8-K/A 1 a2034635z8-ka.txt FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of Earliest Event Reported): July 25, 2000 ---------------------------------------- COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Florida 000-22653 65-035816 -------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 32 Nassau St. (2nd Fl) Princeton, NJ 08542 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 609-924-1001 ----------------------------- F/K/A AMERICAN RISK MANAGEMENT GROUP, INC. Former address: 4700 Ashwood Drive, Ste 300, Cincinnati, OH 45241 -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) ITEM 5. OTHER EVENTS On December 29, 2000, the Company filed a report on Form 8-K which included its Pro Forma Combined Financial Data to illustrate the effects of certain acquisitions made by the Company following the end of its fiscal year. The Form 8-K did not include certain financial statements, related footnotes and certain other financial information relating to one acquisition. The additional information is set forth in Item 7 below along with the previous information filed on December 29, 2000. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS ProForma Combined Financial Data The Unaudited ProForma Combined Statement of Operations of the Company for the fiscal year ended June 30, 2000 (the "ProForma Statement of Operations") and the Unaudited ProForma Combined Balance Sheet of the Company as of June 30, 2000 (the "ProForma Balance Sheet" and together with the ProForma Statement of Operations, the "ProForma Financial Statements") have been prepared to illustrate the effect of the acquisition of the assets and assumption of the liabilities of Cardiovascular Laboratories, LLC ("CLI") as of July 27, 2000, the merger of The Comprehensive Medical Group, Ltd ("CMG") as of July 25, 2000 and the acquisition of the assets and assumption of the liabilities of CAT LLC ("CAT") as of August 2, 2000 by Comprehensive Medical Diagnostics Group, Inc. ("CMDG"), as if such transactions took place on June 30, 2000. The ProForma Financial Statements do not purport to be indicative of the results of operations or financial position of the Company that would have actually been obtained had such transactions been completed as of the assumed dates and for the period presented, or which may be obtained had such transactions been completed as of the assumed dates and for the period presented, or which may be obtained in the future. The ProForma adjustments are described in the accompanying notes and are based upon available information and certain assumptions that the Company believes are reasonable. The ProForma Financial Statements should be read in conjunction with the separate historical financial statements of CLI , a significant subsidiary. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities in the accompanying ProForma Financial Statements based on available information. The actual allocation of purchase price and the resulting effect on income from operations may differ significantly from the ProForma amounts included herein. These ProForma adjustments represent the Company's preliminary determination of purchase accounting adjustments and are based upon available information and certain assumptions that the Company believes to be reasonable. Consequently, the amounts reflected in the ProForma Financial Statements are subject to change, and the final amounts may differ substantially. COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. UNAUDITED PROFORMA COMBINED BALANCE SHEET JUNE 30, 2000

COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. UNAUDITED PROFORMA COMBINED STATEMENT OF OPERATIONS

NOTES TO THE UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS A. The proforma financial statements are based upon the financial activity of CMDG (the Company) and CMG at and for the twelve months ended June 30, 2000 and of CLI at and for the twelve month period ended December 31, 1999. Financial activity of CAT is that as forecasted at and for the twelve month period commencing August 2, 2000, the date its assets were acquired by CMDG. B. As of September 29, 2000 the Company sold 2,121,750 common shares in a private placement exempt from registration under Regulation D, promulgated under the Securities Act of 1933, as amended, thereby generating cash proceeds of $1,761,053. These funds were utilized as follows: a. $1,100,000 cash consideration to acquire the assets of CAT. b. Professional fees and expenses in connection with the offering and the Company's acquisition of the assets of CLI and CAT and the merger into it of CMG in the estimated amount of $300,000. c. General working capital purposes. C. As of July 27, 2000 the Company through its subsidiary, CLH, incidental to its acquisition of the assets and assumption of the liabilities of Cardiovascular Laboratories, Inc., assumed a certain obligation under a seller note to pay up to $684,000 over a period of three years. D. As of July 25, 2000 the Company, pursuant to an Agreement and Plan of Reorganization, issued 3,000,000 shares of its Series A Convertible Preferred Stock, in exchange for 100 shares of CMG's Series A Common Stock, which was all of the issued and outstanding stock of CMG. This issuance by the Company is recorded herein at $.375 per share, management's estimate of the fair market value per share. E. As part of the CMG transaction discussed at D above, the Company issued 843,373 shares of its common stock to entities which had committed to making working capital loans to CMG aggregating approximately $700,000. As of June 30, 2000 the date of the unaudited proforma combined balance sheet, such advances amounted to approximately $545,000. The proforma reflects additional advances of $155,000. F. As of August 2, 2000 the Company issued, in addition to the cash consideration of $1,100,000 discussed at B above, 2,500,000 shares of its Series A Convertible Preferred Stock, which issuance is recorded herein at $.375 per share, management's estimated value of the fair market value per share. G. During its fiscal year ended June 30, 2000 the Company changed its focus and strategy to 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. In that connection the Company: a. On June 29, 2000 discontinued the operations of its administrative services organization, People First, LLC. b. On March 31, 2000 disposed of its manufacturing division, Industrial Fabrication and Repair, Inc. (IFR) upon the exercise by Lester Gann, President of IFR, of his contractual right to reacquire this company in exchange for all of his common shares of CMDG and Notes to the Unaudited ProForma Combined Financial Statements c. On June 30, 2000 decided to close down and liquidate Federal Supply, Inc. and Federal Fabricators, Inc., fabricators and distributors of custom design fire sprinkler systems and components. The unaudited ProForma Combined Statement of Operations has been adjusted to eliminate the impact of discontinued operations and minority interests therein. H. On July 16, 2000 in contemplation of and as a condition precedent to its July 17, 2000 Stock Purchase Agreement, the Company entered into an Agreement with Connie Steinmetz ("Steinmetz"), Strategic Capital Holdings ("Strategic"), Yucatan Holding Company ("Yucatan"), Arizona Development Corporation ("Arizona"), and Atlas Perlman, P.A. ("Escrow Agent") terminating certain agreements with and obligations of the Company consisting of: a. $250,000 owed by the Company to Yucatan b. $175,000 owed by the Company to Arizona c. The Company's obligation under a certain consulting agreement with Steinmetz and, d. The Company's obligations under a certain consulting agreement with Strategic. Steinmetz, Strategic, Yucatan and Arizona were issued 300,000 shares of common stock from the Company in addition to 200,000 common shares owned by certain shareholders of the Company having been placed in escrow. The issuance has been recorded as a $425,000 reduction of indebtedness and corresponding credit to additional paid in capital. I. On July 3, 2000 the Company entered into a certain Termination and Settlement Agreement with the holders of its 8% convertible promissory notes. In order to effectuate the agreement, the terms and conditions of the convertible notes were amended and restated in a Note Reformation Agreement dated as of July 14, 2000 and a new convertible note was issued reflecting a aggregate principal balance of $930,000 and amending and modifying the conversion terms of the convertible notes. The unaudited proforma combined statement of operations has been adjusted to properly reflect the resultant ongoing interest expense. J. Upon the acquisition of the net assets of CLI and CAT, and merger of CMG, Shareholder's Equity accounts have been eliminated against Excess Cost Over Fair Market Value of Assets Acquired. K. Amortization expense of $92,698; reflected to recognize Excess Over Fair Market Value of Net Assets Acquired amounting to $3,707,925 over a 40 year period. CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA INDEX TO THE FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998

Independent Auditors' Report To the Board of Directors and Stockholders of Cardiovascular Laboratories, Inc. of Pennsylvania Wayne, Pennsylvania We have audited the accompanying balance sheets of Cardiovascular Laboratories, Inc. of Pennsylvania as of December 31, 1999 and 1998, and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of Cardiovascular Laboratories, Inc,. and subsidiaries which includes Cardiovascular Laboratories, Inc. of Pennsylvania as of December 31, 1998, were audited by other auditors whose report dated March 2, 1999, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cardiovascular Laboratories, Inc. of Pennsylvania as of December 31, 1999, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. Bridgewater, New Jersey October 25, 2000 1 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA BALANCE SHEETS

See notes to the financial statements. 2 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA STATEMENTS OF OPERATIONS

See notes to the financial statements. 3 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

See notes to the financial statements. 4 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA STATEMENTS OF CASH FLOWS

