SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

        For Quarter Ended June 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 August 14, 1998
-----------------                          ------------------------------

Common Stock, par value                              9,567,292


<PAGE>
                   FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES

                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------

PART I.                     FINANCIAL INFORMATION

  Item 1.        Financial Statements

                 Consolidated Statements of Operations -
                 Six Months Ended June 30, 1998 and 1997.......................1

                 Consolidated Balance Sheets -
                 June 30, 1998 and December 31, .1997..........................2

                 Consolidated Statement of Changes in
                 Shareholder's Equity (Deficit)
                 Six Months Ended June 30, 1998 and 1997.......................3

                 Condensed Consolidated Statements of Cash Flows -
                 Six Months Ended June 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...............8-9


PART II.         OTHER INFORMATION

  Item 1.        Legal Proceedings.......................................... .10

  Item 3.        Defaults upon Senior Securities......................... ....10

  Item 5.        Other Information.........................................10-11

  Item 6.        Exhibits and Reports on Form 8-K.............................11


<PAGE>
PART 1 - FINANCIAL INFORMATION
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                                   JUNE 30                            JUNE 30
                                                                   -------                            -------
                                                             1998          1997               1998              1997
                                                             ----          ----               ----              ----

Revenue:
<S>                                                      <C>             <C>             <C>                <C>
  Fee for service and related revenue                    $ 2,700,745     $2,408,585      $  5,464,983       $ 4,422,702

      Total revenue                                        2,700,745     $2,408,585      $  5,464,983         4,422,702

Medical expenses                                           2,507,941      1,845,000         4,645,649         3,468,768
                                                         -----------     ----------      ------------       -----------

          Gross profit                                       192,804        563,585           819,334           953,934

Operating expenses:

  Salaries and related benefits                               74,346        329,198           406,166           427,424
  General and administrative                                 289,808        283,174           529,806           449,697
  Depreciation and amortization                                8,241         63,840            15,261            94,978
                                                         -----------     ----------      ------------       -----------
      Total operating expenses                               372,395        676,212           951,233           972,099

Operating income (loss)                                     (179,591)      (112,627)         (131,899)          (18,165)

Impairment loss on intangible assets                            --             --          (2,014,168)             --
Interest income (expense),net                                 16,550        (50,651)          (52,078)          (64,951)
                                                         -----------     ----------      ------------       -----------

(Loss) before taxes, write-off of debentures and            (163,041)      (163,278)       (2,198,145)          (83,116)
             discontinued operations

Provision for income taxes                                   164,659        (45,000)          326,753              --
                                                         -----------     ----------      ------------       -----------

Net (loss) before discontinued operations and               (327,700)      (118,278)       (2,524,898)          (83,116)
             write-off of debentures

Write-off of debentures and accrued interest               1,218,537           --           1,218,537              --

Discontinued operations:
     (Loss) from discontinued operations                    (980,251)    (2,244,610)       (1,982,238)       (2,187,432)
      Gain on sale of discontinued operations              4,260,344           --           3,669,391              --
                                                         -----------     ----------      ------------       -----------
Total income (loss) from discontinued operations           3,280,093     (2,244,610)        1,687,153        (2,187,432)

     Net income (loss)                                   $ 4,170,930    $(2,362,888)      $   380,792       $(2,270,548)

(Loss)  per share before write-off                       $     (0.03)   $     (0.01)      $     (0.27)      $     (0.01)
         and discontinued operations
Earnings (loss) per share from  write-off                $      0.47    $     (0.25)      $      0.31       $     (0.24)
        and discontinued operations
Earnings (loss)  per share                               $      0.44    $    (0.26)       $     0.04        $     (0.25)

Weighted average number of common shares
    outstanding                                            9,448,292      9,021,400         9,422,651         9,021,400
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>

                                                              JUNE 30,                DECEMBER 31,
              ASSETS                                            1998                     1997
              ------                                            ----                     ----

