<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
August 6, 1996
------------------------------------------------
Date of Report (date of earliest event reported)
CONTOUR MEDICAL, INC.
----------------------------------------------------
Exact name of Registrant as Specified in its Charter
Nevada 0-26288 77-0163521
- --------------------------- --------------- ---------------------------
State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
3340 Scherer Drive, St. Petersburg, Florida 33716
----------------------------------------------------------
Address of Principal Executive Offices, Including Zip Code
(813) 572-0089
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following
financial
statements are filed herewith:
Page(s)
ATLANTIC MEDICAL SUPPLY COMPANY, INC.
AND SUBSIDIARIES
Reports of Independent Auditors F-1, F-2
Consolidated and Combined Balance Sheets
as of June 30, 1996 and December 31, 1995 F-3
Consolidated and Combined Statements of
Income for the six months ended June 30,
1996 and the year ended December 31, 1995 F-4
Consolidated and Combined Statements of
Stockholders' Equity for the six months
ended June 30, 1996 and the year ended
December 31, 1995 F-5
Consolidated and Combined Statements of
Cash Flows for the six months ended June 30,
1996 and the year ended December 31, 1995 F-6
Notes to Financial Statements F-7 - F-13
AMERICAN HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
Report of Independent Certified Public
Accountants F-14
Combined Balance Sheets as of December 31,
1994 and 1993 F-15, F-16
Combined Statements of Income for the years
ended December 31, 1994 and 1993 F-17
Combined Statements of Stockholders' Equity
for the years ended December 31, 1994 and
1993 F-18
Combined Statements of Cash Flows for the
years ended December 31, 1994 and 1993 F-19
Notes to Combined Financial Statements F-20 - F-24
(b) PRO FORMA FINANCIAL INFORMATION. The following pro forma financial
information is filed herewith:
Pro Forma Financial Statements F-25
-2-
<PAGE>
Pro Forma Consolidated Balance Sheet as of
June 30, 1996 F-26, F-27
Pro Forma Statements of Operation for the
year ended June 30, 1996 F-28
Notes to Pro Forma Consolidated Financial
Statements F-29
(c) EXHIBITS.
10.1 Share Purchase Agreement for the acquisition of Atlantic
Medical Supply Company, Inc.*
____________________
* Included in initial filing.
-3-
<PAGE>
<PAGE>
LANEY
BOTELER &
KILLINGER
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Atlantic Medical Supply Company, Inc.
and Subsidiaries
We have audited the accompanying consolidated balance sheet of Atlantic
Medical Supply Company, Inc. and subsidiaries (the Companies) as of June 30,
1996 and the related consolidated statements of income, stockholders equity
and cash flows for the six months then ended. These financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
combined financial statements of Atlantic Medical Supply Company, Inc.,
Americare Health Services Corp. and Americare Group Purchasing Corp. as of
December 31, 1995, were audited by other auditors whose report dated March 8,
1996, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Atlantic
Medical Supply Company, Inc. and subsidiaries as of June 30, 1996, and the
results of their operations and their cash flows for the six months then ended
in conformity with generally accepted accounting principles.
/s/ Laney, Boteler & Killinger
Atlanta, Ga.
August 6, 1996
100 Ashford Center North, Suite 310, Atlanta, Georgia 30338 770/394-8000
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Americare Health Services Corp.
Americare Group Purchasing Corp.
Atlantic Medical Supply Co., Inc.