See notes to the financial statements. 5 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization Cardiovascular Laboratories, Inc. of Pennsylvania ("CLI-PA") is a for-profit business corporation and wholly-owned subsidiary of CLIXhealth.com, Inc. (CLIXhealth). CLI-PA owns and operates independent vascular laboratories in hospitals and private clinics. Pursuant to an Acquisition Agreement dated March 26, 1998, CLI acquired all of the outstanding stock of CLI-PA by exchanging 2,546,837 unregistered shares of CLIXhealth for 1,000,000 shares of CLI-PA, exchanging 968,998 unregistered shares of CLIXhealth for two option agreements to purchase substantially similar option agreements of CLI-PA and issuing 1,500,000 unregistered shares of CLIXhealth into an escrow trust. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Net Patient Service Revenues and Receivables Net patient service revenues and receivables are derived from hospitals and patients who reside primarily in the Company's regional geographical region (i.e. states of Pennsylvania, Connecticut, New Jersey and New York) and are reported at the estimated net realizable amounts from hospitals, patients, third party payors, and others for services rendered. Significant concentrations of revenues and accounts receivable, net include various hospitals and Medicare. Furniture, Equipment and Vehicles Furniture, equipment and vehicles are recorded at cost. Depreciation, including amortization of capital lease obligations, is computed using the straight-line method based on the estimated useful life of each classification of depreciable asset. Repairs and maintenance which do not extend the useful lives of the assets are expensed as incurred. Income taxes The Company files a Federal income tax return on the cash basis method separate from its parent. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future federal income taxes. 6 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS Reclassifications Certain reclassifications have been made to the 1998 financial statements to conform with the 1999 reporting format. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's material financial instruments at December 31, 1999 for which disclosure of estimated fair value is required by certain accounting standards consisted of cash, accounts receivable, accounts payable and accrued expenses, notes payable and capitalized lease obligations. In the opinion of management, (i) cash, accounts receivable, and accounts payable and accrued expenses were carried at values that approximate their fair value because of their liquidity and/or their short term maturities and (ii) notes payable and capitalized lease obligations were carried at values that approximated their fair values because they had interest rates equivalent to those currently prevailing for financial instruments with similar characteristics. EARNINGS PER SHARE In accordance with Financial Accounting Standards Board No. 128 "Earnings Per Share", basic earnings per share amounts are computed based on the weighted average number of shares actually outstanding. The number of shares used in the computations were 1,000,000 in 1999 and 1998. There were no potentially dilutive common stock equivalents in 1999 or 1998. NET PATIENT SERVICE REVENUES AND RECEIVABLES The Company has agreements with hospitals and third party payors that provide for payments to the Company at amounts different from its established rates. A summary of major payment arrangements with hospitals and third party payors is as follows: Hospitals Patient services rendered to various hospitals are paid on a fee-for-service basis. These rates vary based on negotiated fee schedules. Medicare, Blue Shield, and Medicaid Patient services rendered to Medicare, Blue Shield, and Medicaid program beneficiaries are paid based on various fee schedules. These rates vary according to patient classification systems that are based on clinical, diagnostic and other factors. Oxford Patient services rendered to Oxford program beneficiaries are paid on a fee-for-service basis. These rates vary according to patient classification system that is based on clinical, diagnostic, and other factors. 7 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS FURNITURE, EQUIPMENT AND VEHICLES Furniture, equipment and vehicles and accumulated depreciation at December 31, 1999 and 1998 are as follows:

NOTE PAYABLE, DEMAND The Company has outstanding advances under a Loan Commitment by which the Company can borrow the lesser of $1,000,000 or its borrowing base as determined by a percentage of its accounts receivable. Borrowings bear interest at the Wall St. Journal published prime rate plus 3.0% (11.5% at December 31, 1999). Repayments under the loan are via a lockbox agreement which provides for the receipt and processing of accounts receivable. The agreement has a two-year initial term (through June, 2001) and annual one-year renewals. The outstanding balance under this agreement was $307,529 at December 31, 1999. At December 31, 1998, note payable, demand represents borrowings under the terms of a retired line of credit agreement under which the Company could have borrowed up to $250,000. Borrowings bore interest at the bank's prime rate plus 1.5% (9.25% at December 31, 1998). The note was secured by substantially all assets of the Company. The outstanding balance under this agreement was $244,724 at December 31, 1998. The loan agreement required, among other things, that the Company maintain tangible net worth of $400,000, a net worth ratio of 1.5 and a current ratio of 2.0. The Company was in violation of these debt covenants during 1998. LONG-TERM DEBT Long-term debt at December 31, 1999 and 1998 consists of the following:

