SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1995
Commission File No. 0-26288
CONTOUR MEDICAL, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 77-0163521
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
3340 Scherer Drive
St. Petersburg, Florida 33716
----------------------------------------
(Address of Principal Executive Offices)
(813) 572-0089
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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 Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
There were 4,613,841 shares of the Registrant's $.001 par value Common Stock
outstanding as of November 1, 1995.
PF41.10q
CONTOUR MEDICAL, INC.
FORM 10-Q
INDEX
-----
Part I. Financial Information
- ------ ---------------------
Item 1. Financial Statements Page
Consolidated Balance Sheets as of September 30, 1995
and June 30, 1995 3-4
Consolidated Statements of Operations for the Three
Months Ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1995 and 1994 6-7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-13
Part II. Other Information
- ------- -----------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current:
Cash $ 108,317 $ 96,235
Accounts receivable - trade
Related parties (Note 4) 1,021,819 943,094
Other 805,105 760,703
Inventories (Note 5) 1,502,182 1,297,394
Refundable income taxes 10,680 10,680
Prepaid expenses and other 151,017 74,319
Due from parent (Note 4) 1,018,901 1,168,901
---------- ----------
Total Current Assets 4,618,021 4,351,326
Property and Equipment, less
accumulated depreciation (Note 6) 655,088 592,243
Other Assets:
Deposit on equipment 236,297 228,282
Other 4,575 4,575
---------- ----------
Total Other Assets 240,872 232,857
$5,513,981 $5,176,426
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks -
credit lines (Note 7) $ 303,633 $ 245,600
Accounts payable 866,297 882,524
Accrued expenses 96,080 80,977
Current maturities of long-term
debt (Note 8) 168,477 168,477
---------- ----------
Total Current Liabilities 1,434,487 1,377,578
Long-term debt, less current
maturities (Note 8) 975,813 907,711
---------- ----------
Total Liabilities 2,410,300 2,285,289
Stockholders' Equity:
Preferred stock - Series A conver-
tible, $.001 par value, shares
authorized 1,265,000; issued
600,000, at aggregate liquidation
preference 2,400,000 2,400,000
Common stock $.001 par - shares
authorized 76,000,000; issued
4,598,570 and 4,573,600 3,833 3,808
Additional paid-in capital 886,978 781,738
Accumulated (Deficit) (187,130) (294,409)
---------- ----------
Total stockholders' equity 3,103,681 2,891,137
$5,513,981 $5,176,426
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1995 1994
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
SALES $2,238,129 $1,000,062
COST OF SALES 1,589,072 550,034
GROSS PROFIT 649,057 450,028
OPERATING EXPENSES 489,601 432,277
OTHER INCOME 3,088 48
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 162,544 17,799
INCOME TAX EXPENSE (BENEFIT) 55,265 --
---------- ----------
NET INCOME (LOSS) $ 107,279 $ 17,799
NET INCOME (LOSS) PER COMMON SHARE,
PRIMARY $ .02 $ .01
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 4,571,677 2,758,436
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1995 1994
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 107,279 $ 17,799
Adjustments to reconcile net income
(loss) to net provided (used) by
operating activities:
Depreciation 33,076 19,200
Tax benefit from NOL 55,265 --
(Increase) decrease in accounts
receivable (123,127) (67,281)
(Increase) decrease in inventories (204,788) (8,100)
(Increase) decrease in other
current assets and other assets (84,713) 39,367
Increase (decrease) in accounts
payable (16,227) 105,565
Increase (decrease) in accrued
expenses and other liabilities 15,103 (2,135)
--------- ---------
Net cash provided (used) by
operating activities (218,132) 104,415
CASH FLOW FROM INVESTING ACTIVITIES:
Deposit on equipment -- --
Acquisition of equipment (95,921) --
Decrease in due from parent 150,000 --
--------- ---------
Net cash provided (used) by
investing activities 54,079 --
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1995 1994
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCIAL ACTIVITIES:
Deferred offering costs $ -- $(21,188)
Net borrowing (payments) on line
of credit 58,033 (3,231)
Payments on notes payable (proceeds) 68,102 (12,110)
Exercise of stock options 50,000 --
--------- --------
Net cash provided (used) by
financial activities 176,135 (36,529)
--------- --------
NET INCREASE (DECREASE) IN CASH 12,082 67,886
CASH BEGINNING OF PERIOD 96,235 5,368
CASH END OF PERIOD $ 108,317 $ 73,254
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION AND NON-CASH
ACTIVITIES:
Cash paid for interest $ 28,890 $ 14,977
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the June 30, 1995, audited financial
statements for Contour Medical, Inc. The results of operations for the
periods ended September 30, 1995 and 1994 are not necessarily indicative of
the operating results for the full year.
