SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Amendment No. 1
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1998.....Commission File Number 1-155
FIRST MEDICAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-1920670
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1055 Washington Boulevard, Stamford, CT 06901
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 327-0900
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 11, 1998
- ----------------------- ----------------------------------
Common Stock, par value 9,567,292
$.001 per share
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
INDEX
Page
Number
------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -
Nine Months Ended September 30, 1998 and 1997................1
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997.....................2
Consolidated Statements of Changes in
Shareholders' Equity (Deficit) -
Nine Months Ended September 30, 1998 and 1997................3
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997................4
Notes to Consolidated Financial Statements...................5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................8-11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk..................................................11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings............................................12
Item 3. Defaults upon Senior Securities..............................12
Item 5. Other Information............................................13
Item 6. Exhibits and Reports on Form 8-K.............................14-15
<PAGE>
PART I - FINANCIAL INFORMATION
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 2,788 $ 2,304 $ 8,253 $ 6,727
Cost of revenue 2,384 1,954 7,030 5,423
----- ----- ----- -----
Income from clinic operations 404 350 1,223 1,304
Operating expenses:
Salaries and benefits 144 73 550 500
General and administrative 242 141 759 591
Depreciation and amortization 128 98 193 193
------- -- ------ -----
Total operating expenses 514 312 1,502 1,284
(Loss) income from operations (110) 38 (279) 20
Interest expense, net (31) (67) (128) (132)
------- ---- ------ -------
Loss before income tax provision (141) (29) (407) (112)
Income tax provision 60 -- 387 --
------ ----- ------ --
Loss from continuing operations before
discontinued operations (201) (29) (794) (112)
Discontinued operations:
Loss from operations of
discontinued physician management
and electrical supply division (1) 31 (1,983) (2,157)
Income on disposal of physician management
and electrical supply division 977 -- 4,646 --
------- -- ----- -----
Income (loss) from discontinued operations 976 31 2,663 (2,157)
Cumulative effect of change in
accounting principle -- -- (970) --
---- ---- ----- ----
__--
Net income (loss) $ 775 $ 2 $ 899 $ (2,269)
Income (loss) per share - basic and diluted:
Loss from continuing operations $ (.02) $ -- $ (.08) $ (.01)
Income (loss) from discontinued operations .10 ---- .28 (.24)
Cumulative effect of change in
accounting principle -- -- (.10) --
---- ---- ---- ----
Income (loss) per share $ .08 $ -- $ .10 $ (.25)
Weighted average number of common
shares outstanding-basic and diluted 9,567,292 9,360,520 9,454,581 9,135,682
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,089 $ 1,421
Accounts receivable 752 98
Due from related parties -- 1,140
Inventories 129 --
Prepaid expenses and other current assets 141 51
---------- ---------
Total current assets 2,111 2,710
Property and equipment, net 583 170
Intangible assets, net 2,113 2,014
Other assets 89 248
---------- --------
TOTAL $ 4,896 $ 5,142
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 738 $ 278
Accrued expenses 826 383
Deferred revenue 652 731
Notes payable and accrued interest payable 1,310 3,999
Net liabilities of discontinued operations 1,355 805
----------- --------
Total current liabilities 4,881 6,196
Commitments and contingencies
Shareholders' equity (deficit):
Common stock, par value $.001; authorized
shares100,000,000; shares issued 9,567,292
at September 30, 1998 and 9,397,292 at
December 31, 1997 10 9
Additional paid-in-capital 8,253 8,084
Accumulated deficit (8,248) (9,147)
------------ --------
Total shareholders' equity (deficit) 15 (1,054)
------------ --------
TOTAL $ 4,896 $ 5,142
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES OF
SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Retained Total
Number of Common Additional Earnings Shareholders'
Shares Stock Paid-in Capital (Deficit) Equity (Deficit)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 10,000 $ - $ 380 $ 324 $ 704
Issuance of stock to FMG
Shareholders 9,387,292 23 2,256 -- 2,279
Capital contribution to FMG -- -- 5,000 -- 5,000
Capital contribution to FMG
Subsidiary -- -- 165 -- 165
Net loss -- -- -- (2,269) (2,269)
-------- --- -- -------
Balance, September 30, 1997 9,397,292 $ 23 $ 7,801 $(1,945) $ 5,879
===== == === ===== ======
Balance, December 31, 1997 9,397,292 $ 9 $ 8,084 $(9,147) $(1,054)