We have audited the accompanying combined balance sheet of Americare Health
Services, Corp., Americare Group Purchasing Corp., and Atlantic Medical Supply
Co., Inc. (the Companies) as of December 31, 1995, and the related combined
statements of income, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Americare Health
Services Corp., Americare Group Purchasing Corp., and Atlantic Medical Supply
Co., Inc. at December 31, 1995, and the combined results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
March 8, 1996
F-2
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
----------- -----------
Current assets
Cash and cash equivalents $ 123,777 $ 23,443
Accounts receivable less
allowance for doubtful accounts
of $744,028 and $746,473 5,558,670 4,949,123
Inventories, less allowance for
slow-moving inventory of $40,000 3,000,278 2,061,455
Refundable income taxes 112,736 -
Prepaid expenses and advances 70,817 34,345
Deferred income tax benefit 297,618 -
----------- ----------
Total current assets 9,163,896 7,068,366
----------- ----------
Property and equipment 592,718 550,978
----------- ----------
Other Assets
Advances to stockholders 56,980 5,233
Notes receivable 38,521 38,521
Note receivable from affiliate - 875,000
Non-compete agreement 116,667 166,667
Goodwill 792,442 512,540
Deposits 30,506 31,018
----------- ----------
1,035,116 1,628,979
----------- ----------
Total assets $10,791,730 $9,248,323
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 3,292,000 $2,334,000
Current portion of long-term debt 46,127 46,127
Accounts payable 1,520,914 1,088,214
Accrued expenses 337,566 637,899
----------- ----------
Total current liabilities 5,196,607 4,106,240
Long-term debt 27,363 51,571
Minority interest in subsidiary 57,180 -
----------- ----------
5,281,150 4,157,811
Commitments and contingencies - -
Stockholders' equity 5,510,580 5,090,512
----------- ----------
Total liabilities and
stockholders' equity $10,791,730 $9,248,323
----------- ----------
----------- ----------
See Notes to Financial Statements
F-3
<PAGE>
ATLANTIC MEDICAL SUPPLY CO., INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
For the six months ended June 30, 1996 and
the year ended December 31, 1995
1996 1995
----------- -----------
Net sales $12,926,845 $20,172,643
Cost of goods sold 9,023,403 13,276,258
----------- -----------
Gross margin 3,903,442 6,896,385
----------- -----------
Operating expenses
Salaries and employee benefits 1,193,853 2,174,212
Selling 1,049,276 2,181,498
General and administrative 587,368 1,233,831
Leases 292,135 468,594
Depreciation and amortization 188,678 354,719
Interest 124,404 114,897
Other 161,818 115,594
----------- -----------
3,597,532 6,643,345
----------- -----------
Operating income 305,910 253,040
Other income 7,129 63,740
----------- -----------
Net income before income taxes and minority
interest in net income of subsidiary 313,039 316,780
Income taxes benefit 124,515 -
----------- -----------
Net income before minority interest in net
income of subsidiary 437,554 316,780
Minority interest in net income
of subsidiary (17,486) -
----------- -----------
Net income $ 420,068 $ 316,780
----------- -----------
----------- -----------
See Notes to Financial Statements
F-4<PAGE>
<PAGE>
ATLANTIC MEDICAL SUPPLY CO., INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 1996 and
the year ended December 31, 1995
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ ---------- ---------- ----------
Balance at
December 31, 1994 $3,165 $2,347,835 $4,085,379 $6,436,379
Net income - - 316,780 316,780
Dividends - - (1,662,647) (1,662,647)
------ ---------- ---------- ----------
Balance at
December 31, 1995 3,165 2,347,835 2,739,512 5,090,512
Net income - - 420,068 420,068
------ ---------- ---------- ----------
Balance at
June 30, 1996 $3,165 $2,347,835 $3,159,580 $5,510,580
------ ---------- ---------- ----------
------ ---------- ---------- ----------
Common stock:
Americare Health Services Corporation - $1 par value, 1,655 shares authorized,
issued and outstanding.
Americare Group Purchasing Corporation - $1 par value, 5,000 shares
authorized, 100 shares issued and outstanding.
Atlantic Medical Supply Company, Inc. - No par value, 5,000,000 shares
authorized (1,000 shares prior to March 5, 1996), 2,000,000 shares issued and
outstanding (100 shares prior to March 5, 1996).
