<SUBMISSION>
<ACCESSION-NUMBER>0001157523-04-002849
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>10
<PERIOD>20031231
<FILING-DATE>20040330
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PHASE III MEDICAL INC/DE
<CIK>0000320017
<ASSIGNED-SIC>6399
<IRS-NUMBER>222343568
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>000-10909
<FILM-NUMBER>04701457
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>330 SOUTH SERVICE ROAD
<STREET2>SUITE 120
<CITY>MELVILLE
<STATE>NY
<ZIP>11747
<PHONE>6315744955
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>330 SOUTH SERVICE ROAD
<STREET2>SUITE 120
<CITY>MELVILLE
<STATE>NY
<ZIP>11747
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CORNICHE GROUP INC /DE
<DATE-CHANGED>19951117
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>FIDELITY MEDICAL INC
<DATE-CHANGED>19951025
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>FIDELITY MEDICAL SERVICES INC
<DATE-CHANGED>19830825
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a4604679.txt
<DESCRIPTION>PHASE III MEDICAL, INC. 10-K
<TEXT>
                                  UNITED STATES
                       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
                   For the fiscal year ended December 31, 2003
                                       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

                             PHASE III MEDICAL, INC.
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>

<S>                                                                    <C>
                  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 4955

Securities registered pursuant to Section 12(b) of the Act:               None.
Securities registered pursuant to Section 12(g) of the Act:   Common Stock, $0.001 par value
</TABLE>


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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this Chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting and nonvoting common equity held by
non-affiliates of the Registrant as of June 30, 2003 was approximately $ 3.1
million. (For purposes of determining this amount, only directors, executive
officers, and 10% or greater stockholders have been deemed affiliates).

On March 8, 2004, 26,926,460 shares of the Registrant's common stock, par value
$0.001 per share, were outstanding.

Documents incorporated by reference: None


<PAGE>


This Annual Report on Form 10-K and the documents incorporated herein contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. When used in this
Annual Report, statements that are not statements of current or historical fact
may be deemed to be forward-looking statements. Without limiting the foregoing,
the words "plan," "intend," "may," "will," "expect," "believe," "could,"
"anticipate," "estimate," or "continue" or similar expressions or other
variations or comparable terminology are intended to identify such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. Except
as required by law, the Company undertakes no obligation to update any
forward-looking statements, whether as a result of new information, future
events or otherwise.


                                     PART I


ITEM 1.  BUSINESS

Phase III Medical, Inc. ("Phase III" or the "Company") (formerly known as
Corniche Group Incorporated) provides capital and guidance to companies, within
the medical sector, in exchange for revenues, royalties and other contractual
rights known as "royalty interests", that entitle it to receive a portion of
revenue from the sale of pharmaceuticals, medical devices and biotechnology
products. Previously, the Company was a provider of extended warranties and
service contracts via the Internet at warrantysuperstore.com through June 30,
2002. The business of the Company today comprises the "run off" of its sale of
extended warranties and service contracts via the Internet and the new business
opportunity it is pursuing in the medical/bio-tech sector.

HISTORY

The Company was incorporated under the laws of the State of Delaware in
September 1980 under the name Fidelity Medical Services, Inc. On July 28, 1983
the Company changed its name to Fidelity Medical, Inc. From its inception
through March 1995, the Company was engaged in the development and sale of
medical imaging products through a wholly owned subsidiary. As a result of a
reverse merger on March 2, 1995 with Corniche Distribution Limited and its
subsidiaries, the Company was engaged in the retail sale and wholesale
distribution of stationery and related office products in the United Kingdom.
Effective March 25, 1995 the Company sold its medical imaging products
subsidiary. On September 28, 1995 the Company changed its name to Corniche Group
Incorporated. In February 1996, the Company's United Kingdom operations were
placed in receivership by their creditors. Thereafter through March 1998 the
Company was inactive. On March 4, 1998, the Company entered into a Stock
Purchase Agreement with certain individuals (the "Initial Purchasers") whereby
the Initial Purchasers acquired in aggregate 765,000 shares of a newly created
Series B Convertible Redeemable Preferred Stock. Thereafter the Initial
Purchasers endeavored to establish for the Company new business operations in
the property and casualty specialty insurance and warranty/service contracts
markets. On September 30, 1998 the Company acquired all of the capital stock of
Stamford Insurance Company, Ltd. ("Stamford"). On April 30, 2001 the Company
sold Stamford and is no longer involved in property and casualty specialty
insurance.

On January 7, 2002, the Company entered into a Stock Contribution Exchange
Agreement, as amended (the "Exchange Agreement"), with StrandTek International,
Inc., a Delaware corporation ("StrandTek"), certain of StrandTek's principal
shareholders and certain non-shareholder loan holders of StrandTek (the
"StrandTek Transaction"). Consummation of the StrandTek Transaction was

<PAGE>

conditioned upon a number of closing conditions, including the Company obtaining
financing via an equity private placement, which ultimately could not be met and
as a result, the Exchange Agreement was formally terminated by the Company and
StrandTek in June 2002. In January 2002, the Company advanced to StrandTek a
loan of $1,000,000 on an unsecured basis, which was personally guaranteed by
certain of the principal shareholders of StrandTek and a further loan of
$250,000 on February 19, 2002 on an unsecured basis. Such loans bore interest at
7% per annum and were due on July 31, 2002 following termination of the Exchange
Agreement in June 2002.

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 sought recovery of the
$1,250,000 loans, plus interest, costs and fees, and sought recovery against the
individual defendants pursuant to their partial guarantees. On May 9, 2003, the
Company was granted a final judgment in the amount of $1,415,622 from each
corporate defendant, in the amount of $291,405 against each individual defendant
and dismissing defendants' counterclaims.

Because the February 2002 $250,000 loan was unsecured and not guaranteed, the
Company established an allowance of $250,000 at December 31, 2002. The Company
was informed that on April 16, 2003, StrandTek made an assignment for the
benefit of its creditors, so that any collection on its judgment other than on
the personal guarantees is highly unlikely.

Between July 2003 and December 2003, guarantors Veltman, Buckles and Arnett paid
their judgments in full, with payments totaling approximately $295,000, $295,000
and $297,000 respectively. In December 2003, the Company settled with defendant
Bauman for a payment of $100,000. These payments, totaling approximately
$987,000, complete the transaction.

On July 24, 2003, the Company changed its name to Phase III Medical, Inc., which
better describes the Company's current business plan. In connection with the
change of name, the Company changed its trading symbol to "PHSM" from "CNGI".

DISCONTINUED OPERATIONS

Through April 2001 the Company operated a property and casualty reinsurance
business through its wholly owned subsidiary, Stamford Insurance Company, Ltd.
("Stamford"). Stamford is chartered under the laws of, and is licensed to
conduct business as an insurance company by, the Cayman Islands. Stamford
provided reinsurance coverage for one domestic insurance company until the
fourth quarter of 2000 when the relationship with the carrier was terminated.
Stamford was not able to obtain any additional reinsurance relationships. In
light of the inability of Stamford to write new business and difficulty in
forecasting future claims losses in the run off of its prior reinsurance
contract, on April 30, 2001, the Board of Directors of the Company approved the
sale of Stamford to Butler Financial Solutions, LLC for consideration totaling
$372,000. In the six months ended June 30, 2001, the Company recorded a loss of
approximately $479,000 on the sale of Stamford. The closing and transfer of
funds was completed on July 6, 2001.

CURRENT BUSINESS OPERATIONS

The business of the Company today comprises the "run off" of its sale of
extended warranties and service contracts via the Internet and the new business
opportunity it is pursuing as described below under the sub-heading "Recent
Developments".

WarrantySuperstore.com Internet Business

The Company's primary business focus, through June 2002, was the sale of
<PAGE>

extended warranties and service contracts over the Internet covering automotive,
home, office, personal electronics, home appliances, computers and garden
equipment. The Company offered its products and services in the United States in
states that permit program marketers to be the obligor on service contracts.
This represented approximately 38 states for automobile service contracts and
most states for other product categories. While the Company managed most
functions relating to its extended warranty and service contracts, it did not
bear the economic risk to repair or replace products nor did it administer the
claims function. The obligation to repair or replace products rested with the
Company's appointed insurance carriers, Great American Insurance Company and
American Home Shield. Great American Insurance Company provided contractual
liability insurance covering the obligation to repair or replace products under
the Company's automobile and consumer products extended warranties and service
contracts and American Home Shield covered all home warranty contracts. The
Company was responsible for the marketing, recording sales, collecting payment
and reporting contract details and paying premiums to the insurance carriers. In
addition, the Company provided information to the insurance carriers' appointed
claims administrators who handle all claims under the Company's contracts,
including the payment of claims.

The Company commenced operations initially by marketing its extended warranty
products directly to the consumer through its web site. During fiscal 2000 the
Company developed enhanced proprietary software to facilitate more efficient
processing and tracking of online warranty transactions. This provided the
Company with the ability to deliver its products over the Internet through a
number of distribution channels by enabling it to supply a number of different
extended warranty service contracts on a co-branded or private label basis to
corporations, by embedding the Company's suite of products on such corporation's
web sites. This new capability was launched in January 2001. It was anticipated
that this would result in substantially reduced direct marketing costs for the
years ending December 31, 2001 and thereafter. As a result the Company had four
distinct distribution channels: (i) direct sales to consumers, (ii) co-branded
distribution, (iii) private label distribution and (iv) manufacturer/retailer
partnerships.

During the first half of fiscal 2001, management became concerned by the slow
progress 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 Company
entered into the StrandTek Transaction but, as previously reported, the closing
conditions were not met and the Exchange Agreement was terminated by written
agreement between the parties. In June 2002, management determined, in light of
continuing operating losses, to discontinue its warranty and service contract
business and to seek new business opportunities for the Company.

RECENT DEVELOPMENTS

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 had been exploring business plans for the Company that would involve
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 rights
to one or more of such drugs or medical devices or the royalty streams
therefrom. Mr. Weinreb was 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 for the Company to raise new capital. In accordance with its business
plan, the Company raised $514,781 of capital, including $214,781, net of
expenses of $67,719, through the sale of Common Stock, and $295,000, net of
commissions of $30,000, from the sale of notes. In addition, the Company
received a total of approximately $987,000 from the settlement with the
StrandTek guarantors. A significant portion of the Standtek proceeds was used to
pay outstanding liabilities for legal expenses, employment terminations, travel
and entertainment expenses and consultants. The balance of the proceeds was used
for operating expenses and the retirement of certain debt.
<PAGE>

On December 12, 2003, the Company signed a royalty agreement with Parallel
Solutions, Inc. "(PSI") to develop a new bioshielding platform technology for
the delivery of therapeutic proteins and small molecule drugs in order to extend
circulating half-life to improve bioavailability and dosing regimen, while
maintaining or improving pharmacologic activity. The agreement provides for PSI
to pay the Company a percentage of the revenue received from the sale of certain
specified products or licensing activity. The Company will provide capital and
guidance to PSI to conduct a proof of concept study to improve an existing
therapeutic protein with the goal of validating the bioshielding technology for
further development and licensing the technology. As of December 31, 2003, the
Company has provided $80,000 to PSI pursuant to the royalty agreement.

On January 19, 2004, the Company entered into a letter of intent with NeoStem,
Inc., a California company, whose primary business is to establish an autologous
adult stem cell bank. If a definitive agreement is reached, Phase III would
provide funding and guidance in connection with the adult stem cell banking
enterprise in exchange for a share of the revenues derived from such enterprise.
No assurances can be given that a definitive revenue sharing agreement will be
finalized, that NeoStem's collection, processing and storage technology will be
successfully implemented, that NeoStem will be able to commercialize its adult
stem cell banking enterprise, or that there will be market acceptance of any
such enterprise sufficient to generate any material revenues for NeoStem or any
material royalty revenues for the Company, or that any stem cell therapeutic
strategies will be successfully developed or commercialized.

RISK FACTORS

The risks described below are not the only risks facing the Company. Additional
risks that the Company does not yet know of or that it currently thinks are
immaterial may also impair its business operations. If any of the risks occur,
its business strategy, financial condition or operating results could be
adversely affected.

PHASE III HAS A HISTORY OF OPERATING LOSSES AND A SUBSTANTIAL ACCUMULATED
EARNINGS DEFICIT AND IT MAY CONTINUE TO INCUR LOSSES.

Since its inception in 1980, the Company has generated only limited revenues
from sales and has incurred substantial net losses of approximately $1,000,000,
$1,200,000 and $2,100,000 for the years ended December 31, 2003, 2002 and 2001,
respectively. At December 31, 2003, the Company had a stockholders' deficit of
approximately $1,500,000. The Company expects to incur additional operating
losses as well as negative cash flow from its new business operations until
revenues from the purchase of royalty interests are received.

THE COMPANY HAS LIQUIDITY PROBLEMS.

At December 31, 2003, the Company had a cash balance of $210,947, deficit
working capital of $793,749 and a stockholders' deficit of $1,502,774. In
addition, the Company sustained losses of $1,044,145, $1,159,838 and $2,033,030
for the three fiscal years ended December 31, 2003, 2002 and 2001, respectively.
The Company's lack of liquidity combined with its history of losses raises
substantial doubt as to the ability of the Company to continue as a going
concern. The financial statements of the Company do not reflect any adjustments
relating to the doubt of its ability to continue as a going concern. On
September 22, 2003, the Company commenced an equity private placement pursuant
to Regulation D to raise up to $4,000,000 through the sale of up to 40,000,000
shares of its Common Stock in increments of $5,000 or 50,000 shares. Such shares
will not be registered and will be subject to restrictions on resale. Only
selected investors which qualify as "accredited investors" as defined in Rule
501(a) under the Securities Act of 1933, as amended, were eligible to purchase
these shares. Through December 31, 2003, the Company sold 2,825,000 shares,
resulting in proceeds to the Company of $214,781, net of offering costs of
$67,719. The Company continues to offer these securities without the assistance
of an investment banker and will collect the full proceeds from any sale. From
January 1, 2004 to March 8, 2004, the Company sold an additional 400,000 shares


<PAGE>

of its Common Stock with proceeds to the Company of $40,000 from the amended
private placement. Such shares will not be registered and will be subject to
restrictions on resale. There can be no assurance that the Company will be able
to sell sufficient quantities of these securities and may have to rely on its
ability to borrow money from new and/or existing investors. Management has sold
promissory notes in the aggregate principal amount of $75,000 which bear
interest at 20% per annum to fund the Company until such time as sufficient
proceeds are received from the private placement of its Common Stock.

THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN IS QUESTIONABLE.

At December 31, 2003, the Company's auditors, Holtz Rubenstein & Co., LLP,
qualified its opinion as to the Company's ability to continue as a going
concern. This qualification will make it more difficult for the Company to raise
capital on favorable terms and fund the agreements currently in place.

THE COMPANY WILL CONTINUE TO EXPERIENCE CASH OUTFLOWS.

The Company continues to incur expenses, including the salary of its new
president, rent, legal and accounting fees, insurance and general administrative
expenses. The Company's new business activities are in the development stage and
will therefore result in additional cash outflows in the coming period. The
Company commenced an amended private placement of its Common Stock to raise
additional equity to fund its current liabilities and its on-going cash needs
for working capital, its remaining obligation to PSI of $680,000, as of March
19, 2004 and to develop its planned business operations. There can be no
assurance that it will be successful in such Common Stock offering or in raising
additional funds through the issuance of notes, to satisfy the Company's needs.
Additionally, it is not possible at this time to state when the Company 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 may
hinder its ability to evaluate its business and entails risks that the Company
may fail to adequately address business issues with which it has limited
experience. There is no way to predict when, if ever, the Company will achieve
profitability or positive cash flow.

BECAUSE OF ITS FINANCIAL POSITION, THERE IS SUBSTANTIAL DOUBT ABOUT ITS ABILITY
TO OPERATE AS A GOING CONCERN.

The Company has no cash generating revenues. As of December 31, 2003, the
Company had a stockholders' deficit of $1,502,774 and had a working capital
deficiency of $793,749. Although the Company recently raised $254,781 in a
Common Stock private placement offering and $75,000 from the issuance of
promissory notes to date, those funds have been substantially spent and the
Company's financial condition still raises substantial doubt about its ability
to operate as a going concern.

THE COMPANY WILL NEED ADDITIONAL FINANCING AND IS UNCERTAIN OF ITS ACCESS TO
CAPITAL FUNDING.

The Company's proposed new business will require substantial capital to identify
and make alliances with one or more pharmaceutical and/or biotechnology
companies based on the Company's current operating plan for its new business. In
addition, the Company's cash requirements may vary materially from those now
planned because of results in research, consulting with experts and modeling
sales forecasts for the potential products of potential business partners.

<PAGE>



              RISKS RELATING TO THE COMPANY'S PROPOSED NEW BUSINESS

THE COMPANY HAS ONLY ONE BUSINESS PARTNER TO DATE AND IS UNCERTAIN OF ITS FUTURE
PROFITABILITY WITH ITS INTENDED VENTURE TO GENERATE REVENUES FROM SUCH
RELATIONSHIPS.

The Company's ability to achieve profitability in its new business is dependent
in part on the agreements, if any, entered into with business partners.
Currently the Company has entered into one agreement with PSI, and since the
agreement is in its early stages, it is premature to predict any favorable
outcome. There can be no assurance that any additional agreements will be
entered into. The failure to enter into any such necessary agreements could
delay or prevent the Company's new business from achieving profitability and
would have a material adverse effect on the business, financial position and
results of operations of the Company. Further, there can be no assurance that
the Company's operations will become profitable even if the Company enters into
agreements with business partners.

THE PSI ARRANGEMENT MAY NOT BE SUCCESSFUL.

The Company's contract with its first business partner, PSI, demonstrates
certain of the risks of the Company's business. PSI is attempting to develop a
new bioshielding platform technology for the delivery of therapeutic proteins
and small molecule drugs in order to extend circulating half-life to improve
bioavailability and dosing regimen, while maintaining or improving pharmacologic
activity. The Company is providing funding and consulting services for PSI to
conduct a proof of concept study. No assurances can be given that the proof of
concept program will be successful, that any viable technology will arise from
that program, that the Company or PSI will be able to commercialize any product
or technology that is successfully developed, or that there will be market
acceptance of any such product or technology sufficient to generate any material
revenues for the Company. Even if everything is successful, it will be a long
time before the Company receives any royalty revenues from the PSI project.

THERE ARE RISKS RELATING TO POTENTIAL CORPORATE COLLABORATIONS.

The Company's new business strategy includes identifying and partnering with
various pharmaceutical and/or biotechnology companies that are developing a drug
or medical device. There can be no assurance the Company will enter into any
additional relationships with these business partners and, even if the Company
does enter into such relationships, that the arrangements will be on favorable
terms or that the Company's relationship will be successful. In some cases, the
Company will generate income from its relationship with these companies only
after its potential business partners' product has achieved significant
pre-clinical and/or clinical development, has procured requisite regulatory
approvals and/or has established its manufacturing capabilities.

The Company's potential business partners' business strategy may include
entering into collaborations or marketing and distribution arrangements with
corporate partners for the development (including clinical development),
commercialization, marketing and distribution of certain of their product
candidates. The Company's potential business partners may be dependent on such
corporate collaborations to fund clinical testing, to make certain regulatory
filings and to manufacture and market products resulting from the collaboration.
There can be no assurance that such arrangements with a corporate collaboration
will be scientifically, clinically or commercially successful. In the event that
any such arrangements are made and then terminated, such actions could 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 their
agreements with the Company, or fail to develop or commercialize their products
<PAGE>

or fail to develop or commercialize their products in a timely manner, the
development of their products may be adversely affected, and thus not create an
economic benefit for the Company.

There can be no assurance that the Company's potential business partners will
not change their strategic focus or pursue alternative technologies or develop
alternative products either on their own or in collaboration with others. The
Company's business will also be affected by the effectiveness of its potential
business partners' corporate partners in marketing their products.

THERE ARE COMPANIES, UNIVERSITIES AND RESEARCH INSTITUTIONS THAT MAY BE
RESEARCHING AND TRYING TO DEVELOP PRODUCTS THAT ARE SIMILAR TO THE PRODUCTS OF
THE COMPANY'S POTENTIAL BUSINESS PARTNERS.

Competition in the medical, pharmaceutical and biotechnology industries, the
sector in which the Company plans to establish new business operations, is
intense. The Company's potential business partners may face competition from
companies with far greater financial, marketing, technical and research
resources, name recognition, distribution channels and market presence than the
Company's potential business partners who are marketing existing products or
developing new products that are similar to the products developed by the
Company's potential business partners. There can be no assurance that the
Company's potential business partners' products will be able to compete
successfully with existing products or products under development by other
companies, universities and other institutions.

THE COMPANY'S POTENTIAL BUSINESS PARTNERS MAY DEPEND ON THIRD PARTIES.

The Company's potential business partners may rely entirely on third parties for
a variety of functions, including certain functions relating to research and
development, manufacturing, clinical trials management, regulatory affairs and
sales, marketing and distribution. There can be no assurance that the Company's
potential business partners will be able to establish and maintain any of these
relationships on acceptable terms or enter into these arrangements without undue
delays or expenditures. In addition, the business partners may require, and seek
to raise, additional capital with third parties in order to develop products and
meet their working capital needs. There is no guarantee that the business
partners will be able to raise such additional capital, and any agreements
previously made between the business partners and the Company may make the
business partners less attractive to third parties in this regard.

THERE ARE UNCERTAINTIES ASSOCIATED WITH PRE-CLINICAL AND CLINICAL TESTING.

The grant of regulatory approvals for the commercial sale of any of the
Company's potential business partners' potential products will depend in part on
the Company's potential business partners and/or their collaborators
successfully conducting extensive pre-clinical and clinical testing to
demonstrate their products safety and efficacy in humans. The results of
pre-clinical studies by the Company's potential business partners and/or their
collaborators may be inconclusive and may not be indicative of results that will
be obtained in human clinical trials. In addition, results attained in early
human clinical trials relating to the products under development by the
Company's potential business partners may not be indicative of results that will
be obtained in later clinical trials. As results of particular pre-clinical
studies and clinical trials are received, the Company's potential business
partners and/or their collaborators may abandon projects with which the Company
assisted in developing which they might otherwise have believed to be promising.

The Company's potential business partners may be involved in developing drugs on
which they plan to file investigational new drug applications ("INDs") with the
FDA or make equivalent filings outside of the United States. There can be no
assurance that necessary pre-clinical studies on these products will be
completed satisfactorily, if at all, or that the Company's potential business
<PAGE>

partners otherwise will be able to make their intended filings. Clinical testing
is very expensive, and the Company's potential business partners and/or their
collaborators will have to devote substantial resources for the cost of clinical
trials.

The Company's potential business partners may have no experience in conducting
clinical trials and may have to rely, in part, on academic institutions and on
clinical research organizations to conduct and monitor certain clinical trials.
There can be no assurance that such entities will conduct the clinical trials
successfully.

Failure to commence or complete any planned clinical trials by the Company's
potential business partners would have a material adverse effect on the
Company's new business.

THE COMPANY'S POTENTIAL BUSINESS PARTNERS AND THEIR PRODUCTS WILL BE SUBJECT TO
GOVERNMENT REGULATIONS AND THERE IS NO ASSURANCE OF REGULATORY APPROVAL.