Issuance of common stock 170,000 1 169 -- 170
Net income -- -- -- 899
------- --- --- -------
899
Balance, September 30, 1998 9,567,292 $ 10 $ 8,253 (8,248) $ 15
======== === ===== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
----------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 899 $ (2,269)
Adjustments to reconcile net income
(loss) to net cash used
in continuing
operating activities:
Depreciation and amortization 193 193
Cumulative effect of change in accounting
principle 970 --
Noncash compensation 170 --
Decrease (increase) in due from affiliates 1,140 (513)
Increase in intangibles and other assets (993) (4,545)
Increase in net liabilities
of discontinued operations 550 46
Other changes, net (49) 237
---- ----
Net cash provided by (used in) continuing operating
activities 2,880 (6,851)
Capital expenditures (523) (124)
Capital contribution to FMG and subsidiary -- 5,165
Issuance of common stock -- 2,279
(Repayment) proceeds of loan payables and others (2,689) 2,505
------- ------
(Decrease) increase in cash and cash equivalents (332) 2,974
Cash and cash equivalents, beginning of year 1,421 124
----- -----
Cash and cash equivalents, end of the period $ 1,089 $ 3,098
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Basis of Presentation
The financial information for the three months and nine months ended September
30, 1998 and 1997 is unaudited. However, the information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for the fair statement of results for the
interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes included in First Medical Group, Inc.'s ("the Company") December 31, 1997
Report on Form-10K.
The results of operations for the three month and nine month period ended
September 30, 1998 are not necessarily indicative of the results to be expected
for the full year.
Earnings (loss) per common share is calculated by dividing net income (loss) by
weighted average number of common shares for the period. Dilutive earnings per
share reflect, in periods in which they have a dilutive effect, the effect of
common shares issuable upon exercise of stock options and other stock
equivalents. For the periods presented, there were no common stock equivalents
included in the calculation, since they would be anti-dilutive.
2. Discontinued Operations
On April 14 and 15, 1998, the Company through certain of its wholly-owned
subsidiaries completed the sale of its Florida physician practice management
operations. The sales price was approximately $6.75 million for certain assets
of the Company. The Company is also divesting its Texas and Mid-West physician
practice management operations. As a result of these transactions, the Company
has reflected its physicians practice management division as discontinued
operations for financial statement purposes.
On April 17, 1998, the Company sold Hallmark Electrical Supplies Corp.
("Hallmark") which was a wholly owned subsidiary of the Company to a certain
member of management of the Company and certain members of management of
Hallmark for a total sales price of $1.9 million. The purchase price of $1.9
million represented a cash payment of $750,000 and the assumption of $1.15
million of liabilities and a covenant not to compete by the member of the
management of the Company.
On July 8, 1998, the Company through its wholly-owned subsidiary, First Medical
Corporation, Inc. sold all of the assets of its Indiana operations and its
contracts with Humana Health Plan, Inc. ("Humana") to provide physician practice
management to MCO, LLC. The total sales price
5
<PAGE>
was $727,378. The proceeds of the sale were used to pay off the existing loan
with Devon Bank in the amount of $377,378 and $350,000 was applied to amounts
owed to Humana.
On July 16, 1998, First Medical Corporation-Texas Division, sold its assets to
Durham Physicians Group, P.A. for $90,000 to be paid in equal installments
beginning July 1, 1999, bearing 8% interest per annum compounded annually. First
Medical Corporation-Texas Division and Durham Physicians Group, P.A. also
terminated their Full Service Management Agreement.
Summarized financial information for discontinued operations is as follows (in
thousands):
Nine Months Ended September 30,
1998 1997
------------------
Revenue $ 19,604 $ 43,565
Loss from discontinued operations $ (1,983) $ (2,157)
September 30, 1998
------------------
Current assets $ 5,584
Other assets 90
--
Total assets 5,674
Total liabilities 7,029
-----
Net liabilities of discontinued operations $ (1,355)
3. Change in Accounting Principle
Prior to 1998, the Company capitalized certain costs relating to start-up
operations. Pursuant to Statement of Position 98-5, Reporting on the Costs of
Start-Up Activities, the Company recorded $970,000 as a cumulative effect of the
change in accounting principle relating to the write-off of such costs. This
amount is reflected in the consolidated statement of operations for the nine
months ended September 30, 1998.
