<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 000-22653
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0353816
---------------------------------
(IRS Employer Identification No.)
32 Nassau Street, Second Floor, Princeton, New Jersey 08542
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(Address of principal executive offices)
609-924-1001
---------------------------------
(Issuer's telephone number)
AMERICAN RISK MANAGEMENT GROUP, INC.
4700 Ashwood Drive, Ste 300, Cincinnati, Ohio 45241
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past
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 [ ]
State the number of shares outstanding of each of
the issuer's classes of common equity, as of the latest
practicable date. As of February 29, 2000 the registrant
had issued and outstanding 9,721,369 shares of common stock.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
----------------------
<TABLE>
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of
September 30, 2000 (unaudited)............................................ 2
Condensed Consolidated Statement of Operations for the Three Months
Ended September 30, 2000 and 1999 (unaudited)............................. 3
Condensed Conslidated Statements of Cash Flows for the Three Months
Ended September 30, 2000 and 1999 (unaudited)............................. 4
Condensed Consolidated Statement of Stockholders' Equity for the
Three Months Ended September 30, 2000 (unaudited)......................... 6
Notes to the Financial Statements............................................ 7
Item 2. Management's Discussion and Analysis or Plan
of Operations............................................................. 16
Part II. OTHER INFORMATION
Signatures................................................................... 20
Schedule 27..................................................................
</TABLE>
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
<TABLE>
<S> <C>
Assets
Current Assets
Cash $ 41,705
Accounts Receivable 683,406
Prepaid Expenses 318,967
------------
Total Current Assets 1,044,078
Property and Equipment, Net of $78,361 accumulated depreciation 1,494,227
Goodwill, Net of accumulated amortization of $14,681 3,909,197
Deferred Costs 116,560
------------
Total Assets 6,564,062
============
Liabilities and Stockholders Equity
Current Liabilities
Accounts Payable and Accrued Expenses 646,795
Note Payable, Demand 269,770
Current Portion of Acquisition Indebtedness 414,650
Current Portion of Long Term Debt 187,546
Current Portion of Capitalized Lease Obligations 72,773
Notes Payable - Affiliates 94,441
------------
Total Current Liabilities 1,685,975
Promissory Notes Payable 125,000
Acquisition Indebtedness, Less Current Portion 370,533
Long Term Debt 154,668
Capitalized Lease Obligations 298,573
8% Convertible Notes Payable 763,174
------------
Total Liabilities 3,397,923
------------
Stockholders' Equity
Series A Convertible Preferred Stock, $.001 par value, 30,000,000 shares authorized
5,850,000 issued and outstanding 5,850
Common Stock, $.001 par value 50,000,000 shares authorized 9,742,743 shares
issued and 9,739,418 shares outstanding 9,742
Additional Paid In Capital 12,018,313
Treasury Stock, 3,325 shares at cost (64,941)
Accumulated Deficit (8,802,825)
------------
Total Stockholders' Equity 3,166,139
------------
Total Liabilities and Stockholders' Equity $ 6,564,062
============
</TABLE>
See notes to the condensed consolidated financial statements.
2
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues $ 559,121 $ --
----------- -----------
Selling, General and Administrative Expenses 956,011 --
Depreciation and Amortization 67,099 --
----------- -----------
Total 1,023,110 --
----------- -----------
Operating Loss (463,989) --
Other Expense
Interest 44,122 --
----------- -----------
Loss From Continuing Operations (508,111) --
Loss From Discontinued Operations (net of $0 tax effect) (98,420) (426,515)
----------- -----------
Loss Before Minority Interest (606,531) (426,515)
Loss Applicable to Minority Interest -- 85,303
----------- -----------
Net Loss $ (606,531) $ (341,212)
=========== ===========
Net Loss Per Common Share from Continuing Operations $ (0.10) $ --
Net Loss Per Common Share from Discontinued Operations (0.02) (0.07)
----------- -----------
Net Loss Per Common Share $ (0.12) $ (0.07)
=========== ===========
Weighted Average Common Shares Outstanding 5,007,632 5,007,632
=========== ===========
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Operating Activities:
Net Loss $ (606,531) $ (341,212)
Adjustments to Reconcile Net Loss to Net Cash Provided (Used) by
Operating Activities
Depreciation and Amortization 67,099 60,046
Amortization of Debt Issuance Costs -- 230,287
Compensation and Other Services Paid Through Issuance of Common 47,708 145,312
Stock
Loss Attributable to Minority Interest -- (85,303)
----------- -----------
(491,724) 9,130
Changes in Operating Assets and Liabilities
Accounts Receivable (683,406) (23,457)
Inventories -- 8,452
Prepaid Expenses (80,425) --
Other Assets 43,477 30,078
Other Assets -- (50,934)
Accounts Payable and Current Liabilities 511,142 51,631
----------- -----------
Net Cash (Used In) Provided By Operating Activities (700,936) 24,900
Cash Flows From Investing Activities
Net Cash From Reverse Acquisition -- 76,994
Purchase of Property and Equipment (796,645) --
Purchase of Goodwill (2,611,378) --
Deferred Costs (4,060) --
Repayment of Acquisition Indebtedness (16,964) --
Repayment of Long Term Debt (30,701)
Repayment of Capitalized Lease Operations (11,286) --
----------- -----------
Net Cash (Used In) Provided by Investing Activities (3,471,034) 76,994
Cash Flows From Financing Activities
Capital Contribution -- 100
Proceeds From Demand Note Payable 269,770 --
Proceeds From Acquisition Indebtedness 802,147 --
Proceeds From Long Term Debt 372,915 --
Proceeds From Capitalized Lease Obligations 382,632 --
Proceeds From Promissory Notes Payable 125,000 --
Proceeds From Notes Payable Affiliate 794,441 --
Issuance of Common Shares 1,456,753 --
----------- -----------
Net Cash Provided By Financing Activities 4,203,658 100
Net Increase in Cash 31,688 101,994
Cash Beginning of Period 10,017 --
----------- -----------
Cash, End of Period $ 41,705 $ 101,994
=========== ===========
</TABLE>
See notes to the condensed consolidated financial statements.