The Company's potential business partners and their products will be subject to
comprehensive regulation by the FDA in the United States and by comparable
authorities in other countries. These national agencies and other federal,
state, and local entities regulate, among other things, the pre-clinical and
clinical testing, safety, effectiveness, approval, manufacture, labeling,
marketing, export, storage, record keeping, advertising, and promotion of the
Company's potential business partners' products.

The process of obtaining FDA approvals can be costly, time consuming, and
subject to unanticipated delays and the Company's potential business partners
may have had only limited experience in filing and pursuing applications
necessary to gain regulatory approvals. There can be no assurance that such
approvals will be granted on a timely basis, or at all.

The Company's potential business partners may also be subject to numerous and
varying foreign regulatory requirements governing the design and conduct of
clinical trials and the managing and marketing of their products. The approval
procedure varies among countries and can involve additional testing, and the
time required to obtain approval may differ from that required to obtain FDA
approval.

There can be no assurance that the Company's potential business partners or
their partners will qualify for regulatory approvals or receive necessary
approvals to commercialize product candidates in any market. Delays in receipt
of or failure to receive regulatory approvals, or the loss of previously
received approvals, would have a material adverse effect on the Company's
potential business partners' business, and therefore, on the Company's business.

THE COMPANY'S NEW VENTURE MAY REQUIRE IT TO REGISTER AS AN INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940.

The Company is not registered as an investment company under the Investment
Company Act of 1940, as amended (or any similar state laws) (the "Company Act").
The Company does not believe (i) it is an "investment company" pursuant to the
Company Act, or (ii) that it will hold "securities" pursuant to the Company Act
or the Securities Act of 1933, as amended. However, the Securities and Exchange
Commission ("SEC") may disagree with the Company's position and deem the Company
to be an "investment company" under the Company Act and require the Company to
register as an investment company. If this were to occur, the Company's
day-to-day operations would become subject to the regulatory and disclosure
requirements imposed by the Company Act. The Company does not have the
infrastructure to operate as an investment company. The Company has sought
guidance from the SEC staff with respect to this issue. No assurance can be
given that the staff will respond favorably.
<PAGE>

                     RISKS RELATING TO INTELLECTUAL PROPERTY

IF THE COMPANY OR ITS BUSINESS PARTNERS ARE UNABLE TO OBTAIN PATENT PROTECTION
FOR THE PRODUCTS THAT RESULT FROM THE MEDICAL DEVELOPMENT BUSINESS, THE VALUE OF
THE MEDICAL DEVELOPMENT BUSINESS WILL BE ADVERSELY AFFECTED. IF THE COMPANY OR
ITS BUSINESS PARTNERS INFRINGE PATENT OR OTHER INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES, THEY MAY NOT BE ABLE TO DEVELOP AND COMMERCIALIZE THE PRODUCTS
AND SERVICES THAT WILL COMPRISE THE MEDICAL DEVELOPMENT BUSINESS OR THE COST OF
DOING SO MAY INCREASE.

Patent positions of  pharmaceutical  and  biotechnology  companies are generally
uncertain and involve  complex  legal,  scientific  and factual  questions.  The
ability of the Company or its  business  partners  to develop and  commercialize
products  and  services  depends in  significant  part on the  Company's  or its
business  partners'  ability to (i) obtain patents,  (ii) obtain licenses to the
proprietary  rights of others on commercially  reasonable  terms,  (iii) operate
without  infringing upon the proprietary  rights of others,  (iv) prevent others
from infringing on the Company's or its business partners'  proprietary  rights,
and (v) protect trade secrets.

THERE IS SIGNIFICANT  UNCERTAINTY  ABOUT THE VALIDITY AND  PERMISSIBLE  SCOPE OF
PATENTS IN THE  PHARMACEUTICAL  AND  BIOTECHNOLOGY  INDUSTRY,  WHICH MAY MAKE IT
DIFFICULT FOR THE COMPANY OR ITS BUSINESS  PARTNERS TO OBTAIN PATENT  PROTECTION
FOR DISCOVERIES.

The validity and permissible  scope of patent claims in the  pharmaceutical  and
biotechnology fields, including the genomics field, involve important unresolved
legal  principles  and are the  subject  of public  policy  debate in the United
States and abroad.  There is also some  uncertainty as to whether human clinical
data will be required  for  issuance of patents for human  therapeutics.  If the
Company is  involved  in a project in this field and if such data are  required,
the  Company's or its business  partners'  ability to obtain  patent  protection
could be delayed or otherwise adversely affected.

THIRD PARTIES MAY OWN OR CONTROL PATENTS OR PATENT  APPLICATIONS AND REQUIRE THE
COMPANY OR ITS  BUSINESS  PARTNERS TO SEEK  LICENSES,  WHICH COULD  INCREASE THE
COMPANY'S OR ITS BUSINESS PARTNERS' DEVELOPMENT AND COMMERCIALIZATION  COSTS, OR
PREVENT THE COMPANY OR ITS BUSINESS  PARTNERS  FROM  DEVELOPING OR MARKETING THE
COMPANY'S OR ITS BUSINESS PARTNERS' PRODUCTS OR SERVICES.

The Company or its  business  partners may not have rights under some patents or
patent  applications  related to some of their  existing or  proposed  products,
processes or services. Third parties may own or control these patents and patent
applications in the United States and abroad. Therefore, in some cases, in order
to develop,  manufacture,  sell or import some of the  Company's or its business
partners' existing and proposed products,  processes or services, the Company or
its business partners may choose to seek, or be required to seek, licenses under
third-party  patents  issued in the United States and abroad or those that might
issue from United States and foreign  patent  applications.  In such event,  the
Company or its  business  partners  would be  required  to pay  license  fees or
royalties or both to the licensor.  If licenses are not available to the Company
or its  business  partners on  acceptable  terms,  the  Company or its  business
partners may not be able to develop, manufacture, sell or import these products,
processes or services.
<PAGE>

THE COMPANY OR ITS BUSINESS PARTNERS MAY BECOME INVOLVED
IN EXPENSIVE PATENT LITIGATION OR OTHER PROCEEDINGS, WHICH COULD RESULT IN THE
COMPANY OR ITS BUSINESS PARTNERS INCURRING SUBSTANTIAL COSTS AND EXPENSES OR
SUBSTANTIAL LIABILITY FOR DAMAGES OR REQUIRE THE COMPANY OR ITS BUSINESS
PARTNERS TO STOP THEIR DEVELOPMENT AND COMMERCIALIZATION EFFORTS.

There has been substantial litigation and other proceedings regarding the patent
and other  intellectual  property rights in the pharmaceutical and biotechnology
industries.  The Company or its  business  partners may become a party to patent
litigation or other proceedings regarding intellectual property rights.

The cost to the Company or its  business  partners of any patent  litigation  or
other  proceeding,  even if resolved in the Company's or its business  partners'
favor,  could be  substantial.  Some of the Company's or its business  partners'
competitors  may be able to sustain the cost of such  litigation or  proceedings
more  effectively  than the Company or its  business  partners  because of their
substantially  greater  financial  resources.  If a patent  litigation  or other
proceeding is resolved against the Company or its business partners, the Company
or its business partners may be enjoined from developing, manufacturing, selling
or importing  their products,  processes or services  without a license from the
other  party and the  Company or its  business  partners  may be held liable for
significant  damages.  The Company or its  business  partners may not be able to
obtain any required license on commercially acceptable terms or at all.

Uncertainties   resulting  from  the  initiation  and   continuation  of  patent
litigation  or other  proceedings  could have a material  adverse  effect on the
Company's  or its  business  partners'  ability to  compete in the  marketplace.
Patent litigation and other proceedings may also absorb  significant  management
time.

COMPETITION

Competition in the medical,  pharmaceutical  and biotechnology  industries,  the
sector in which the Company  plans to  establish  new  business  operations,  is
intense.  The Company's  potential  business  partners may face competition from
companies  with  far  greater  financial,   marketing,  technical  and  research
resources, name recognition,  distribution channels and market presence than the
Company's  potential  business  partners who are marketing  existing products or
developing  new  products  that are  similar to the  products  developed  by the
Company's  potential  business  partners.  There  can be no  assurance  that the
Company's  potential  business  partners'  products  will  be  able  to  compete
successfully  with  existing  products or products  under  development  by other
companies, universities and other institutions.

EMPLOYEES

As of December 31, 2003, the Company had one employee.

ITEM 2.  PROPERTIES

On February 21, 2003 the Company leased office space in Melville, New York at an
original annual rental of $18,000. The lease has been extended for an additional
twelve months and expires on March 31, 2005. The annual rental increases to
approximately $19,200 on April 1, 2004 and continues until the expiration date.
This space will be sufficient for the Company's needs until the business plan of
the Company has been successfully executed.

ITEM 3.  LEGAL PROCEEDINGS

As discussed in Note 3 of the accompanying notes to the financial statements,
StrandTek defaulted on the payment of $1,250,000 plus accrued interest due to
<PAGE>


the Company on July 31, 2002. The Company ceased accruing interest as of July
31, 2002 for financial statement purposes. 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 sought recovery of
the $1,250,000 loan, plus interest, costs and fees, and sought recovery against
the individual defendants pursuant to their partial guarantees.

Between July 2003 and December 2003, guarantors Veltman, Buckles and Arnett paid
their judgments in full, with payments totaling approximately $295,000, $295,000
and $297,000 respectively. In December 2003, the Company settled with defendant
Bauman for a payment of $100,000. These payments, totaling approximately
$987,000, complete the transaction.

The Company is not aware of any material pending legal proceedings or claims
against the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of 2003.

<PAGE>



                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)      Market Information. The Company's Common Stock is traded on the OTC
         Bulletin Board under the symbol "PHSM" since July 24, 2003. Prior to
         that date, the Company's Common Stock traded 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 March 8, 2004, the closing bid price
         for the Company's Common Stock was $0.14. Information set forth in the
         table below represents inter-dealer prices without retail mark-up,
         mark-down, or commission, and may not necessarily represent actual
         transactions.


         2003                          High               Low

         First Quarter               $ 0.13            $ 0.03

         Second Quarter                0.15              0.06

         Third Quarter                 0.31              0.08

         Fourth Quarter                0.31              0.11



         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


(b)     Holders.  As of March 8, 2004, there were approximately  1,068 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 STOCK

The Certificate of Designation for the Company's Series A Preferred Stock
provides that at any time after December 1, 1999 any holder of 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 legally do so) at
a 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 of
Series A Preferred Stock may be redeemed by the Company unless all outstanding
shares of Series A Preferred Stock are simultaneously redeemed. The holders of
Series A Preferred Stock may convert their Series A Preferred Stock into shares
of Common Stock of the Company at a price of $5.20 per share.
<PAGE>

On January 29, 2002 notice was given that, pursuant to the Company's Restated
Certificate of Incorporation, as amended, the Company has called for redemption
and will redeem (the "Redemption") on the date of the closing of the StrandTek
Transaction (the "Redemption Date"), all shares of the Company's Series A
Convertible Preferred Stock outstanding on that date at a redemption price of
$1.05, plus accrued and unpaid dividends from July 1, 1995 through and including
the Redemption Date of approximately $0.47 per share. The Redemption, among
other financial, legal and business conditions, was a condition precedent to the
closing of the StrandTek Transaction. Similarly, completion of the Redemption
was subject to closing the StrandTek Transaction. Upon termination of the
StrandTek Transaction, the Company rescinded the Notice of Redemption.

At December 31, 2003, 681,174 shares of Series A Preferred Stock were
outstanding. If the preferred shareholders do not convert their shares into
Common Stock, and if the Company were required to redeem any significant number
of shares of Series A Preferred Stock, the Company's financial condition may be
materially affected.

RECENT SALES OF UNREGISTERED SECURITIES

In  September  2002,  the  Company  sold to  accredited  investors,  pursuant to
Regulation D, five 60-day promissory notes in the principal sum of $25,000 each,
resulting in net proceeds to the Company of $117,500, net of offering costs. The
notes bear interest at 15% per annum payable at maturity. The terms of the notes
include a default penalty pursuant to which if the notes are not paid on the due
date,  the  holder  shall  have the  option  to  purchase  25,000  shares of the
Company's  Common  Stock for an  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 the note is paid in full,  the  holder has the
option to purchase an additional 25,000 shares of the Company's Common Stock for
an  aggregate  purchase  price  of  $125.  As of  December  31,  2003 a total of
1,000,000 of such shares resulting in net proceeds to the Company of $5,000 were
exercised  because the notes remain  unpaid.  Options to purchase an  additional
650,000  shares of Common  Stock at an aggregate  purchase  price of $3,250 have
been granted pursuant to the default  penalty.  Subsequent to December 31, 2003,
200,000 shares of Common Stock were  purchased  resulting in net proceeds to the
Company of $1,000.

In February 2003, the Company sold to accredited investors, pursuant to
Regulation D, 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. In
November 2003, the Company repaid all $50,000 of such promissory notes together
with all accrued interest of $6,854.

On March 17, 2003, the Company commenced a private placement offering, pursuant
to Regulation D, to raise up to $250,000 in 6-month promissory notes in
increments of $5,000 bearing interest at 15% per annum. Only selected investors
which qualify as "accredited investors" as defined in Rule 501(a) under the
Securities Act of 1933, as amended, were eligible to purchase these promissory
notes. The Company raised the full $250,000 through the sale of such promissory
notes, resulting in net proceeds to the Company of $225,000, net of offering
costs. The note contains a default provision which raises the interest rate to
20% if the notes are not paid when due. The Company issued $250,000 of these
notes and as of December 31, 2003, $60,000 of the principle amount of these
notes was in default. All interest payments have been made and are current.

On September 22, 2003, the Company commenced an equity private placement
pursuant to Regulation D to raise up to $4,000,000 through the sale of up to
40,000,000 shares of its Common Stock in increments of $5,000 or 50,000 shares.
Such shares will not be registered and will be subject to restrictions on
resale. Only selected investors which qualify as "accredited investors" as
defined in Rule 501(a) under the Securities Act of 1933, as amended, were
eligible to purchase these shares. The placement closed on December 31, 2003
upon the sale of 2,825,000 shares, resulting in proceeds to the Company of
$214,781, net of offering costs of $67,719.
<PAGE>

The Company amended its equity private placement (see Note 7) pursuant to
Regulation D to raise up to $4,000,000 through the sale of up to 40,000,000
shares of Common Stock in increments of $5,000 or 50,000 shares. Such shares
will not be registered and will be subject to restrictions on resale. 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 shares. The initial placement closed on December 31, 2003. The amended
private placement does not include any investment banking fees and therefore all
proceeds, less expenses such as printing, transfer fees, etc., will be paid
directly to the Company. The previous investment banker, Robert M. Cohen &
Company, has been fully paid for its efforts. As of March 8, 2004, 400,000
shares have been sold with proceeds to the Company of $40,000.

In February 2004, the Company sold 30 day 20% notes pursuant to Regulation D in
the amount of $75,000 to two accredited investors to fund current operations. It
is anticipated that these notes will be repaid from the proceeds of the amended
equity private placement. These notes have a default provision that if they are
not paid within 30 days, there is an additional interest payment of $250 per
$25,000 for each 30 day period or part thereof.

In March 2004, the Company sold a 30 day 20% note pursuant to Regulation D in
the amount of $50,000 to a director who qualifies as an accredited investor to
fund current operations. It is anticipated that this note will be repaid when
sufficient proceeds of the amended equity private placement are received.

<PAGE>



ITEM 6...SELECTED FINANCIAL DATA

The selected statements of operations and balance sheet data set forth below are
derived from audited financial statements of the Company. The information set
forth below should be read in conjunction with the Company's audited financial
statements and notes thereto. See Item 8 "Financial Statements and Supplementary
Data" and Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operation". On February 4, 1999 the Company changed its fiscal
year-end from March 31 each year to December 31 each year. The selected
financial data set out below has not been retroactively restated to reflect such
change in fiscal year-end date and accordingly is presented as historically
reported in the financial statements of the Company.

<TABLE>
<CAPTION>

Statement of Operations:                         Year Ended      Year Ended      Year Ended     Year Ended      Year Ended
($'000 except net loss per share which is      December 31,    December 31,    December 31,   December 31,    December 31,
stated in $)                                           2003            2002            2001           2000            1999
<S>                                                    <C>            <C>            <C>              <C>              <C>
Earned revenues                                        $ 65           $  81          $  107           $ 27             $ -

Direct costs                                             44              60              70             33               -

Gross profit                                             21              21              37            (6)               -

Operating  (loss)                                     (894)         (1,149)         (1,606)        (2,516)         (1,023)

Loss before discontinued operations and
preferred dividends                                 (1,044)         (1,160)         (1,792)        (2,296)         (1,084)

Net loss attributable to common
stockholders                                        (1,068)         (1,208)         (2,081)        (2,075)         (1,170)

Basic and diluted earnings per share:

  Loss from continuing operations                    (0.05)          (0.05)          (0.08)         (0.16)          (0.16)
  Income (loss) from discontinued operations             -               -           (0.01)         (0.02)               -

Net loss attributable to common
shareholders                                         (0.05)          (0.05)          (0.09)         (0.14)          (0.17)


Weighted average number of shares
outstanding                                      23,509,343      22,344,769      22,284,417     14,902,184       6,905,073



Balance Sheet Data:                                   As of           As of           As of          As of           As of
$'000                                          December 31,    December 31,    December 31,   December 31,    December 31,
                                                       2003            2002            2001           2000            1999

Working Capital (Deficiency)                       $  (794)          $ (82)         $ 1,085        $ 2,079         $ 3,192

Total Assets                                            312           1,183           1,836          3,757           4,905

Current Liabilities                                   1,023           1,141             489            458             868

(Accumulated Deficit)                              (10,762)         (9,694)         (8,486)        (6,406)         (4,302)

Total Stockholders' (Deficit)/Equity                (1,503)           (824)             373          2,450           3,140
</TABLE>

<TABLE>
<CAPTION>

Selected Quarterly Financial Data

$'000                             Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter
(except net loss per share          Ended      Ended      Ended      Ended      Ended      Ended      Ended      Ended      Ended
<S>                <C>           <C>   <C>   <C>  <C>   <C>  <C>   <C>  <C>  <C>   <C>   <C>  <C>   <C>  <C>   <C>  <C>  <C>   <C>
which is stated in $)            12/31/03    9/30/03    6/30/03    3/31/03   12/31/02    9/30/02    6/30/02    3/31/02   12/31/01

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>                                   <C>        <C>        <C>        <C>       <C>        <C>        <C>        <C>        <C>
Earned Revenues                      $ 15       $ 15       $ 17       $ 18       $ 19       $ 20       $ 18       $ 24       $ 42

Direct Costs                            8         11         12         13         13         14         14         19         17

Gross profit                            7          4          5          5          5          6          5          5         25

Operating Loss                      (369)      (197)      (205)      (123)      (357)      (225)      (201)      (366)      (449)

Net Loss Attributable to
Common Stockholders                 (437)      (216)      (260)      (155)      (389)      (231)    * (246)      (342)    * (725)

Net loss per share                 (0.02)     (0.01)     (0.01)     (0.01)          -     (0.01)     (0.01)     (0.02)     (0.03)

</TABLE>

$'000                            Quarter    Quarter    Quarter
(except net loss per share         Ended      Ended      Ended
which is stated in $)            9/30/01    6/30/01    3/31/01

Earned Revenues                     $ 33       $ 21       $ 11

Direct Costs                          31         15          7

Gross profit                           2          6          4

Operating Loss                     (386)      (353)      (418)

Net Loss Attributable to
Common Stockholders                (374)      (329)      (653)

Net loss per share                (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.


<PAGE>



<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with the audited
financial statements and notes thereto, included in Item 8 of this report, and
is qualified in its entirety by reference thereto.

GENERAL

During the first half of fiscal 2001, management became concerned by the slow
progress 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 closing
conditions, including the Company obtaining financing via an equity private
placement, which ultimately could not be met and as a result in June 2002, the
Exchange Agreement was formally terminated by written agreement between the
Company and StrandTek. In June 2002, management also determined, in light of
continuing operating losses, to discontinue its warranty and service contract
business and to seek new business opportunities for the Company.

NEW BUSINESS OPPORTUNITIES

Management had been exploring new business opportunities for the Company and 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 had been exploring business plans for the Company 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 rights to one or more of such drugs
or medical devices or the royalty streams therefrom. Mr. Weinreb was 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 for the Company to raise
new capital. There can be no assurance that any such business plan developed by
the Company will be successful, that the Company will be able to acquire such
new business or rights or raise new capital, or that the terms of any
transaction will be favorable to the Company.

RESULTS OF CONTINUING OPERATIONS

The Company's "Significant Accounting Policies" are described in Note 2 to the
audited financial statements and notes thereto, included in Item 8 of this
report. The Company recognizes revenue from its warranty service contracts
ratably over the length of the contracts executed. Additionally, the Company
purchased insurance to fully cover any losses under the service contracts from a
domestic carrier. The insurance premium expense and other costs related to the
sale are amortized ratably over the life of the contracts.

FISCAL 2003 COMPARED TO FISCAL 2002

The Company generated recognized revenues from the sale of extended warranties
and service contracts via the Internet of $65,000 in fiscal 2003. The revenues
generated in the year were derived almost entirely from revenues deferred over
the life of the contracts sold in prior years. Similarly, direct costs of
$44,000 incurred in fiscal 2003, relate to costs previously deferred over the
life of such contracts.

General and administrative expenses totaled $685,000 during the year ended
December 31, 2003 as compared to $912,000 for fiscal 2002, a decrease of
$227,000 or 24.9%. The decrease was primarily attributable to decreases in
employee termination costs ($145,000), legal ($86,000), travel and entertainment
<PAGE>


($65,000), directors fees ($25,000), rents ($33,000) and depreciation ($16,000)
partially offset by increases in insurance ($66,000) and salaries as a result of
the employment agreement by and between the Company and Mark Weinreb ($41,000).
Costs generally were significantly lower as the Company wound down its
operations and closed its office facilities in Texas in July 2002.

The Company realized a loss from the unsecured, un-guaranteed note receivable
from StrandTek of $150,000 in fiscal 2003. Through March 1, 2004, the Company
made payments to PSI of $240,000. The Company's minimum commitment to PSI
pursuant to the royalty agreement with PSI is $1,000,000.

Interest income increased by $18,000 to $89,000 in fiscal 2003 as compared to
fiscal 2002 due to the collection of the StrandTek note receivable and the
additional funds received from the sale of Common Stock and notes. Interest
expense increased in fiscal 2003 to $215,000 from $23,000 in fiscal 2002 due to
the higher level of debt and certain debt being in default and therefore subject
to a higher interest rate. In addition, the Company recorded interest expense in
fiscal 2003 relating to the Series A preferred in the amount of approximately
$24,000 due to a recent accounting pronouncement.

For the reasons cited above, the net loss before preferred stock dividend
decreased to $1,044,000 in fiscal 2003 from the comparable loss of $1,160,000
for fiscal 2002.