4. Acquisition
Effective July 1, 1998, American Medical Centers Management Company, Ltd.
("AMCMC BVI") acquired the stock of American Medical Clinics Moscow, Inc. and
American Medical Center-St. Petersburg Ltd. ("AMC-CIS"). The transaction was
accounted for under the purchase method of accounting. The total purchase
consideration was approximately $1.3 million and represented money owed to the
Company by AMC-CIS. The excess of purchase consideration over fair market value
of net assets of AMC-CIS amounted to $848,108 and is being amortized on a
straight-line basis over 25 years. Prior to the acquisition, the Company had a
management services agreement with AMC-CIS whereby AMC-CIS would provide medical
services to the
6
<PAGE>
Company's customers. As a result of the management agreement arrangement, in
accordance with EITF 97-2, Application of APB No. 16, Business Combinations, and
FASB Statement No. 94, Consolidation of All Majority-Owned Subsidiaries, to
Physicians' Practice Entities and Certain Other Entities with Contractual
Management Arrangements ("EITF 97-2"), the Company has historically consolidated
the results of operations of AMC-CIS.
5. Supplementary Schedule
1998 1997
(in thousands)
--------------
Cash paid during the nine months
ended September 30, for:
Interest $ 37 $ 132
Income taxes 387 --
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
GENERAL
Statements made in this filing about management's intentions, hopes, beliefs,
expectations or predictions of the future are forward-looking statements. It is
important to note that actual results could differ materially from those
projected in such forward-looking statements. Factors that could cause future
results to vary materially from current expectations include, but are not
limited to competition in the health care industry, legislation and regulatory
changes, changes in the economy and stability in the international markets in
which the Company operates.
Financial Condition
CASH AND CASH EQUIVALENTS. At September 30, 1998, the Company had cash of $ 1.1
million as compared to $ 1.4 million at December 31, 1997. The decrease in cash
and cash equivalents relates primarily to the net proceeds received form the
sale of the discontinued operations offset by operating losses of $ 2.0 million
incurred during the nine months ended September 30, 1998 from discontinued
operations and the repayment of bank debt of $2.8 million.
ACCOUNTS RECEIVABLE. Accounts receivable as of September 30, 1998 was $752,000
as compared to $98,000 at December 31, 1997. The increase relates primarily to
the acquisition of AMC-CIS as of July 1, 1998.
DUE FROM RELATED PARTIES. Due from related parties at September 30, 1998 was
zero as compared to $1.1 million at December 31, 1997. This amount was owed by
AMC-CIS to the Company and was used as purchase consideration for the Company's
purchase of AMC-CIS as of July 1, 1998.
7
<PAGE>
INTANGIBLE AND OTHER ASSETS. The decrease in intangible and other assets relates
primarily to goodwill acquired in connection with the purchase of AMC-CIS of
$848,000 offset by the write-off of $970,000 of start up costs of certain
operations due to the change in accounting principle.
NOTES PAYABLE AND ACCRUED INTEREST PAYABLE. Notes payable and accrued interest
payable at September 30, 1998 was $1.3 million as compared to $4.0 million at
December 31, 1997. Proceeds from the sale of the physician practice management
operations were used to repay $2.8 million of bank facilities.
NET LIABILITIES OF DISCONTINUED OPERATIONS. Net liabilities of discontinued
operations at September 30, 1998 was $1.4 million as compared to $.8 million at
December 31, 1997. The increase in net liabilities is due to operating losses
incurred in connection with the physician practice management division.
RESULTS OF OPERATIONS
THIRD QUARTER OF 1998 IN COMPARISON
WITH THIRD QUARTER OF 1997
REVENUE. Total revenue of the Company for the three months ended September
30, 1998 and 1997 was $2.8 million and $2.3 million, respectively, an increase
of 21%, due mainly to the opening of two new clinics in Eastern Europe as well
as increased patient visits in existing facilities.
COST OF REVENUES. Cost of revenues for the three months ended September 30,
1998 and 1997 was $2.4 million and $ 2.0 million, respectively. Cost of revenues
as a percentage of revenue, was 86% and 85% for the three months ended September
30, 1998 and 1997, respectively. The increase relates to increased staff levels
as a result of increased visits.