See Notes to Financial Statements
F-5
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and
the year ended December 31, 1995
1996 1995
Operating activities ----------- -----------
Net income $ 420,068 $ 316,780
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 188,678 354,719
Gain on sale of assets - (2,032)
Provisions for (recovery of) bad debts (7,353) 464,887
Minority interest in net income
of subsidiary 17,486 -
Change in assets and liabilities:
Decrease (increase) in assets
Accounts receivable (65,080) (1,215,114)
Inventories (414,932) (555,597)
Prepaid expenses and advances (140,706) (19,906)
Notes receivable - (494)
Deposits 512 (5,397)
Deferred income tax benefit (211,779) -
Increase (decrease) in liabilities
Accounts payable (236,455) 284,434
Accrued expenses (309,128) 376,578
----------- -----------
Net cash used in operating activities (758,689) (1,142)
----------- -----------
Investing activities
Purchases of property and equipment (103,051) (391,879)
Proceeds from sale of property and equipment - 14,900
Advance under note receivable from affiliate - (875,000)
----------- -----------
Net cash used in investing activities (103,051) (1,251,979)
----------- -----------
Financing activities
Payments on long-term debt (24,208) (18,353)
Net proceeds from line of credit
and notes payable 958,000 2,440,000
Repayments from (advances to) stockholders (51,747) 204,767
Dividends paid - (1,662,647)
----------- -----------
Net cash provided by financing
activities 882,045 963,767
----------- -----------
Net increase (decrease) in cash
and cash equivalents 20,305 (289,354)
Cash and cash equivalents
at beginning of period 103,472 312,797
----------- -----------
Cash and cash equivalents at end of period $ 123,777 $ 23,443
----------- -----------
----------- -----------
See Notes to Financial Statements.
F-6<PAGE>
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITIES AND ORGANIZATION
Atlantic Medical Supply Company, Inc. (Atlantic) and Facility Supply, Inc.
(Facility), provide medical supplies to long-term care facilities and home
health agencies.
Americare Health Services Corporation (Health) provides nutritional
supplements, urological, orthotics, wound care and ostomy supplies to
residents of long-term care facilities.
Americare Group Purchasing Corporation (Group) provides specialized cost
management services, principally brokerage services, to long-term health care
facilities.
The main markets for all four companies are the southeastern United States.
On December 4, 1995, Atlantic Medical Supply Holdings Company, Inc. (AMS
Holding), a company affiliated through common ownership, acquired 80% of the
voting common stock of Facility Supply, Inc. (FSI) for $490,000. The
acquisition was accounted for using the purchase method of accounting. On
March 5, 1996, in simultaneous transactions, AMS Holding was merged with
Atlantic, the surviving company, and Atlantic also acquired 100% of the voting
common stock of both Health and Group creating a parent/subsidiary
relationship. Previously, Atlantic, Health, Group and AMS Holding were
affiliated through common shareholders. Atlantic issued two million shares of
its common stock in exchange for all of the outstanding shares of Health,
Group, AMS Holding and existing Atlantic shares. Shares were issued to the
prior stockholders in the same proportion of ownership. The consolidation has
been accounted for using the pooling of interest method as prescribed under
APB No. 16. The stock of AMS Holding has been retired through the merger and
the outstanding stock of Health and Group is held by Atlantic. Effective July
1, 1996, all of the outstanding shares of Atlantic were acquired by Contour
Medical, Inc. (Note 9).
PRINCIPALS OF CONSOLIDATION AND COMBINATION
The consolidated financial statements for the period ended June 30, 1996
include the accounts of Atlantic Medical Supply Co., Inc. and its wholly owned
subsidiaries, Americare Health Services Corp, Americare Group Purchasing
Corp., and an 80%-owned subsidiary, Facility Supply, Inc. Minority interest
in the consolidated subsidiary represents the minority stockholders'
proportionate share of the equity of Facility Supply, Inc.
The combined financial statements for the year ended December 31, 1995
included the accounts of Atlantic Medical Supply Co., Inc., Americare Health
Services Corp. and Americare Group Purchasing Corp. All three companies had
the same stockholders with substantially the same proportional ownership.
All material intercompany transactions and balances have been eliminated in
both the consolidated and combined financial statements.
F-7
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MEDICARE AND MEDICAID REVENUES
Net sales include amounts estimated by management to be reimbursable by
Medicare, Medicaid and other third-party programs under applicable payment
formulas in effect.
