site
became operational with a limited product offering in April.
Additional product offerings have been periodically added and the
web site is now fully operational.
Because the Company's business plan was implemented after
there was wide-spread public awareness of the potential for
problems with Year 2000 compliance, the Company was able to
address Year 2000 compliance issues during all stages of
developing its operations. The Company's operations and the
WarrantySuperstore.com web site utilize computer hardware and
software purchased from third party vendors and the Company's own
proprietary software. Substantially all of the software utilized
in the WarrantySuperstore.com web site was developed internally by
the Company. The Company's ability to plan in advance for Year
2000 compliance before establishing its operational systems
allowed it to avoid purchasing any hardware or software or
developing any software that is not Year 2000 compliant.
At the time that the Company purchased its hardware and
software from third party vendors, it obtained assurances from the
vendors that such hardware and software is Year 2000 compliant.
The Company's proprietary software was also developed to be Year
2000 compliant. The Company has tested all of its hardware and
software for Year 2000 compliance and is satisfied that its
hardware and software will continue to operate after December 31,
1999 and will be able to accurately process data containing dates
occurring before, on and after December 31, 1999.
The Company has also contacted its suppliers, banks,
investment advisors, and other third parties with which it does
business to coordinate Year 2000 conversion, and it intends to
continue such communications through the end of the year and into
early 2000. The Company is satisfied that the third-party service
providers upon which it relies to conduct its operations have
adequately addressed their own Year 2000 compliance issues. The
Company has not been required to incur any costs specifically
related to establishing Year 2000 compliance with its third-party
service providers.
Based upon information currently available, the Company does
not anticipate that, in the aggregate, costs associated with Year
2000 issues will have a material financial impact. However, there
can be no assurances that, despite steps taken by the Company to
assure that its operations, its suppliers and others with whom it
does business are free of Year 2000 issues, that the Year 2000
rollover will not result in any disruptions in the Company's
operations. If, despite the Company's efforts under its Year 2000
planning, there are Year 2000 related failures affecting the
Company from outside sources, management does not believe that the
impact will be substantial. However, given the importance of the
internet to the Company's operations, if there are Year 2000
related failures, whether localized or
18
<PAGE> 20
widespread, affecting the infrastructure that supports the
internet, customer access to the WarrantySuperstore.com web site
may be limited or completely eliminated and the Company's revenues
would be adversely affected until such problems were resolved.
There can be no assurances that the Company will not encounter
non-compliance issues, whether related to the internet or
otherwise, that could have a material adverse impact on its
financial condition and results of operations.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Certain statements included in this report, including the
words "believes", "anticipates", "expects" and similar
expressions, are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties,
which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrences of
unanticipated events. Readers are also urged to carefully review
and consider the various disclosures made by the Company in this
report, as well as the Company's periodic reports and other
filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
19
<PAGE> 21
CORNICHE GROUP INCORPORATED
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) Not applicable.
(c) During the three months ended September 30, 1999, the
Company sold 688,335 shares of common stock to 28
accredited investors, as such term is defined in Regulation
D under the Securities Act of 1933, as amended (the
"Securities Act"). The shares were sold for cash at an
aggregate offering price at $619,500. Commissions in the
aggregate amount of $61,950 were paid to a broker-dealer in
connection with the sales. The sales were made solely to
accredited investors pursuant to the exemption from
registration under the Securities Act contained in Rule 506
of Regulation D promulgated under the Securities Act.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the Company's stockholders was held on
September 14, 1999. At the close of business on July 30, 1999, the
record date for determining those holders of the Company's capital
stock entitled to vote at the meeting, there were 7,030,313 shares
of the Company's common stock issued and outstanding and 825,000
of the Company's Series B Preferred Stock issued and outstanding.
Joel San Antonio, Robert H. Hutchins, Glenn Aber, Ronald Glime and
James Fyfe were re-elected as directors of the Company to serve
until the next annual meeting of the Company's stockholders to be
held in 2000 and until their respective successors are elected and
qualified.