4
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information
Interest Paid $ 37,122 $ 14,961
========== ==========
Income Taxes Paid $ -- $ --
========== ==========
Supplemental Schedule of Non-Cash Investing and Finance Activities
Issuance of 3,000,000 Preferred Shares for the Common Shares of
The Comprehensive Medical Group, Ltd. 1,125,000 --
Issuance of 2,500,000 Preferred Shares in Exchange for the Assets of
CAT, a New York Limited Liability Company 937,500 --
Issuance of 250,000 Preferred Shares for Long Term Consulting
Agreement 93,750 --
Issuance of 100,000 Preferred Shares as Incentive Compensation 37,500
Issuance of 5,381,500 Common Shares Upon Conversion of 8%
Convertible Note 166,826 --
Issuance of 843,373 Common Shares in Exchange for Forgiveness of
Indebtedness to Affiliates 700,000 --
Issuance of 630,000 Common Shares for Consulting Service 236,250 --
Issuance of 300,000 Common Shares Pursuant to Settlement Agreement
and Forgiveness of Indebtedness 425,000 --
---------- ----------
Total $3,721,826 $
========== ==========
</TABLE>
See notes to the condensed consolidated financial statements.
5
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PREFERRED STOCK
-----------------------------
SHARES AMOUNT
------------ ------------
<S> <C> <C>
Balance, June 30, 2000 -- $ --
Preferred Stock Issuances
In Exchange for the Common Shares of The Comprehensive Medical Group, Ltd. 3,000,000 3,000
In Exchange for the Assets of CAT, a New York Limited Liability Company 2,500,000 2,500
For Long-Term Consulting Agreement 250,000 250
As Incentive Compensation 100,000 100
Common Stock Issuances -- --
Pursuant to Private Placement Offering -- --
Resulting from Note Conversion -- --
In Exchange for Forgiveness of Indebtedness -- --
For Consulting Services -- --
Pursuant to Settlement Agreement and in Forgiveness of Indebtedness -- --
Fees Incidental to Private Placement -- --
Fees and Costs Incurred Incidental to Private Placement -- --
Commissions Paid Incidental to Private Placement -- --
Net Loss -- --
------------ ------------
Balance, September 30, 2000 5,850,000 $ 5,850
============ ============
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------- ADDITIONAL
PAID IN
SHARES AMOUNT CAPITAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance, June 30, 2000 263,493 $ 263 $ 6,855,063
Preferred Stock Issuances
In Exchange for the Common Shares of The Comprehensive Medical Group, Ltd. -- -- 1,122,000
In Exchange for the Assets of CAT, a New York Limited Liability Company -- -- 935,000
For Long-Term Consulting Agreement -- -- 93,500
As Incentive Compensation -- -- 37,400
Common Stock Issuances -- -- --
Pursuant to Private Placement Offering 2,106,024 2,106 1,745,894
Resulting from Note Conversion 5,381,500 5,382 161,444
In Exchange for Forgiveness of Indebtedness 843,373 843 699,157
For Consulting Services 630,000 630 235,620
Pursuant to Settlement Agreement and in Forgiveness of Indebtedness 300,000 300 424,700
Fees Incidental to Private Placement 218,353 218 (218)
Fees and Costs Incurred Incidental to Private Placement -- -- (109,597)
Commissions Paid Incidental to Private Placement -- -- (181,650)
Net Loss -- -- --
------------ ------------ ------------
Balance, September 30, 2000 9,742,743 $ 9,742 $ 12,018,313
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TREASURY STOCK
ACCUMULATED --------------------------
DEFICIT SHARES AMOUNT TOTAL
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, June 30, 2000 $(8,196,294) 3,325 $ (64,941) $(1,405,909)
Preferred Stock Issuances
In Exchange for the Common Shares of The Comprehensive Medical Group, Ltd. -- -- -- 1,125,000
In Exchange for the Assets of CAT, a New York Limited Liability Company -- -- -- 937,500
For Long-Term Consulting Agreement -- -- -- 93,750
As Incentive Compensation -- -- -- 37,500
Common Stock Issuances
Pursuant to Private Placement Offering -- -- -- 1,748,000
Resulting from Note Conversion -- -- -- 166,826
In Exchange for Forgiveness of Indebtedness -- -- -- 700,000
For Consulting Services -- -- -- 236,250
Pursuant to Settlement Agreement and in Forgiveness of Indebtedness -- -- -- 425,000
Fees Incidental to Private Placement -- -- -- --
Fees and Costs Incurred Incidental to Private Placement -- -- -- (109,597)
Commissions Paid Incidental to Private Placement -- -- -- (181,650)
Net Loss (606,531) -- -- (606,531)
----------- ----------- ----------- -----------
Balance, September 30, 2000 $(8,802,825) 3,325 $ (64,941) $ 3,166,139
=========== =========== =========== ===========
</TABLE>
See notes to the condensed consolidated financial statements.