8 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS

The loans are secured by liens on equipment and accounts receivable. The aggregate amount of future principal repayments at December 31, 1999 is as follows:

PROMISSORY NOTES PAYABLE The Company has 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 1, 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 the Company and are subordinated to advances of up to $1,000,000 under it's demand note payable loan commitment. CAPITALIZED LEASE OBLIGATIONS The Company acquired hospital equipment under the provisions of three long term leases during 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 December 31, 1999 have a cost of $423,930, accumulated amortization of $34,198 and a net book value of $389,732. Amortization of the lease property is included in depreciation expense. 9 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS The future minimum lease payments under capital lease and the net present value of the future minimum lease payments at December 31, 1999 are as follows: Total minimum lease payments $ 556,170 Amount representing interest 135,870 -------- Present value of Net Minimum Lease Payments 420,300 Current portion 65,202 -------- Long-term capital lease obligation $ 355,098 ========

RETIREMENT PLAN The Company sponsors a 401(k) retirement plan. The Company did not make any contributions in 1999 and 1998. The plan was terminated effective December 31, 1999. INCOME TAXES The income tax benefit (expense) is comprised of the following:

The deferred income tax benefit in 1999 and 1998 results primarily from temporary differences in the recognition of accounts receivable, accounts payable and accrued expenses between the cash basis method utilized for tax reporting purposes and accrual basis method utilized for financial statement purposes. The following represents the tax effects of temporary differences that result in the net deferred income tax liability at December 31, 1999 and 1998:

10 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS

Net deferred income taxes are classified in the accompanying consolidated financial statements at December 31, 1999 and 1998 as follows:

At December 31, 1999 and 1998, the Company has approximately $860,000 of net operating losses available to carry forward for federal and state income tax purposes. The federal net operating loss carryforwards will expire between 2011 and 2019 and the state net operating loss carryforwards will expire between 2003 and 2019. The expected income tax benefit using the statutory federal income tax rate differs from the actual income tax benefit primarily because of contributions and meals and entertainment. The Company files separate federal and state income tax returns. COMMITMENTS AND CONTINGENCIES Leases The Company leases equipment and offices, under long-term lease agreements expiring through 2003, which are classified as operating leases. The future minimum lease payments as of December 31, 1999 are as follows:

Lease expense for equipment and offices was $398,611 in 1999 and $744,944 in 1998. 11 CARDIOVASCULAR LABORATORIES, INC. OF PENNSYLVANIA NOTES TO THE FINANCIAL STATEMENTS Contingencies The health care industry is subject to numerous laws and regulations of federal, state and local governments. Compliance with these laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at the time. Recently, government activity has increased with respect to investigations and allegations concerning possible violations by health care providers of fraud and abuse statutes and regulations, which could result in the imposition of significant fines and penalties as well as significant repayments for net patient service revenues previously billed. Compliance with such laws and regulations are subject to future government review and interpretations as well as regulatory actions unknown or unasserted at this time. SUBSEQUENT EVENTS On January 6, 2000 the Company entered into a settlement agreement with a former officer and others whereby the Company received $235,000 in full satisfaction of it's claim and termination of the pending litigation. On May 31, 2000 the Company entered into a transaction whereby it sold substantially all of its assets in exchange for the assumption by the purchaser of substantially all of it's liabilities and a note in the amount of $684,000 payable over three years. This note is subject to adjustment in the event that future monthly revenue levels are not attained and to the extent that, primarily, net accounts receivable sold are not fully collected. The transaction closed in escrow pending the assignment and assumption of certain obligations of the Company by the purchaser. RELATED PARTY TRANSACTIONS During 1999 and 1998 The Company paid consulting fees to a corporation wholly owned by the President of the Company pursuant to a consulting agreement. These payments totaled $33,250 and $69,103 in 1999 and 1998 respectively. 12 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 hereunto duly authorized. COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP, INC. By: /s/ Ronald Wilheim ----------------------------------------- Ronald Wilheim Chief Executive Officer Date: January 18, 2001

COMPREHENSIVE MEDICAL DIAGNOSTICS GROUP INC 8-K/A