FISCAL 2002 COMPARED TO FISCAL 2001

The Company generated recognized revenues from the sale of extended warranties
and service contracts via the Internet of $81,000 in fiscal 2002. The revenues
generated in the year were derived almost entirely from revenues deferred over
the life of the contracts sold in prior years. Similarly, direct costs of
$61,000 incurred in fiscal 2002, relate to costs previously deferred over the
life of such contracts. Revenues in fiscal 2001 totaled $225,000 of which
$107,000 were recognized as earned revenues, the balance deferred over the life
of the contracts sold. Direct costs in fiscal 2001 totaled $71,000.

General and administrative expenses totaled $912,000 during the year ended
December 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 wound
down its operations and closed its office facilities in Texas in July 2002. As a
result, selling, general and administrative expenses in fiscal 2002 are not
comparable to fiscal 2001 when the Company incurred operating expenses such as
advertising and significantly higher payroll costs. One time employee
termination and general closure costs totaling approximately $150,000 were
incurred in fiscal 2002 and an impairment charge of $55,000 was recorded in June
2002 to adjust property and equipment to its net realizable value.

In the year ended December 31, 2002, the Company provided an allowance for the
unsecured, un-guaranteed note receivable 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 to
fiscal 2001 because interest income from the StrandTek loans, accrued through
July 31, 2002 was less than interest earned from investments in marketable
securities in fiscal 2001. Interest expense increased from $6,000 in the year
ended December 31, 2001 to $23,000 in fiscal 2002 primarily due to the
short-term loans secured in September 2002 to fund the Company's operating
expenses.

For the reasons cited above, net loss before preferred stock dividend decreased
by 35.3% to $1,160,000 in 2002 from the comparable loss of $1,792,000 for fiscal
2001.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The 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, 2003     December 31, 2002

Cash provided by (used in)
operating activities                 $ (1,021,913)          $ 1,005,376

Cash provided by (used in)
investing activities                      847,419            (1,247,338)

Cash provided by (used in)
financing activities                      366,186               209,949

At December 31, 2003, the Company had a cash balance of $210,947, deficit
working capital of $793,749 and a stockholders' deficit of $1,502,774. In
addition, the Company sustained losses of $1,044,145, $1,159,838 and $2,033,030
for the three fiscal years ended December 31, 2003, 2002 and 2001, respectively.
The Company's lack of liquidity combined with its history of losses raises
substantial doubt as to the ability of the Company to continue as a going
concern. On September 22, 2003 the Company commenced an equity private placement
pursuant to Regulation D to raise up to $4,000,000 through the sale of up to
40,000,000 shares of its Common Stock in increments of $5,000 or 50,000 shares.
Such shares will not be registered and will be subject to restrictions on
resale. Only selected investors which qualify as "accredited investors" as
defined in Rule 501(a) under the Securities Act of 1933, as amended, were
eligible to purchase these shares. Through December 31, 2003, the Company sold
2,825,000 shares, resulting in proceeds to the Company of $214,781, net of
offering costs of $67,719. The Company continues to offer these securities
without the assistance of an investment banker and will collect the full
proceeds from any sale. As of March 8, 2004, the Company has sold 400,000 shares
of its Common Stock with proceeds to the Company of $40,000 from the amended
private placement. There can be no assurance that the Company will be able to
sell sufficient quantities of these securities and may have to rely on its
ability to borrow money from new and/or existing investors. Management has sold
promissory notes which bear interest at 20% per annum to fund the Company until
such time as sufficient proceeds are received from the private placement of its
Common Stock.


<PAGE>



The following table reflects a summary of the Company's contractual cash
obligations as of December 31, 2003:
<TABLE>
<CAPTION>

                                                           Payments due by period
Contractual Obligations                               Less than                                    More than
                                         Total          1 year     1-3 years       3-5 years        5 years
<S>                                     <C>            <C>             <C>               <C>            <C>
Long-term debt obligations              $  9,513       $  9,513     $      0             $ 0            $ 0
Notes payable                            400,000        400,000            0               0              0
Operating leases                          23,700         18,900        4,800               0              0
Employment agreement                     438,846        199,500      239,346               0              0
Purchase obligations                     920,000        920,000            0               0              0
                                         -------        -------     --------              --             --
     Total                            $1,792,059     $1,547,913     $244,146             $ 0            $ 0
                                       =========      =========     ========              ==             ==
</TABLE>

INFLATION

The Company does not believe that its operations have been materially influenced
by inflation in the fiscal year ended December 31, 2003, a situation which is
expected to continue for the foreseeable future.

SEASONALITY

The Company does not believe that its operations are seasonal in nature.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
         RISK

Not Applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary financial information required to be
filed under this Item are presented commencing on page F-1 of the Annual Report
on Form 10-K, and are incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

As previously reported on the Company's Form 8-K filed January 8, 2004, as
amended on February 3, 2004, on January 6, 2004, upon recommendation and
approval of the Company's and Board of Directors, the Company dismissed Travis,
Wolff & Company, LLP ("Travis Wolff") and engaged Holtz Rubenstein & Co., LLP
("Holtz") as the Company's independent auditors for the fiscal year ended
December 31, 2003.

Travis Wolff's reports on the Company's financial statements for each of the
years ended December 31, 2002 and 2001 contained a qualified opinion as to the
uncertainty of the Company's ability to continue as a going concern. No
modifications were made to the financial statements as a result of this
uncertainty.

<PAGE>

During the years ended December 31, 2002 and 2001 and through January 6, 2004,
there were no disagreements with Travis Wolff on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which if not resolved to Travis Wolff's satisfaction, would have
caused them to make reference to the subject matter in connection with their
report on the Company's financial statements for such years; and there were no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

During the years ended December 31, 2002 and 2001 and through January 6, 2004,
the Company did not consult Holtz with respect to the application of accounting
principles as to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the Company's financial
statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.

ITEM. 9A.  CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the Company's most recently completed fiscal quarter (the
registrant's fourth fiscal quarter in the case of an annual report) covered by
this report, the Company carried out an evaluation, with the participation of
the Company's management, including the Company's Chief Executive Officer, of
the effectiveness of the Company's disclosure controls and procedures pursuant
to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the
Company's Chief Executive Officer concluded that the Company's disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There have been no changes in the Company's internal controls over financial
reporting that occurred during the Company's last fiscal quarter to which this
report relates that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.


<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding the directors and
executive officers of the Company as of March 8, 2004:

Name                    Age        Position
----                    ---        --------

Mark Weinreb            51         Director, President & Chief Executive Officer
Wayne Marasco           50         Director
Joseph Zuckerman        52         Director
Michael Lax             50         Director


Mark Weinreb
Chief Executive Officer

Mr. Weinreb joined the Company on February 6, 2003 as a Director, Chief
Executive Officer and President. In 1976, Mr. Weinreb joined Bio Health
Laboratories, Inc., a state-of-the-art medical diagnostic laboratory providing
clinical testing services for physicians, hospitals, and other medical
laboratories. He progressed to become the laboratory administrator in 1978 and
then an owner and the laboratory's Chief Operating Officer in 1982. Here he
oversaw all technical and business facets, including finance, laboratory science
technology and all the additional support departments. He left Bio Health Labs
in 1989 when he sold the business to a biotechnology company listed on the New
York Stock Exchange. In 1992, Mr. Weinreb founded Big City Bagels, Inc., a
national chain of franchised upscale bagel bakeries and became Chairman and
Chief Executive Officer of such entity. The company went public in 1995 and in
1999 he redirected the company and completed a merger with an Internet service
provider. In 2000, Mr. Weinreb became the Chief Executive Officer of Jestertek,
Inc., a 12-year old software development company pioneering gesture recognition
and control using advanced inter-active proprietary video technology. In 2002,
he left Jestertek after arranging additional financing. Mr. Weinreb received a
Bachelor of Arts degree in 1975 from Northwestern University and a Master of
Science degree in 1982 in Medical Biology, from C.W. Post, Long Island
University.

Wayne Marasco, M.D., Ph.D.
Director

Dr. Marasco joined the Board of Directors of the Company in June 2003. Dr.
Marasco is an Associate Professor in the Department of Cancer Immunology & AIDS
at the Dana-Farber Cancer Institute and Associate Professor of Medicine in the
Department of Medicine, Harvard Medical School. Dr. Marasco is a board-certified
physician specializing in the treatment of infectious diseases. His clinical
sub-specialty is in the treatment of immunocompromised (cancer, bone marrow and
solid organ transplants) and HIV-1 infected patients.

The Marasco research laboratories are primarily focused on the areas of antibody
engineering and gene therapy. New immuno- and genetic- therapies for HIV-1
infection / AIDS, HTLV-1, the etiologic agent in Adult T-cell Leukemia, and
other emerging infectious diseases are being studied. Dr. Marasco's laboratory
is recognized internationally for its pioneering development of intracellular
antibodies (sFv) or "intrabodies" as a new class of molecules for research and
gene therapy applications. He is the author of more than 70 peer reviewed
research publications, numerous chapters, books and monographs and has been an
invited speaker at many national and international conferences in the areas of
antibody engineering, gene therapy and AIDS. Dr. Marasco is also the Scientific
Director of the National Foundation for Cancer Research (NFCR) Center for
Therapeutic Antibody Engineering. The NFCR Center is located at the Dana-Faber
Cancer Institute and will work with investigators globally to develop new human
monoclonal antibody drugs for the treatment of human cancers.
<PAGE>

In 1995, Dr. Marasco founded IntraImmune Therapies, Inc., a gene therapy and
antibody engineering company. He served as the Chairman of the Scientific
Advisory Board until the company was acquired by Abgenix in 2000. He has also
served as a scientific advisor to several biotechnology companies working in the
field of antibody engineering, gene discovery and gene therapy. He is an
inventor on numerous issued and pending patent applications.

Joseph Zuckerman, M.D.
Director

Joseph D. Zuckerman joined the Board of Directors of the Company in January
2004. Since 1997, Dr. Zuckerman has been Chairman of the NYU-Hospital for Joint
Diseases Department of Orthopaedic Surgery and the Walter A. L. Thompson
Professor of Orthopaedic Surgery at the New York University School of Medicine.
He is responsible for one of the largest departments of orthopaedic surgery in
the country, providing orthopaedic care at five different hospitals including
Tisch Hospital, the Hospital for Joint Diseases, Bellevue Hospital Center, the
Manhattan Veteran's Administration Medical Center and Jamaica Hospital. He is
also the Director of the Orthopaedic Surgery Residency Program, which trains
more than 60 residents in a five year program.

Dr. Zuckerman holds leadership positions in national organizations and is
President of the American Shoulder and Elbow Surgeons and Chair of the Council
on Education for the American Academy of Orthopaedic Surgeons. He recently
developed and successfully implemented a sponsorship program between the
hospital and the New York Mets. His clinical practice is focused on shoulder
surgery and hip and knee replacement and he is the author or editor of ten
textbooks, 60 chapters and more than 200 articles in the orthopaedic and
scientific literature.

Michael Lax
Director

Michael Lax joined the Board of Directors of the Company in March 2004 and
graduated from the University of Rochester with degrees in Chemical and
Mechanical Engineering. Upon his graduation in 1975, Mr. Lax went to work for
Kodak as a Process and Product Development Engineer. Since 1988, Mr. Lax has
been the President and Chief Executive Officer of Autronic Plastics, Inc. and
its subsidiaries, a plastic manufacturing concern specializing in plastic
product design, mold construction and manufacturing of industrial and precision
components such as medical devices, office products, life safety products and
entertainment packaging. Autronic Plastics, Inc.'s clients include Pfizer,
Borders Books & Music, Blockbuster, Circuit City, Nintendo, and Cooper Lighting
Company. Mr. Lax's 28 years of experience at Autronic Plastics, Inc. have
centered on creative ideation, concept development and managing executions to
ensure that the integrity of the initial designs come alive. Taking the company
in a new direction, Mr. Lax founded Clear-Vu Products in 1990 to further
specialize in the entertainment-packaging sector.

Mr. Lax has been awarded numerous patents for packaging designs, solid state
illumination, and life safety products. In addition, his work and collaborations
have received numerous design awards including a Gold Industrial Design
Excellence Award from the Industrial Designers Society of America.

COMMITTEES OF THE BOARD OF DIRECTORS

Composition of the Board of Directors. Because of the Company's recent
reorganization and implementation of its new business plan, and its ongoing
efforts to engage qualified board members under its new business plan, the
Company does not have a separately designated audit committee or compensation
committee at this time. Accordingly, the Company's Board of Directors has
determined that the Company does not have an audit committee financial expert.
<PAGE>


The Company continues to seek new board members in order to implement its
reorganization and new business plan, and appoint a separately designated audit
committee.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of a registered class
of the Company's equity securities, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
These persons are required by the Securities and Exchange Commission to furnish
the Company with copies of all Section 16(a) reports that they file. Based
solely on the Company's review of these reports and written representations
furnished to the Company, the Company believes that in 2003 each of the
reporting persons complied with these filing requirements, except that a report
on Form 4 reporting one transaction in February 2003 with respect to Mark
Weinreb due on February 8, 2003 was not filed until February 17, 2003, a report
on Form 5 reporting four transactions for the year ended December 31, 2002 with
respect to James J. Fyfe due on February 14, 2003 was not filed until June 10,
2003 and a report on Form 5 reporting four transactions for the year ended
December 31, 2002 with respect to Paul L. Harrison due on February 14, 2003 was
not filed until June 10, 2003. These late filings were inadvertent and required
filings were made promptly after noting the failures to file.

CODE OF ETHICS

         The Company has adopted a Code of Ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer or controller (or persons performing similar functions). A copy of such
Code of Ethics has been filed as Exhibit 14.1 to this Annual Report on Form
10-K.
<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation paid during the three
years ended December 31, 2003 to the Company's Chief Executive Officer. No other
executive officer of the Company earned in excess of $100,000 for services
rendered during fiscal 2003.

<TABLE>
<CAPTION>

                           Summary Compensation Table


                                                                      Annual            Long-Term
                                                                   Compensation       Compensation
                                                                   ------------       ------------
                                                                                       Securities
                                                                                       Underlying          All Other
 Name and Principal Position                 Notes      Year          Salary          Options/SAR's      Compensation
 ---------------------------                 -----      ----          ------          ------------       ------------
<S>                                           <C>       <C>          <C>                <C>                <C>
 Mark Weinreb                                 (1)       2003         $ 157,154          2,500,000          $ 11,000
 Chief Executive Officer
 (Appointed February 6, 2003)

</TABLE>


Notes:
(1) All other compensation comprises monthly automobile allowances.

OPTION GRANTS IN 2003

The following table provides certain information with respect to options granted
to the Company's chief executive officer during the fiscal year ended December
31, 2003:
<TABLE>
<CAPTION>

Option Grants in Last Fiscal Year

                                    Percent of                                          Potential Realizable Value
                                       Total                                            at Assumed Annual Rates of
                       Number of      Options      Exercise      Market                   Stock Price Appreciation
                      Securities    Granted to     Price        Price on                     for Option Term(1)
                     Underlying      Employees                  Date of                 ---------------------------
                       Options          In         per Share      Grant     Expiration
        Name          Granted(2)    Fiscal Year      ($)           ($)         Date           5%             10%
---------------------------------- -------------- ----------  ----------- ------------ ------------- ----------------
<S>                     <C>            <C>            <C>         <C>         <C> <C>     <C>             <C>
Mark Weinreb            2,500,000      100%          $0.03       $0.03       2/6/13      $128,275        $204,257
====================

----------------------
(1)    The Securities and Exchange  Commission (the "SEC")  requires  disclosure of the
       potential  realizable  value  or  present  value of each  grant.  The 5% and 10%
       assumed  annual rates of  compounded  stock price  appreciation  are mandated by
       rules of the SEC and do not represent  the  Company's  estimate or projection of
       the Company's  future Common Stock prices.  The  disclosure  assumes the options
       will be held for the full ten-year  term prior to exercise.  Such options may be
       exercised  prior to the end of such ten-year term. The actual value,  if any, an
       executive  officer may realize will depend on the excess of the stock price over
       the  exercise  price  on the date  the  option  is  exercised.  There  can be no
       assurance that the stock price will appreciate at the rates shown in the table.

</TABLE>

<PAGE>

(2)    These options vested immediately.

OPTION EXERCISES AND HOLDINGS

The following table provides information concerning options exercised during
2003 and the value of unexercised options held by each of the executive officers
named in the Summary Compensation Table at December 31, 2003.
<TABLE>
<CAPTION>

                       Option Values at December 31, 2003


                                                             Number of
                                                         Securities Underlying
                            Shares                        Unexercised Options                       Value of
                           Acquired                      at December 31, 2003                 In-the-Money Options at
                              On                           (# of shares)                     December 31, 2003 ($)(1)
                           Exercise      Value      --------------------------------- -------------------------------------
          Name           (# shares)     Realized     Exercisable     Unexercisable       Exercisable       Unexercisable
  --------------------- ------------- ------------- -------------- ------------------ ------------------- -----------------

<S>                                                  <C>                                   <C>
  Mark Weinreb               --          --          2,500,000            --               $300,000             --
  ==========================================================================================================================

  ---------------------
(1)  Based on $0.15 per share, the closing  price of the Company's Common  Stock,  as reported by the
     OTC  Bulletin  Board, on December 31, 2003.

</TABLE>

EMPLOYMENT AGREEMENTS

On February 6, 2003, Mr. Weinreb was appointed President and Chief Executive
Officer of the Company and 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, and $20,000 for each
subsequent year of the term, without condition.

In addition, the Company, pursuant to its newly adopted 2003 Equity
Participation 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 the Company's Common Stock at an exercise price of
$0.03 per share and otherwise upon the terms set forth in the Initial Option
Agreement. In addition, 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 to Mr. Weinreb, on
the day immediately following the end of the five day period, an option for the
purchase of an additional 2,500,000 shares of the Company's Common Stock for an
exercise price of $0.50 per share, pursuant to the 2003 Equity Participation
Plan and a Stock Option Agreement to be entered into between the Company and Mr.
Weinreb containing substantially the same terms as the Initial Option Agreement,
except for the exercise price and that the option would be treated as an
"incentive stock option" for tax purposes only to the maximum extent permitted
by law (the "Additional Option Agreement"). The Company has agreed to promptly
file with the Securities and Exchange Commission a Registration Statement on
Form S-8 (the "Registration Statement") pursuant to which 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 Initial Option Agreement, are
registered. Additionally, the Company has agreed, following any grant under the
Additional Option Agreement, to promptly file a post-effective amendment to the
Registration Statement pursuant to which the Common 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's Common Stock obtained upon exercise
<PAGE>

of any Initial Agreement or the Additional Option Agreement prior to the first
anniversary of the date of the employment agreement.

In connection with the hiring of Mr. Weinreb and in anticipation of its new
business line, on July 24, 2003, the Company held a meeting of stockholders to
elect two directors, to approve and 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, approve an amendment to the Company's
Certificate of Incorporation to increase the authorized number of shares of
Common Stock to 250,000,000, and approve a change of the Company's name to
"Phase III Medical, Inc."

Director Compensation

All current independent directors have individually received options to purchase
300,000 shares of the Company's Common Stock pursuant to the Company's 2003
Equity Participation Plan at prices ranging from $0.05 to $0.15. In addition to
these options, all independent directors are reimbursed for out of pocket travel
expenses and will receive an annual option grant to purchase 50,000 shares of
the Company's Common Stock on the date of the Company's annual stockholder's
meeting; provided; however, that no director may receive more than one grant of
these options in any calendar year. Upon achieving certain target increases in
stock price for a defined period of time during an existing independent
directors tenure, the Company has agreed to grant each director an additional
option to purchase 100,000 shares of the Company's Common Stock substantially
upon the same terms of the options to purchase 300,000 shares of the Company's
Common Stock previously granted, except for the exercise price of such options.

<PAGE>



         ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

The following table sets forth information as to the number of shares of the
Company's Common Stock beneficially owned, as of March 8, 2004, by (i) each
beneficial owner of more than five percent of the outstanding Common Stock, (ii)
each current named executive officer and director and (iii) all current
executive officers and directors of the Company as a group. All shares are owned
both beneficially and of record unless otherwise indicated. Unless otherwise
indicated, the address of each beneficial owner is c/o Phase III Medical, Inc.,
330 South Service Road, Suite 120, Melville, New York 11747.

<TABLE>
<CAPTION>

                                 Number and Percentage of Shares of Common Stock Owned


                                                                                                        Percentage
                                                                          # of Shares              of Common Stock
Name and Address of Beneficial                          Notes            Beneficially           Beneficially Owned
Owner                                                                           Owned                  (See Note 1)
<S>                                                       <C>                <C>                            <C>
Joel San Antonio
56 North Stanwich Road
Greenwich, CT 06831                                                         3,752,500                       13.9%

Mark Weinreb                                              (2)               2,540,000                        9.4%

Wayne Marasco                                             (3)                 800,000                        3.0%

Michael Lax                                               (3)                 300,000                        1.1%

Joseph Zuckerman, M.D.                                    (3)                 550,000                        2.0%

All current  directors  and officers as a
group (four persons)                                  (2) (3)               4,190,000                       15.6%
Notes:
(1)   Based on 26,926,460 shares of Common Stock outstanding on March 8, 2004.
(2)   Includes 2,500,000 currently exercisable options to purchase Common Stock.
(3)   Includes 300,000 currently exercisable options to purchase Common Stock.
</TABLE>

EQUITY COMPENSATION PLAN INFORMATION

The following table gives information about the Company's Common Stock that may
be issued upon the exercise of options, warrants and rights under the Company's
2003 Equity Participation Plan as of December 31, 2003. This plan was the
Company's only equity compensation plan in existence as of December 31, 2003

<TABLE>

                                                                                                 (c)
                                                                                         Number of Securities
                                                                                          Remaining Available
                                                                                          For Future Issuance
                                              (a)                       (b)                 Under Equity
                                     Number of Securities to      Weighted-Average        Compensation Plan
                                     be Issued Upon Exercise     Exercise Price of      (Excluding Securities
                                     of Outstanding Options,    Outstanding Options,        Reflected In
          Plan Category                Warrants and Rights      Warrants and Rights          Column(a))
          -------------             -------------------------  ---------------------  ------------------------

Equity Compensation Plans
Approved by

<S>                                                <C>                        <C>                  <C>
Shareholders............                           3,700,000                  $0.05                11,300,000

Equity Compensation
Plans Not Approved by
Shareholders                                               0                      0                         0
                                    -------------------------  ---------------------  ------------------------


TOTAL                                              3,700,000                  $0.05                11,300,000
</TABLE>

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

All audit and audit-related work and all non-audit work performed by the
Company's independent accountants is approved in advance by the Board of
Directors of the Company, including the proposed fees for such work. The Audit
Committee is informed of each service actually rendered.

Audit Fees. Audit fees billed or expected to be billed to the Company by the
Company's principal accountant for the audit of the financial statements
included in the Company's Annual Reports on Form 10-K, and reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q,
for the years ended December 31, 2003 and 2002 totaled approximately $48,185 and
$48,228, respectively.

Audit-Related Fees. The Company was billed $0 and $0 by the Company's principal
accountant for the fiscal years ended December 31, 2003 and 2002, respectively,
for assurance and related services that are reasonably related to the
performance of the audit or review of the Company's financial statements and are
not reported under the caption Audit Fees above.

