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.





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<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).





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<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




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<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





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