The consolidated financial statements include the accounts of Contour
Medical, Inc. ("CMI") and its wholly-owned subsidiaries, Contour Fabricators,
Inc. ("CFI") and Contour Fabricators of Florida, Inc. ("CFFI"), collectively
referred to as the Company. All material intercompany accounts and
transactions have been eliminated. CMI is a majority-owned subsidiary of
Retirement Care Associates, Inc. ("Parent").
2. Change in Method of Accounting for Taxes and Income
---------------------------------------------------
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109")
which requires recognition of estimated income taxes payable or refundable
on income tax returns for the current year and for the estimated future tax
effect attributable to temporary differences and carry forwards. Measurement
of deferred income tax is based on enacted tax laws including tax rates, with
the measurement of deferred income tax assets being reduced by available tax
benefits not expected to be realized.
3. Change in Year End
------------------
The Company changed its fiscal year end from December 31 to June 30 during
1995.
4. Related Party Transactions
--------------------------
During 1995, the Company began distributing medical supplies to health care
facilities owned, leased or managed by the Parent. Sales to these facilities
approximated $746,241 for the three month period ended September 30, 1995,
and $1,426,000 for the six month period ended June 30, 1995. Trade accounts
receivable of $1,021,819 and $943,094 were outstanding as of September 30,
1995 and June 30, 1995, respectively, as related to these health care
facility sales. Additionally, the Company had an outstanding loan receivable
due from its parent company of $1,018,901 and $1,168,901 as of September 30,
1995 and June 30, 1995, respective, which is due on demand with no stated
interest rate.
5. Inventories
-----------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
<S> <C> <C>
Raw Materials $ 322,948 $ 259,952
Work in process 46,601 58,704
Finished goods 1,132,633 978,738
---------- ----------
$1,502,182 $1,297,394
</TABLE>
All inventories are pledged as collateral.
6. Property and Equipment
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, June 30,
Useful Lives 1995 1995
------------ ------------- ----------
<S> <C> <C> <C>
Land $ 50,000 $ 50,000
Building 5-45 years 603,301 596,247
Machinery and equipment 3-7 years 1,101,315 1,034,568
Furniture and fixtures 5-7 years 132,187 124,651
Leasehold improvements 5 years 28,505 13,923
Vehicles 3-5 years 9,109 9,109
---------- ----------
1,924,417 1,828,498
Less accumulated depre-
ciation 1,269,329 1,236,255
---------- ----------
$ 655,088 $ 592,243
</TABLE>
All property and equipment are pledged as collateral (see Notes 7 and 8).
7. Notes Payable to Banks
----------------------
Notes payable to banks consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
<S> <C> <C>
Borrowings under CFFI's $250,000 line
of credit, interest at prime plus 1%
(10% at June 30, 1995), payable monthly,
collateralized by accounts receivable
and inventory $245,600 $245,600
Borrowings under lines of credit 58,033 --
-------- --------
$303,633 $245,600
</TABLE>
8. Long-term Debt
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
<S> <C> <C>
Mortgage payable to bank, bearing interest
at 8.58%, principal and interest of $6,793,
due monthly through 2003, collateralized by
accounts receivable, inventory, equipment
and real property $ 591,155 $ 491,622
Mortgage payable to bank, interest at prime
plus .75% (9.75% at June 30, 1995), prin-
cipal of $1,190 plus interest due monthly
through 2000, collateralized by accounts
receivable, inventory, equipment and real
property 69,095 78,571
Note payable to bank, interest at prime plus
.75% (9.75% at June 30, 1995), principal and
interest of $3,044 due monthly through May
2000, collateralized by accounts receivable,
inventory, equipment and real property 178,655 182,622
Note payable to bank, interest at prime plus
1% (10% at June 30, 1995), principal of
$5,000 plus interest due monthly through
June 2000, collateralized by equipment 285,000 300,000
Note payable to bank, interest at prime plus
1% (10% at June 30, 1995), principal and
interest of $1,667 due monthly through
August 1996, collateralized by accounts
receivable, inventory and equipment 20,385 23,333
---------- ----------
1,144,290 1,076,188
Less current maturities 168,477 168,477
---------- ----------
Total long-term debt $ 975,813 $ 907,711
</TABLE>
The net book value of property and equipment collateralized under the above
debt agreements was $655,088 and $592,243 as of September 30, 1995 and June
30, 1995, respectively.