Tax Fees. The Company was billed or expected to be billed an aggregate of $5,072
and $2,900 by the Company's principal accountant for the fiscal years ended
December 31, 2003 and 2002, respectively, for tax services, principally advice
regarding the preparation of income tax returns.

All Other Fees. The Company incurred fees for the fiscal years ended December
31, 2003 and 2002, respectively, for permitted non-audit services of $3,230 and
$0, respectively.

The Company's Board of Directors pre-approved the Company's engagement of Holtz
Rubenstein & Co., LLP to act as the Company's independent auditor for the fiscal
year ended December 31, 2003. The Company's Board of Directors pre-approved
Travis Wolff & Company, L.L.P. to act as the Company's independent auditor for
the fiscal years ended December 31, 2002 and December 31, 2001. The Company's
independent auditors performed all work only with its full time permanent
employees.


<PAGE>



                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
         FORM 8-K

The following documents are being filed as part of this Report:

(a)(1)  Financial Statements:

Reference is made to the Index to Financial Statements and Financial Statement
Schedule on Page F-1.

(a)(2)  Financial Statement Schedule.

Reference is made to the Index to Financial Statements and Financial Statement
Schedule on Page F-1.

All other schedules have been omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the Financial
Statements or Notes thereto.
<TABLE>
<CAPTION>

(a)(3)   Exhibits:

       <C>   <C>                                                                                       <C>
3      (a)    Certificate of Incorporation filed September 18, 1980 (1)                                 3
       (b)    Amendment to Certificate of Incorporation 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)                                                                 C 3(f)
       (l)    Amendment to Certificate of Incorporation dated May 18, 1998 (10)                         A
       (m)    Amendment to Certificate of Incorporation filed July 24, 2003 (15)                       3.1
       (n)    By-laws of the Corporation, as amended on April 25, 1991 (6)
4      (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)
       (f)    Form of Promissory Note - September 2002 Offering (13)                                  4.1
       (g)    Form of Promissory Note - February 2003 Offering (13)                                   4.2
       (h)    Form of Promissory Note - March 2003 Offering (13)                                      4.3
10     (a)    1992 Stock Option Plan (8)                                                               B
       (b)    Stock Purchase Agreement, dated as of March 4, 1998, between
              the Company and the Initial Purchasers named therein (10)                                B
       (c)    1998 Employee Stock Option Plan (10)                                                     D
       (d)    Stock Contribution Exchange Agreement with StrandTek International, Inc.
              dated January 7, 2002, as amended on February 11, 2002 (11)                             10(o)
       (e)    Supplemental Disclosure Agreement to Stock Contribution Exchange
              Agreement with StrandTek International, Inc. dated January 7, 2002 (11)                 10(p)
       (f)    Employment Agreement dated as of February 6, 2003 by and between
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

       <C>   <C>                                                                                       <C>

              Corniche Group Incorporated and Mark Weinreb (12)                                       99.2
       (g)    Stock Option Agreement dated as of February 6, 2003 between
              Corniche Group Incorporated and Mark Weinreb (12)                                       99.3
       (h)    Corniche Group Incorporated 2003 Equity Participation Plan (12)                         99.4
       (i)    Royalty Agreement, dated as of December 5, 2003, by and between
              Parallel Solutions, Inc. and Phase III Medical, Inc. (13)(14)                           10.1
       (j)    Form of Stock Option Agreement (13)                                                     10.2
14     (a)    Code of Ethics for Senior Financial Officers (13)                                       14.1
23     (a)    Consent of Holtz Rubenstein & Co., LLP (13)                                             23.1
31     (a)    Certification of Chief Executive Officer pursuant to Section 302
              of the Sarbanes-Oxley Act of 2002 (13)                                                  31.1
32     (a)    Certification pursuant to 18 U.S.C. Section 1350, as adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (13)                          32.1
</TABLE>

Notes:

(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 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.
<PAGE>

(14)     Certain portions of this exhibit have been omitted based upon a request
         for confidential treatment. The omitted portions of this exhibit have
         been filed separately with the Securities and Exchange Commission on a
         confidential basis.
(15)     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 July 24, 2003, which exhibit is incorporated here by
         reference.

(b)      Reports on Form 8-K

On December 12, 2003, the Company filed a Current Report on Form 8-K (under
Items 5 and 7) regarding the Royalty Agreement, dated as of December 5, 2003, by
and between Parallel Solutions, Inc. and Phase III Medical, Inc.

<PAGE>




                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                  Phase III Medical, Inc.


                                                  By:   /s/ Mark Weinreb
                                                        ----------------
                                                        Mark Weinreb, President

Dated:  March 30, 2004.


          Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:

Signatures                           Title                              Date
----------                           -----                              ----



/s/ Mark Weinreb                     Director, President
------------------------------       and Chief Executive Officer  March 30, 2004
Mark Weinreb




/s/ Wayne Marasco                    Director                     March 30, 2004
------------------------------
Wayne Marasco




/s/ Joseph Zuckerman                 Director                     March 30, 2004
------------------------------
Joseph Zuckerman


/s/ Michael Lax                      Director                     March 30, 2004
------------------------------
Michael Lax





<PAGE>





                             PHASE III MEDICAL, INC.


                                Table of Contents

<TABLE>
<CAPTION>





                                                                                                                Page
                                                                                                        ----------------------
Report of Independent Certified Public Accountants -
<S>                                                                                                                 <C>
        Holtz Rubenstein & Co., LLP                                                                             F - 1

Report of Independent Certified Public Accountants -
        Travis, Wolff & Company, L.L.P.                                                                         F - 2

Financial Statements:

        Consolidated Balance Sheets at December 31, 2003 and 2002                                               F - 3

        Consolidated Statements of Operations
                          Years Ended December 31, 2003, 2002 and 2001                                          F - 4

        Consolidated Statements of Stockholder's Equity (Deficit)
                          Years Ended December 31, 2003, 2002 and 2001                                          F - 5

        Consolidated Statements of Cash Flows
                          Years Ended December 31, 2003, 2002 and 2001                                          F - 6

        Notes to Consolidated Financial Statements                                                          F - 8 - F - 21

</TABLE>




<PAGE>





                          Independent Auditors' Report



Board of Directors and Stockholders
Phase III Medical, Inc.
Melville, New York


We have audited the accompanying consolidated balance sheet of Phase III
Medical, Inc. as of December 31, 2003 and the related consolidated statements of
operations, stockholders' equity (deficit ) and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Phase III Medical,
Inc. as of December 31, 2003 and the results of their operations and their cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's recurring losses from
operations raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




                                               /s/ HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
February 3, 2004





                                       F-1




<PAGE>




REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors of
Phase III Medical, Inc.

We have audited the accompanying consolidated balance sheet of Phase III
Medical, Inc. (the "Company") as of December 31, 2002 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 2002 and 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Phase
III Medical, Inc. as of December 31, 2002 and the consolidated results of their
operations and their cash flows for the years ended December 31, 2002 and 2001,
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared assuming
Phase III Medical, Inc. will continue as a going concern. As discussed in the
accompanying notes to the consolidated financial statements, the Company sold
its insurance subsidiary in July 2001. Additionally, the Company discontinued
sales of its extended warranty service contracts through its website in December
2001. Accordingly, the Company has no operations nor available means to finance
its current expenses and with which to pay its current liabilities. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 13. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/TRAVIS, WOLFF & COMPANY, L.L.P.

Dallas, Texas
March 11, 2003




                                       F-2

<PAGE>

<TABLE>
<CAPTION>

                                             PHASE III MEDICAL, INC.

                                           Consolidated Balance Sheets


                                                                                                     December 31,
                                                                                               -------------------------
                                                                                                       2003        2002
                                                                                                ------------ -----------
<S>                                                                                            <C>          <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                                 $    210,947 $    19,255
     Notes receivable, net of allowance of $250,000 in 2002                                               -   1,000,000
     Prepaid expenses and other current assets, net of allowance
          of $8,103 in 2002                                                                          18,024      40,094
                                                                                                ------------ -----------

          Total current assets                                                                      228,971   1,059,349

Property and equipment, net                                                                           1,935           -

Deferred acquisition costs                                                                           77,782     123,835

Other assets                                                                                          3,000           -
                                                                                                ------------ -----------

                                                                                               $    311,688 $ 1,183,184
                                                                                                ============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Interest and dividends payable - preferred stock                                          $    433,196 $   385,512
     Accounts payable                                                                                87,896     344,279
     Accrued liabilities                                                                             92,115     157,806
     Stockholder advances                                                                                 -     106,000
     Notes payable                                                                                  400,000     125,000
     Current portion of long-term debt                                                                9,513      22,595
                                                                                                ------------ -----------

          Total current liabilities                                                               1,022,720   1,141,192

Unearned revenues                                                                                   110,568     175,200

Series A mandatorily redeemable convertible preferred stock                                         681,174     681,174

Long-term debt                                                                                            -       9,513

COMMITMENTS AND CONTINGENCIES

Stockholders' 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, 2003 and
   at December 31, 2002                                                                                 100         100
 Common stock, $.001par value; authorized, 250,000,000
   shares;
    issued and outstanding, 26,326,460 at December 31, 2003
    and 22,398,710 shares at December 31, 2002                                                       26,327      22,399
 Additional paid-in capital                                                                       9,232,753   8,847,573
 Accumulated deficit                                                                            (10,761,954) (9,693,967)
                                                                                                ------------ -----------

          Total stockholders' equity (deficit)                                                   (1,502,774)   (823,895)
                                                                                                ------------ -----------

                                                                                               $    311,688 $ 1,183,184
                                                                                                ============ ===========
</TABLE>


The accompanying  notes are an integral part of the consolidated  financial
statements




                                       F-3

<PAGE>

<TABLE>
<CAPTION>


                                        PHASE III MEDICAL, INC.

                                 Consolidated Statements of Operations





                                                                              Years ended December 31,
                                                             -----------------------------------------------------------
                                                                         2003              2002                2001
                                                              -------------------- ----------------- -------------------

<S>                                                          <C>                  <C>               <C>
Earned revenues                                              $             64,632 $          81,348 $           107,447

Direct Costs                                                              (43,608)          (60,565)            (70,674)
                                                              -------------------- ----------------- -------------------

            Gross Profit                                                   21,024            20,783              36,773

Selling, general and administrative                                      (685,353)         (911,950)         (1,642,874)
Purchase of medical royalty stream                                        (80,000)                -                   -
Realized loss on note receivable                                         (150,000)                -                   -
Provision for uncollectible note receivable and
 accrued interest                                                               -          (258,103)                  -
                                                              -------------------- ----------------- -------------------

            Operating loss                                               (894,329)       (1,149,270)         (1,606,101)

Other income (expense):
Unrealized gain on marketable securities                                        -                 -              18,779
Realized loss on marketable securities                                          -            (3,490)                  -
Property and equipment impairment charge                                        -           (54,732)                  -
Capitalized software impairment charge                                          -                 -            (305,333)
Interest income                                                            88,923            70,676             107,183
Interest expense - Series A mandatorily
redeemable convertible preferred stock                                    (23,842)                -                   -
Interest expense                                                         (214,897)          (23,022)             (6,212)
                                                              -------------------- ----------------- -------------------

                                                                         (149,816)          (10,568)           (185,583)
                                                              -------------------- ----------------- -------------------
Loss before discontinued
operations and preferred dividend                                      (1,044,145)       (1,159,838)         (1,791,684)

Discontinued operations:
Income from operations                                                          -                 -             237,898
Loss on disposal                                                                -                 -            (479,244)
                                                              -------------------- ----------------- -------------------


                                                                                -                 -            (241,346)
                                                              -------------------- ----------------- -------------------

Net loss                                                               (1,044,145)       (1,159,838)         (2,033,030)

Preferred dividend                                                        (23,842)          (47,684)            (47,684)
                                                              -------------------- ----------------- -------------------

Net Loss attributable to common stockholders                 $         (1,067,987)$      (1,207,522)$        (2,080,714)
                                                              ==================== ================= ===================

Basic earnings per share
Loss before discontinued operations                                         (0.05)            (0.05)              (0.08)
Loss from discontinued operations                            $                  - $               - $             (0.01)
                                                              -------------------- ----------------- -------------------

Net loss attributable to common stockholders                 $              (0.05)$           (0.05)$             (0.09)
                                                              ==================== ================= ===================

Weighted average common shares outstanding                             23,509,343        22,344,769          22,284,417
                                                              ==================== ================= ===================

</TABLE>


The accompanying  notes are an integral part of the consolidated  financial
statements




                                             F-4
<PAGE>

<TABLE>
<CAPTION>


                                        PHASE III MEDICAL, INC.

                       Consolidated Statements of Stockholders' Equity (Deficit)



                                                    Series B
                                                   Convertible
                                                 Preferred Stock    Common Stock     Additional
                                                 --------------- -------------------  Paid-in    Accumulated
                                                  Shares  Amount   Shares    Amount   Capitol     Deficit     Total
                                                 -------- ------ ----------- ------- ---------- ------------ -----------

<S>                 <C> <C>                       <C>    <C>     <C>        <C>     <C>        <C>          <C>
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)
Issuance of common stock for cash,
 net of offering costs                                 -      -   2,825,000   2,825    211,956            -     214,781
Issuance of common stock upon
exercise of common stock options                       -      -   1,000,000   1,000      4,000            -       5,000
Issuance of common stock for services                  -      -     100,000     100      2,900            -       3,000
Issuance of common stock to directors                  -      -       2,750       3        300            -         303
Series A convertible stock dividends                   -      -           -       -          -      (23,842)    (23,842)
Stock options granted with debt                        -      -           -       -    166,024            -     166,024
Net loss                                               -      -           -       -          -   (1,044,145) (1,044,145)
                                                 -------- ------ ----------- ------- ---------- ------------ -----------

Balance at December 31, 2003                      10,000 $  100  26,326,460 $26,327 $9,232,753 $(10,761,954)$(1,502,774)
                                                 ======== ====== =========== ======= ========== ============ ===========

</TABLE>


The accompanying  notes are an integral part of the consolidated  financial
statements


                                           F-5


<PAGE>

<TABLE>
<CAPTION>

                                        PHASE III MEDICAL, INC.

                                 Consolidated Statements of Cash Flows



                                                                                          Years ended December 31,
                                                                                     -----------------------------------
                                                                                           2003        2002        2001
                                                                                     ----------- ----------- -----------

<S>                                                                                 <C>         <C>         <C>
Cash flows from operating activities:                                               $(1,044,145)$(1,159,838)$(2,033,030)
 Net loss
 Adjustments to reconcile net loss to net cash (used in)
  Provided by operating activities:
    Net income from discontinued operations                                                   -           -    (237,898)
    Loss on sale of subsidiary                                                                -           -     479,244
    Property and equipment impairment charge                                                  -      54,732           -
    Capitalized software impairment charge                                                    -           -     305,333
    Common shares issued and stock options granted for
      interest expense and for services rendered                                        169,327       9,894       4,542
    Depreciation                                                                            646      16,766     155,436
Series A mandatorily redeemable
      convertible preferred stock                                                        23,842           -           -
    Unearned revenues                                                                   (64,632)    (84,579)    144,971
    Deferred acquisition costs                                                           46,053      59,744    (106,629)
    Realized loss on note receivable                                                    150,000           -           -
    Provision for uncollectible note receivable and
      accrued interest                                                                        -     258,103           -
    Changes in operating assets and liabilities :
      Marketable securities                                                                   -   1,503,374     872,840
      Prepaid expenses and other current assets                                          22,070     (28,463)     55,557
      Other assets                                                                       (3,000)      4,175           -
      Accounts payable, accrued expenses
        and other current liabilities                                                  (322,074)    371,468     (14,209)
                                                                                     ----------- ----------- -----------

  Net cash (used in) provided by operating activities                                (1,021,913)  1,005,376    (373,843)

Cash flows from investing activities:
  Acquisition of property and equipment                                                  (2,581)     (1,133)     (9,061)
  Notes receivable                                                                      850,000  (1,250,000)          -
  Proceeds from sale of property and equipment                                                -       3,795           -
  Proceeds from sale of subsidiary                                                            -           -     372,000
                                                                                     ----------- ----------- -----------

  Net cash provided by (used in) investing activities                                   847,419  (1,247,338)    362,939

Cash flows from financing activities:
  Net proceeds from issuance of capital stock                                           219,781           -           -
  Stockholder advances                                                                 (106,000)    106,000           -
  Net proceeds from notes payable                                                       275,000     125,000           -
  Repayment of long-term debt                                                           (22,595)    (21,051)    (23,432)
                                                                                     ----------- ----------- -----------

   Net cash provided by (used in) financing activities                                  366,186     209,949     (23,432)
                                                                                     ----------- ----------- -----------

Net increase (decrease) in cash and cash equivalents                                    191,692     (32,013)    (34,336)

Cash and cash equivalents at beginning of year                                           19,255      51,268      85,604
                                                                                     ----------- ----------- -----------

Cash and cash equivalents at end of year                                            $   210,947 $    19,255 $    51,268
                                                                                     =========== =========== ===========
</TABLE>



The accompanying  notes are an integral part of the consolidated  financial
statements





                                    F-6
<PAGE>



                                        PHASE III MEDICAL, INC.

                           Consolidated Statements of Cash Flows - continued


<TABLE>
<CAPTION>

                                                                                    Years ended December 31,
                                                                        ------------------------------------------------
                                                                                   2003             2002           2001
                                                                        ----------------  ---------------  -------------

Supplemental disclosures of cash flow information:
 Cash paid during the year for:
<S>                                                                    <C>               <C>              <C>
   Interest                                                            $         26,483  $         8,804  $       6,212
                                                                        ================  ===============  =============

Supplemental schedule of non-cash investing
 and financing activities

Issuance of common stock for services rendered                         $          3,303  $         1,121  $       4,542
                                                                        ================  ===============  =============

Compensatory element of stock options                                  $        166,024  $         8,773  $           -
                                                                        ================  ===============  =============

Net accrual of dividends on Series A preferred stock                   $         23,842  $        47,684  $      47,684
                                                                        ================  ===============  =============

</TABLE>


The accompanying  notes are an integral part of the consolidated  financial
statements




                                      F - 7

<PAGE>


                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 1 - The Company


Phase III Medical, Inc. (hereinafter referred to as the "Company") was known as
Corniche Group Incorporated until it changed its name on July 24, 2003. The
Company was incorporated in Delaware on September 18, 1980 under the name
Fidelity Medical Services, Inc. From its inception through March 1995, the
Company was engaged in the development, design, assembly, marketing, and sale of
medical imaging products. As a result of a reverse merger with Corniche
Distribution Limited and its Subsidiaries ("Corniche") 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. Effective
March 25, 1995, the Company sold its wholly-owned medical imaging products
subsidiary. On September 28, 1995 the Company changed its name to Corniche Group
Incorporated. In February 1996, the Company's United Kingdom operations were
placed in receivership by their creditors. Thereafter, through May 1998, the
Company had no activity. 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 endeavored to establish for the Company new
business operations in the property and casualty specialty insurance and the
service contract markets. On September 30, 1998, the Company acquired all of the
capital stock of Stamford Insurance Company, Ltd. ("Stamford") from Warrantech
Corporation ("Warrantech") for $37,000 in cash in a transaction accounted for as
a 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 on
the sale of Stamford. The closing was effective May 1, 2001 and transfer of
funds was completed on July 6, 2001.


On January 7, 2002, the Company entered into a Stock Contribution Exchange
Agreement (the "Exchange Agreement") and a Supplemental Disclosure 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 loan holders of
Strandtek (the "StrandTek Transaction"). The Exchange Agreement was amended on
February 11, 2002. Had the transactions contemplated by the Agreements closed,
StrandTek would have become a majority owned subsidiary of the Company and the
former shareholders of StrandTek would have controlled the Company. Consummation
of the StrandTek Transaction was conditioned upon a number of closing
conditions, including the Company obtaining financing via an equity private
placement, which ultimately could not be met and, as a result, the Agreements
were formally terminated by the Company and StrandTek in June 2002.

The Company was a provider of extended warranties and service contracts via the
Internet at warrantysuperstore.com through June 30, 2002. In June 2002,
management determined, in light of continuing operating losses, to discontinue
its warranty and service contract business and to seek new business
opportunities for the Company. 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 for the Company that involve 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 rights to one or more of such drugs or medical
devices or the royalty streams therefrom. Mr. Weinreb was appointed to finalize
and execute the Company's new business plan.

                                       F-8

<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


Note 1 - The Company - (Continued)

On December 12, 2003, the Company signed a royalty agreement with Parallel
Solutions, Inc. "(PSI") to develop a new bioshielding platform technology for
the delivery of therapeutic proteins and small molecule drugs in order to extend
circulating half-life to improve bioavailability and dosing regimen, while
maintaining or improving pharmacologic activity. The agreement provides for PSI
to pay the Company a percentage of the revenue received from the sale of certain
specified products or licensing activity. The company will provide capital and
guidance to PSI to conduct a Proof of Concept Study to improve an existing
therapeutic protein with the goal of validating the bioshielding technology for
further development and licensing the technology. The Company will need to
recruit management, business development and technical personnel, and develop
its business model. Accordingly, it will be necessary for the Company to raise
new capital. There can be no assurance that any such business plan developed by
the Company will be successful, that the Company will be able to acquire such
new business or rights or raise new capital, or that the terms of any
transaction will be favorable to the Company.

The business of the Company today comprises the "run off" of its sale of
extended warranties and service contracts via the Internet and the new business
opportunity it is pursuing in the medical/bio-tech sector.

At December 31, 2003, the Company had a cash balance of $210,947, deficit
working capital of $793,749 and a stockholders' deficit of $1,502,774. In
addition the Company sustained losses of $1,044,145, $1,159,838 and $2,033,030
for the three fiscal years ended December 31, 2003, 2002 and 2001 respectively.
The Company's lack of liquidity combined with its history of losses raises
substantial doubt as to the ability of the Company to continue as a going
concern. The consolidated financial statements of the Company do not reflect any
adjustments relating to the doubt of its ability to continue as a going concern.
Management is presently selling notes which bear interest at 20% per annum to
fund the Company until such time as sufficient proceeds, if any, are received
from the private placement of its common stock. On September 22, 2003 the
Company commenced an equity private placement to raise up to $4 million through
the sale of up to 40 million shares of its Common Stock in increments of $5,000
or 50,000 shares. Through December 31, 2003, the Company sold 2,825,000 shares,
resulting in proceeds to the Company of $214,781. The Company continues to offer
these securities without the assistance of an investment banker and will collect
the full proceeds from any sale. There can be no assurance that the Company will
be able to sell these securities and may have to rely on its ability to borrow
money from new and or existing investors.

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 consolidated statement of cash flows.

                                       F-9

<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


Note 2 - Summary of Significant Accounting Policies - (Continued)

(d)      Concentrations of Credit-Risk: Financial instruments that potentially
         subject the Company to significant concentrations of credit risk
         consist principally of cash. The Company places its cash accounts with
         high credit quality financial institutions, which at times may be in
         excess of the FDIC insurance limit.

(e)      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 are 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 expense as incurred.

(f)      Income Taxes: The Company, in accordance with SFAS 109, "Accounting for
         Income Taxes", 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.