Current assets:
<S>                                                         <C>                       <C>
  Cash and cash equivalents                                 $  1,981,820              $ 1,421,250
  Other receivables                                              204,090                   98,332
  Due from related parties                                     1,171,749                1,139,760
  Inventories                                                     11,515                      -
  Prepaid expenses and other current assets                       60,064                   50,406
                                                            ------------              -----------

     Total current assets                                      3,429,238                2,709,748

Property and equipment, net                                      163,870                  170,281
Intangible assets,net                                                  -                2,014,169
Other assets                                                     250,648                  248,386
                                                            ------------              -----------
     Total                                                   $ 3,843,756              $ 5,142,584

    LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                               311,877                  278,497
  Accrued expenses                                               854,271                1,164,093
  Corporate deposits                                             596,383                  731,372
  Loans payable to banks                                               -                3,217,812
  Net liabilities pertaining to discontinued operations        2,584,154                  804,531
                                                            ------------              -----------

     Total current liabilities                                 4,346,685                6,196,305

Commitments and contingencies

Shareholders' deficit:
  Capital stock, par value $.001; authorized shares                9,567                    9,397
       100,000,000
  Additional paid in capital                                   8,253,318                8,083,488
  Retained deficit                                            (8,765,814)              (9,146,606)
                                                            ------------              -----------

     Total shareholders' deficit                                (502,929)              (1,053,721)
                                                            ------------              -----------

     Total                                                   $ 3,843,756              $ 5,142,584
</TABLE>



See accompanying notes to consolidated financial statements.

                                       2
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES OF SHAREHOLDERS' (DEFICIT) EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                 ADDITIONAL             RETAINED              TOTAL
                                             COMMON               PAID-IN               EARNINGS          SHAREHOLDERS'
                                              STOCK               CAPITAL              (DEFICIT)         (DEFICIT)EQUITY

<S>                                        <C>                  <C>                  <C>                   <C>        
Balance, January 1, 1997                   $       100          $   379,685          $   323,712           $   703,497


Net loss                                          --                   --             (2,270,550)           (2,270,550)
                                           -----------          -----------          -----------           -----------

Balance, June 30, 1997                     $       100          $   379,685          $(1,946,838)          $(1,567,053)







Balance, January 1, 1998                   $     9,397          $ 8,083,488          $(9,146,606)          $(1,053,721)


Issuance of 170,000 shares                         170              169,830              170,000

Net income                                        --                   --                380,792               380,792
                                           -----------          -----------          -----------           -----------

Balance, June 30, 1998                     $     9,567          $ 8,253,318          $(8,765,814)          $  (502,929)

</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)

                                                           1998            1997
                                                           ----            ----


Net income (loss)                                     $   380,792   $(2,270,548)

Add:  Depreciation and amortization                        15,261        94,978

         Loss on impairment of intangibles              2,014,169          --

         Proceeds of loan payable to banks                   --       1,700,552


         Issuance of common stock                         170,000          --

         Increase in net liabilities relating

             to discontinued operations                 1,779,623     2,332,341

Less: Investment in Lehigh                                   --        (818,651)

         Repayment of loan payable to banks            (3,217,812)         --

         Other changes in assets and liabilities         (581,463)     (546,929)
                                                      -----------   -----------

Increase in cash and cash equivalents                     560,570       491,743
Cash and cash equivalents, beginning of the year        1,421,250       124,314
                                                      -----------   -----------
Cash and cash equivalents, end of the period          $ 1,981,820   $   616,057


See accompanying notes to consolidated financial statements.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

The  financial  information  for the three  months and six months ended June 30,
1998 and 1997 is  unaudited.  The balance  sheet as of December 31, 1997 and the
income  statement  for the three  months and six months  ended June 30, 1997 has
been reclassified to reflect the managed care and HallMark  Electrical  Supplies
Corp.   ("HallMark")  operations  as  discontinued   operations.   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 six month  period ended June
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 and share equivalents outstanding.  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  managed care  operations.  The
total  sales price was  approximately  $6.75  million for certain  assets of the
Company.  The Company is also  divesting  its Texas and  Mid-West  managed  care
operation.  It is anticipated  that these operations will be sold in July, 1998.
As a result of these  transactions,  the Company has  reflected its managed care
operation as discontinued operations for financial statement purposes.