6
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF BUSINESS
Comprehensive Medical Diagnostics Group, Inc. ("Medical Diagnostics") was
incorporated in Florida on August 17, 1992. Prior to June 30, 2000 its
financial statements included the continuing operations of its wholly owned
subsidiaries, Industrial Fabrication & Repair, Inc. ("IFR") and PeopleFirst
Staffing LLC ("PeopleFirst"). On September 7, 1999 Medical Diagnostics and
PeopleFirst consummated certain transactions pursuant to a Share Exchange
Agreement whereby PeopleFirst became an 80% subsidiary of Medical
Diagnostics. The Exchange was treated for accounting purposes as a "purchase
business combination" and a "reverse acquisition" effective as of September
1, 1999 in which Medical Diagnostics was the legal acquirer and PeopleFirst
was the accounting acquirer.
On April 29, 2000 Medical Diagnostics discontinued the operations of IFR and
on June 29, 2000 discontinued the administrative services operations and
commenced a liquidation of the remaining assets and liabilities of
PeopleFirst (see DISCONTINUED OPERATIONS).
As further explained below (see BUSINESS ACQUISITIONS), as a result of the
acquisitions discussed therein, Medical Diagnostics has changed its focus and
strategy to concentrate on becoming a provider of medical treatment,
diagnostic testing and ancillary services to the long-term healthcare
business sector and the medical community at large.
UNAUDITED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of
normal recurring accruals, necessary to present fairly the financial position
of Comprehensive Medical Diagnostics Group, Inc. and its subsidiaries
(collectively, the "Company") as of September 30, 2000 and their results of
operations, changes in stockholders' equity and cash flows for the three
months ended September 30, 2000 and 1999. Certain terms used herein are
defined in the audited consolidated financial statements of the Company as of
June 30, 2000 and for the years ended June 30, 2000 and 1999 (the "Audited
Financial Statements") included in the Company's Annual Report on Form 10-KSB
(the "Form 10KSB") for the year ended June 30, 2000 that was previously filed
with the United States Securities and Exchange Commission (the "SEC").
Pursuant to rules and regulations of the SEC, certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from these consolidated financial statements unless significant changes have
taken place since the end of the most recent fiscal year. Accordingly, these
unaudited condensed consolidated financial statements should be read in
conjunction with the Audited Financial Statements and the other information
also included in the Form 10-KSB.
The results of the Company's operations for the three months ended September
30, 2000 and 1999 are not necessarily indicative of the results of operations
for the full years ending June 30, 2001 and 2000.
BUSINESS ACQUISITIONS
Cardiovascular Laboratories Holding, Inc.
As of July 27, 2000 the Company, through its wholly owned subsidiary,
Cardiovascular Laboratories Holding, Inc. ("CLH") acquired the assets and
assumed the liabilities of Cardiovascular, LLC ("CLI") which, on May 31, 2000
acquired the assets (including inventory, equipment, machinery, and
contractual and other rights and certain accounts receivable) and assumed
certain liabilities of Cardiovascular Laboratories, Inc. of PA ("CLP"). The
transaction between CLI and CLP closed in escrow, which escrow was maintained
after the closing between CLH and CLI, pending the assignment and assumption
of certain equipment leases and financing contracts by CLH.
7
<PAGE>
As consideration for the acquisition of CLI, CLH assumed CLI's obligations
under a seller note to CLP to pay $684,000 over a period of three years
subject to reduction should certain monthly revenue levels not be attained
and also assumed CLI's obligations under certain leases, financing agreements
and trade obligations.
CLH specializes in the provision of non-invasive cardiovascular imaging and
the turnkey management of fixed sight vascular and ecocardiographic
ultrasound laboratories.
Comprehensive Medical Group, Ltd.
As of July 25, 2000, the Company entered into an Agreement and Plan of
Reorganization with The Comprehensive Medical Group, Ltd ("CMG"). The Company
issued 3,000,000 shares of its Series A Convertible Preferred Stock to CMG's
shareholders in exchange for all issued and outstanding stock of CMG.
CMG intends to provide health and wellness management services for employee
assistance programs, human resource departments and labor unions; and to
design and operate a kiosk based point of purchase medical marketing program
called "The Wellness Shop"; and to design and operate a website called
"Leaseonlife.com" to provide interactive health and wellness analysis,
treatment content and management tools.
