-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GJJ47VKEOwIwLYpIlU3HLyH3APtRbFRTDReoM8SLzYI4EiZZaEZVY1xSBNs7kxpr Bz2EIpVfgocXsOy9wPz07g== 0000866970-01-500017.txt : 20010517 0000866970-01-500017.hdr.sgml : 20010517 ACCESSION NUMBER: 0000866970-01-500017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHOENIX GROUP CORP CENTRAL INDEX KEY: 0000866970 STANDARD INDUSTRIAL CLASSIFICATION: 8051 IRS NUMBER: 232596710 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-20354 FILM NUMBER: 1626736 BUSINESS ADDRESS: STREET 1: 4514 TRAVIS STREET STREET 2: SUITE 330 CITY: DALLAS STATE: TX ZIP: 75205 BUSINESS PHONE: 2145999777 MAIL ADDRESS: STREET 1: 4514 TRAVIS STREET STREET 2: SUITE 330 CITY: DALLAS STATE: TX ZIP: 75205 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX HEATHCARE CORP DATE OF NAME CHANGE: 19990519 FORMER COMPANY: FORMER CONFORMED NAME: IATROS HEALTH NETWORK INC DATE OF NAME CHANGE: 19941221 FORMER COMPANY: FORMER CONFORMED NAME: GRACECARE HEALTH SYSTEMS INC DATE OF NAME CHANGE: 19930328 10QSB 1 pxgp10qsb.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q SB [ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 0-20354 The Phoenix Group Corporation (Exact name of small business issuer as specified in its charter) Delaware 23-2596710 (State or other jurisdiction of I.R.S. Employer Identification No. incorporation of organization) 4514 Travis Street, Suite 330, Dallas, Texas 75205 (Address of principal executive offices) (Zip Code) 214-599-9777 (Issuer's telephone number, including area code) Former name, former address and former fiscal year, if changed since last report Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. __X__YES ____ NO As of April 30, 2001, there were 69,155,850 shares of Common Stock issued or issuable and outstanding, 533,333 shares of Series A Senior Convertible Preferred Stock issued and outstanding, and 100,000 shares of Series B Preferred Stock issued and outstanding. Transitional Small Business Disclosure Format ____ YES __X__ NO THE PHOENIX GROUP CORPORATION FORM 10-Q SB TABLE OF CONTENTS Part I. FINANCIAL INFORMATION 1 Item 1. Financial Statements 1 Consolidated Balance Sheets March 31, 2001 and December 31, 2000 1 Consolidated Statements of Operations for the periods ended March 31, 2001 and 2000 2 Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Information About Market Risk 9 Part II. OTHER INFORMATION 10 Item 1. Legal Proceedings 10 Item 2. Changes in Securities and Use of Proceeds 10 Item 3. Defaults upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits 10 Signatures Part I. Financial Information Item 1: Financial Statements THE PHOENIX GROUP CORPORATION CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 (unaudited) March 31, December 31, ASSETS 2001 2000 CURRENT ASSETS Cash and cash equivalents $ 1,502 $ 1,627 Deposits and other 81,818 32,542 Total current assets 83,320 34,169 PROPERTY AND EQUIPMENT, net 65,693 75,808 OTHER ASSETS 43,985 14,198 TOTAL ASSETS $192,998 $124,175 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Notes payable - related party and other $ 2,854,813 $2,699,887 Accounts payable 829,760 684,669 Accrued expenses and other current liabilities 620,191 387,101 Net current liabilities of discontinued operations 6,570,000 6,575,000 Total current liabilities 10,874,764 10,346, 657 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) Preferred Stock, $.001 par value, 5,000,000 shares authorized: Series A, 533,333 shares issued and outstanding 533 533 Series B, 100,000 shares issued and outstanding 100 100 Common Stock, $.001 par value, 250,000,000 shares authorized; 69,155,850 and 58,203,567 issued or issuable and outstanding in 2001 and 2000, respectively 69,156 58,204 Additional Paid-In Capital 46,218,661 45,669,761 Accumulated Deficit (56,970,216) (55,951 ,080) (10,681,766)(10,222,4 82) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $192,998 $124,175 The accompanying notes are an integral part of these consolidated financial statements. THE PHOENIX GROUP CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000 (unaudited) Three Months Ended March 31 2001 2000 Operating Expenses General and administrative $846,352 $1,072,473 Loss from continuing operations before other income (expense) (846,352) (1,072, 473) Other income (expense) Other income - 3,442 Interest expenses (117,903) (53,459) Depreciation and amortization (10,862) (9,068) (128,765) (59,085) Loss from continuing operations before discontinued operations (975,117) (1,131,558) Discontinued Operations Net gain (loss) on settlement of discontinued accounts (23,450) 145,258 Net loss from operations (20,569) (27,912) Gain (loss) from discontinued operations (44,019) 117,346 Net Loss $(1,019,136)$ (1, 014,212) Basic and Diluted Loss per Share Continuing