On April 17, 1998, the Company sold 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.

As a result of these  transactions,  the Company  recorded a gain on the sale of
approximately  $ 4.3 million and is reflected in the results of  operations  for
the three months ended June 30, 1998.

                                                 5.
<PAGE>

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  managed care 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 36 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.

CONDENSED FINANCIAL STATEMENTS-DISCONTINUED OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998

(IN THOUSANDS):

CONDENSED INCOME STATEMENTS

                           MANAGED CARE           HALLMARK              TOTAL

Revenues                    $   15,514            $ 4,090             $ 19,604

Medical Cost/Cost
         of Sales               15,289              2,850              18,139
                                ------              -----              ------

Gross Profit                       225             1,240                1,465

Income (loss) from
  discontinued operations    $   (2085)              $   103          $ (1982)


CONDENSED BALANCE SHEET

                                         MANAGED CARE

Current assets                           $    10,403
Other assets                                     327
                                                 ---
Total                                         10,730

Current liabilities                           13,314

Net liabilities pertaining

to discontinued operations                  $ (2,584)





                                       6.
<PAGE>

3.       WRITE-OFF OF DEBENTURES AND ACCRUED INTEREST

During the three months ended June 30, 1998,  the Company  elected to record the
write-off  of the 13  1/2%  Senior  Subordinated  Debenture  notes  and 14  7/8%
Subordinated  Debentures  aggregating  $390,000 and the related accrued interest
payable  of $  828,537.  These  notes  were not  surrendered  to the  Company in
connection  with the The Lehigh  Group  Inc.  financial  restructuring  that was
consummated  in 1991.  Included in the operating  results of the Company for the
three months ended June 30, 1998, is income amounting to $ 1,218,537 relating to
the write-off of these debentures and accrued interest payable.

4.       SUPPLEMENTARY SCHEDULE

                                                  1998            1997
                                                      (IN THOUSANDS)

 Cash paid during the six months ended
 June 30, for:
  Interest                                       $  52           $ 65
  Income taxes                                     327              -


















                                                 7.
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATION

  RESULTS OF OPERATIONS
  SECOND QUARTER OF 1998 IN COMPARISION
  WITH SECOND QUARTER OF 1997

         REVENUE.        Total revenue of the Company for the three months ended
  June 30, 1998 and 1997 was $2.7  million and $2.4  million,  respectively,  an
  increase  of 13%,  due  mainly to the  opening  of two new  clinics in Eastern
  Europe as well as increased patient visits in existing facilities.

         MEDICAL  EXPENSE.  Medical  expense for the three months ended June 30,
  1998 and 1997 was $2.5 million and $1.8 million, respectively. Medical expense
  as a  percentage  of revenue,  was 93% and 75% for the three months ended June
  31, 1998 and 1997, respectively.

         OPERATING  EXPENSES.  Operating expenses for the Company were $ 372,000
  during the three  months  ended June 30, 1998 as compared to $676,000 in 1997.
  Operating expenses as a percent of revenue were 14% and 28%, respectively,  in
  1998 and 1997.

         WRITE-OFF OF DEBENTURES AND ACCRUED INTEREST PAYABLE.  The write-off of
  debentures and accrued interest payable during the three months ended June 30,
  1998 was $ 1,218, 537.

         LOSS/INCOME FROM  DISCONTINUED  OPERATIONS.  The loss from discontinued
operations  for the  three  months  ended  June 30,  1998 was $.980  million  as
compared to a loss of $2.2  million for the first  three  months  ended June 30,
1997. The gain on sale of discontinued  operations during the three months ended
June 30, 1998 was $ 4.3 million.