Diagnostic Management Group Holdings, Inc.
As of August 2, 2000, the Company through its wholly owned subsidiary,
Diagnostic Management Group Holdings, Inc. ("DMG") acquired the assets of
CAT, a New York limited liability company.
The purchase price for CAT's assets was $1,100,000 in cash and 2,500,000
shares of the Company's Series A Convertible Preferred Stock. DMG acquired
all inventory equipment, machinery, contractual and other rights, and certain
accounts receivable, also assuming certain equipment leases and trade
payables.
DMG manages the operation of a medical diagnostic cardiological and
neurological testing services and tele-medicine of CAT - ECG PC, a New York
professional corporation.
DISCONTINUED OPERATIONS
On April 1, 2000 the Company discontinued its manufacturing operations by
agreeing to sell IFR back to its previous owner in exchange for 3,325 shares
of the Company's common stock with a fair value of approximately $64,941 (or
$19.53 per share). The shares reacquired have been reflected as treasury
stock in the accompanying condensed consolidated balance sheet. On June 29,
2000, the Board of Directors, and a majority of the stockholders of the
Company approved the adoption of a plan to effectively (i) discontinue the
administrative services operations of PeopleFirst through the return of the
right to operate its business to its previous owners in exchange for their
agreement to relieve the Company of all obligations arising from such
operations and (ii) liquidate the remaining assets and liabilities of
PeopleFirst. Accordingly, the results of the Company's manufacturing and
administrative services operations are reported, and as to 1999 reclassified,
as a loss from discontinued operations in the accompanying condensed
consolidated statement of operations.
8
<PAGE>
Revenue and loss from discontinued operations was as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
September 30, September 30,
2000 1999
------------ --------------
<S> <C> <C>
Revenue $ -- $ 381,472
============= ============
Loss from discontinued operations $ (98,420) $ (426,515)
============= ============
Loss from operations $ (98,420) $ (426,515)
============= ============
</TABLE>
PROPERTY AND EQUIPMENT
<TABLE>
<S> <C>
Property and equipment, at cost, consists of the following
Operating equipment $ 1,434,941
Website and kiosk software and equipment 100,986
Office equipment 18,754
Vehicles 17,907
------------
Subtotal 1,572,588
Less accumulated depreciation and amortization 78,361
------------
Total $ 1,494,227
============
</TABLE>
Depreciation expense charged to operations for the three month period ended
September 30, 2000 amounted to $52,418.
GOODWILL
During the three month period ended September 30, 2000 the Company acquired
substantially all of the assets of CAT and CLI subject to the assumption of
certain indebtedness; as well as all of the issued and outstanding stock of
CMG. The excess cost over net book value of assets acquired as a result of
these acquisitions aggregated $3,923,878 and is comprised as follows:
<TABLE>
<S> <C>
CLI
Assumption of a non-interest bearing seller note of $684,000
payable over 36 months and subject to adjustment if certain
monthly revenue levels are not attained after a present value
discount of 10% $ 577,163
Assumption of liabilities in excess of net book value of assets
acquired 208,895
Capitalized costs and fees incidental to the transaction 70,151
------------
Subtotal $ 856,209
------------
</TABLE>
<TABLE>
<S> <C>
CAT
Cash $ 1,100,000
Issuance of 2,500,000 shares of the Company's Series A Convertible
Preferred Stock with an estimated fair value of $.375 per share at
the time of issuance 937,500
Capitalized costs and fees incidental to the transaction 15,311
Less: Amount allocable to fair market in excess of net book value of
property and equipment acquired (750,000)
------------
Subtotal $ 1,302,811
------------
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
CMG
Issuance of 3,000,000 shares of the Company's Series A Convertible
Preferred Stock with an estimated fair value of $.375 per share at
time of issuance $ 1,125,000
Assumption of liabilities in excess of net book value of assets acquired 634,858
Capitalized costs and fees incidental to the transaction 5,000
------------
Subtotal 1,764,858
------------
Total $ 3,923,878
============
</TABLE>
The Company is amortizing goodwill over a 40 year period. Amortization for
the three months ended September 30, 2000 amounts to $14,681.
The following unaudited pro forma information shows the results of
operations for the three months ended September 30 2000 and 1999 as though
the acquisitions described at BUSINESS ACQUISITIONS and dispositions
described at DISCONTINUED OPERATIONS had been consummated on July 1, 1999:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
September 30, September 30,
2000 1999
----------- -------------
<S> <C> <C>
Revenues $ 831,680 $ 821,416
Operating costs 1,430,603 979,786
----------- -----------
Net Loss (598,923) (158,370)
=========== ===========
Net loss per common share $ (0.12) $ (0.03)
=========== ===========
Weighted average common shares outstanding 5,007,632 5,007,632
=========== ===========
</TABLE>
NOTES PAYABLE DEMAND
The Company through its subsidiary, CLH agreed to assume certain demand loan
obligations of CLP. Pursuant thereto, there are outstanding advances under a
loan commitment which permits borrowings as determined by a percentage of
CLH's qualifying accounts receivable, up to a maximum limitation of
$1,000,000. Such borrowings bear interest at the lenders defined prime rate
plus 3% (12 1/2% at September 30, 2000). Repayments under the loan are via
a lock box agreement which provides for the receipt and processing of
accounts receivable. The outstanding balance under this financing
arrangement was $269,770, at September 30, 2000.