OPERATING EXPENSES. Operating expenses for the Company were $514,000 during
the three months ended September 30, 1998 as compared to $ 312,000 in 1997.
Operating expenses as a percentage of revenue was 18% in 1998 as compared to 14%
in 1997. The increase is attributable to additional corporate overhead resulting
from the divestiture of the physician practice management division.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. Income from discontinued
operations for the three months ended September 30, 1998 was $976,000 as
compared to income of $31,000 for the three months ended September 30, 1997.
Included in income from discontinued operations for the three months ended
September 30, 1998 was a gain of $977,000 million resulting from the sale of the
Texas and Mid-West physician practice management operations.
NET INCOME. Net income for the three months ended September 30, 1998 was
$775,000 as compared to net income of $ 2,000 in the third quarter of 1997 due
primarily to the gain on sale of the Texas and Mid-West physician practice
management operations of $977,000.
8
<PAGE>
RESULTS OF OPERATIONS
FIRST NINE MONTHS OF 1998 IN COMPARISON
WITH FIRST NINE MONTHS OF 1997
REVENUE. Total revenue of the Company for the nine months ended September
30, 1998 and 1997 was $8.3 million and $6.7 million, respectively, an increase
of 23%, due mainly to the opening of two new clinics in Eastern Europe as well
as increased patient visits in existing facilities.
COST OF REVENUES. Cost of revenues for the nine months ended September 30,
1998 and 1997 was $7.0 million and $ 5.4 million, respectively. Cost of revenues
as a percentage of revenue, was 85% and 81% for the nine months ended September
30, 1998 and 1997, respectively. The increase was related to increased staffing
levels as a result of the increase in visits.
OPERATING EXPENSES. Operating expenses for the Company were $1.5 million
during the nine months ended September 30, 1998 as compared to $1.3 million in
1997. Operating expenses as a percentage of revenue was 18% in 1998 as compared
to 19% in 1997.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. Income from discontinued
operations for the nine months ended September 30, 1998 was $2.7 million as
compared to a loss of $2.2 million for the nine months ended September 30, 1997.
Included in income from discontinued operations for the nine months ended
September 30, 1998 was a net gain of $4.6 million resulting from the sale of the
physician practice management and electrical supply business.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. The cumulative
effect of a change in accounting principle of $ 970,000 reflected in the
consolidated statement of operations during the nine months ended September 30,
1998 relates to the write-off of start-up costs of certain operations pursuant
to Statement of Position 98-5.
NET INCOME (LOSS). Net income for the nine months ended September 30, 1998
was $ 899,000 as compared to a net loss of $ 2.3 million for the nine months
ended September 30, 1997 due primarily to the net gain on sale of the physician
practice management operations and electrical supply business of $4.6 million
offset by $ 2.0 million of operating losses incurred in connection with
discontinued operations and the impact relating to the change in accounting
principle.
Liquidity and Capital Resources
The working capital of the Company as of September 30, 1998 is at a deficit
of $2.8 million as compared to $3.5 million as of December 31, 1997. The
decrease in the deficit of $.7 million is due mainly to the sale of the
physician practice management operation and the electrical supply business
offset by an increase of net liabilities related to discontinued operations due
to operating losses incurred in connection with the physician practice
management division. Included in the working capital deficit as of September 30,
1998 are the notes payable and accrued interest of approximately $1.3 million to
which the Company is unable to locate the note holders.
9
<PAGE>
The Company is in default in the payment of interest (approximately
$920,000 interest was past due as of September 30, 1998) on the $390,000
aggregate principal amount of its 13 1/2 % Senior Subordinated Notes due May 15,
1998 ("13 1/2 % Notes) and 14 7/8% Subordinated Debentures due October 15, 1995,
("14 7/8% Debentures") that remain outstanding and were not surrendered to the
Company in connection with its financial restructuring consummated in 1991. The
Company has been unable to locate the holders of the 13 1/2% Notes and 14 7/8%
Debentures (with the exception of certain of the 14 7/8% Debentures, which were
retired during 1996).
Year 2000
The Company is aware of the issues related with the computer systems that
could be affected by the "Year 2000." The Year 2000 problem is the result of
computer programs being written using two digits rather than four to define the
applicable year.
The Company primarily uses general business applications that are licensed
by the same vendor. It is expected that these applications will be Year 2000
compliant. Should such systems not be Year 2000 compliant, the Company believes
that reasonable manual alternatives are available to produce such data. The
Company believes that such cost to perform these tasks are not considered to be
material.