         NET INCOME (LOSS).  Net income for the three months ended June 30, 1998
was $ 4,171,000 as compared to net loss of $ 2,362,000 in the second  quarter of
1997.

  RESULTS OF OPERATIONS
  FIRST HALF OF 1998 IN COMPARISION
  WITH FIRST HALF OF 1997

          REVENUE.       Total revenue of the Company for the six months ended
  June 30, 1998 and 1997 was $ 5.5 million and $ 4.4 million,  respectively,  an
  increase  of 25%,  due  mainly to the  opening  of two new  clinics in Eastern
  Europe as well as increased patient visits in existing facilities.

         MEDICAL EXPENSE. Medical expense for the six months ended June 30, 1998
  and 1997 was $ 4.6 million and $3.5 million, respectively.  Medical expense as
  a  percentage  of revenue,  was 84% and 80% for the six months  ended June 31,
  1998 and 1997, respectively.

                                                 8.
<PAGE>
                  OPERATING EXPENSES.  Operating expenses for the Company were $
951,000  during the six months  ended June 30,  1998 as compared to $ 972,000 in
1997. Operating expenses as a percent of revenue were 17% and 22%, respectively,
in 1998 and 1997.

                 IMPAIRMENT LOSS ON INTANGIBLE  ASSETS.  The Company  recorded a
loss on  impairment  of  intangible  assets during the six months ended June 30,
1998 of $ 2,014,168.

                 WRITE-OFF  OF  DEBENTURES  AND ACCRUED  INTEREST  PAYABLE.  The
write-off of debentures and accrued interest payable during the six months ended
June 30, 1998 was $ 1,218, 537.

                 LOSS/INCOME  FROM  DISCONTINUED   OPERATIONS.   The  loss  from
discontinued operations for the six months ended June 30, 1998 was $ 2.0 million
as compared to a loss of $2.2  million for the six months  ended June 30,  1997.
The gain on sale of discontinued operations during the six months ended June 30,
1998 was $ 4.3 million.

                 NET INCOME (LOSS). Net income for the six months ended June 30,
1998 was $ 381,000  as  compared  to net loss of $  2,070,000  in the six months
ended June 30, 1997.



LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 1998,  the Company had cash of $ 1,981,000 as compared to $
1,421,000 at December 31, 1997.

         As of December  31,  1997,  the  Company had a credit  facility of $2.5
  million bearing  interest at 1/2% above prime, of which $500,000 is guaranteed
  by  certain  current  and former  members of the  Company.  The  Company  also
  borrowed an additional  $537,000 to purchase  Lehigh stock in connection  with
  the merger.  Proceeds  from the sale of the managed  care  operation in April,
  1998 were used to repay these facilities.


                                       9.
<PAGE>
                                PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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 condition.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

The Company continues to be in default in the payment of interest (approximately
$829,000.00  interest  is past due as of June 30,  1998) on  $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.,  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 pay off 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 First Medical Group,  Inc.,  ("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 $1,900,000.00.  The purchase price of $1,900,000.00  represented a cash
payment of $750,000.00 and the assumption of $1,150,000.00 worth of debt and Mr.
Zizza's agreement not to compete.

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.

It On  July  8,  1998,  First  Medical  Group,  Inc.  through  its  wholly-owned
subsidiary,  First  Medical  Corporation,  sold all of the assets of its Indiana
operations  and its contracts with Humana Health Plan,  Inc. to provide  managed
care to MCO,  LLC. The total sales price was  $727,378.00.  The proceeds of sale
were used to pay off an existing  loan with Devon Bank in the amount of $377,378
and $350,000 was applied to money owed to Humana Health Plans, Inc.

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 36  equal  monthly
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.

                                       10
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

A Form 8-K was filed on April 29, 1998 (see item 5).





                                      11.
<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
                                                  ---------------------
                                                     President

Dated  August 18, 1998