ACQUISITION INDEBTEDNESS
Acquisition indebtedness is comprised of the following:
<TABLE>
<S> <C>
Non-interest bearing seller note payable in the original principal amount
of $684,000 incurred upon the acquisition of CLI's net assets and payable
over a 36 month period without interest and subject to adjustment if
certain future monthly revenue levels are not attained, after a 10% present
value discount $ 555,799
Remaining cash consideration due incidental to the acquisition of
CAT's net assets 150,000
Amounts due CAT sellers consisting of uncollected and unremitted
accounts receivable existing on the transaction date 79,384
------------
Total 785,183
Less current portion (414,650)
------------
$ 370,533
============
</TABLE>
The aggregate amount of future principal repayments at September 30, 2000 is
as follows:
10
<PAGE>
<TABLE>
<CAPTION>
Year ending September 30
-----------------------------------------------------------------------
<S> <C> <C>
2001 $ 414,650
2002 185,266
2003 185,267
-------------
Total $ 785,183
=============
</TABLE>
LONG TERM DEBT
The Company, through its subsidiary CLH, has agreed to assume certain
long-term debt of CLP which, at September 30, 2000 consists of the following:
<TABLE>
<S> <C>
Term loan payable in monthly installments of $2,075, including interest
at 13.7% through October 16, 2001 $ 24,943
Term loan payable in monthly installments of $1,908, including interest
at 9.0% through June 1, 2001 16,594
Equipment loan payable in monthly installments of $557, including
interest at 10.0% through May 27, 2003 15,747
Equipment loan payable in monthly installments of $598, including
interest at 7.5% through January 15, 2001 2,358
Equipment loan payable in monthly installments of $13,640, including
interest at 10.675% through September 29, 2002 282,572
------------
342,214
Less current portion (187,546)
------------
Long-term debt $ 154,668
============
</TABLE>
The loans are secured by liens on equipment and accounts receivable of CLH.
The aggregate amount of future principal repayments at September 30, 2000 is
as follows:
<TABLE>
<CAPTION>
Years Ending September 30,
<S> <C> <C>
2001 $ 187,546
2002 150,369
2003 4,299
------------
Total $ 342,214
============
</TABLE>
11
<PAGE>
COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
PROMISSORY NOTES PAYABLE
The Company, through its subsidiary CLH has agreed to assume three
promissory notes payable made March 30, 1998 totaling $125,000. The notes
have an interest rate of 7% per annum which is payable quarterly. The
principal balances of the notes were initially due March 30, 1999 but have
been extended through July 2002. In accordance with the terms of the notes
the interest rate on the outstanding principal balances was increased to
the default rate of 11% per annum as of April 1, 1999. The notes are
secured by a second security interest in the accounts receivable of CLH and
are subordinated to advances of up to $1,000,000 under a demand note
payable loan commitment. The outstanding principal balances as of September
30, 2000 totaled $125,000.
CAPITALIZED LEASE OBLIGATIONS
The Company through it's subsidiary CLH, agreed to assume obligations under
the provisions of three long-term leases entered into in 1999. For
financial reporting purposes, minimum lease payments relating to the
equipment have been capitalized. The leases expire between May 20, 2004 and
January 31, 2005. The leased property under capital leases as of September
30, 2000 were acquired at the pre-acquisition amortized costs of $340,274,
and have accumulated amortization of $14,132 and a net book value of
$326,142. Amortization of the lease property is included in
depreciation expenses.
The future minimum lease payments under capital lease and the net present
value of the future minimum lease payments at September 30, 2000 are as
follows:
<TABLE>
<S> <C>
Total minimum lease payments $ 466,915
Amount representing interest (95,569)
------------
Present value of net minimum Lease payments 371,346
Current portion 72,773
------------
Long-term capital lease obligation $ 298,573
============
</TABLE>
8% CONVERTIBLE NOTE PAYABLE
Prior to July 14, 2000, the Company had outstanding three 8% Convertible
Promissory Notes, dated March 3, 1999 in the aggregate principal amount of
$819,000 ("Convertible Notes") and one 8% Promissory Note having a
principal amount of $81,000 ("Non-Convertible Note"). The Company was in
default as to the above notes and interest of $30,000 was due.
The terms and conditions of the Convertible Notes were amended and restated
in a Note Reformation Agreement dated as of July 14, 2000 and new
Convertible Notes were issued reflecting a total balance of $930,000,
extending the maturity date to June 30, 2003 and amending and modifying the
conversion terms of the Convertible Notes. Additionally, the
Non-Convertible Note was cancelled.
Subsequently, the Amended and Restated Convertible Notes were sold by the
note holder to a group of investors.
As of September 30, 2000 certain convertible note holders exercised their
conversion rights resulting in the Company's issuance of 5,381,500 common
shares and thereby reducing the principal balance of the 8% Convertible
Note to $763,174.