(g)      Pro Forma  Effect of Stock  Options:  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  retrospectively  from July 1, 2000. The effect of
         adoption of the  Interpretation  was a charge to operations in 2000 of
         $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,  $1.097 in  September  2000 and $.03 in  February
         2003, $.05 in May, June and July 2003, and $.18 in September 2003, 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 between 4% and 10%, the Company  would have recorded
         compensation expense of $205,760,  $43,593 and $59,129,  respectively,
         for the years ended December 31, 2003,  2002 and 2001 as calculated by
         the Black-Scholes option pricing model.


         As such, proforma net loss and net loss per share would be as follows:
<TABLE>
<CAPTION>

                                                      2003                2002                 2001
                                                 ---------------     ----------------     ---------------

<S>                                         <C>                  <C>                   <C>
Net loss as reported                        $       (1,067,987)  $       (1,159,838)   $     (2,033,030)
Additional compensation                               (205,760)             (43,593)            (59,129)
                                                 ---------------     ----------------     ---------------

Adjusted net loss                           $       (1,273,747)  $       (1,203,431)   $     (2,092,159)
                                                 ===============     ================     ===============

Net loss per share as reported              $             (.05)  $            (0.05)   $          (0.09)
                                                 ===============     ================     ===============

Adjusted net loss per share                 $             (.05)  $            (0.05)   $          (0.09)
                                                 ===============     ================     ===============

                                      F-10

</TABLE>

<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------



Note 2 - Summary of Significant Accounting Policies - (Continued)

(h)      Recent Accounting Pronouncements:

         In November 2002, the FASB issued FASB Interpretation (FIN) No. 45,
         "Guarantor's Accounting and Disclosure Requirements for Guarantees,
         Including Indirect Guarantees of Indebtedness of Others, an
         interpretation of FASB Statements No. 5, 57 and 107 and Rescission of
         FASB Interpretation No. 34". FIN 45 elaborates on the existing
         disclosure requirements for most guarantees, including loan guarantees
         such as standby letters of credit and warranty obligations. It also
         clarifies that at the time a company issues a guarantee, a company must
         recognize an initial liability for the fair value of the obligations it
         assumes under that guarantee and must disclose that information in its
         interim and annual financial statements. The provisions of FIN 45
         relating to initial recognition and measurement must be applied on a
         prospective basis to guarantees issued or modified after December 31,
         2002. The adoption of the initial recognition and measurement
         provisions did not have a significant impact on the Company's financial
         condition or results of operations. The disclosure requirements of FIN
         45, which were effective for both interim and annual periods that end
         after December 15, 2002. The adoption of FIN No. 45 did not have a
         material impact on the Company's consolidated financial statements.

         In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
         Interest Entities", to address perceived weaknesses in the accounting
         and financial reporting for investments or interests in entities
         commonly known as special purpose or off-balance-sheet entities. FIN 46
         requires certain variable interest entities to be consolidated by the
         primary beneficiary of the entity if the equity investors in the entity
         do not have the characteristics of a controlling financial interest or
         do not have sufficient equity at risk for the entity to finance its
         activities without additional subordinated financial support from other
         parties. FIN 46 was required to be applied to preexisting entities of
         the Company as of the beginning of the first quarter after June 15,
         2003. FIN 46 was required to be applied to all new entities with which
         the Company became involved beginning February 1, 2003. The adoption of
         FIN No. 46 did not have a material impact on the Company's consolidated
         financial statements.

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
         133 on Derivative Instruments and Hedging Activities". This Statement
         clarifies accounting and reporting for derivative instruments,
         including certain embedded derivatives, and for hedging activities
         under SFAS No. 133. SFAS No. 149 is effective for contracts entered
         into or modified after June 30, 2003 and for hedging relationships
         designated after June 30, 2003. The guidance should be applied
         prospectively. The adoption of SFAS No. 149 did not have a material
         impact on the Company's consolidated financial statements.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity". This Statement was developed to respond to concerns expressed
         by users of financial statements about issuers' classification in the
         statement of financial position of certain financial instruments that
         have characteristics of both liabilities and equity but that have been
         presented either entirely as equity or between the liabilities section
         and the equity section of the statement of financial position
         "mezzanine equity"). This Statement also addresses questions about the
         classification of certain financial instruments that embody obligations
         to issue equity shares. SFAS No. 150 aims to eliminate diversity in
         practice by requiring certain types of

                                      F-11

<PAGE>


                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 2 - Summary of Significant Accounting Policies - (Continued)

         "freestanding" financial instruments, such as mandatorily redeemable
         instruments, to be reported as liabilities. Preferred dividends on
         these instruments are now classified as interest expense. Retroactive
         reclassification of amounts reported in historical financial statements
         for periods prior to the effective date of SFAS No. 150 is not
         permitted. The provisions of SFAS No. 150, which also include a number
         of new disclosure requirements, was effective for instruments entered
         into or modified after May 31, 2003 and pre-existing instruments as of
         the beginning of the first interim period that commenced after June 15,
         2003. Accordingly, the Company has classified the Series A Convertible
         Preferred Stock as a long-term liability in accordance with the
         provisions of SFAS No. 150. See Note 9 for a further discussion.

(i)      Advertising Costs: The Company expenses advertising costs as incurred.
         Advertising costs amounted to $107,117 for the year ended December 31,
         2001. There were no advertising costs in 2003 or 2002.

(j)      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.

(j)      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.


(k)      Purchase of Royalty Interests: The Company charges payments for the
         purchase of future potential royalty interests to expense as paid and
         will record revenues when royalty payments are received.


                                      F-12

<PAGE>


                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 3 - Notes Receivable

In January 2002, the Company advanced to StrandTek a loan of $1 million on an
unsecured basis, which is personally guaranteed by certain of the principal
shareholders of StrandTek and a further loan of $250,000 on February 19, 2002 on
an unsecured basis. Such loans bear interest at 7% per annum and were due on
July 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 Company
commenced legal proceedings against StrandTek and the guarantors to recover the
principal, accrued interest and costs of recovery. The Company ceased accruing
interest on July 31, 2002. Subsequent to July 31, 2002, the notes accrue
interest at the default rate of 12% per annum. The Company provided an allowance
for the $250,000

unsecured loan and interest of $8,103 at December 31, 2002. On July 24, 2003 the
Company entered into a Forbearance Agreement with personal guarantors Veltmen
and Buckles pursuant to which they made payments totaling $590,640, including
interest of $90,640. A similar Forbearance Agreement was reached with personal
guarantor Arnett as of July 28, 2003 pursuant to which he paid $287,673,
including interest of $37,673. A Settlement Agreement was reached with personal
guarantor Bauman as of December 23, 2003 pursuant to which he paid $100,000 in
full settlement of the judgment against him in the amount of
$291,406.  The  payment  was  received  on  December  30,  2003 as stated in the
agreement.  These payments,  totaling  approximately  $987,000 were paid as full
satisfaction for the outstanding amounts owed to the Company.  Accordingly,  the
Company recorded a realized loss on these notes of $150,000 in 2003.

Note 4 - Accrued Expenses

Accrued expenses are as follows:
<TABLE>
<CAPTION>

                                                                                     December 31,
                                                                      -------------------------------------
                                                                           2003                 2002
                                                                      ----------------     ----------------

   <S>                                                              <C>                   <C>
  Professional fees                                              $             49,009  $            28,500
  Interest on notes payable                                                    27,835                5,446
  Employment contract termination                                                   -              120,000
  Other                                                                        15,271                3,860
                                                                      ----------------     ----------------

                                                                 $             92,115  $           157,806
                                                                      ================     ================
</TABLE>

Note 5 - Notes Payable

In September 2002, the Company sold to accredited investors five 60-day
promissory notes in the principal sum of $25,000 each, resulting in net proceeds
to the Company of $117,500, net of offering costs. The notes bear interest at
15% per annum payable at maturity. The notes include a default penalty pursuant
to which, if the notes are not paid on the due date, the holder shall have the
option to purchase twenty five thousand shares of the Company's common stock for
an 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 the
note is paid in full, the holder shall have the option to purchase an


                                      F-13
<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 5 - Notes Payable - (Continued)

additional  twenty five  thousand  shares of the  Company's  common stock for an
aggregate purchase price of $125. At December 31, 2003, the Company had reserved
750,000  (2002:  250,000)  shares of the  Company's  common  stock for  issuance
against  exercise of the  options  granted  pursuant to the default  penalty and
recognized $166,024 (2002: $8,773) as a charge to interest expense. See Note 7.

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, were eligible to purchase these promissory notes. The Company raised
$50,000 through the sale of such promissory notes, resulting in net proceeds to
the Company of $45,000, net of offering costs. In November 2003, the Company
repaid all $50,000 of such promissory notes together with all accrued interest
of $6,854.
On March 17, 2003, the Company commenced a private  placement  offering to raise
up to $250,000  in 6-month  promissory  notes in  increments  of $5,000  bearing
interest at 15% per annum. Only selected  investors which qualify as "accredited
investors"  as defined  in Rule  501(a)  under the  Securities  Act of 1933,  as
amended,  were eligible to purchase these  promissory  notes. The Company raised
the full $250,000  through the sale of such promissory  notes,  resulting in net
proceeds to the Company of $225,000,  net of offering costs. The notes contain a
default  provision  which raises the  interest  rate to 20% if the notes are not
paid when due. The Company  issued  $250,000 of these notes.  As of December 31,
2003,  $60,000  of the  principal  amount of these  notes were in  default.  All
interest  payments have been made and are current.  As of March 15, 2004, all of
these notes are in default and bear interest at 20%.

Note 6 - Series A Mandatorily Redeemable Convertible Preferred Stock

In connection with the settlement of 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. 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
share, per year, payable semi-annually. The Series A Preferred Stock is callable
by the Company 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 trade 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 1, 1999 the holders of the Series A Preferred Stocks
may require the Company to redeem their 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 years ended December 31,
2000 and 1999, 128,880 and 18,711, respectively, shares of Series A Preferred
Stock were converted into 24,743 and 3,586, respectively, shares of common


                                      F-14
<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note  6  -  Series  A  Mandatorily  Redeemable  Convertible  Preferred  Stock  -
(Continued)

stock. At December 31, 2003, 2002 and 2001, 681,174 shares of Series A Preferred
Stock were outstanding, and accrued dividends on these outstanding shares were
$433,196, $385,512 and $337,827 respectively.

On January 29, 2002, notice was given that, pursuant to the Company's Restated
Certificate of Incorporation, as amended, the Company called for redemption on
the date of closing the StrandTek Transaction, all shares of Series A Preferred
Stock outstanding on that date at a redemption price of $1.05, plus accrued and
unpaid dividends of approximately $0.47 per share. The redemption, among other
financial, legal and business conditions, was a condition of closing the
StrandTek Transaction. Similarly, the redemption was subject to closing the
StrandTek Transaction. Upon termination of the StrandTek Transaction, the
Company rescinded the notice of redemption.

Note 7 - Stockholders' Equity

(a)      Series B Convertible Redeemable Preferred Stock:

         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 ratably 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
         converted their shares into 100,000 shares of the Company's common
         stock.

         At December 31, 2003 and 2002, 10,000 Series B Preferred Shares were
         issued and outstanding. 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 2003 annual meeting, the stockholders approved an amendment
         increasing the authorized common stock to 250 million shares from 75
         million shares.

                                      F-15

<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

(b)      Common Stock: -continued

         In 2001, the Company issued 10,500 shares of its common stock whose
         fair value was $4,542, in 2002 8,000 shares of its common stock whose
         fair value was $1,121 and in 2003 2,750 shares of its common stock
         whose fair value was $303 to its board members for director's fees.

         In 2003, the Company issued 1,000,000 shares of its common stock,
         resulting in net proceeds to the Company of $5,000 as a result of the
         exercise of stock options granted pursuant to the default provisions of
         the 60 day promissory notes discussed in Note 5.

         On February 6, 2003, the Company entered into a deferment agreement
         with three major creditors 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. In
         addition, in consideration for the deferral, the Company agreed to
         issue 100,000 restricted shares of the Company's common stock, whose
         fair value was $3,000. The deferred creditors were paid in full, during
         2003 from the recoveries against the StrandTek (see Note 3) personal
         guarantors.

         On September 22, 2003 the Company commenced an equity private placement
         to raise up to $4 million through the sale of up to 40 million shares
         of its Common Stock in increments of $5,000 or 50,000 shares. Only
         selected investors which qualify as "accredited investors" as defined
         in Rule 501(a) under the Securities Act of 1933, as amended, were
         eligible to purchase these shares. The placement closed on December 31,
         2003 upon the sale of 2,825,000 shares, resulting in proceeds to the
         Company of $214,781, net of offering costs of $67,719.

         The Company retained Robert M. Cohen & Company as placement agent, on a
         best efforts basis, for the offering. The Company agreed to pay the
         placement agent an amount equal to 10% of the proceeds of the offering
         as commissions for the placement agents' services in addition to
         reimbursement of the placement agents' expenses (by way of a 3%
         non-accountable expense allowance) and indemnification against
         customary liabilities.

(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.

         In connection with the September 2003 equity private placement, the
         Company issued a 5 year warrant to purchase 282,500 shares of its
         Common Stock at an exercise price of $.12 per share to its retained
         placement agent, Robert M. Cohen & Company. The warrant contains
         "piggyback registration rights. The fair value of these warrants were
         $13,500 at December 31, 2003.

         A total of 326,500 shares of common stock are reserved for issuance
         upon exercise of outstanding warrants as of December 31, 2003 at prices
         ranging from $.12 to $8.10 and expiring through December 2008. No
         warrants were exercised during any of the periods presented.

                                      F-16

<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

(d)      Stock Option Plans:

         (i) 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 and are exercisable for a period of ten
         years, 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. The 1998 Employee Incentive Stock
         Option Plan was superceded by the 2003 Equity Participation Plan in
         February 2003. (see below).

         (ii) In April 1992, the Company adopted the 1992 Stock Option Plan to
         provide for the granting of options to directors. According to the
         terms of this plan, each director is granted options to purchase 1,500
         shares each year. The maximum amount of the Company's common stock that
         may be granted under this plan is 20,000 shares. The plan expired by
         its own terms in 2002.

         Stock option activity under the 1992 and 1998 Stock Option Plans is as
         follows:

<TABLE>
<CAPTION>

                                                                                  Weighted
                                                         Number of            Average Exercise
                                                           Shares                   Price
                                                      ------------------     --------------------
          <S>                                                    <C>                        <C>
          Balances at December 31, 2000                         403,000    $                1.45
          Granted                                                75,000                     0.37
          Expired                                               (1,500)                     0.31
          Cancelled                                           (175,000)                     1.23
                                                      ------------------     --------------------

          Balances at December 31, 2001                         301,500                     1.30
          Granted                                                     -                        -
          Expired                                               (1,500)                     0.41
          Cancelled                                           (300,000)                     1.31
                                                      ------------------     --------------------

          Balances at December 31, 2003 and 2002                     -    $                   -
                                                      ==================     ====================
</TABLE>

                                      F-17

<PAGE>


                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------


  (e)     Stock Option Plans:- Continued

          Under the 1998 and 1992 plans 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.


          (iii) At the 2003 annual meeting,  the stockholders  approved the 2003
          Equity  Participation Plan. The Company has reserved 15,000,000 shares
          of  common  stock  for  the  grant  of  incentive  stock  options  and
          non-statutory  stock options to employees and non-employee  directors,
          consultants  and advisors.  Pursuant to such plan the Company  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 the  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.


          Additionally,  the Company has granted  options to purchase  1,200,000
          shares of Common Stock at exercise prices ranging from $.05 to $.18 to
          members of its board of directors and its advisory board.  All options
          were  granted  at an  exercise  price  equal to the fair  value of the
          common stock at the date of grant.



          Stock option activity under the 2003 Equity  Participation  Plan is as
          follows:

<TABLE>
<CAPTION>


                                                                               Range of
                                                                               Exercise                 Weighted Average
                                                     Number of Shares (1)        Price                   Exercise Price
                                                --------------------------    --------------     ---------------------------
          <S>                                                    <C>              <C>             <C>
          Balance at December 31, 2002                                  -                 -                               -
          Granted                                               3,700,000       $.03 - $.18                            $.05
          Exercised                                                     -                 -                               -
          Expired                                                       -                 -                               -
          Cancelled                                                     -                 -                               -
                                                --------------------------    --------------     ---------------------------

          Balance at December 31, 2003                          3,700,000       $.03 - $.18   $                        $.05
                                                                              ==============     ===========================
          (1) All options are exercisable for a period of ten years.
</TABLE>


                                        F-18


<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 8 - Income Taxes

     Deferred tax assets consisted of the following as of December 31:
<TABLE>
<CAPTION>

                                                           2002                2003                     2001
                                                 --------------------    --------------------     -------------------
<S>                                           <C>                     <C>                     <C>
Net operating loss carryforwards              $         2,566,000     $         2,068,000     $           1,828,000
Depreciation and amortization                               1,000                  62,000                   126,000
Capital loss carryforward                                 149,000                 166,000                   166,000
Deferred revenue                                           38,000                  60,000                    88,000
Deferred legal and other fees                              30,000                 158,000                         -
Allowance for notes receivable                                  -                  88,000                         -
Other, net                                                      -                       -                         -
                                                 --------------------    --------------------     -------------------

Net deferred tax assets                                 2,784,000               2,602,000                 2,208,000
Deferred tax asset valuation allowance
                                                       (2,784,000)              (2,602,000)              (2,208,000)
                                                 --------------------    --------------------     -------------------
                                              $                 -     $                 -     $                   -
                                                 ====================    ====================     ===================

The provision for income taxes is different than the amount computed using the
applicable statutory federal income tax rate with the difference for each year
summarized below:

                                                            2003                  2002                   2001
                                                      ------------------    ------------------     -----------------
Federal tax benefit at statutory rate                           (34.0%)               (34.0%)               (34.0%)
Change in valuation allowance                                    34.0%                 33.0%                 33.0%
Permanent difference                                                -                   1.0%                  1.0%
                                                      ------------------    ------------------     -----------------

Provision for income taxes                                       0.00%                 0.00%                 0.00%
                                                      ==================    ==================     =================
</TABLE>


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 during any three-year period.

Upon receipt of the proceeds from the last foreign purchasers of the Company's
common stock in January 2000, common stock ownership changed in excess of 50%
during the three-year period then ended. At December 31, 2003, the Company had
net operating loss carryforwards of approximately $7,547,000. Included in the
net operating loss carryforward is approximately $2,121,000 that has been
limited by the ownership change. The tax loss carryforwards expire at various
dates through 2023. The future tax benefit of the net operating loss
carryforwards aggregating approximately $2,566,000 at December 31, 2003 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.

                                      F-19
<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 9 - Segment Information

Until April 30, 2001, the Company operated in two segments; as a reinsuror and
as a seller of extended warranty service contracts through the Internet. The
reinsurance segment has been discontinued with the sale of Stamford (see Note
1), and the Company's remaining revenues are derived from the run-off of its
sale of extended warranties and service contracts via the Internet.
Additionally, the Company is currently establishing a new business in the
medical, bio-tech sector. The Company's operations are conducted entirely in the
U.S. Although the Company has not realized any revenue from its purchase of
royalty revenue interests, the Company will be operating in two segments until
the "run-off" is completed.

Note 10 - Related Party Transactions

The Company processes claims on its warranty contracts through Warrantech
Corporation (Warrantech), in which a principal shareholder of the Company is
also a significant shareholder and Chief Executive Officer, President and
Chairman of the Board of Directors. Warrantech receives an administration fee of
$50 per contract for processing the claim. Total administrative fees paid to
Warrantech in 2003, 2002 and 2001 totaled $0, $0 and $48,506, respectively.


Note 11 - Commitments and Contingencies

On February 21, 2003 the Company leases office space in Melville, New York at an
original annual rental of $18,000. The lease has been extended for an additional
twelve months and expires on March 31, 2005. The annual rental increases to
approximately $19,200 on April 1, 2004 and continues until the expiration date.

On February 6, 2003, the Company entered into an employment agreement with the
President and CEO. The employment agreement has an initial term of three years,
with automatic annual extensions unless terminated by the Company or by the
President at least 90 days prior to an applicable anniversary date. The Company
has agreed to pay the President 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, the Company will pay 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 the President's
service, and $20,000 for each subsequent year of the term, without condition.

On December 5, 2003 the Company entered into a royalty agreement with Parallel
Solutions, Inc. ("PSI") to develop a new bioshielding platform technology for
the delivery of therapeutic proteins and small molecule drugs in order to extend
circulating half-life to improve bioavailability and dosing regimen, while
maintaining or improving pharmacologic activity. The Royalty Agreement provides
for PSI to pay Phase III a percentage of the revenue received from the sale of
certain specified products or licensing activity. Phase III shall provide
capital in nine monthly installments of $80,000, commencing in December 2003,
for a total payment of $720,000 and guidance to PSI to conduct a Proof of
Concept Study to improve an existing therapeutic protein with the goal of
validating the bioshielding technology for further commercial development and
licensing the technology. There can be no assurances that the Company will be
able to raise sufficient capital to pay this obligation or if fully paid, a
royalty will be paid to the Company by PSI under the terms of the agreement.

                                      F-20
<PAGE>

                            PHASE III MEDICAL, INC.
                 Notes to the Consolidated Financial Statements
--------------------------------------------------------------------------------

Note 12 - Subsequent Events

As described in Note 5, 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. For each 30 day period, the purchaser is granted the option to
purchase 25,000 shares of common stock for an aggregate price of $125 on the
30th day. In January 2004, two holders of such promissory notes exercised their
options and purchased 200,000 shares of common stock resulting in net proceeds
to the Company of $1,000.

The Company amended its equity private placement (see Note 7) to raise up to $4
million through the sale of up to 40 million shares of Common Stock in
increments of $5,000 or 50,000 shares. 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 shares. The initial placement
closed on December 31, 2003 as stated in Note 9. The amended private placement
does not include any investment banking fees and therefore all proceeds, less
expenses such as printing, transfer fees, etc., will be paid directly to the
Company. The previous investment banker, Robert M. Cohen & Company, has been
fully paid for its efforts

In February 2004, the Company sold 30 day 20% notes in the amount of $75,000 to
two accredited investors to fund current operations. It is anticipated that
these notes will be repaid from the proceeds of the amended equity private
placement. These notes have a default provision that if they are not paid within
30 days, there is an additional interest payment of $250 per $25,000 for each 30
day period or part thereof.


                                      F-21
<PAGE>












                               EXHIBITS FORM 10-K


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>a4604679ex41.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 4.1
<TEXT>


                                   EXHIBIT 4.1

                     Form of Promissory Note September 2002







<PAGE>

                                                               Exhibit 4.1

                                 PROMISSORY NOTE




PRINCIPLE TERMS:

Effective Date:
Maker:                                     Corniche Group Incorporated

Maker's Mailing Address:

Payee:

Annual Interest Rate on Unpaid
Principal from Effective Date:             Fifteen percent (15%) per annum

Annual Interest Rate on
Matured Unpaid Amounts:                    Fifteen percent (15%) per annum

Terms of Payment
(principal and interest):                  The entire Principal Amount, together
                                           with accrued interest thereon, is
                                           payable in one installment 60 days
                                           from the Effective Date. Maker
                                           reserves the right to prepay this
                                           Promissory Note in any amount at
                                           any time prior to maturity without
                                           penalty

------------------------------------------------------------------------------

OTHER TERMS:

1. General. Maker promises to pay to the order of Payee at the place for
payment, and according to the terms of payment, the principal amount plus
interest at the rates stated above under Principle Terms. All unpaid amounts
shall be due by the scheduled payment date.