Billings to the Medicare and Medicaid programs are subject to examination and
adjustment by the carriers. In the opinion of management, the financial
statements contain adequate provisions for adjustments, if any, that may
result from carrier audits. Medicare and Medicaid account for approximately
17% and 24% of consolidated and combined net sales for 1996 and 1995,
respectively.
ACCOUNTS RECEIVABLE
Accounts receivable are due primarily from Medicare, Medicaid, other
third-party payors, long-term care facilities and home health agencies.
Credit is extended based on an evaluation of the customer's qualification for
third-party payment and the customer's financial condition. Generally,
collateral is not required.
INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is determined using
straight-line and accelerated methods over the estimated useful lives of the
assets of five and seven years. Expenditures for repairs and maintenance are
charged to expense as incurred.
INCOME TAXES
Prior to January 1, 1996, the Companies elected to be taxed under Subchapter S
of the Internal Revenue Code whereby the stockholders include the Companies'
taxable income in their individual income tax returns. Effective January 1,
1996, the Companies elected to change their tax status to that of a taxable
corporation.
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to allowance for doubtful receivables (deductible for
financial statement purposes but not for income tax purposes). The deferred
tax assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes also are recognized
for operating losses
F-8
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (Continued)
and tax credits that are available to offset future taxable income. Income
tax expense is the tax payable and the net change in deferred tax assets and
liabilities for the period.
OTHER ASSETS
Non-compete agreements and goodwill are amortized over five years and ten
years, respectively, for 1996 and 1995 using the straight-line basis.
Amortization of non-compete agreements for the periods ended June 30, 1996 and
December 31, 1995 totaled $50,000 and $106,666, respectively and amortization
of goodwill for the same period totaled $38,440 and $76,880, respectively.
The balance sheet amounts reflect the remaining unamortized balances.
CASH AND CASH EQUIVALENTS
The Companies consider all highly liquid investments with a maturity of three
months or less when acquired to be cash equivalents.
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 amount of assets and liabilities at the date of the
consolidated and combined financial statements and the reported amount of
revenues and expenses during the reporting periods. Actual results could
differ from the estimates.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 1996 and
December 31 1995:
1996 1995
---------- ----------
Automobiles and trucks $ 115,957 $ 136,251
Office equipment 228,066 212,181
Office furniture 77,844 65,163
Medical equipment 46,958 46,958
Computer equipment and software 1,034,027 905,415
Leasehold improvements 18,334 4,520
Land improvements 9,842 9,842
---------- ----------
1,531,028 1,380,330
Less accumulated depreciation (938,310) (829,352)
---------- ----------
$ 592,718 $ 550,978
---------- ----------
F-9
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 2 - PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation expense for the periods ended June 30, 1996 and December 31, 1995
totaled $87,360 and $171,173, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt at June 30, 1996 and December 31, 1995, consisted of the
following:
1996 1995
--------- ---------
Note payable to a bank, due
May 1998, $1,958 payable
monthly (including interest
at 8.25%), collateralized by
telephone equipment. $ 41,556 $ 53,000
Note payable to a bank, due
August 1997, $2,403 payable
monthly (including interest
at 8.25%), collateralized by
computer equipment. 31,933 44,698
--------- ---------
73,490 97,698
Less current portion (46,127) (46,127)
--------- ---------
$ 27,363 $ 51,571
--------- ---------
Future maturities of long-term debt are as follows:
1997 $ 46,127
1998 27,363
---------
$ 73,490
---------
Interest paid during the period ended June 30, 1996 and the year ended
December 31, 1995 totalled $78,245 and $95,922, respectively.
NOTE 4 - LINE OF CREDIT
The Companies have a $3.5 million unsecured line of credit with a bank
expiring August 15, 1996. Interest at the prime rate minus 1/4% (8.0% at June
30, 1996) is payable monthly. At June 30, 1996 and December 31, 1995,
$3,292,000 and $2,334,000, respectively, was outstanding on this line of
credit.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Companies lease office and warehouse space from a stockholder. The lease
provides for monthly rent of $8,248, to be adjusted September 1, 1996, based
F-10
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
on the consumer price index. The lease will terminate on August 31, 1997.