12
<PAGE>
PREFERRED STOCK
The Company is authorized to issue 30,000,000 shares of $.0001 par value
preferred stock. As of September 30, 2000 the company has issued and
outstanding 5,850,000 shares of Series A Preferred Stock; such shares have
voting rights equal to those of common shareholders, have priority in
liquidation over common shareholders, have no stated dividend requirements
and may each be converted into one common share.
Incidental to the acquisition of CAT and CMG (see BUSINESS ACQUISITIONS)
the Company issued 5,500,000 shares of Series A Preferred Stock which, in
the opinion of management had a fair value at the time of issuance of $.375
per share.
Additionally, the Company has issued 250,000 shares of Series A Preferred
Stock pursuant to a long-term consulting agreement and 100,000 shares of
Series A Preferred Stock as incentive compensation to an officer of the
Company; such issuances, in the opinion of management, having a fair value
at the time of issuance of $.375 per share.
COMMON STOCK
The Company is authorized to issue 50,000,000 $.001 par value common
shares.
Through September 30, 2000 the Company has issued 2,949,397 common shares
in exchange for cash consideration of $1,748,000 and debt forgiveness of
$700,000 which issuance was made pursuant to a private placement to
accredited investors, which is exempt from registration under Regulation D
of the Securities Act of 1933, as amended. Additionally, the Company issued
218,353 common shares and incurred fees, costs and commissions amounting to
$291,247 incidental to such issuances.
Through September 30, 2000 the Company has issued 5,381,500 common shares
pursuant to the conversion of a portion of the Company's 8% Convertible
Preferred Notes resulting in a principal reduction of $166,826.
Pursuant to a certain Termination and Settlement Agreement, the Company
issued 300,000 common shares in exchange for forgiveness of $425,000.
The Company has entered into consultancy agreements whereby 630,000 common
shares have been rendered in exchange for services to be provided through
June 30, 2001. It is management's opinion that the fair value of such
common shares issued is $.375 per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's material financial instruments for which disclosure of
estimated fair value is required by certain accounting standards consisted
of cash, accounts receivable, accounts payable, notes payable, acquisition
indebtedness, long-term debt, capital lease obligations and it's 8%
convertible note. In the opinion of management, such items other than a
component of acquisition indebtedness are carried at values that
approximate their fair values because of their liquidity, short-term
maturities or because they bear interest rates equivalent to those
currently prevailing for financial instruments with similar
characteristics.
Certain non-interest bearing acquisition indebtedness, in the original
principle amount of $684,000, has been subjected to a 10% present value
discount in the accompanying condensed consolidated balance sheet at
September 30, 2000.
13
<PAGE>
INCOME TAXES
As of September 30, 2000 the Company had net operating loss carryforwards
of approximately $26,000,000. These net operating loss carryforwards are
available to reduce future taxable income and will expire at various dates
through 2021. Due to the uncertainties relating to, among other things,
changes in the ownership of the Company which occurred in September of 1999
and July of 2000, as well as the disposition and acquisition of various
subsidiaries, and the extent and timing of its future taxable income, the
Company has offset the deferred tax assets attributable to potential
benefits of approximately $7,200,000 from the utilization of those net
operating loss carryforwards by an equivalent valuation allowance.
Also, for the above reasons, no credit for income taxes is included in the
accompanying condensed consolidated statements of operations for the three
month periods ended September 30, 2000 and September 30, 1999 respectively.
EARNINGS (LOSS) PER SHARE
The Company presents "basic" earnings (loss) per common share and, if
applicable, "diluted" earnings per common share pursuant to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings per
Share" Basic earnings (loss) per common share is calculated by dividing net
income or loss applicable to common stock by the weighted average number of
common shares outstanding during each period. The calculation of diluted
earnings per common share is similar to that of basic earnings per common
share, except that: (i) the denominator is increased to include the number
of additional common shares that would have been outstanding if all
potentially dilutive common shares, such as those issuable upon the assumed
exercise of stock options and warrants and the conversion of notes or
preferred shares had been issued during the period and (ii) the numerator
is adjusted to eliminate interest on convertible notes and convertible
preferred dividend requirements.
Diluted per share amounts have not been presented in the accompanying
condensed consolidated statements of operations because the Company had a
net loss for the three month periods ended September 30, 2000 and 1999,
respectively and, accordingly, the effects of the assumed conversion of all
of the Company's outstanding convertible notes, and the assumed exercise of
all of the Company's outstanding warrants and the application of the
treasury stock method, would have been anti-dilutive.
CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
accounts receivable. The Company maintains its cash balances with major
financial institutions that have high credit ratings. At times, such
balances may exceed Federally insured limits.
The Company generally extends credit to its customers (which include third
party payors), all of whom are located in the northeastern United States.
Management of the Company closely monitors the extension of credit to
customers while maintaining allowances for potential credit losses. During
the three month periods ended September 30, 2000 and 1999, no customer
accounted for more than 10% of the Company's revenues. Generally, the
Company does not have a significant receivable from any single customer
and, accordingly, management does not believe that the Company was exposed
to any significant credit risk at September 30, 2000.