The Company is in the process of identifying those vendors that it relies
on to supply diagnostic test results relating to patient testing and to a small
group of third-party payors. The Company intends to send inquires to these
vendors and third-party payors to ascertain compliance.
Based upon the information currently available, the Company believes that
its risk associated with problems arising from Year 2000 issues is not
significant. However, because of the many uncertainties associated with Year
2000 issues, and because the Company's assessment is necessarily based upon
information from third-party payors and suppliers, there can be no assurance
that the Company's assessment is correct or as to the materiality or effect of
any failure of such assessment to be correct. The Company will continue with its
review process as described above and make modifications as deemed necessary
under the circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the quantitative and qualitative
disclosures about market risk since December 31, 1997.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
1. On September 16, 1998, The Lehigh Group, Inc., now known as First Medical
Group, Inc. was sued along with other defendants in the United States
District Court of Northern Ohio
10
<PAGE>
Western Division pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act. The plaintiffs have alleged that the
Company is the successor-in-interest to the Hilfinger Corporation (a
defunct subsidiary of the Company) and claim that the Hilfinger Corporation
arranged for the disposal or treatment of waste chemicals at one or more
sites. The plaintiffs are seeking damages, jointly and severally, against
the defendants in excess of $25 million. The occurrence was alleged to have
taken place during the period of 1950 through 1972. The Company has put
several insurance carriers on notice of this matter, however no
determination has been made regarding whether there is insurance coverage.
The Company has retained counsel in Ohio to defend this claim.
2. On or about June 26, 1998, the Company was sued in the United States
District Court for the Southern District of Florida by plaintiffs who seek
damages ranging between $150,000 and $200,000 in connection with the sale
of stock in Dominion Healthnet, Inc. The plaintiffs claim they are entitled
to this amount based upon a buy-out agreement the plaintiffs entered into
with First Medical Corporation ( a subsidiary of the Company) when the
plaintiffs sold their interest in Dominion Healthnet, Inc., to First
Medical Corporation. The Company has retained counsel in Florida to defend
this claim. If this matter is adversely determined, it could have a
material adverse effect on the Company's financial condition.
The Company is involved in minor litigation, none of which is considered by
management to be material to its business or, if adversely determined, would
have a material adverse effect on the Company's financial statements.
Item 3. Defaults Upon Senior Securities
The Company continues to be in default in the payment of interest (approximately
$920,000 interest is past due as of September 30, 1998) on the $390,000
principal amount of 13 1/2% Notes and 14 7/8% Debentures.
Item 5. Other Information
As reported on a Form 8-K filed on April 29, 1998, on April 14 and 15, 1998,
First Medical Group, Inc., ("FMG") through certain of its wholly-owned
subsidiaries completed the sale of its Florida operations which amounted to the
sale of all of the assets of its nine outpatient centers and its management
agreements for the South Florida multi-specialty practices. The total sales
price determined through arms-length negotiations, was approximately $6.75
million, the proceeds of which were used to payoff an existing loan with First
Union Bank in the amount of $2,827,812, money owed to Humana Inc., in the sum of
$1,227,045 and various accounts payable and other accrued liabilities in the
amount of $1,483,541. The balance of the proceeds will be used for general
working capital requirements.
On April 17, 1998 FMG sold Hallmark Electrical Supplies Corp., ("Hallmark")
which was a wholly owned subsidiary of FMG to Salvatore J. Zizza and the
existing management of Hallmark for a total sales price of $1.9 million. The
$1.9 million represented a cash payment of $750,000 and the assumption of $1.150
million of liabilities and Mr. Zizza's agreement not to compete.
11
<PAGE>
Simultaneously with the sale of Hallmark, Mr. Zizza resigned as Executive Vice
President, Chief Financial Officer and Treasurer of FMG and its subsidiaries.
Mr. Zizza continues to serve as a director of FMG.
On July 8, 1998, the Company through its wholly-owned subsidiary, First Medical
Corporation, Inc. sold all of the assets of its Indiana operations and its
contracts with Humana Health Plan, Inc. ("Humana") to provide physician practice
management to MCO, LLC. The total sales price was $727,378. The proceeds of the
sale were used to pay off the existing loan with Devon Bank in the amount of
$377,378 and $350,000 was applied to amounts owed to Humana.