operations $ (.02) $(.03) Discontinued operations - - Loss per Common Share $ (.02) $(.03) The accompanying notes are an integral part of these consolidated financial statements. THE PHOENIX GROUP CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000 (unaudited) Three Months Ended March 31, March 31, 2001 2000 OPERATING ACTIVITIES Net loss $(1,019,136)$(1,014, 212) Adjustments to reconcile net loss to net cash provided (utilized) by operating activities: Depreciation and amortization 10,862 29,068 Provision for doubtful accounts receivable - - - - Common stock issued for services rendered 459,237 651,200 Changes in Accounts receivable - - Inventory - - - - Prepaid expenses and other 49,276 (319) Notes payable - related party and other.......... 154,926 - Accounts payable and accrued expenses 378,181 9,442 Net current liabilities of discontinued operations - - - 230,552 Net cash provided (utilized) by operating activities 33,346 (94,269) INVESTING ACTIVITIES Purchase of property and equipment (747) (3,392) Changes in other assets (32,724) (1,677) Net cash provided (utilized) by investing activities (33,471) (5,069) FINANCING ACTIVITIES Short-term borrowings, net - 83,536 Proceeds of long-term debt, net - - Net cash provided (utilized) by financing activities - - - 83,536 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (125) (15,802) Cash and cash equivalents, beginning of period 1,627 15,802 Cash and cash equivalents, end of period $ 1,502 $ - - - The accompanying notes are an integral part of these consolidated financial statements. THE PHOENIX GROUP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED MARCH 31, 2001 AND 2000 NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES During interim periods, The Phoenix Group Corporation ("The Company") follows the accounting policies set forth in its Annual Report on Form 10-K SB filed with the Securities and Exchange Commission. Users of financial information produced in interim periods are encouraged to refer to the footnotes contained in the Annual Report when reviewing interim financial results. In management's opinion, the accompanying interim financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, the results of operations, and the statements of cash flows of the Company for the interim periods. A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements is as follows: Business The Phoenix Group Corporation (the "Company" or "Phoenix") is a Delaware Corporation organized in June 1988. Phoenix has predominately been engaged in providing healthcare management and ancillary services to the long-term care industry. During 1999 and 2000, the Company discontinued all operations associated with its historic businesses. New management of the Company has undertaken to implement a strategic business plan to reposition Phoenix through new growth initiatives involving targeted business acquisitions in the home health care industry. Principles of consolidation The consolidated financial statements include the accounts of The Phoenix Group Corporation and its wholly-owned subsidiaries. All inter-company transactions and accounts have been eliminated. Cash and cash equivalents The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash accounts, which at times may exceed federally insured limits. The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits. Management believes that the Company does not have significant credit risk related to its cash accounts. Property and Equipment Property and equipment is stated at cost. The cost of property and equipment is depreciated over the estimated useful lives of the respective assets using primarily the straight-line method. Normal maintenance and repair costs are charged against income. Major expenditures for renewals and betterments, which extend useful lives, are capitalized. When property and equipment is sold or otherwise disposed of, the asset gain or loss is included in operations. Property and equipment is principally comprised of office furniture, fixtures and equipment having useful lives ranging from three to seven years for purposes of computing depreciation. Income taxes The Company employs the asset and liability method in accounting for income taxes pursuant to Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities and net operating loss carryforwards, and are measured using enacted tax rates and laws that are expected to be in effect when the differences are reversed. THE PHOENIX GROUP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED MARCH 31, 2001 AND 2000 NOTE 1: NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Earnings per share The Company adopted Statement of Financial Accounting Standard No. 128 "Earnings per Share" ("SFAS 128") in 1997. Basic earnings per share are