Certain of the above agreements contain certain financial and operating
covenants, including requirements that the Company maintain certain net
worth levels and satisfy current and debt-to-net-worth ratios. The Company
was in compliance with all debt covenants as of September 30, 1995 and June
30, 1995.
The aggregate maturities of long-term debt are as follows as of September 30,
1995:
<TABLE>
<S> <C>
1996 $168,477
1997 $162,136
1998 $159,456
1999 $163,798
2000 $168,527
Thereafter $321,896
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with the attached Financial
Statements and Notes thereto of the Company.
Three Months Ended September 30, 1995, Compared to Three Months Ended
September 30, 1994
- ---------------------------------------------------------------------
As a result of the factors discussed below, for the three months ended
September 30, 1995, the Company had net income of $107,279 compared to net
income of $17,799 for the three months ended September 30, 1994.
Sales increased by $1,238,067 for the three months ended September 30, 1995
as compared to the three months ended September 30, 1994. Approximately
$190,000 of this increase related to the Company's traditional product lines,
and the remaining increase resulted from sales of pre-packaged kits and bulk
medical supplies to nursing homes.
Gross profit for the three months ended September 30, 1995, was $649,057 or
29% of sales, as compared to $450,028 or 45% of sales, for the same period of
the previous year. The decrease in gross profit as a percentage of sales is
primarily the result of lower gross profit for kits and bulk medical supply
products.
Operating expenses for the three month period ending September 30, 1995, were
$489,601 as compared to $432,277 in 1994. The operating expenses increased
approximately 13% as the result of higher administrative and marketing costs
due to the increased level of sales and overall business activity.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1995, the Company had $3,183,534 of working capital as
compared to $2,973,748 on June 30, 1995.
Operating activities for the three months ended September 30, 1995, utilized
cash of $218,132 as compared to operating activities during the three months
ended September 30, 1994, which provided cash of $104,415. The increased
use of cash was primarily due to increases in inventory and accounts
receivable.
The cash flows from investing activities of $54,079 during the three months
ended September 30, 1995, were a result of the repayment of $150,000 from the
Company's parent which was partially offset by the use of $95,921 for the
acquisition of additional equipment.
Cash flow of $176,135 was provided from financing activities in 1995, whereas
in 1994 cash flows from financing activities used cash of $36,529. During
the three months ended September 30, 1995, $126,135 was provided from bank
borrowings and $50,000 was provided by the exercise of stock options.
The Company currently maintains a total of $350,000 in lines of credit with
its banks for short-term working capital needs. As of September 30, 1995,
$303,633 had been borrowed against these lines.
Seasonality and Inflation
- -------------------------
The Comapny's business is relatively consistent and stable on a monthly basis,
and has not indicated any seasonality over the prior three fiscal periods.
In addition, the Company does not believe that inflation has had a material
effect on its results from operations during the past three fiscal years.
There can be no assurance, however, that the Company's business will not be
affected by inflation in the future.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
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.
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1933, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
</TABLE>
<TABLE>
<S> <C>
(REGISTRANT) CONTOUR MEDICAL, INC.
BY (SIGNATURE) /s/ Gerald J. Flanagan
(NAME AND TITLE) Gerald J. Flanagan, President
(DATE) NOVEMBER 7, 1995
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF FILING
- ------- ------------------------------
<S> <C> <C>
27. Financial Data Schedule Filed herewith electronically
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3-5 of the
Company's Form 10-Q for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000829649
<NAME> CONTOUR MEDICAL, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 108,317
<SECURITIES> 0
<RECEIVABLES> 1,826,924
<ALLOWANCES> 0
<INVENTORY> 1,502,182
<CURRENT-ASSETS> 4,618,021
<PP&E> 1,924,417
<DEPRECIATION> 1,269,329
<TOTAL-ASSETS> 5,513,981
<CURRENT-LIABILITIES> 1,434,487
<BONDS> 0
<COMMON> 3,833
0
2,400,000
<OTHER-SE> 699,848
<TOTAL-LIABILITY-AND-EQUITY> 5,513,981
<SALES> 2,238,129
<TOTAL-REVENUES> 2,241,217
<CGS> 1,589,072
<TOTAL-COSTS> 1,589,072
<OTHER-EXPENSES> 489,601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 162,544
<INCOME-TAX> 55,265
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,279
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