Rental payments made during the period ended June 30, 1996 and the year ended
December 31, 1995 totalled $49,486 and $99,921, respectively.
The Companies also paid consulting fees of $100,000 to a related entity in
1995. The agreement was cancelled on August 6, 1996.
Atlantic loaned $875,000 to AMS Holding on December 1, 1995. The note bore
interest at the rate of prime minus 1/4% and was collateralized by AMS
Holding's 80% interest in Facility Supply, Inc. The note was eliminated in
consolidation in 1996.
NOTE 6 - EMPLOYEE BENEFIT PLAN
The Companies have a 401(k) profit-sharing plan (the Plan) which covers all
eligible employees of the companies. Eligible employees can contribute up to
15% of eligible compensation to the Plan. The Companies provide a match of up
to 2% of each employee's salary. Expenses related to the Plan for the periods
ended June 30, 1996, and December 31, 1995 totalled $16,624 and $38,486,
respectively.
NOTE 7 - INCOME TAXES
Deferred taxes are recognized for temporary differences between the basis of
assets and liabilities for financial statement and income tax purposes. At
June 30, 1996, the companies have a deferred tax asset of $297,618 relating to
allowances for doubtful accounts and slow-moving inventory. These items have
been deducted for financial statement purposes but are not deductible for
income tax purposes until actually written off. For those Companies with
S-corporation tax status at December 31, 1995, no deferred tax assets or
liabilities were recorded due to the companies S-corporation tax status.
The components of income tax expense (benefit) are as follows:
Current
Federal $ 147,029
State 26,074
---------
173,103
---------
Deferred
Federal (250,576)
State (47,041)
---------
(297,618)
---------
Income tax benefit $(124,515)
---------
During the period ended June 30, 1996, the consolidated companies realized a
tax benefit of $85,839 from utilizing a net operating loss carryforward from
1995.
F-11
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Companies have various lease agreements for the land and buildings used
for operations. The leases expire at various dates through May 31, 1997, with
the exception of Atlantic Medical Supply Company, Inc. headquarters in
Augusta, Georgia. This office space is leased from a director and stockholder
under a five-year lease expiring August 31, 1997 (Note 5). Monthly rents
range by location from $1,965 to $13,803. Lease expense totalled $292,135 and
$468,594 for the periods ended June 30, 1996 and December 31, 1995,
respectively.
On July 1, 1994, the Company signed an employment agreement with the current
president and chief executive officer. On August 6, 1996, the agreement was
terminated for $150,000 and his resignation as president, chief executive
officer, director and shareholder of the companies (Note 9). These financial
statements do not include a provision for the payment of the termination fee.
NOTE 9 - SUBSEQUENT EVENTS
On August 6, 1996, effective July 1, 1996, Contour Medical, Inc. acquired all
of the outstanding shares of Atlantic Medical Supply Company, Inc. In
connection therewith, various consulting, employment, stock option and other
agreement were terminated and the majority of the officers and directors of
the companies resigned. Amounts paid by the Atlantic Medical to the various
individuals for cancellation of the agreements totaled $150,000. These
financial statements do not include a provision for the payment of the
termination fee.
NOTE 10 - PROFORMA FINANCIAL INFORMATION - UNAUDITED
The following information has been prepared to reflect the effect the
combination would have had on the financial statements for the years ended
December 31, 1995, 1994 and 1993 had the combination been done prior to
January 1, 1993. Facility Supply, Inc. (FSI) was not audited for the three
years ended December 31, 1995, 1994 and 1993. Information included below for
FSI is based on financial statements prepared by management internally and
corporate income tax returns. The amortization of goodwill related to the
acquisition of FSI is immaterial.