based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share is based upon the weighted average number of common shares outstanding during the period plus the number of incremental shares of common stock contingently issuable upon exercise of stock options and warrants. Use of Estimates The preparation of 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. Reclassifications Certain reclassifications, particularly related to the presentation of discontinued operations, have been made to 2000 amounts to conform to the 2001 presentation. NOTE 2: GOING CONCERN For the three months ended March 31, 2001, the Company reported a net loss from continuing operations of $975,117. This is largely attributable to the costs of sustaining a corporate infrastructure and the related overhead deemed necessary to support management's strategic growth initiatives. Recent operating losses reported by the Company from discontinued operations have exhausted the Company's capital resources and had a material adverse effect on short-term liquidity and the Company's ability to satisfy its residual corporate obligations. At March 31, 2001, the Company reports a working capital deficit of $10,791,444. The Company requires an infusion of new capital, a newly established business base and a related level of profitability to meet its short-term obligations. In light of the Company's current financial position, its inability to independently meet its short-term corporate obligations, its need to further capitalize existing operations and its dependency on revenue growth to support continuing operations, its viability as a going concern is uncertain. While the Company has experienced an infusion of limited new working capital, there can be no assurance that management's efforts to re-direct and re-capitalize the Company will be successful. NOTE 3: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION During the quarter ended March 31, 2001, the Company issued an aggregate of 10,952,283 shares of common stock having a market value of $559,852. This included 8,282,460 shares of common stock valued at $415,377 to satisfy accrued salaries and other compensation to executive officers as well as administrative personnel of the Company; 935,191 shares of common stock valued at $43,860 for consulting and professional services rendered to the Company; 1,234,632 shares of common stock valued at $77,165 for working capital realized during 2000; and, 500,000 shares of common stock valued at $23,450 to satisfy accounts payable. THE PHOENIX GROUP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED MARCH 31, 2001 AND 2000 NOTE 3: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Continued) During the quarter ended March 31, 2000, the Company converted approximately $895,292 of debt (including accrued, but unpaid interest of approximately $57,175) related to discontinued operations through the issuance of 2,212,281 shares of the Company's common stock. $241,667 of the converted debt (927,859 shares of the Company's common stock) was held by Executive Officers of the Company. In March 2000, the Board of Directors approved the issuance of 1,669,546 shares of common stock to the Company's Chairman and Chief Executive Officer and 1,5202,580 shares of common stock to the former President of the Company in lieu of accrued salaries at December 31, 1999, of $475,000. In March 2000, the Company authorized the issuance of 7,400,000 shares of common stock in connection with the appointment of a new Executive Vice President of the Company who will also serve in the capacity of President of Healthcare Information Technologies, Inc. ("HIT"), the recently acquired and wholly owned subsidiary of the Company. The Company entered into an employment agreement with this executive effective January 1, 2000 for a period of three years with an annual compensation level of $240,000. The employment contract terms are substantially similar to those used for other Company executives. The issuance of the shares resulted in a one-time, non-cash, charge to operations of $651,200 for the quarter ended March 31, 2000. Operations associated with HIT were subsequently discontinued during 2000, together with the employment agreement involving the associated executive officer. NOTE 4: DISCONTINUED OPERATIONS In April 2000, the Company announced the formation of Converged Media, Inc. ("CMI") as a new business initiative conceived to pioneer the convergence of radio, telephone, television and the Internet through the use of highly specialized products and services with targeted business and consumer profiles. Effective January 2001, the Company announced the discontinuation of operations of CMI. Net loss from discontinued operations reported for the quarter ended March 31, 2001 relates principally