On July 16, 1998, First Medical Corporation-Texas Division, sold its assets to
Durham Physicians Group, P.A. for $90,000 to be paid in equal installments
beginning July 1, 1999, bearing 8% interest per annum compounded annually. First
Medical Corporation-Texas Division and Durham Physicians Group, P.A. also
terminated their Full Service Management Agreement.
Item 6. Exhibits and Reports on Form 8-K.
A Form 8-K was filed on April 29, 1998 (see item 5).
EXHIBITS
- --------
3.1 Restated Certificate of Incorporation and Amendments thereto
(incorporated by reference to the Registrant's Annual Report on Form
10-K filed on April 16, 1998).
3.2 Certificate of Amendment to Restated Certificate of Incorporation dated
November 12, 1997 (incorporated by reference to the Registrant's Proxy
Statement dated October 29, 1997).
3.3 Form of Certificate of Designation of the Series A Convertible
Preferred Stock (incorporated by reference to Appendix B of the
Registrant's Proxy Statement contained in Pre-Effective Amendment No. 5
to the Registrant Registration Statement on Form S-1 (previously Form
S-4) dated June 26, 1997).
3.4 Amended and Restated By-Laws of the Registrant, as amended to date
(incorporated by reference to Exhibit 3 (ii) to the Registrant's
Current Report on Form 8-K dated July 17, 1996).
4.1 Form of Indenture, dated as of October 15, 1985, among Registrant,
NICO, Inc. and J. Henry Schroder Bank & Trust the Registrant, as
Trustee, including therein the form of the subordinated debentures to
which such Indenture relates (incorporated by reference to Exhibit 4
(a) to the Registrant's Current Report on Form 8-K dated November 7,
1985).
4.2 Amendment to Indenture dated as of March 14, 1991 (incorporated by
reference to Exhibit (b) (2) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990).
12
<PAGE>
4.3 Indenture dated as of March 15, 1991 (the "Class B Note Indenture")
among the Registrant, NICO, the guarantors signatory thereto, and
Continental Stock Transfer and Trust the Registrant, as Trustee, to
which the 8% Class B Senior Secured Redeemable Notes due March 15, 1999
of NICO were issued together with the form of such Notes (incorporated
by reference to Exhibit 4 (i) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1990).
4.4 First Supplemental Indenture dated as of May 5, 1993 between NICO and
Continental Stock Transfer & Trust the Registrant, as trustee under the
Class B Note Indenture (incorporated by reference to Exhibit 4 (h) to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1993).
4.5 Form of indenture between the Registrant, NICO and Shawmut Bank, N.A.,
as Trustee, including therein the form of Senior Subordinated Note due
April 15, 1998 (incorporated by reference to Exhibit 4 (b) to Amendment
No. 2 to the Registrant's Registration Statement on Form S-2 dated May
13, 1988).
11.0 Statement re: computation of per share earnings (incorporated herein by
reference to the notes to consolidated financial statements).
27.0 Financial Data Schedule
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST MEDICAL GROUP, INC.
By: /s/ Dennis A. Sokol
--------------------------
Dennis A. Sokol
Chief Executive Officer
and President
Dated: September 17, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the company's
financial statements contained in the company's 10-Q for the nine months ended
September 30, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000058526
<NAME> First Medical Group
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,089
<SECURITIES> 0
<RECEIVABLES> 752
<ALLOWANCES> 0
<INVENTORY> 129
<CURRENT-ASSETS> 2,111
<PP&E> 1,350
<DEPRECIATION> 767
<TOTAL-ASSETS> 4,896
<CURRENT-LIABILITIES> 4,881
<BONDS> 390
0
0
<COMMON> 10
<OTHER-SE> 5
<TOTAL-LIABILITY-AND-EQUITY> 4,896
<SALES> 0
<TOTAL-REVENUES> 8,253
<CGS> 0
<TOTAL-COSTS> 7,030
<OTHER-EXPENSES> 1,502
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> (407)
<INCOME-TAX> 387
<INCOME-CONTINUING> (794)
<DISCONTINUED> 2,663
<EXTRAORDINARY> 0
<CHANGES> (970)
<NET-INCOME> 899
<EPS-BASIC> 10
<EPS-DILUTED> 10
</TABLE>