20
<PAGE> 22
The stockholder vote for each director elected at the meeting was
as follows:
Common Stock
<TABLE>
<CAPTION>
ABSTENTIONS AND
NAME VOTES CAST FOR VOTES WITHHELD BROKER NON-VOTES
<S> <C> <C> <C>
Joel San Antonio 4,462,609 12,133 16,305
Robert H. Hutchins 4,462,601 12,140 16,305
Glenn Aber 4,462,677 12,065 16,305
Ronald Glime 4,441,109 33,633 16,305
James Fyfe 4,460,679 14,063 16,305
</TABLE>
Series B Preferred Stock
<TABLE>
<CAPTION>
ABSTENTIONS AND
NAME VOTES CAST FOR VOTES WITHHELD BROKER NON-VOTES
<S> <C> <C> <C>
Joel San Antonio 7,850,000 0 0
Robert H. Hutchins 7,850,000 0 0
Glenn Aber 7,850,000 0 0
Ronald Glime 7,850,000 0 0
James Fyfe 7,850,000 0 0
</TABLE>
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The following exhibits are filed or are incorporated by
reference from previous filings with the Securities and Exchange
Commission.
21
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
3.1 Certificate of Incorporation of the Company (1)
3.2 Amendment to Certificate of Incorporation of the Company (1)
3.3 Amendment to Certificate of Incorporation of the Company (2)
3.4 Amendment to Certificate of Incorporation of the Company (2)
3.5 Amendment to Certificate of Incorporation of the Company (3)
3.6 Amendment to Certificate of Incorporation of the Company (4)
3.7 Amendment to Certificate of Incorporation of the Company (5)
3.8 Amendment to Certificate of Incorporation of the Company (6)
3.9 Certificate of Designation for Series A Preferred Stock of the Company (7)
3.10 Amendment to Certificate of Incorporation of the Company (9)
3.11 Certificate of Designation for Series B Preferred Stock of the Company (10)
3.12 By-laws of the Company, as amended (6)
3.13 Amendment to Certificate of Incorporation of the Company (10)
4.1 Form of Underwriter's Warrant (6)
4.2 Form of Promissory Note - 1996 Offering (9)
4.3 Form of Promissory Note - 1997 Offering (9)
4.4 Form of Common Stock Purchase Warrant - 1996 Offering (9)
4.5 Form of Common Stock Purchase Warrant - 1997 Offering (9)
10.1 1986 Stock Option Plan, as amended (7)
10.2 1992 Stock Option Plan (8)
10.3 Stock Purchase Agreement dated as of January 30, 1997 by and among the Company,
the Bank of Scotland and 12 buyers (9)
10.4 Mutual Release dated as of January 30, 1997 by and among the Company, James Fyfe and
the Bank of Scotland (9)
10.5 Stock Purchase Agreement, dated as of March 4, 1998, between the Company and the Initial
Purchasers named therein (10)
10.6 1998 Employee Stock Option Plan (10)
27 Financial Data Schedule, filed herewith
</TABLE>
Notes:
(1) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-18, File No. 2-69627, which
exhibit is incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-2, File No. 2-88712, which
exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-2, File No. 33-4458, which
exhibit is incorporated herein by reference.
(4) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the annual report of
the Company on Form 10-K for the year ended September 30,
1987, which exhibit is incorporated herein by reference.
(5) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-3, File No. 33-42154, which
exhibit is incorporated herein by reference.
22
<PAGE> 24
(6) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-1, File No. 33-42154, which
exhibit is incorporated herein by reference.
(7) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the annual report of
the Company on Form 10-K for the year ended September 30,
1994, which exhibit is incorporated herein by reference.
(8) Filed with the Securities and Exchange Commission as an
exhibit, as indicated above, to the proxy statement of the
Company dated March 30, 1992, which exhibit is incorporated
herein by reference.
(9) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the annual report of
the Company on Form 10-K for the year ended March 31, 1996,
which exhibit is incorporated herein by reference.
(10) Filed with the Securities and Exchange Commission as an
exhibit, as indicated above, to the proxy statement of the
Company dated April 23, 1998, which exhibit is incorporated
herein by reference.