to the operations of CMI. Net current accounts of discontinued operations at March 31, 2001 and December 31, 2000 totaled $6,575,000 and were comprised principally of judgment creditor obligations of $1,450,000 from prior corporate and ancillary operations; $3,150,000 from nursing operations; $850,000 from Trinity; and $1,125,000 from Southland. NOTE 5: COMMITMENTS AND CONTINGENCIES The Company is a defendant in certain lawsuits involving third- party creditors whose claims arise from transactions, which largely occurred under prior management and are related to discontinued operations. Management believes that it has sufficiently reserved for these claims in its financial statements at March 31, 2001. NOTE 6: RELATED PARTY TRANSACTIONS The Company is obligated under the terms of a line of credit agreement to Match, Inc. in the amounts of $1,731,025 and $1,610,624 at March 31, 2001 and December 31, 2000, respectively. Ronald E. Lusk, Chairman and Chief Executive Officer of the Company controls Match, Inc. as its sole stockholder and President. The line of credit agreement with Match, Inc. is available up to a limit of $2 million; bears interest at approximately 10%; is due on demand and is secured by pledges of substantially all assets of the Company. This note obligation includes accrued interest of approximately $275,000 and $232,000 at March 31, 2001 and December 31, 2000, respectively. To date, there have been no interest payments made to Match, Inc. Match, Inc. is the sole holder of all of the issued and outstanding Series A Preferred Stock of the Company. THE PHOENIX GROUP CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED MARCH 31, 2001 AND 2000 NOTE 7: SIGNIFICANT TRANSACTIONS In March 2000, the Company sold the stock of certain subsidiary companies that were discontinued in 1999 and prior years and recognized debt forgiveness associated with operations discontinued in 1999 in the amount of $3,856,238. The Company also realized a gain on settlement of an account related to previously discontinued operations for $145,258 in the quarter ended March 31, 2000. All of these transactions were with entities controlled by the Company's Chairman, and Chief Executive Officer. The $3,856,238 was credited to Paid-in- Capital in the accompanying financial statements. NOTE 8: SUBSEQUENT EVENTS Effective on May 4, 2001 the Company entered into a Stock Purchase Agreement to acquire all of the issued and outstanding common stock of Lifeline Home Health Services, Inc. and Lifeline Managed Home Care ("Lifeline"). The purchase consideration associated with this acquisition is non-cash and includes issuance of the Company's Common Stock. Lifeline, based in Dallas, Texas, is the second largest home health company serving the greater metropolitan Dallas / Fort Worth market area. Lifeline reports annualized operating revenues approximating $7 million and currently services over twenty local area counties. This stock purchase acquisition of Lifeline represents the first of a series of transactions contemplated by the Company. In connection with this event, the Company has announced the aggressive implementation of its business strategy embarking upon a rollup effort involving the home health care industry. Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations Forward Looking Statements This form 10-QSB includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of the Company. When used herein, the words "anticipate," "believe," "estimate" and "expect" and similar expressions, as they relate to the Company's management, are intended to identify forward-looking statements. Such statements reflect significant assumptions, risks and subjective judgments by the Company's management concerning anticipated results. These assumptions and judgments may or may not prove to be correct. Moreover such forward- looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated in such forward-looking statements. Forward- looking statements speak only as to the date hereof. Business and Business Strategy The Company has evaluated a wide range of industry sectors where unique business opportunities exist for targeted growth initiatives. As a result, the Company has identified the home health care industry where it intends to embark upon a rollup strategy in this undercapitalized and fragmented business sector. In deploying an aggressive acquisition program, the Company's business and growth strategy includes standardizing technology, implementing a centralized billing system and eliminating real estate and related administrative overhead through market consolidation. The ability of the Company to complete targeted business acquisitions will transform the Phoenix Group Corporation into one of the more progressive and premier operators in this segment of the health care industry. The Company has completed its first of a series of such acquisitions and has received indications from sources of capital needed to fund its continued growth initiatives. The Company intends to capitalize on the pursuit of several undervalued opportunities that have been identified. Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations (Continued) The Company's decision to re-enter the health care industry was based upon its evaluation of diminished uncertainties relating to Medicare; implementation of the associated Prospective Payment System (PPS); prospects to capitalize on the Company's management and related health care expertise; prevailing trends promoting reorganizations and advanced technology capabilities; and the prevalent opportunities existing within this business sector. Results of Operations During 2000 through January 2001, new management of the Company completed a strategic initiative to exit its under-performing and historic business activities. Having divested of all previous business segments, the Company believes it is more effectively positioned to pursue growth and development opportunities contemplated by new management's business plan. This involves the Company emerging, principally through growth by business acquisitions targeted in the home health care industry. A critical component of successfully implementing the new business plan will be the Company's ability to secure sufficient capital to sustain its continuing operating needs and corporate obligations. The Company's consolidated financial statements reflect a loss from continuing operations of $975,117 for the quarter ended March 31, 2001, compared with a net loss from continuing operations of $1,159,470 for the prior year quarter ended March 31, 2000. The reported losses for both periods represent general and administrative expenses reported by the Company and are exclusively related to corporate expenses and related corporate overhead. Significant components of general and administrative expenses for the quarter ended March 31, 2001 include $449,900 in executive compensation satisfied principally through the issuance of the Company's common stock; general payroll and related benefits of corporate staff totaling $156,498; professional fees totaling $131,708; and other corporate administrative and office expenses totaling $85,708. Significant components of general and administrative expenses for the quarter ended March 31, 2000 include accrued executive compensation of $178,750, a non-cash charge for executive compensation related to a stock grant for an executive officer of the company of $651,200, professional fees of $142,825, salaries and wages of $80,000 and other expenses of $66,757. Other income for the quarter ended March 31, 2000 totaled $42,589, the majority of which represented collections of previously written off accounts receivable of discontinued operations Depreciation and amortization for the quarter ended March 31, 2001 relates exclusively to corporate furniture, fixtures and equipment. Depreciation and amortization for the quarter ended March 31, 2000 totaled $29,068 with $20,000 representing amortization of intangibles that were acquired in 1999. Interest expense reported for the quarterly periods represents accrued amounts associated with corporate note obligations. In the quarter ended March 31, 2000, the Company incurred extinguishment of debt related to discontinued operations and disposed of the stock of certain subsidiaries related to previously discontinued operations. The transactions resulted in a net gain of $3,856,238 and was credited to Paid-in-Capital in the accompanying financial statements. In the quarter ended March 31, 2000, the Company also realized a gain on settlement of an account related to discontinued operations in the amount of $145,258. The transactions were with entities controlled by the Company's Chairman and Chief Executive Officer. Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations (Continued) Liquidity and Capital Resources During 2000 through January 2001, the Company completed discontinuing all prior business segments that have historically generated significant operating losses. At March 31, 2001 and December 31, 2000, the Company reports a negative working capital deficit of $10,791,444 and $10,312,488, respectively, and, as discussed in Note 2 to the financial statements, requires an infusion of new capital in order to meet its short-term obligations. Moreover, the Company, having discontinued all operations and sources of revenue, is critically dependent upon developing new sources of revenue to provide working capital. New management of the Company continues to work with creditors to secure non-cash settlement of