Atlantic Medical Supply Co., Inc. (AMS)
Americare Health Services Corp. (AHS)
Americare Group Purchasing Corp. (AGP)
Facility Supply, Inc. (FSI)
AHS, AGP FSI Minority
& AMS (Unaudited) Interest Total
1993 ----------- ---------- -------- -----------
Assets $ 5,528,337 $ 630,332 $ - $ 6,158,669
Liabilities 1,054,781 560,190 14,028 1,628,999
Equity 4,473,556 70,142 (14,028) 4,529,670
Revenue 14,756,112 3,024,259 17,780,371
Expense 13,645,914 3,006,943 16,652,857
Net income 1,110,198 17,316 1,127,514
F-12
<PAGE>
ATLANTIC MEDICAL SUPPLY COMPANY, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995
NOTE 10 - PROFORMA FINANCIAL INFORMATION - UNAUDITED (CONTINUED)
AHS, AGP FSI Minority
& AMS (Unaudited) Interest Total
----------- ---------- -------- -----------
1994
Assets 7,511,531 1,020,457 8,531,988
Liabilities 1,075,152 832,173 37,657 1,944,982
Equity 6,436,379 188,284 (37,657) 6,587,006
Revenue 17,781,275 4,819,348 22,600,623
Expense 15,343,613 4,736,206 20,079,819
Net income 2,437,662 83,142 2,520,804
1995
Assets 9,248,323 1,185,584 10,433,907
Liabilities 4,157,811 903,028 56,511 5,117,350
Equity 5,090,512 282,556 (56,511) 5,316,557
Revenue 20,236,383 8,448,739 28,685,122
Expense 19,919,603 8,506,000 28,425,603
Net income 316,780 (57,261) 259,519
F-13<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Americare Health Services Corp.
Americare Group Purchasing Corp.
Atlantic Medical Supply Co., Inc.
We have audited the accompanying combined balance sheets of Americare Health
Services Corp., Americare Group Purchasing Corp., and Atlantic Medical Supply
Co., Inc. (the Companies) as of December 31, 1994 and December 31, 1993, and
the related combined statements of income, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Americare Health
Services Corp., Americare Group Purchasing Corp., and Atlantic Medical Supply
Co., Inc. at December 31, 1994 and December 31, 1993, and the combined results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
March 8, 1995
F-14
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
COMBINED BALANCE SHEETS
December 31
1994 1993
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 312,797 $ 434,127
Accounts receivable 4,768,540 2,861,532
Less estimated uncollectibles and
allowances (569,643) (460,369)
---------- ----------
4,198,897 2,401,163
Inventories, less allowances for
slow-moving inventory of $25,000 1,505,858 1,222,519
Prepaid expenses and advances 14,439 29,195
---------- ----------
Total current assets 6,031,991 4,087,004
Furniture and equipment 1,025,536 896,945
Less accumulated depreciation (682,397) (540,867)
---------- ----------
343,139 356,078
Other:
Advances to stockholders 210,000 -
Notes receivable 38,027 -
Noncompete agreement, net of
accumulated amortization
of $326,666 and $206,666 at
December 31, 1994 and 1993,
respectively 273,333 393,334
Goodwill, net of accumulated
amortization of $174,388 and
$102,508 at December 31, 1994
and 1993, respectively 589,420 666,300
Deposits 25,621 25,621
---------- ----------
1,136,401 1,085,255
Total assets $7,511,531 $5,528,337
---------- ----------
---------- ----------
F-15
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
COMBINED BALANCE SHEETS (Continued)
December 31
1994 1993
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 803,780 $ 794,669
Accrued expenses 261,321 229,960
Notes payable 10,051 20,101
---------- ----------
Total current liabilities 1,075,152 1,044,730
Notes payable less current portion - 10,051
Stockholders' equity:
Common stock, par value: $1 per
share--Americare Health Services
Corp. and Americare Group
Purchasing Corp.; no par value--
Atlantic Medical Supply Co., Inc.:
Authorized- 1,665 shares Americare
Health Services Corp., 5,000 shares
Americare Group Purchasing Corp.,
100 shares Atlantic Medical
Supply Co., Inc.