OPERATING LEASE COMMITMENTS
On September 1, 1999, CMG entered into a twenty-one month sublease for the
period September 1, 1999 through June 30, 2001 for 4,500 square feet of
office space. The rent is $4,200 per month and is not subject to further
increases.
On March 10, 1999, CAT entered into an amended ten year lease for the term
March 10, 1999 through March 31, 2009, for 7,000 square feet of laboratory
and office space.
14
<PAGE>
Management's Discussion and Analysis or Plan of Operations
The following discussion regarding the Company and its business and
operations contains "forward-looking statements" within the meaning of
The Private Securities Litigation Reform Act 1995. Such statements
consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such
as "may," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable
terminology. The reader is cautioned that all forward-looking
statements are necessarily speculative and there are certain risks
and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward looking
statements. The Company does not have a policy of updating or revising
forward-looking statements and thus it should not be assumed that
silence by management of the Company over time means that actual
events are bearing out as estimated in such forward looking
statements.
The following discussion should be read in conjunction with the
condensed consolidated financial statements and notes appearing
elsewhere in this report.
Overview
Comprehensive Medical Diagnostics Group, Inc. ("Medical Diagnostics")
was originally incorporated in Florida on August 17, 1992 as American
Risk Management Group, Inc. It's name was changed to Comprehensive
Medical Diagnostic Group, Inc. on August 20, 2000.
The Company was originally formed to seek acquisitions or business
opportunities, to the extent permitted by its assets, in various
business sectors throughout the United States. Pursuant to this
strategy, the Company bought and sold several businesses over the last
few years.
The Company has changed its focus and strategy and will concentrate on
becoming a provider of medical treatment, diagnostic testing and
ancillary services to the long-term health care business sector and the
medical community at large. The Company will also attempt to position
itself to become an internet provider of health care content and
services.
In order to implement its focus and strategy the Company recently
completed three acquisitions as follows:
Cardiovascular Laboratories Holding, Inc.
As of July 27, 2000 the Company, through its wholly owned
subsidiary, Cardiovascular Laboratories Holding, Inc. ("CLH")
acquired the assets and assumed the liabilities of
Cardiovascular, LLC ("CLI") which, on May 31, 2000 acquired
the assets (including inventory, equipment, machinery, and
contractual and other rights and certain accounts receivable)
and assumed certain liabilities of Cardiovascular
Laboratories, Inc. of PA ("CLP"). The transaction between CLI
and CLP closed in escrow, which escrow was maintained after
the closing between CLH and CLI, pending the assignment and
assumption of certain equipment leases and financing contracts
by CLH.
As consideration for the acquisition of CLI, CLH assumed CLI's
obligations under a seller note to CLP to pay $684,000 over a
period of three years subject to reduction should certain
monthly revenue levels not be attained and also assumed CLI's
obligations under certain leases, financing agreements and
trade obligations.
CLH specializes in the provision of non-invasive
cardiovascular imaging and the turnkey management of fixed
sight vascular and ecocardiographic ultrasound laboratories.
<PAGE>
Comprehensive Medical Group, Ltd.
As of July 25, 2000, the Company entered into an Agreement and
Plan of Reorganization with The Comprehensive Medical Group,
Ltd. ("CMG"). The Company issued 3,000,000 shares of its
Series A Convertible Preferred Stock to CMG's shareholders in
exchange for all issued and outstanding stock of CMG.
CMG intends to provide health and wellness management services
for employee assistance programs, human resource departments
and labor unions; and to design and operate a kiosk based
point of purchase medical marketing program called "The
Wellness Shop"; and to design and operate a website called
"Leaseonlife.com" to provide interactive health and wellness
analysis, treatment content and management tools.
Diagnostic Management Group Holdings, Inc.
As of August 2, 2000, the Company through its wholly owned
subsidiary, Diagnostic Management Group Holdings, Inc. ("DMG")
acquired the assets of CAT, a New York limited liability
company.
The purchase price for CAT's assets was $1,100,000 in cash and
2,500,000 shares of the Company's Series A Convertible
Preferred Stock. DMG acquired all inventory equipment,
machinery, contractual and other rights, and certain accounts
receivable, also assuming certain equipment leases and trade
payables.
DMG manages the operation of a medical diagnostic
cardiological and neurological testing services and tele-
medicine of CAT - ECG PC, a New York professional corporation.
Additionally the Company discontinued certain operations as follows:
On April 1, 2000 the Company discontinued its manufacturing operations
by agreeing to sell it's subsidiary Industrial Fabrication & Repair,
Inc. ("IFR") back to its previous owner in exchange for 3,325 shares of
the Company's common stock with a fair value of approximately $64,941
(or $19.53 per share). The shares reacquired have been reflected as
treasury stock in the accompanying condensed consolidated balance
sheet. On June 29, 2000, the Board of Directors, and a majority of the
stockholders of the Company approved the adoption of a plan to
effectively (i) discontinue the administrative services operations of
PeopleFirst Staffing LLC (PeopleFirst) through the return of the right
to operate its business to its previous owners in exchange for their
agreement to relieve the Company of all obligations arising from such
operations and (ii) liquidate the remaining assets and liabilities of
PeopleFirst.