obligations or otherwise secure forbearance arrangements with creditors while continuing to implement its growth strategy and capitalization plan for the Company. In light of the Company's current financial position, its inability to independently meet its short-term corporate obligations, its need to further capitalize continuing operations and its dependency on new revenue growth, its viability as a going concern is uncertain. There can be no assurance that new management will be successful in its efforts to improve the Company's financial position and operating performance. At March 31, 2001 and December 31, 2000, the Company reports virtually no liquid assets with which to sustain its working capital requirements of continuing operations. The sole source of immediate cash for the Company is from the line of credit agreement it has established with Match, Inc. This line of credit facility is for an amount of up to $2 million and is reported outstanding at March 31, 2001 and December 31, 2000 in the amounts of $1,731,025 and $1,610,624, respectively. This loan agreement is a demand note payable and accrues interest at approximately 10%. There can be no assurance that additional funding under this credit agreement will be available or extended. Notes payable - related party and other at March 31, 2001, totaled $2,854,813 representing principally working capital financing from Match, Inc. ($1,731,025); bank and third party notes ($862,698); and notes payable from officers of the Company ($258,090). Comparable amounts are reported at December 31, 2000 Accounts payable at March 31, 2001, totaled $829,760 compared to $684,669 at December 31, 2000. Such amounts primarily reflect accrued legal, professional and other corporate expenses associated with the periods. Accrued expenses and other current liabilities at March 31, 2001 totaled $620,191 compared with $387,101 at December 31, 2000. Components reported at March 31, 2001 include accrued interest on all corporate obligations ($430,850); accrued salaries and wages and related accounts ($104,166); and other accrued corporate expenses ($85,175). Amounts reported at December 31, 2000 primarily related to accrued interest on all corporate obligations. Item 3: Quantitative and Qualitative Information About Market Risk The Company does not engage in trading market risk sensitive instruments. Neither does the Company purchase as investments, hedges or for purposes "other than trading" instruments that are likely to expose the Company to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk. The Company has issued no debt instruments, entered into no forward or futures contracts, purchased no options and entered into no swaps. The Company's primary market risk exposure is that of interest rate risk. Part II. Other Information Item 1: Legal Proceedings Nothing to report. Item 2: Changes In Securities and Use of Proceeds During the quarter ended March 31, 2001, the Company issued an aggregate of 10,952,283 shares of common stock having a market value of $559,852. This included 8,282,460 shares of common stock valued at $415,377 to satisfy accrued salaries and other compensation to executive officers as well as administrative personnel of the Company; 935,191 shares of common stock valued at $43,860 for consulting and professional services rendered to the Company; 1,234,632 shares of common stock valued at $77,165 for working capital realized during 2000; and, 500,000 shares of common stock valued at $23,450 to satisfy accounts payable. During the quarter ended March 31, 2000, the Company issued 3,172,126 shares of its common stock to its Chairman and Chief Executive Officer and former President in lieu of accrued compensation at December 31, 1999 of $475,000. During the quarter ended March 31, 2000, the Company issued 7,400,000 shares of its common stock in connection with the appointment of a new Executive Vice President of the Company who served as President of Healthcare Information Technologies, Inc., a wholly-owned subsidiary. In April 2000, the Company converted $118,750 of accrued compensation of executive officers for the quarter ended March 31, 2000 into 540,339 shares of the Company's common stock. Item 3: Defaults Upon Senior Securities None Item 4: Submission Of Matters To A Vote Of Security Holders None Item 5: Other Information None Item 6: Exhibits And Reports On Form 8-K (a) Exhibits - None (b) The Company has filed herewith the following report on Form 8-K relating to the first quarter of 2001: Date Items Reported 5/9/01 Disposition of Converged Media, Inc. 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. THE PHOENIX GROUP CORPORATION May 9, 2001 By: Ronald E. Lusk Chairman of the Board, President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----