2. Default Penalty. If there occurs an Event of Default (as defined below in
paragraph 8), then Payee shall have the option to purchase twenty-five thousand
(25,000) shares of common stock of Maker par value $.0001 per share ("Common
Stock") for an aggregate purchase price of one hundred and twenty five and
no/100 dollars ($125.00). If the Event of Default continues for 30 days, then on
the 30th day (and at the end of each successive 30-day period until this
Promissory Note is paid in full), Payee shall have the option to purchase an
additional twenty-five thousand (25,000) shares of common stock of Maker par
value $.0001 per share ("Common Stock") for an aggregate purchase price of one
hundred and twenty-five and no/100 dollars ($125.00) for each additional
purchase of Common Stock.

3. Costs of Collection. If this note is given to an attorney for collection, or
if suit is brought for collection, or if it is collected through probate,
bankruptcy, or other judicial proceeding, then Maker shall pay Payee all costs
of collection, including reasonable attorneys' fees and court costs, in addition
to other amounts due.

4. Savings Clause. Interest on the debt evidenced by this note shall not exceed
the maximum amount of non-usurious interest that may be contracted for, taken,
<PAGE>



reserved, charged, or received under law, any interest in excess of that maximum
amount shall be credited on the principal of the debt or, if that has been paid,
refunded. On any acceleration or required or permitted prepayment, any such
excess shall be canceled automatically as if the acceleration or prepayment or,
if already paid, credited on the principal of the debt or, if the principal of
the debt has been paid, refunded. This provision overrides other provisions in
this and all other instruments concerning the debt.

5. Accredited Investor. The Payee hereby certifies that Payee is an "Accredited
Investor" (as that term is defined by Regulation D under the Securities Act of
1933, as amended) by checking the following statements that are applicable to
Payee:

[Please CHECK all of the following statements that are applicable to Payee. At
least one of the following must be checked.]

         (a)      I am an "Accredited Investor" because I had individual income
                  of more than $200,000 in each of the two prior calendar years
                  and I reasonably expect to have individual income in excess of
                  $200,000 during the current calendar year.

         (b)      I am an "Accredited Investor" because my spouse and I together
                  had income of more than $300,000 in each of the two prior
                  calendar years and we reasonably except to have joint income
                  in excess of $300,000 during the current calendar year.

         (c)      I am an "Accredited Investor" because I have an individual net
                  worth, or my spouse and I have a joint net worth of more than
                  $1,000,000.

         6.       Representations of Payee. Payee represents and warrants to
                  Maker as follows:

         (a)      Payee has received and examined all information, including
                  financial statements, of or concerning Maker which Payee
                  considers necessary to making an informed decision regarding
                  an investment in the Common Stock. In addition, Payee has had
                  the opportunity to ask questions of, and receive answers from,
                  the officers and agents of Maker concerning Maker and to
                  obtain such information, to the extent such persons possessed
                  the same or could acquire it without unreasonable effort or
                  expense, as Payee deemed necessary to verify the accuracy of
                  the information referred to herein.

         (b)      Payee is acquiring the Common Stock for his own account, for
                  investment purposes only, and not with a view to the resale or
                  distribution of all or any part thereof.

         (c)      Payee acknowledges that the Common Stock (i) has not been
                  registered under applicable securities laws, (ii) will be
                  "restricted securities" as defined in applicable securities
                  laws, (iii) has been issued in reliance on the statutory
                  exemptions from registration contemplated by applicable
                  securities laws based (in part) on the accuracy of Payee's
                  representations contained herein, (iv) will not be
                  transferable without registration under applicable securities
                  laws, unless an exemption from such registration requirements
                  is available, and (v) certificates representing the Common
                  Stock will bear a restrictive legend evidencing such
                  restrictions.
<PAGE>


         (d)      Payee has reviewed and understands Maker's (i) Annual Report
                  on Form 10-K for the fiscal year ended December 31, 2001; (ii)
                  Quarterly Report on Form 10-Q for the three and six months
                  ended June 30, 2002 and (iii) Current Report on Form 8-K dated
                  June 18, 2002.

7. Governing Law. This Promissory Note, and all rights and remedies hereunder,
will be governed by the laws of the State of New York.

8. Event of Default. An "Event of Default" shall have occurred if Maker fails to
pay any payment of principal or interest on this Note when due.


MAKER:

CORNICHE GROUP INCORPORATED

By:_____________________________
      James J. Fyfe, Director



PAYEE:

--------------------------------


<PAGE>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>a4604679ex412.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 4.2
<TEXT>

                                   EXHIBIT 4.2


                      Form of Promissory Note February 2003







<PAGE>


                                                         Exhibit 4.2

                                 PROMISSORY NOTE



PRINCIPLE TERMS:

Effective Date:

Maker:                                      Corniche Group Incorporated

Maker's Mailing Address:                    Corniche Group Inc.
                                            330 South Service Road
                                            Suite 120
                                            Melville, New York 11747
Payee:

Place for Payment:

Principal Amount:

Annual Interest Rate on Unpaid              Twenty percent (20%) per annum
Principal from Effective Date:

Annual Interest Rate on                     Twenty percent (20%) per annum.
Matured Unpaid Amounts:

Terms of Payment (principal and interest)   The entire  Principal  Amount,
                                            together  with  accrued  interest
                                            thereon,  is  payable  in  one
                                            installment 30 days from the
                                            Effective  Date.  Maker reserves the
                                            right to prepay  this  Promissory
                                            Note in any amount at any time
                                            prior to maturity without penalty.


------------------------------------------------------------------------------

OTHER TERMS:

1.       General. Maker promises to pay to the order of Payee at the place for
         payment, and according to the terms of payment, the principal amount
         plus interest at the rates stated above under Principal Terms. All
         unpaid amounts shall be due by the scheduled payment date.

2.       Costs of Collection. If this note is given to an attorney for
         collection, or if suit is brought for collection, or if it is collected
         through probate, bankruptcy, or other judicial proceeding, then Maker
         shall pay Payee all costs of collection, including reasonable
         attorneys' fees and court costs, in addition to other amounts due.

3.       Savings Clause. Interest on the debt evidenced by this note shall not
         exceed the maximum amount of non-usurious interest that may be
         contracted for, taken, reserved, charged, or received under law, any
         interest in excess of that maximum amount shall be credited on the

<PAGE>

         principal of the debt or, if that has been paid, refunded. On any
         acceleration or required or permitted prepayment, any such excess shall
         be canceled automatically as if the acceleration or prepayment or, if
         already paid, credited on the principal of the debt or, if the
         principal of the debt has been paid, refunded. This provision overrides
         other provisions in this and all other instruments concerning the debt.

4.       Accredited Investor. The Payee hereby certifies that Payee is an
         "Accredited Investor" (as that term is defined by Regulation D under
         the Securities Act of 1933, as amended) by checking the following
         statements that are applicable to Payee:

         [Please CHECK all of the following statements that are applicable to
          Payee. At least one of the following must be checked.]

         (a)      I am an "Accredited Investor" because I had individual income
                  of more than $200,000 in each of the two prior calendar years
                  and I reasonably expect to have individual income in excess of
                  $200,000 during the current calendar year.

         (b)      I am an "Accredited Investor" because my spouse and I together
                  had income of more than $300,000 in each of the two prior
                  calendar years and we reasonably expect to have joint income
                  in excess of $300,000 during the current calendar year.

         (c)      I am an "Accredited Investor" because I have an individual net
                  worth, or my spouse and I have a joint net worth of more than
                  $1,000,000.

5.       Representations of Payee. Payee represents and warrants to Maker as
         follows:

         (a)      Payee has received and examined all information, including
                  financial statements, of or concerning Maker which Payee
                  considers necessary to making an informed decision regarding
                  an investment in this Promissory Note. In addition, Payee has
                  had the opportunity to ask questions of, and receive answers
                  from, the officers and agents of Maker concerning Maker and to
                  obtain such information, to the extent such persons possessed
                  the same or could acquire it without unreasonable effort or
                  expense, as Payee deemed necessary to verify the accuracy of
                  the information referred to herein.

         (b)      This Promissory Note is one of a series of Promissory Notes in
                  the aggregate principal amount of up to $100,000. Payee
                  acknowledges and understands that: (i) Maker will use the
                  proceeds of this Promissory Note to enable Maker to commence
                  the establishment of new business operations; (ii) the
                  proceeds of this Promissory Note will not be sufficient to
                  provide Maker with the necessary funds to achieve its current
                  business plan; (iii) Maker does not have sufficient cash
                  available to repay this Promissory Note; and (iv) Payee bears
                  the economic risk of never being repaid on this Promissory
                  Note.
<PAGE>

         (c)      Payee is acquiring this Promissory Note for his own account,
                  for investment purposes only, and not with a view to the
                  resale or distribution of all or any part thereof.

         (d)      Payee acknowledges that this Note (i) has not been registered
                  under applicable securities laws, (ii) will be a "restricted
                  security" as defined in applicable securities laws, (iii) has
                  been issued in reliance on the statutory exemptions from
                  registration contemplated by applicable securities laws based
                  (in part) on the accuracy of Payee's representations contained
                  herein, and (iv) will not be transferable without registration
                  under applicable securities laws, unless an exemption from
                  such registration requirements is available.

         (e)      Payee understands that the Maker currently has no business
                  operations but plans to establish a business in the medical
                  sector as more fully described in Maker's Current Report on
                  Form 8-K dated February 6, 2003.

         (f)      Payee has reviewed and understands Maker's Current Report on
                  Form 8-K dated February 6, 2003 and its quarterly report on
                  the Form 10-Q, three and nine month ended September 30, 2002.

6.       Governing Law. This Promissory Note, and all rights and remedies
         hereunder, will be governed by the laws of the State of New York,
         without regard to conflicts of law principles.



IN WITNESS WHEREOF, Maker has executed and delivered this Promissory Note as of
the Effective Date first stated above.

MAKER:                                                        PAYEE:

CORNICHE GROUP INCORPORATED
         NAME:_______________________



By:________________________________
            ______________________________
Name:  Mark Weinreb

                      Title: President and Chief Executive Offic

<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>a4604679ex43.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 4.3
<TEXT>
                                   EXHIBIT 4.3


                       Form of Promissory Note March 2003








<PAGE>





                                                           Exhibit 4.3

THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND MUST BE HELD
INDEFINITELY and MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
IS SUBSEQUENTLY REGISTERED UNDER SAID ACT OR, IN THE OPINION OF COUNSEL TO THE
COMPANY, AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAIABLE.

                                 PROMISSORY NOTE


$ ___________________                              Date: _______________ ,
2003

FOR VALUE RECEIVED, Corniche Group Incorporated, a Delaware corporation,
("Maker") promises to pay to _____________________________________ ("Payee"), in
lawful money of the United States of America, the principal sum of
_________________________ ($ __________ ), together with interest thereon
accruing at an annual rate equal to 15%, in the manner provided below. Interest
shall be calculated on the basis of a year of 365 or 366 days, as applicable,
and charged for the actual number of days elapsed.


1.       PAYMENTS

         1.1   Principal and interest.

               Interest on the unpaid  principal amount shall be payable monthly
               in arrears  on the last day of each  calendar  month,  commencing
               __________________ , 2003 until the entire principal amount shall
               be paid in full. All principal and accrued interest shall be paid
               in full on __________ , 2003.

         1.2   Manner of Payment

               All payments of principal and interest on this Note shall be made
               by check at  ____________________________  or at such other place
               in the United States of America as Payee shall designate to Maker
               in writing.  If any payment of principal or interest on this Note
               is due on a day which is not a Business  Day,  such payment shall
               be due on the next succeeding  Business Day. "Business Day" means
               any day other  than a  Saturday,  Sunday or legal  holiday in the
               State of New York.

        1.3    Prepayment

               Maker may, without premium or penalty,  at any time and from time
               to time,  prepay all or any portion of the outstanding  principal
               balance due under this Note,  provided that each such  prepayment
               is  accompanied  by accrued  interest on the amount of  principal
               prepaid  calculated to the date of such  prepayment.  Any partial
               prepayments  shall be applied first to accrued  interest and then
               to principal.
<PAGE>

2.       DEFAULTS

        2.1    Events of Default

               The  occurrence of any one or more of the  following  events with
               respect to Maker shall  constitute an event of default  hereunder
               ("Event of Default"):

               (a)If Maker shall fail to pay when due any payment of principal
                  or interest on this Note.

               (b)If, pursuant to or within the meaning of the United States
                  Bankruptcy Code or any other federal or state law relating to
                  insolvency or relief of debtors (a "Bankruptcy Law"), Maker
                  shall (i) commence a voluntary case or proceeding; (ii)
                  consent to the entry of an order for relief against it in an
                  involuntary case; (iii) consent to the appointment of a
                  trustee, receiver, assignee, liquidator or similar official;
                  (iv) make an assignment for the benefit of its creditors; or
                  (v) admit in writing its inability to pay its debts as they
                  become due.

               (c)If a court of competent jurisdiction enters an order or decree
                  under any Bankruptcy Law that (i) is for relief against Maker
                  in an involuntary case; (ii) appoints of a trustee, receiver,
                  assignee, liquidator or similar official for the Maker or
                  substantially all of the Maker's properties; or (iii) orders
                  the liquidation of the Maker, and in each case the order is
                  not dismissed within 90 days.

          2.2  Remedies

               Upon the occurrence of an Event of Default  hereunder (unless all
               Events of Default  have been  cured or waived by Payee),  (a) the
               interest  rate will  increase to a default  rate of 20% per annum
               effective  upon such Event of Default,  and (b) Payee may, at its
               option, (i) by written notice to Maker, declare the entire unpaid
               principal  balance  of  this  Note,  together  with  all  accrued
               interest thereon,  immediately due and payable, and (ii) exercise
               all and any rights and remedies  available to it under applicable
               law,  including,  without  limitation,  the right to collect from
               maker  all  sums  due  under  this  Note.  Maker  shall  pay  all
               reasonable  costs and expenses  incurred by or on behalf of Payee
               in connection  with Payee's  exercise of any or all of its rights
               and  remedies  under this Note,  including,  without  limitation,
               reasonable attorneys' fees and expenses.

         3.    REPRESENTATIONS BY PAYEE

               Payee represents and warrants to Maker as follows:
<PAGE>

               (a)Payee has received and examined all  information,  including
                   financial  statements,  of or  concerning  Maker which Payee
                   considers necessary to making an informed decision regarding
                   this Note. In addition, Payee has had the opportunity to ask
                   questions  of, and receive  answers  from,  the officers and
                   agents  of  Maker   concerning  Maker  and  to  obtain  such
                   information,  to the extent such persons  possessed the same
                   or could acquire it without  unreasonable effort or expense,
                   as Payee  deemed  necessary  to verify the  accuracy  of the
                   information referred to herein.

               (b) The Payee  acknowledges  and understands  that (i) the Maker
                   will  use the  proceeds  of this  Note to  enable  Maker  to
                   commence the establishment of new business operations;  (ii)
                   the proceeds of this Note will not be  sufficient to provide
                   Maker  with the  necessary  funds  to  achieve  its  current
                   business plan; (iii) the Maker does not have sufficient cash
                   available  to repay  this  Note;  (iv) this Note will not be
                   guaranteed nor will it be secured by any assets of Maker nor
                   senior to any  other  indebtedness  of Maker;  (v) the Maker
                   will pay a commission  to Maker's  agent,  Robert M. Cohen &
                   Company,  Inc.  equal to 10% of the principal  amount loaned
                   pursuant to this Note; and (v) Payee bears the economic risk
                   of never being repaid on this Promissory Note.

               (c) The Payee  hereby  certifies  that  Payee is an  "Accredited
                   Investor" (as that term is defined by Regulation D under the
                   Securities Act of 1933, as amended)  because at least one of
                   the following statements is applicable to Payee:

                    (i) Payee  is an  Accredited  Investor  because  the  Payee
                        had individual  income of more than  $200,000 in each of
                        the two  prior  calendar   years  and  reasonably
                        expects  to  have individual  income in excess of
                        $200,000  during the current calendar  year.
                    (ii) The Payee is an  Accredited  Investor because the Payee
                         and his spouse together had income of more than
                         $300,000 in each of the two prior  calendar  years
                         and reasonably expect to have joint income in excess of
                         $300,000 during the  current  calendar  year.
                   (iii) The Payee is an  Accredited  Investor because the Payee
                         has an individual net worth, or the Payee and his
                         spouse have a joint net worth of more than $1,000,000.

               (d) Payee  is  acquiring  this  Note  for his own  account,  for
                   investment  purposes only, and not with a view to the resale
                   or distribution of all or any part thereof.

               (e) Payee   acknowledges   that  this  Note  (i)  has  not  been
                   registered under applicable  securities laws, (ii) will be a
                   "restricted  security" as defined in  applicable  securities
                   laws,  (iii) has been issued in  reliance  on the  statutory
                   exemptions  from  registration  contemplated  by  applicable
                   securities  laws based (in part) on the  accuracy of Payee's
                   representations  contained  herein,  and  (iv)  will  not be
                   transferable    without    registration   under   applicable
                   securities laws,  unless an exemption from such registration
                   requirements is available.
<PAGE>

               (f)  Payee has reviewed and understands Maker's (i) Annual Report
                    on Form 10-K for the fiscal year ended  December  31,  2001;
                    (ii)  Quarterly  Report on  Form10-Q  for the three and nine
                    months ended  September 30, 2002;  (iii)  Current  Report on
                    Form 8-K dated  February 6, 2003; and (iv) Current Report on
                    Form 8-K dated February 28, 2003.

4.       MISCELLANEOUS

         4.1  Waiver

              The rights and remedies of Payee under this Note shall be
              cumulative and not alternative. No waiver by Payee of any right or
              remedy under this Note shall be effective unless it is in writing
              and signed by Payee. Neither the failure nor any delay in
              exercising any right, power or privilege under this Note will
              operate as a waiver of such right, power or privilege and no
              single or partial exercise of any such right, power or privilege
              by Payee will preclude any other or further exercise of such
              right, power or privilege or the exercise of any other right,
              power or privilege. To the maximum amount permitted by applicable
              law, (i) no claim or right of Payee arising out of this Note can
              be discharged by Payee, in whole or in part, by a waiver or
              renunciation of the claim or right unless in a writing, signed by
              Payee; (b) no waiver that may be given by Payee will be applicable
              except in the specific instance for which it is given; and (c) no
              notice to or demand on Maker will be deemed to be a waiver of any
              obligation of Maker or of the right of Payee to take further
              action without notice or demand as provided in this Note.

              Maker acknowledges that this Note and Maker's obligations under
              this Note are, and shall at all times continue to be, absolute and
              unconditional in all respects, and shall at all times be valid and
              enforceable. To the extent permitted by applicable law, Maker
              hereby absolutely, unconditionally and irrevocably forever waives
              any and all right to assert any defense, set-off, off-set,
              counterclaim, cross-claim, or claim of any nature whatsoever with
              respect to this Note or Maker's obligations hereunder.

         4.2  Notices

              Any notice or communication to be given hereunder by any party, to
              the other party shall be in writing and shall be deemed to have
              been given when personally delivered, or one day after the date
              sent by recognized overnight courier or transmitted by facsimile,
              which transmission by facsimile has been confirmed or 3 (three)
              days after the date sent by registered or certified mail, postage
              prepaid, as follows:

                  If to Maker, addressed to it at:

                  Corniche Group Incorporated
                  330 South Service Road
                  Suite 120
                  Melville, NY 11747
<PAGE>

                  Attn:    Mark Weinreb
                  Facsimile Number: (631) 574 4956

                  If to Payee, addressed to:

                  Name: ______________________________
                  Address: ___________________________
                           ___________________________

                  Or persons or addresses as may be  designated  in writing by
                  the party to receive such notice.

         4.3  Severability

              If any provision of this Note is held invalid or unenforceable by
              any court of competent jurisdiction, the other provisions of this
              Note will remain in full force and effect. Any provision of this
              Note held invalid or unenforceable only in part or degree will
              remain in full force and effect to the extent not held invalid or
              unenforceable.

         4.4  Governing Law.

              This Promissory Note will be governed by the laws of the State of
              New York without regard to conflicts of laws principles.

         4.5  Assignment; Parties in Interest

              This Note shall bind Maker and its successors and assigns. This
              Note shall not be assigned or transferred by Maker, without the
              express prior written consent of Payee, and this Note will inure
              to the benefit of Payee and his heirs, estates, representatives,
              administrators, successors and assigns.

        4.6   Section Headings, Construction

              The headings of Sections in this Note are provided for convenience
              only and will not affect its construction or interpretation. All
              references to "Section" or "Sections" refer to the corresponding
              Section or Sections of this Note unless otherwise specified.

              All words used in this Note will be construed to be of such gender
              or number as the circumstances require. Unless otherwise expressly
              provided, the words "hereof" and "hereunder" and similar
              references refer to this Note in its entirety and not to any
              specific section or subsection hereof.

        4.7   Savings Clause

              If, at any time, the rate of interest under this Note shall be
              deemed by any competent court of law, governmental agency or
<PAGE>

              tribunal to exceed the maximum rate of interest permitted by the
              laws of any applicable jurisdiction or the rules or regulations of
              any regulatory authority or agency, then during such time as such
              rate of interest would be deemed excessive, that portion of each
              interest payment attributable to that portion of such interest
              rate that exceeds the maximum rate of interest so permitted shall
              be deemed a voluntary prepayment of principal or, if all principal
              has been paid, that portion of each interest payment attributable
              to that portion of such interest rate that exceeds the maximum
              rate of interest so permitted shall be promptly refunded to Maker.

        4.8   Waiver of Jury Trial

              MAKER AND PAYEE EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED
              BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRAIL BY JURY IN
              RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
              UNDER, OR IN CONNECTION WITH, THIS NOTE, IT BEING AGREED THAT ALL
              SUCH TRAILS SHALL BE CONDUCTED SOLELY BY A JUDGE. MAKER AND PAYEE
              EACH CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF EITHER
              HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER WOULD NOT,
              IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS.
              MAKER AND PAYEE EACH AGREE AND ACKNOWLEDGE THAT IT HAS BEEN
              REPRESENTED BY INDEPENDENT COUNSEL IN CONNECTION WITH THIS NOTE OR
              BEEN ADVISED THAT IT SHOULD BE REPRESENTED BY INDEPENDENT COUNSEL
              IN CONNECTION WITH THIS NOTE. IF MAKER OR PAYEE HAS DECIDED NOT TO
              BE REPRESENTED BY INDEPENDENT COUNSEL IN CONNECTION WITH THIS
              NOTE, IT IRREVOCABLY AND FOREVER WAIVES ANY AND ALL DEFENSES OR
              RIGHTS ARISING OUT OF OR RELATED TO SAID DECISION.

IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.


                            CORNICHE GROUP INCORPORATED

                                            By:
                                         _______________________________
                                      Name: Mark Weinreb
                                            Title: President and Chief
                                            Executive Officer

Accepted and agreed to:

-----------------------------------
Payee




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>6
<FILENAME>a4604679ex101.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 10.1
<TEXT>
                                  EXHIBIT 10.1

                  Royalty Agreement between Parallel Solutions,
                        Inc. and Phase III Medical, Inc.







<PAGE>



                                                                   Exhibit 10.1

          Confidential Materials omitted and filed separately with the
      Securities and Exchange Commission. Asterisks. Denote such omissions.

                                ROYALTY AGREEMENT

THIS ROYALTY AGREEMENT (this "Agreement") is made as of the 5th day of December,
2003 (the "Effective Date") by and between Parallel Solutions, Inc., a Delaware
corporation with offices at 763D Concord Avenue, Cambridge MA 02138 ("PSI"), and
Phase III Medical, Inc., a Delaware corporation with offices at 330 South
Service Road, Suite 120, Melville, New York 11747 ("Phase III") (PSI and Phase
III are referred to individually as a "Party" and collectively as the
"Parties").
         NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties agree as follows:

Definitions.
"Affiliate".
Affiliate shall mean, with respect to any person, any other person controlling,
controlled by or under common control with such person. For purposes of this
Section, "control" shall mean (a) in the case of corporate entities, direct or
indirect ownership of at least fifty percent (50%) of the stock or shares having
the right to vote for the election of directors, and (b) in the case of
non-corporate entities, direct or indirect ownership of at least fifty percent
(50%) of the equity interest with the power to direct the management and
policies of such non-corporate entities.
"Field".  Field shall mean therapeutic protein drugs and/or small molecule drugs
that have been [**] characteristics,  including, without limitation, (i) [**] of
the pharmaceutical substance, (ii) [**], (iii) [**], and/or (iv) [**]. The Field
shall not include any other molecules,  or applications of [**], including,  but
not limited to, [**].  For purposes of clarity,  if a [**], so as to confer [**]
characteristics  as set  forth  above,  subject  to the  terms,  conditions  and
exceptions set forth above, such Product shall be included in the Field.
"Intellectual Property".  Intellectual Property shall have the meaning set forth
in Section 8(b).  "Net Sales".  Net Sales shall mean, with respect to a Product,
the gross  amount  invoiced by PSI and/or its  Affiliates  (but not its or their
licensees)  on  sales  of  Products  for  use in the  Field  by PSI  and/or  its
Affiliates to unaffiliated third parties, less the following deductions:  Trade,
cash and/or quantity  discounts actually allowed and taken directly with respect
to such sales, as reflected in the amount invoiced;
Tariffs,  duties,  excises,  sales  taxes or other taxes  imposed  upon and paid
directly by PSI and/or its Affiliates  with respect to the  production,  sale or
use of the Product (excluding  national,  state or local taxes based on income),
as reflected in the amount  invoiced;  Amounts paid to third  parties to license
patents  covering  such  third  party's  technology  if, in the  absence of such
license,  the sale by PSI or its  Affiliates of a Product would or is likely to,
in the reasonable judgment of PSI, infringe such patents;
Amounts repaid or credited by reason of rejections,  defects, recalls or returns
or because of chargebacks, refunds, rebates or retroactive price reductions; and
Freight,  insurance  and other  transportation  charges  incurred  in shipping a
Product, as reflected in the amount invoiced.
"Product".  Product  shall mean any product in the Field  comprised in part of a
[**] molecule.

<PAGE>

"Program  Patent Rights" shall mean all United States and/or foreign patents and
patent   applications,   and  all   substitutions,   divisions,   continuations,
continuations-in-part,  reissues,  reexaminations  and  extensions  thereof that
during the term of this Agreement are owned or otherwise  controlled by PSI that
relate exclusively to the Field.
"POC Study". POC Study shall have the meaning set forth in Section 3(a).
"Proof of Concept Guidelines". Proof of Concept Guidelines shall mean the
guidelines applicable to the POC Study and set forth in Exhibit A.
"Term". Term shall have the meaning set forth in Section 7(a).
"Valid Claim". Valid Claim means a claim (i) of any issued, unexpired United
States or foreign patent that shall not have been donated to the public,
disclaimed, nor held invalid or unenforceable against the other Party by a court
of competent jurisdiction in an unappealed or unappealable decision, or (ii) of
any United States or foreign patent application that shall not have been
cancelled, withdrawn, abandoned nor been pending for more than seven (7) years.

Development Funding.
-------------------
In consideration for rights received by Phase III under this Agreement and the
obligations assumed by PSI hereunder with respect to the conduct of the POC
Study, Phase III hereby agrees to pay PSI:
an aggregate sum of [**] Dollars (US$[**]), payable to PSI, for synthetic and in
vitro work carried out by PSI ("PSI Research",  which term is further defined in
Exhibit A hereto),  [**] Dollars (US $[**]) starting upon the Effective Date and
then every thirty (30) days  thereafter  (collectively,  the "PSI Funding" to be
paid to PSI over such nine month  period,  hereinafter  referred  to as the "PSI
Funding Period"); and
amounts reasonably  required in order for PSI to  complete  the in vitro and in
vivo evaluation of target molecules  contemplated by the POC Study and the Proof
of Concept Guidelines which are to be carried out by third party  subcontractors
engaged by PSI in reasonable  consultation with Phase III ("Evaluation  Study"),
(collectively,  the "Evaluation Funding", and together with the PSI Funding, the
"Development   Funding").   Phase  III  shall  pay  to  each  such  third  party
subcontractor  amounts constituting  Evaluation Funding within fifteen (15) days
after  its  receipt  from time to time  from PSI of a  written  funding  request
specifying the subcontractor,  the purpose of the study, and amounts required to
be paid to the subcontractor. So long as Phase III provides as and when required
under this paragraph at least $[**] of Evaluation Funding in addition to all PSI
Funding as required in Section  2.2(a)(i),  any right of Phase III under Section
4(a) or  Section  4(b)  only that is  conditioned  on it  providing  Development
Funding or Evaluation Funding shall be deemed fully satisfied.  If the POC Study
is successful  (as defined in Exhibit A), the Parties  acknowledge  that funding
will be necessary  beyond the Development  Funding in order for PSI to develop a
marketable product. At PSI's request,  the Parties shall negotiate in good faith
the terms and  conditions of an agreement or amendment  hereto under which Phase
III provides to PSI such additional development funding;  provided that, neither
Party shall be obligated to enter into any such agreement.
The Parties also acknowledge that PSI may enter into a license with a third
party pharmaceutical company that relates exclusively to the Field prior to
Phase III making all contemplated Development Funding payments. In such event,
upon consummation of such a license, and if PSI expressly waives in a signed
writing to Phase III PSI's right to further Development Funding, Phase III shall
have no further obligations to make such payments hereunder, but shall
nevertheless still be entitled to receive its full [**] percent ([**]%) payment
as set forth in Section 4 received by PSI from such third party or otherwise. In
addition to the Development Funding, Phase III shall pay [**] percent ([**]%) of
all legal and regulatory costs incurred by PSI for the prosecution of patent
applications and maintenance of patents related exclusively to the Field and
such other patents related to the Field which Phase III shall determine in
consultation with PSI.
<PAGE>

Development Program.
--------------------
POC Study. (i) Subject to the terms and conditions of this Agreement (including
the payment in full of the Development Funding), PSI shall use commercially
reasonable efforts to perform the activities described in the proof of concept
validation study for development of the [**] therapeutic protein delivery
program as set forth as Exhibit A hereto (the "POC Study") for no longer than
the PSI Funding Period plus the period required to do the Evaluation Studies;
provided that, PSI may elect at its discretion for the three (3) month period
immediately following the PSI Funding Period to continue to conduct the POC
Study. Notwithstanding the foregoing, Evaluation Studies may, subject to payment
in full of Development Funding, continue until complete or otherwise mutually
agreed, regardless of the period of time required to complete such studies. The
POC Study shall conform to the Proof of Concept Guidelines set forth in Exhibit
A. Not later than the date two (2) weeks after execution of this Agreement, PSI
shall deliver to Phase III a more detailed POC Study plan with detailed monthly
benchmarks or activity goals, and PSI shall thereafter use commercially
reasonable efforts to meet the goals and benchmarks in such timetable. In no
event shall PSI have any obligation to conduct any activity outside the scope of
the Required Research (as defined in Exhibit A hereto) of the POC Study, and, in
the event that Phase III fails to pay Development Funding as and when required
in Section 2(a) above, PSI shall have no further obligation to conduct the POC
Study as set forth herein.
         (ii) Within thirty (30) days following the conclusion of the
POC Study and receipt by PSI of all relevant subcontractor reports, PSI shall
deliver to Phase III a written report including all subcontractor reports
summarizing the results of the POC Study.
Notice of Transfer. If PSI determines to sell, assign or otherwise transfer
ownership of or title to (a "Transfer") the Program Patent Rights and/or
non-patented intellectual property owned by PSI that relates exclusively to the
Field (collectively, the "Program Rights"), and PSI enters into substantive
negotiations regarding the material terms and conditions of such potential
Transfer with a third party, then PSI shall, on a one-time basis for each such
potential Transfer, provide Phase III with reasonable advance written notice of
the material terms and conditions of such Transfer and reasonable updates
thereto. Such information shall be deemed to be the Confidential Information of
PSI.
Reports. PSI shall provide written progress reports at the completion of each
phase of the POC Study (e.g. [**]). Phase III shall have reasonable access to
the facilities of PSI during normal working hours to review the POC Study upon
reasonable prior notice to PSI.
Researcher. [**], or another capable immunologist or scientist appropriately
skilled in the execution of the listed animal studies and approved by Phase III,
shall be hired or contracted as a consultant by PSI during the three (3) month
evaluation phase of the POC Study to oversee the external in vitro and in vivo
research of the POC Study. PSI shall pay all compensation for such immunologist
or scientist during such period, at no additional cost to Phase III beyond the
amounts described in Section 2 of this Agreement.
Revenue Sharing.
---------------
Licensing Income. Subject to Phase III's payment in full (to the extent then
due) of the PSI Funding and, to the extent required pursuant to Section
2(a)(ii), the Evaluation Funding, PSI shall pay to Phase III an amount equal to
[**] percent ([**]%) of "Licensing Income" (in each case, as defined below). The
term "Licensing Income" shall mean (A) amounts received by PSI and/or its
Affiliates from unaffiliated third parties in consideration for the grant of an
express license to manufacture, use, sell or otherwise exploit a Product for use
in the Field, or otherwise to use in the Field the Program Rights, including,

<PAGE>

without limitation, all up-front fees, milestone payments, royalties, and other
license fees, but specifically excluding (i) any payments for research and
development activities or for the performance of any manufacturing or other
services, to the extent reasonably related to the fair value of those services,
(ii) proceeds from the purchase of any assets or equity securities of PSI and/or
its Affiliates acquired by a licensee or acquiror, whether by purchase, merger,
consolidation or otherwise, provided that if there is both a license and an
acquisition of assets or securities, only to the extent that the proceeds from
the sale of such assets or securities are reasonably related to the value of
such assets or securities; and (iii) proceeds from any loan or debt transaction
with a licensee, less (B) amounts paid by PSI to third parties to license
patents covering such third party's technology if, in the absence of such
license, the license by PSI or its Affiliates to manufacture, use, sell or
otherwise exploit a Product would or is likely to, in the reasonable judgment of
the Parties, infringe such patents.
Sales Income. Subject to Phase III's payment in full (to the extent then due) of
the PSI Funding and, to the extent required pursuant to Section 2(a)(ii), the
Evaluation Funding, PSI shall pay to Phase III an amount equal to the [**]
percent ([**]%) of the "Benchmark Percentage" (as defined below) of Net Sales.
As used above, the term "Benchmark Percentage" shall mean a mutually agreed
percentage equal to the average percentage royalty charged by companies similar
to PSI for [**] drugs similar to the Products at the time of sale of such
Products; provided, however, if the Parties are unable to reach an agreement on
such percentage within sixty (60) days after either Party requested in writing
that the Parties negotiate concerning such percentage, then either Party may
submit this dispute to a single arbitrator with relevant industry experience
appointed jointly by the Parties, or failing agreement on a joint appointment,
appointed by the President of the American Arbitration Association ("AAA"), and
such arbitrator shall then determine the Benchmark Percentage through an
arbitration conducted in Cambridge, Massachusetts in accordance with the
commercial arbitration rules of the AAA.
Payment Period. The payment obligations described in Section 4(a) and 4(b) above
shall commence on the date hereof and shall continue so long as PSI is receiving
any Licensing Income or Net Sales.
Actions  by PSI.  In the  event  that (i) any of the  Program  Patent  Rights is
infringed by a third party, (ii) PSI elects, at its sole discretion, to bring an
action for  infringement  against such third party,  and (iii) Phase III pays to
PSI,  from  time  to time  as  incurred  by PSI,  [**]  percent  ([**]%)  of the
out-of-pocket expenses and attorneys' fees of PSI relating to such action, then,
any recovery of damages,  including  settlement  proceeds and royalties,  by PSI
from any such action, shall be applied first in satisfaction of any unreimbursed
out-of-pocket  expenses  and  attorneys'  fees of the  Parties  relating to such
action,  and  then  the  remaining  amounts  from  any  such  recovery  shall be
considered Licensing Income hereunder subject to Section 4(a) above.

Payments; Reporting
-------------------
Payment. All payments hereunder (whether pursuant to Section 2 or 4) shall be
made by check or wire transfer to such bank and account as the recipient may
from time to time designate in writing. All payments due hereunder are expressed
in and shall be paid in United States Dollars.
Foreign Exchange. If any amounts due to Phase III under Section 4 hereunder are
initially stated in a currency other than United States Dollars, then, for the
purpose of calculating the amount due, such amounts shall be converted into

<PAGE>

United States Dollars at the exchange rate between those two currencies most
recently quoted in the Wall Street Journal in New York as of the last business
day of the calendar quarter for which such amounts are being paid.
Reports and Payments. (i) Monthly. Not later than thirty (30) days after the end
of each month, PSI shall deliver to Phase III a monthly statement, setting forth
the amounts due under Section 4(a) during the preceding month. Together with
such report, PSI will pay Phase III payments accruing during such preceding
month. (ii) Quarterly. Not later than 30 days after the end of each calendar
quarter, PSI shall deliver to Phase III a quarterly statement, setting forth the
amounts due under Section 4(b) during the preceding calendar quarter. Together
with such report, PSI will pay Phase III payments accruing during such preceding
calendar quarter. (iii) All reports and payments of amounts under this Section
5(c) not disputed as to correctness by Phase III within three (3) years after
receipt thereof shall thereafter conclusively be deemed correct for all
purposes.
Responsibility for Taxes. Sales, use or similar taxes now or hereafter imposed
with respect to the transactions contemplated hereunder (but not income taxes or
other taxes imposed upon PSI and measured by the gross or net income of PSI)
shall be the responsibility of Phase III, and if paid or required to be paid by
PSI, the amount thereof shall be added to and become a part of the amounts
payable by Phase III hereunder.
Payable Only Once. The amounts payable under this Agreement shall be imposed
only once with respect to the same unit of a Product.
Audits by Phase III of  Licensing  Income and Sales  Income.  PSI shall keep and
shall require its Affiliates to keep within their control, complete and accurate
records of the latest  three (3) years of sales or  licenses  pursuant  to which
payments are due to Phase III under  Sections  4(a) and (b) above.  For the sole
purpose of  verifying  amounts  payable  to Phase III,  Phase III shall have the
right annually at Phase III's expense to retain an independent  certified public
accountant  selected by Phase III and  reasonably  acceptable  to PSI, to review
such records in the location(s)  where such records are maintained by PSI or its
Affiliates  upon thirty (30) days  written  notice and during  regular  business
hours.  Any information  made available  during an audit shall be treated as the
confidential  information  of PSI.  Such review by Phase III shall be limited to
one review per calendar year. If the review  reflects an  underpayment  to Phase
III, such underpayment shall be remitted to Phase III within thirty (30) days of
written  notice.  If the  underpayment is equal to or greater than seven percent
(7%) of the amount  that was  otherwise  due,  PSI shall pay all of Phase  III's
reasonable costs of such review.  If the review reflects an overpayment to Phase
III, the amount of such overpayment  shall be remitted to PSI within thirty (30)
days of receipt of written notice thereof.
Cooperation.
------------
Consulting Services. Phase III shall provide to PSI, without charge, consulting
services in connection with and during the course of the POC Study, to be
determined by the mutual consultation of the parties. During the POC Study and
Post-Study Period, Phase III will be provided with reasonable access to PSI's
chief scientist working on the POC Study.
Licensing. PSI and Phase III shall cooperate to identify potential licensing
partners and to secure licensing or royalty agreements with third parties. PSI
shall use reasonable efforts to consult with Phase III prior to making a
licensing decision, and to consider Phase III's advice in good faith. PSI shall
provide Phase III with reasonable notice prior to PSI entering into a license or
other agreement with respect to a Product with any third party.
Board Observer Rights. During the POC Study and for a period of nine (9) months
after its conclusion (but in no event after the expiration or earlier
termination of the Term), Phase III shall have the right to attend the portions
of convened PSI Board of Directors meetings relating to the POC Study or to

<PAGE>

other matters related exclusively to the Field as a non-voting observer, subject
to execution of an appropriate confidentiality agreement. Notwithstanding the
foregoing, in no event shall Phase III have any right to observe or be present
at the portion of any such meetings (i) during which PSI receives or discusses
legal advice of any kind if its presence would impair or compromise
attorney-client privilege or confidentiality, (ii) during discussions relating
to any dispute under this Agreement, or (iii) during discussions regarding any
other matter that PSI deems in the good faith exercise of its reasonable
discretion to be in conflict of interest with Phase III.
Publications. To the extent permitted under publication guidelines and
standards, Phase III shall be identified, either as a co-investigator or as
having funded the study, as appropriate, with PSI in any publication of the
results of the POC Study in peer reviewed scientific journals selected by PSI.
PSI will use reasonable efforts to submit the results of the in vitro and in
vivo studies for publication in a peer-reviewed journal within a reasonable
period after the completion of the POC Study, subject to such delay as is deemed
reasonably necessary by PSI to ensure appropriate patent filings to protect
PSI's intellectual property and competitive position. PSI in good faith will
attempt to have its studies published in journals identified by Phase III.
Publicity. Phase III and PSI must approve all public announcements of the
relationship contemplated by this Agreement jointly, provided that neither
Party's consent shall be required with respect to such announcements or
disclosures that such other Party reasonably determines are necessary to comply
with the federal securities laws, rules and regulations and any other legal
requirements.
Term; Termination.
-----------------
Term. Unless sooner terminated pursuant to this Section 7, this Agreement will
be effective as of the Effective Date and will remain in effect until the
last-to-expire payment obligation of the Parties hereunder (such period of time
referred to as the "Term").
Termination.  In the event that either  Party  commits a material  breach of its
obligations under this Agreement (including,  without limitation,  an obligation
to make a payment  when due),  and such Party fails to cure such  breach  within
thirty (30) days after written  notice from the other Party (or in the case of a
breach of a payment obligation with respect to PSI Funding,  within fifteen (15)
days),  the notifying  Party shall have the right to terminate this Agreement at
any time thereafter upon further notice to the breaching Party.
Survival. Sections 8, 19 and 20 shall survive any expiration or earlier
termination of this Agreement.
Insolvency.  Each  Party  acknowledges  and  agrees  that it  intends  that  its
obligations  under this  Agreement  shall survive the  insolvency of such Party.
Further,  to the extent  applicable,  all rights and licenses  granted  under or
pursuant to any section of this Agreement are, and shall  otherwise be deemed to
be, for purposes of Section 365(n) of the Bankruptcy  Code licenses of rights to
"intellectual  property" as defined  under  Section  101(35A) of the  Bankruptcy
Code.  The Parties shall retain and may fully  exercise all of their  respective
rights and elections under the Bankruptcy Code.
Confidential Information.
------------------------
Phase III and PSI each agree that all information received by one from the other
pursuant to this Agreement (1) shall be received in strict confidence, (2) shall
be used only for the purposes of this Agreement, and (3) shall not be disclosed
by the recipient Party, its agents or employees without the prior written
consent of the disclosing Party, except to the extent that the recipient Party
can establish competent written proof that such information:
was in the public domain at the time of disclosure;
<PAGE>

later became part of the public domain through no act or omission of the
recipient Party, its employees, agents, successors or assigns;
was lawfully  disclosed to the recipient Party by a third party having the right
to  disclose  it  without  such  third  party   violating  its   confidentiality
obligations to the disclosing Party; was already known by the recipient Party at
the time of disclosure;
was independently developed by the recipient Party;
is required by law or regulation to be disclosed, provided however, that (a) the
disclosing Party shall first give the other Party written notice and adequate
opportunity to object to such order for disclosure or to request confidential
treatment; and (b) information disclosed pursuant to this Section 8(a)(vi) shall
otherwise remain Confidential Information for the purposes of this Agreement; or
is disclosed to potential investors or lenders on a need-to-know basis and
pursuant to confidentiality agreements no less protective of such information
than the terms and conditions of this Section 8.
PSI understands that Phase III is a publicly held corporation and that trading
in its securities while in possession of material, non-public information
related to Phase III may violate federal and state securities laws.

Intellectual Property. Each Party shall retain all rights to all inventions,
patents, copyrights, trade secrets and other intellectual property
("Intellectual Property") conceived or reduced to practice by such Party prior
to or during the course of this Agreement. The Parties expressly agree that all
Intellectual Property conceived, reduced to practice or otherwise arising from
the POC Study shall be owned exclusively by PSI. Phase III shall have no right
or license implied or otherwise in or to any intellectual property or data owned
or controlled or utilized by PSI, including, without limitation, any
intellectual property conceived in the course of the POC Study. All inventions
and results of the POC Study shall be the Confidential Information of PSI, but
subject to disclosure by Phase III pursuant to 8(a) above.