The condensed consolidated statement of operations includes the
operations of CLH, CMG and DMG from the respective effective dates that
they were acquired by the Company. The results of operations IFR and
PeopleFirst are reported as losses from discontinued operations.
Pro Forma
The following discussion includes the results of operations for the
three months ended September 30, 2000 and 1999 as though both the
acquisitions and dispositions described above had been consummated on
July 1, 1999.
During the three months ended September 30, 2000, consolidated revenues
increased by approximately $11,000 or 1% from approximately $821,000
for the three months ended September 30, 1999 to approximately $832,000
for the three months ended September 30, 2000.
Operating costs for the three months ended September 30, 2000 increased
approximately $451,000 or 46% from approximately $980,000 for the three
months ended September 30, 1999 to approximately $1,431,000 for the
three months ended September 30, 2000. This increase is attributable to
an increases in kiosk and website development costs, administrative
expenses and expenses related to changes in the Company's focus and
direction.
<PAGE>
On a pro forma basis, the Company's loss from continuing operations
increased by approximately $441,000 or $(.09) per share from
approximately $158,000 or $(.03) per share for the three months ended
September 30, 1999 to approximately $599,000 or $(0.12) per share for
the three months ended September 30, 2000.
Historical Information
These results include the operations of CLH, CMG and DMG from the
effective date of their acquisitions by the Company through September
30, 2000.
During the three months ended September 30, 2000 the Company had
revenues of $559,121, all of which was derived from its operating
subsidiaries, CLH and DMG.
Selling general and administrative expenses were $956,011 of which
$527,830 was attributable to its operating subsidiaries and the
remainder, of $428,181 was attributable to kiosk and website
development costs as well as administrative expenses.
Depreciation attributable to acquired assets and amortization of
goodwill arising from these acquisitions amounted to $67,099 for the
three months ended September 30, 2000. Interest expense was $44,122 for
this period.
As a result of all the above, the Company's loss from continuing
operations and net loss amounted to $508,111 $(0.10 per share) and
$606,531 $(0.12 per share), respectively, for the three months ended
September 30, 2000.
Liquidity and Capital Resources
At September 30, 2000 the Company had a working capital deficiency of
$641,897. The working capital deficiency is attributable to the excess
of current liabilities over assets assumed in the acquisitions of CHP,
current amounts due to sellers of CAT and CHP and current obligations
incidental to CMG's kiosk and website development costs and fees
incidental to the above, a private placement offering and a debt
restructuring.
Private Placement
On July 17, 2000, the Company entered into subscription agreements with
fifteen accredited investors under a private placement, which is exempt
from registration under Regulation D of the Securities Act of 1933, as
amended. The Company has agreed to sell to these accredited investors
5,000,000 shares of its common stock at a per share price of $.83 for
an aggregate purchase price of $4,150,000. As of September 29, 2000,
the Company has received or accounted for $2,448,000 of these
subscriptions.
Note Restructuring
Prior to July 14, 2000, the Company had outstanding three 8%
Convertible Promissory Notes, dated March 3, 1999 in the aggregate
principle amount of $819,000 ("Convertible Notes") and one 8%
Promissory Note having a principal amount of $81,000 ("Non-Convertible
Note"). The Company was in default as to the above notes and interest
of $30,000 was due.
The terms and conditions of the Convertible Notes were amended and
restated in a Note Reformation Agreement dated as of July 14, 2000 and
new Convertible Notes were issued reflecting a total balance of
$930,000, extending the maturity date to June 30, 2003 and amending and
modifying the conversion terms of the Convertible Note.
Additionally, the Non-Convertible Note was cancelled.
Subsequently, the Amended and Restated Convertible Notes were sold by
the note holder to a group of investors.
<PAGE>
As of September 30, 2000 certain convertible note holders exercised
their conversion rights resulting in the Company's issuance of
5,381,500 common shares and thereby reducing the principal balance of
the 8% Convertible Note to $763,174.
The Company anticipates that its working capital, as a result of
its private placement, together with anticipated cash flow from the
recently acquired companies, will be sufficient to satisfy the
Company's cash requirements for at least twelve months. In the event
the Company's plan changes (due to unanticipated expenses or
difficulties of integrating these acquisitions), or if the working
capital and projected cash flow otherwise prove insufficient to fund
operations, the Company could be required to seek additional financing
sooner than currently anticipated. The Company has no current
arrangements with respect to, or sources of, additional financing.
Accordingly, there can be no assurance that additional financing will
be available to the Company when needed, or at all, on commercially
reasonable terms. The Company's inability to obtain such additional
financing could have a material adverse effect on the Company's
liquidity. The Company believes that it will be able to obtain
financing, if needed, although there can be no assurances of such.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Comprehensive Medical Diagnostics Group,
Inc., a Florida corporation
Date: November 20, 2000 By: /s/ JAMES H. CLINGHAM, SR.
-----------------------------------
James H. Clingham, Sr., President