(b) Reports on Form 8-K.
None.
23
<PAGE> 25
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/ Robert Hutchins
-----------------------------------
Robert Hutchins, President and
Principal Financial Officer
Date: November 22, 1999
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
3.1 Certificate of Incorporation of the Company (1)
3.2 Amendment to Certificate of Incorporation of the Company (1)
3.3 Amendment to Certificate of Incorporation of the Company (2)
3.4 Amendment to Certificate of Incorporation of the Company (2)
3.5 Amendment to Certificate of Incorporation of the Company (3)
3.6 Amendment to Certificate of Incorporation of the Company (4)
3.7 Amendment to Certificate of Incorporation of the Company (5)
3.8 Amendment to Certificate of Incorporation of the Company (6)
3.9 Certificate of Designation for Series A Preferred Stock of the Company (7)
3.10 Amendment to Certificate of Incorporation of the Company (9)
3.11 Certificate of Designation for Series B Preferred Stock of the Company (10)
3.12 By-laws of the Company, as amended (6)
3.13 Amendment to Certificate of Incorporation of the Company (10)
4.1 Form of Underwriter's Warrant (6)
4.2 Form of Promissory Note - 1996 Offering (9)
4.3 Form of Promissory Note - 1997 Offering (9)
4.4 Form of Common Stock Purchase Warrant - 1996 Offering (9)
4.5 Form of Common Stock Purchase Warrant - 1997 Offering (9)
10.1 1986 Stock Option Plan, as amended (7)
10.2 1992 Stock Option Plan (8)
10.3 Stock Purchase Agreement dated as of January 30, 1997 by and among the Company,
the Bank of Scotland and 12 buyers (9)
10.4 Mutual Release dated as of January 30, 1997 by and among the Company, James Fyfe and
the Bank of Scotland (9)
10.5 Stock Purchase Agreement, dated as of March 4, 1998, between the Company and the Initial
Purchasers named therein (10)
10.6 1998 Employee Stock Option Plan (10)
27 Financial Data Schedule, filed herewith
</TABLE>
Notes:
(1) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-18, File No. 2-69627, which
exhibit is incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-2, File No. 2-88712, which
exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-2, File No. 33-4458, which
exhibit is incorporated herein by reference.
(4) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the annual report of
the Company on Form 10-K for the year ended September 30,
1987, which exhibit is incorporated herein by reference.
(5) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-3, File No. 33-42154, which
exhibit is incorporated herein by reference.
<PAGE> 27
(6) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the registration
statement of the Company on Form S-1, File No. 33-42154, which
exhibit is incorporated herein by reference.
(7) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the annual report of
the Company on Form 10-K for the year ended September 30,
1994, which exhibit is incorporated herein by reference.
(8) Filed with the Securities and Exchange Commission as an
exhibit, as indicated above, to the proxy statement of the
Company dated March 30, 1992, which exhibit is incorporated
herein by reference.
(9) Filed with the Securities and Exchange Commission as an
exhibit, numbered as indicated above, to the annual report of
the Company on Form 10-K for the year ended March 31, 1996,
which exhibit is incorporated herein by reference.
(10) Filed with the Securities and Exchange Commission as an
exhibit, as indicated above, to the proxy statement of the
Company dated April 23, 1998, which exhibit is incorporated
herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 207,655
<SECURITIES> 33,035
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 256,224
<PP&E> 148,596
<DEPRECIATION> (20,342)
<TOTAL-ASSETS> 414,727
<CURRENT-LIABILITIES> 696,118
<BONDS> 0
810,054
8,250
<COMMON> 7,092
<OTHER-SE> (1,189,838)
<TOTAL-LIABILITY-AND-EQUITY> 414,727
<SALES> 0
<TOTAL-REVENUES> 60
<CGS> 5
<TOTAL-COSTS> 1,427,502
<OTHER-EXPENSES> 42,706
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,100
<INCOME-PRETAX> (1,464,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,464,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,464,501)
<EPS-BASIC> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