Representations and Warranties.
-------------------------------
Representations of Authority. PSI and Phase III each represents and warrants to
the other that as of the Effective Date it has full right, power and authority
to enter into this Agreement and to perform its respective obligations under
this Agreement.
Consents. PSI and Phase III each represents and warrants that
all necessary consents, approvals and authorizations of all government
authorities and other persons required to be obtained by such Party in
connection with execution, delivery and performance of this Agreement have been
and shall be obtained.
No Conflict. PSI and Phase III each represents and warrants that the execution
and delivery of this Agreement, the performance of such Party's obligations
hereunder (i) do not conflict with or violate any requirement of applicable laws
or regulations and (ii) do not and will not conflict with, violate or breach or
constitute a default or require any consent under, any contractual obligations
of such Party.
Intellectual  Property.  PSI  represents  and  warrants  to Phase  III as of the
Effective Date that: To PSI's actual knowledge, PSI has the full power and right
to grant to Phase III the rights set forth in this Agreement, free of any liens,
claims, fees, commissions or other encumbrances, other than pursuant to licenses
and any research,  development and consulting agreements that have been provided
to Phase III.
<PAGE>

To PSI's actual knowledge, without having made an investigation, the operations
of PSI in the Field do not infringe upon or conflict with the Intellectual
Property of any other person in the Field. [**].
To PSI's actual knowledge,  all such Intellectual  Property owned or licensed by
PSI, has not been challenged in any judicial or administrative  proceeding,  and
no written claim has been received by PSI, and to its actual knowledge, no claim
is pending or threatened  against PSI, to the effect that any such  Intellectual
Property owned or licensed by PSI is invalid or unenforceable by PSI.
With respect to the Field, to PSI's actual knowledge, no person nor such
person's business or products has infringed or misappropriated the Intellectual
Property owned or licensed by PSI or currently is infringing or misappropriating
such Intellectual Property owned, purported to be owned or licensed by PSI.
Each present or past employee or officer has executed a written agreement with
PSI that (a) conveys any and all right, title and interest in and to all
Intellectual Property developed by such person in connection with such person's
employment or contract to PSI, (b) requires such person, during and after the
term of employment or contract, to cooperate with PSI in the prosecution of any
patent applications filed in connection with such Intellectual Property, (c)
establishes that to the extent such Person is an author of a copyrighted work
created in connection with such person's employment or contract, such work is
assigned to PSI, (d) includes a representation and covenant by such person that
no process, technique, innovation or other work product provided to PSI is or
will be derived from or otherwise constitute the proprietary information of a
prior employer or contractor, in contravention of any prior confidentiality
agreement, and (e) obligates the employee or contractor to keep any confidential
information, including trade secrets, of PSI confidential both during and after
the term of employment or contract.
To PSI's actual knowledge, it is not necessary for the business of PSI in the
Field to use any Intellectual Property owned by any present or past director,
officer, or employee of PSI. Covenant. PSI shall notify Phase III of patentable
inventions for which PSI files a Program Patent Right. PSI shall use
commercially reasonable efforts during the POC Study and Post-Study Period (i)
to evaluate potentially patentable inventions in the Field, and (ii) to
determine whether to file patent applications covering such inventions, taking
into account relevant factors, including, without limitation, PSI's past
practices, intellectual property strategy, and PSI's financial constraints.
Assignment. Either Party may in its sole discretion assign this Agreement or any
of its rights, interests or obligations hereunder with or without the prior
written approval of the other Party; provided that, the assignee assumes all
obligations of such Party under this Agreement; and, provided further, that if
such assignment is made by PSI in connection with the transfer or sale of all or
substantially all of the business of PSI to which this Agreement relates,
whether by merger, sale of stock, sale of assets (including a transfer of the
Program Rights), or otherwise, it is understood and agreed that (i) the products
of such Acquiring Party conceived, reduced to practice, developed or
independently acquired prior to such acquisition or after such acquisition
without use of the technology acquired from PSI shall not be deemed Products
hereunder, (ii) the intellectual property, technology and other rights of the
Acquiring Party conceived, reduced to practice, developed or independently
acquired prior to such acquisition or after such acquisition without use of the
technology acquired from PSI shall not be deemed to be Program Patent Rights or
otherwise subject to the terms or conditions of this Agreement, and (iii)
following such acquisition, PSI's (or the Acquiring Party's or its successor's)
obligation to pay amounts due under Section 4 hereof shall be assumed and
<PAGE>

continue, subject to the terms of this Agreement, so long as PSI or such
Acquiring Party (or its successor) is receiving any Licensing Income or Net
Sales (as provided in paragraph 4(c). This Agreement shall inure to the benefit
of the Parties hereto and be binding on their respective successors and
permitted assigns. It is understood and agreed by the Parties that, upon the
sale or assignment by PSI and/or any of its Affiliates of the Program Rights to
any unaffiliated person or entity (the "Acquiring Party") (whether on a
stand-alone basis or pursuant to a transaction involving the transfer or sale of
all or substantially of the business of PSI to which this Agreement relates,
whether by merger, sale of stock, sale of assets or otherwise), PSI shall assign
this Agreement to the Acquiring Party and the Acquiring Party shall assume the
rights and obligations of PSI under this Agreement.
Severability. If any provision of this Agreement is held to be invalid, illegal,
or unenforceable, in whole or part, such invalidity will not affect any
otherwise valid provision, and all other valid provisions will remain in full
force and effect.
Counterparts.  This  Agreement  may be  executed  and  delivered  (including  by
facsimile  transmission)  in one or more  counterparts,  all of  which  shall be
considered  one and the same  agreement and shall become  effective  when one or
more  counterparts  have been signed by each of the Parties and delivered to the
other  Party,  it  being  understood  that  all  Parties  need not sign the same
counterpart.
Titles.  The titles and headings  preceding  the text of the  paragraphs of this
Agreement  have been  inserted  solely for  convenience  of reference and do not
constitute a part of this  Agreement or affect its  meaning,  interpretation  or
effect.
Waiver.  The  failure of any Party to insist in any one or more  instances  upon
performance  of any terms or conditions of this  Agreement will not be construed
as a waiver of future performance of any such term,  covenant,  or condition and
the  obligations  of any Party with respect to such term,  covenant or condition
will continue in full force and effect.
Notices. All notices and other communications  hereunder shall be in writing and
shall be deemed  given if delivered  personally,  sent by  facsimile,  mailed by
registered  or certified  mail (return  receipt  requested) or sent by overnight
courier to the Parties at the following  addresses (or at such other address for
a party as shall be specified by like notice):

If to PSI, to
Parallel Solutions, Inc.
763D Concord Avenue
Cambridge MA 02138
Attention:  Dermot Liddy, CEO
Telephone: 617-876-2178
Facsimile: 617-876-0728

If to Phase III, to
330 South Service Road, Suite 120
Melville, NY 11747
Attention:  Mark Weinreb, President and CEO
Telephone:  631.574.4955
Facsimile:  631.574.4956

Any of the above addresses may be changed at any time by notice given as
provided above; provided, that any such notice of change of address shall be
effective only upon receipt. All notices, requests or instructions given in
accordance herewith shall be deemed given (i) on the date of delivery, if hand
delivered, (ii) on the date of receipt, if sent by facsimile, (iii) three
<PAGE>

business days after the date of mailing, if mailed by registered or certified
mail, return receipt requested, and (iv) one business day after the date of
sending, if sent by Federal Express or other recognized overnight courier.
Entire Agreement. This Agreement (which term shall be deemed to include the
Exhibits hereto and the other certificates, documents and instruments delivered
hereunder) constitutes the entire agreement of the Parties hereto with respect
to the subject matter hereof and supersedes all prior agreements, letters of
intent and understandings, both written and oral, among the Parties with respect
to the subject matter hereof. There are no representations or warranties,
agreements, or covenants other than those expressly set forth in this Agreement.
Modification. Except as otherwise provided herein, this Agreement cannot be
amended or modified except by subsequent written agreement among Phase III and
PSI. Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts. Each
PSI and Phase III submits to the exclusive jurisdiction of the state and federal
courts located in the Commonwealth of Massachusetts.
No Consequential Damages. NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL,
INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE, MULTIPLE OR OTHER INDIRECT
DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER,
OR FOR LOSS OF PROFITS, LOSS OF DATA OR LOSS OF USE DAMAGES ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT WHETHER BASED UPON WARRANTY, CONTRACT,
TORT, STRICT LIABILITY OR OTHERWISE, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.
Warranty Disclaimer. Except as expressly set forth in Section 9, THE PARTIES
MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND UNDER THIS
AGREEMENT, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY THAT PRODUCTS WILL BE
SUCCESSFULLY DEVELOPED HEREUNDER, AND IF PRODUCTS ARE DEVELOPED, WITH RESPECT TO
SUCH PRODUCTS, AND THE PARTIES DISCLAIM ALL IMPLIED WARRANTIES OF
NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
[Signature Page Follows]


<PAGE>




IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date and
year first above written.
PARALLEL SOLUTIONS, INC.
By:      /s/Dermot Liddy
   ----------------------
Name:     Dermot Liddy
    ---------------------
Title:        CEO.
      -------------------
PHASE III MEDICAL, INC.
By:       /s/Mark Weinreb
   ----------------------
Name:     Mark Weinreb
     --------------------
Title:    President & CEO
      -------------------


EXHIBIT A
                           PROOF OF CONCEPT GUIDELINES

     For the sake of  clarity,  both  Parties  agree  that the POC  Study  shall
     consist of Required  Research only (as defined below) and that the duration
     of this POC  Study  is no  longer  than  nine (9)  months  (plus,  at PSI's
     discretion,   an  additional  three  (3)  months),  absent  further  mutual
     agreement  between the  Parties.  Both  Parties  also agree that  potential
     additional  research,  as further  described below, may be added to the POC
     Study by mutual agreement of both Parties.  The Parties agree that both the
     Required Research and any such additional  research shall be at the expense
     of  Phase  III  Medical  to the  extent  described  herein  and  that  such
     additional  research may involve  extending  the duration of the POC Study.
     The  compound  that will be tested  during the Required  Research  shall be
     [**]. [**]The  definition of a successful  Required Research study shall be
     as  follows:  The POC  Study  shall be  deemed  successful  if the  results
     indicate that [**] than the [**],  as determined  from [**] with respect to
     [**]; and (b) is likely to be [**].  The Parties  understand and agree that
     there is no  requirement  or assurance  that the Required  Research will be
     successful.
"Required Research" shall mean PSI Research and Evaluation Study, as those terms
are defined below.

PSI Research
Up to [**] during the duration of the POC Study. The Parties  recognize the
possibility that [**]. Both Parties agree that they will [**].

A number of lead compounds may be [**] performed by PSI. Such candidates [**].
These lead compounds will [**]. [**]

<PAGE>

(b) Evaluation Study
[**] testing of a lead candidate or candidates as outlined above will [**]. Such
testing shall be [**] to the extent described herein.

[**] testing of the lead candidates in the [**]. Such testing shall be [**] to
the extent described herein.

[**] testing will also include [**]. Such testing shall be [**] to the extent
described herein

[**] testing will include [**]. In this regard, [**]. Such review shall [**] to
the extent described herein.

Potential Additional Research

At Phase III's request and as agreed by PSI, PSI shall [**] the lead candidate
or candidates. The expense for such studies shall be as determined hereafter by
the Parties.

At Phase III's request and as agreed by PSI, PSI shall [**].

Such testing shall [**] as determined hereafter by the Parties.

At Phase III's request, and as agreed by PSI, [**] shall be [**]. The expense
for such studies shall be as determined hereafter by the Parties.







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>7
<FILENAME>a4604679ex102.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 10.2
<TEXT>
                                  Exhibit 10.2

                         Form of Stock Option Agreement



<PAGE>




                                                                    Exhibit 10.2

     STOCK  OPTION  AGREEMENT,  made  as of the  2nd  day of  March,  2004  (the
"Agreement"),  between  PHASE III  MEDICAL,  INC., a Delaware  corporation  (the
"Company"), and ________________(the "Optionee"). -------------------

     WHEREAS, the Company has adopted the 2003 Equity Participation Plan subject
to shareholder approval (the "Plan").

     WHEREAS, the Optionee has become a Director of the Company.

     WHEREAS,  the  Company  has  agreed to grant to the  Optionee  an option to
purchase Common Shares of the Company pursuant to the Plan.

     NOW,  THEREFORE,  in  consideration  of the  foregoing,  the Company hereby
grants to the Optionee the right and option to purchase  Common Shares under and
pursuant  to the terms and  conditions  of the Plan and upon and  subject to the
following terms and conditions:

         1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase up to _________________________Common
Shares of the Company (the "Option Shares") during the period commencing on the
date hereof and terminating at 5:00 P.M. on __________(the "Expiration Date").

         2. NATURE OF OPTION. The Option is not intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
relating to "incentive stock options".

         3. EXERCISE PRICE. The exercise price of each of the Option Shares
shall be ___________(the "Exercise Price"). The Company shall pay all original
issue or transfer taxes on the exercise of the Option.

         4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance
with the provisions of the Plan. In addition to the permissible methods of
exercise provided for in the Plan, the Optionee may elect to have the Company
reduce the number of shares otherwise issuable to him upon exercise of the
Option by a number of shares having a fair market value (determined in
accordance with the provisions of the Plan) equal to the Exercise Price of the
Option being exercised (a "Net Exercise"). As soon as practicable after the
receipt of notice of exercise and payment of the Option Price as provided for in
the Plan, or upon a Net Exercise, the Company shall tender to the Optionee
certificates issued in the Optionee's name evidencing the number of Option
Shares covered thereby.

         5. TERMINATION OF SERVICE. The Option shall remain exercisable until
the Expiration Date notwithstanding any termination or cessation of service as a
Director with the Company or its subsidiaries for any reason whatsoever.

<PAGE>

         6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.

         7. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and hand delivered or sent by registered or
certified mail, return receipt requested, addressed to the Company, 330 South
Service Road, Suite 120, Melville, New York 11747, Attention: President and to
the Optionee at the address indicated below. Notices shall be deemed to have
been given on the date of hand delivery or mailing, except notices of change of
address, which shall be deemed to have been given when received.

         8. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.

         9. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains
the entire understanding of the parties hereto with respect to the subject
matter hereof and may be modified only by an instrument executed by the party
sought to be charged.

                  [Remainder of page intentionally left blank]


<PAGE>



     IN WITNESS WHEREOF,  the parties have executed this Agreement as of the day
and year first above written.

                            PHASE III MEDICAL, INC.

                            By:
                               -------------------------------------------------
                                      President


                            Signature of Optionee



                            Name of Optionee

                            Address of Optionee:









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>a4604679ex141.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 14.1
<TEXT>
                                  EXHIBIT 14.1


                  Code of Ethics for Senior Financial Officers




<PAGE>



                                                                    Exhibit 14.1

                                 CODE OF ETHICS
                                       FOR
                            SENIOR FINANCIAL OFFICERS

                                    PURPOSE.
The Board of Directors (the "Board") of Phase III Medical, Inc. (the "Company")
has adopted the following Code of Ethics (the "Code") to apply to the Company's
Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or
Controller, or persons performing similar functions (the "Senior Financial
Officers"). This Code is intended to focus Senior Financial Officers on areas of
ethical risk, provide guidance to help them recognize and deal with ethical
issues, provide mechanisms to report unethical conduct, foster a culture of
honesty and accountability, deter wrongdoing and promote fair and accurate
disclosure and financial reporting.

No code or policy can anticipate every situation that may arise. Accordingly,
this Code is intended to serve as a source of guiding principles. Senior
Financial Officers are encouraged to bring questions about particular
circumstances that may involve one or more of the provisions of this Code to the
attention of the Audit Committee, who may consult with inside or outside legal
counsel as appropriate.

                                  INTRODUCTION
Each Senior Financial Officer is expected to adhere to a high standard of
ethical conduct. The good name of the Company depends on the way Senior
Financial Officers conduct business and the way the public perceives that
conduct. Unethical actions, or the appearance of unethical actions, are not
acceptable. Senior Financial Officers are expected to be guided by the following
principles in carrying out their responsibilities.

     -    Loyalty.  Senior  Financial  Officers  should not be, or appear to be,
          subject to influences,  interests or relationships  that conflict with
          the best interests of the Company.

     -    Compliance  with  Applicable  Laws.  Senior  Financial   Officers  are
          expected to comply with all laws, rules and regulations  applicable to
          the Company's activities.

     -    Observance of Ethical Standards. Senior Financial Officers must adhere
          to high  ethical  standards  in the  conduct  of their  duties.  These
          include honesty and fairness.
                  INTEGRITY OF RECORDS AND FINANCIAL REPORTING.
Senior Financial Officers are responsible for the accurate and reliable
preparation and maintenance of the Company's financial records. Accurate and
reliable preparation of financial records is of critical importance to proper
management decisions and the fulfillment of the Company's financial, legal and
reporting obligations. Diligence in accurately preparing and maintaining the
Company's records allows the Company to fulfill its reporting obligations and to
provide stockholders, governmental authorities and the general public with full,
fair, accurate, timely and understandable disclosure. Senior Financial Officers

<PAGE>


are responsible for establishing and maintaining adequate disclosure controls
and procedures, and internal controls and procedures, including procedures that
are designed to enable the Company to: (a) accurately document and account for
transactions on the books and records of the Company; and (b) maintain reports,
vouchers, bills, invoices, payroll and service records, business measurement and
performance records and other essential data with care and honesty.

Senior Financial Officers shall immediately bring to the attention of the Audit
Committee any information they may have concerning:

Defects, deficiencies, or discrepancies related to the design or operation of
internal controls which may affect the Company's ability to accurately record,
process, summarize, report and disclose its financial data; or Any fraud,
whether or not material, that involves management or other employees who have
roles in the Company's financial reporting, disclosures or internal controls.

CONFLICT OF INTEREST.
Senior Financial Officers must avoid any conflicts of interest between
themselves and the Company. Any situation that involves, or may involve, a
conflict of interest with the Company, should be disclosed promptly to the Audit
Committee, who may consult with inside or outside legal counsel as appropriate.

A "conflict of interest" can occur when an individual's personal interest is
adverse to - or may appear to be adverse to - the interests of the Company as a
whole. Conflicts of interest also arise when an individual, or a member of his
or her family, receives improper personal benefits as a result of his or her
position with the Company.

This Code does not attempt to describe all possible conflicts of interest which
could develop. Some of the more common conflicts from which Senior Financial
Officers must refrain, however, are set forth below:

     -    Improper  conduct and activities.  Senior  Financial  Officers may not
          engage in any conduct or  activities  that are  inconsistent  with the
          Company's  best  interests  or that  disrupt or impair  the  Company's
          relationship  with any person or entity with which the Company has, or
          proposes to enter into, a business or contractual relationship.

     -    Compensation from non-Company  sources.  Senior Financial Officers may
          not accept  compensation  for services  performed for the Company from
          any source other than the Company.

     -    Gifts.  Senior  Financial  Officers  and  members  of their  immediate
          families may not accept gifts from persons or entities  where any such
          gift is being  made in  order  to  influence  their  actions  in their
          position  with the  Company,  or where  acceptance  of the gifts could
          create the appearance of a conflict of interest.

<PAGE>


     -    Personal use of Company assets.  Senior Financial Officers may not use
          Company  assets,  labor or  information  for personal use,  other than
          incidental  personal use, unless approved by the Audit Committee or as
          part of a compensation or expense reimbursement program.

     -    Financial  Interests in other  Businesses.  Senior Financial  Officers
          should avoid having an  ownership  interest in any other  enterprises,
          such  as  a  customer,   supplier  or  competitor,  if  that  interest
          compromises the officer's loyalty to the Company.

                            CORPORATE OPPORTUNITIES.
Senior Financial Officers are prohibited from: (a) taking for themselves
personally opportunities related to the Company's business without first
presenting those opportunities to the Company and obtaining approval from the
Board; (b) using the Company's property, information, or position for personal
gain; or (c) competing with the Company for business opportunities.
                               CONFIDENTIALITY.
Senior Financial Officers should maintain the confidentiality of information
entrusted to them by the Company and any other confidential information about
the Company, its business or finances, customers or suppliers, that comes to
them, from whatever source, except when disclosure is authorized or legally
mandated. For purposes of this Code, "confidential information" includes all
non-public information relating to the Company, its business or finances,
customers or suppliers.

                  COMPLIANCE WITH LAWS, RULES AND REGULATIONS.
Senior Financial Officers shall comply with laws, rules and regulations
applicable to the Company, including insider trading laws, and all other Company
policies.
         ENCOURAGING THE REPORTING OF ANY ILLEGAL OR UNETHICAL BEHAVIOR.
Senior Financial Officers must promote ethical behavior and create a culture of
ethical compliance. Senior Financial Officers should foster an environment in
which the Company: (a) encourages employees to talk to supervisors, managers and
other appropriate personnel when in doubt about the best course of action in a
particular situation; (b) encourages employees to report violations of laws,
rules and regulations to appropriate personnel; and (c) informs employees that
the Company will not allow retaliation for reports made in good faith.

                                   CONCLUSION.
Senior Financial Officers should communicate any suspected violations of this
Code promptly to the Audit Committee. The Board or a person or persons
designated by the Board will investigate violations, and appropriate
disciplinary action will be taken in the event of any violation of this Code, up
to and including termination. Only the Audit Committee may grant any waivers of
this policy.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>9
<FILENAME>a4604679ex231.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 23.1
<TEXT>
                                  EXHIBIT 23.1


                     Consent of Holtz Rubenstein & Co., LLP



<PAGE>



                                                                    Exhibit 23.1

Consent of Independent Auditors


We hereby consent to the incorporation by reference into the Registration
Statement on Form S-8 (Registration No. 0-10909) of Phase III Medical, Inc. of
our report dated February 3, 2004 with respect to the consolidated financial
statements of Phase III Medical, Inc. appearing in this Annual Report on Form
10-K of Phase III Medical, Inc. for the year ended December 31, 2003.



/s/ Holtz Rubenstein & Co., LLP
Melville, New York
March 30, 2004






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>10
<FILENAME>a4604679ex311.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 33.1
<TEXT>
                                  EXHIBIT 31.1

                                302 Certification




<PAGE>


                                                                    Exhibit 31.1


                                 CERTIFICATION

I, Mark Weinreb, certify that:

1. I have reviewed this Annual Report on Form 10-K of Phase III Medical, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's board of directors and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

        (a) Designed such disclosure controls and procedures, or caused such
        disclosure controls and procedures to be designed under our supervision,
        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
        report is being prepared;

        (b) Evaluated the effectiveness of the registrant's disclosure controls
        and procedures and presented in this report our conclusions about the
        effectiveness of the disclosure controls and procedures, as of the end
        of the period covered by this report based on such evaluation; and

        (c) Disclosed in this report any change in the registrant's internal
        control over financial reporting that occurred during the registrant's
        most recent fiscal quarter (the registrant's fourth fiscal quarter in
        the case of an annual report) that has materially affected, or is
        reasonably likely to materially affect, the registrant's internal
        control over financial reporting; and

5. The registrant's board of directors and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

        (a) All significant deficiencies and material weaknesses in the design
        or operation of internal control over financial reporting which are
        reasonably likely to adversely affect the registrant's ability to
        record, process, summarize and report financial information; and

        (b) Any fraud, whether or not material, that involves management or
        other employees who have a significant role in the registrant's internal
        control over financial reporting.

Date: March 30, 2004

                                                   /s/ Mark Weinreb
                                                   Mark Weinreb
                                                   Chief Executive Officer





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>11
<FILENAME>a4604679ex321.txt
<DESCRIPTION>PHASE III MEDICAL, INC. EX 32.1
<TEXT>
                                  EXHIBIT 32.1

                                906 Certification


<PAGE>


                                                                    Exhibit 32.1

                            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 Phase III Medical, Inc. (the "Company")
on Form 10-K for the year ended December 31, 2003 filed with the Securities and
Exchange Commission (the "Report"), I, Mark Weinreb, Chief Executive 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) 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
results of operations of the Company for the periods presented.

Dated: March 30, 2004

                                              /s/ Mark Weinreb
                                              Mark Weinreb
                                              Chief Executive Officer


This certification has been furnished solely pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.







</TEXT>
</DOCUMENT>
</SUBMISSION>