Issued and outstanding--1,665 shares
Americare Health Services, Inc.,
1,000 shares Arnericare Group
Purchasing Corp., 100 shares
Atlantic Medical Supply Co., Inc. 3,165 3,165
Additional paid-in capital 2,347,835 2,347,835
Retained earnings 4,085,379 2,122,556
---------- ----------
Total stockholders' equity 6,436,379 4,473,556
---------- ----------
Total liabilities and
stockhoders' equity $7,511,531 $5,528,337
---------- ----------
---------- ----------
See accompanying notes.
F-16
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
COMBINED STATEMENTS OF INCOME
December 31
1994 1993
----------- -----------
Net sales $17,683,827 $14,73S,365
Cost of goods sold 12,141,083 10,622,646
----------- -----------
Gross margin 5,542,744 4,115,719
Operating expenses:
Salaries and employee benefits 1,552,490 1,418,980
General and administrative 1,082,917 999,545
Lease expense 215,956 243,281
Depreciation and amortization 346,517 331,675
Interest 4,650 15,783
----------- -----------
3,202,530 3,009,264
----------- -----------
Operating income 2,340,214 1,106,455
Other income 97,448 17,747
Other expense - 14,004
----------- -----------
Net income $ 2,437,662 $ 1,110,198
----------- -----------
----------- -----------
See accompanying notes.
F-17
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ ---------- ---------- ----------
Balance at January l,
1993 $3,165 $2,347,835 $1,337,086 $3,688,086
Net income - - 1,110,198 1,110,198
Dividends - - (324,728) (324,728)
------ ---------- ---------- ----------
Balance at December 31,
1993 3,165 2,347,835 2,122,556 4,473,556
Net income - - 2,437,662 2,437,662
Dividends - - (474,839) (474,839)
------ ---------- ---------- ----------
Balance at December 31,
1994 $3,165 $2,347,835 $4,085,379 $6,436,379
------ ---------- ---------- ----------
------ ---------- ---------- ----------
See accompanying notes.
F-18<PAGE>
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
COMBINED STATEMENTS OF CASH FLOWS
Year Ended December 31
1994 1993
----------- -----------
Operating activities:
Net income $2,437,662 $1,110,198
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 346,517 331,675
Provisions for losses on accounts
receivable 109,274 203,114
Change in operating assets and
liabilities:
Accounts receivable (1,907,008) (1,091,456)
Inventories (283,339) 196,834
Prepaid expenses and advances 14,756 83,105
Notes receivable (38,027) -
Deposits - (645)
Accounts payable 9,111 196,822
Accrued expenses 31,361 68,610
Income taxes payable - (111,500)
----------- -----------
Net cash provided by operating
activities 720,307 986,757
Investing activities:
Proceeds from sale of furniture
and equipment - 1,800
Purchase of furniture and equipment (136,697) (97,426)
----------- -----------
Net cash used in investing activities (136,697) (95,626)
Financing activities:
Payments on notes payable (1,750,101) (1,425,050)
Proceeds from notes payable 1,730,000 900,202
Advances to stockholders (210,000) -
Dividends (474,839) (324,728)
----------- -----------
Net cash used in financing activities (704,940) (849,576)
----------- -----------
Net (decrease) increase in cash
and cash equivalents (121,330) 41,555
Cash and cash equivalents at
beginning of year 434,127 392,572
----------- -----------
Cash and cash equivalents at
end of year $ 312,797 $ 434,127
----------- -----------
----------- -----------
See accompanying notes.
F-19<PAGE>
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Americare Health Services Corp. (Health) provides nutritional supplements,
urological, orthotics, wound care, and ostomy supplies to residents of
long-term care facilities.
Americare Group Purchasing Corp. (Group) provides specialized cost management
services, principally brokerage services, to long-term health care facilities
located in the southeastern United States.
Atlantic Medical Supply Co., Inc. (Atlantic) provides medical supplies to
long-term care facilities and home health agencies.
The combined financial statements include the accounts of Health, Group and
Atlantic because they have the same stockholders in similar proportion.
All material intercompany transactions and balances have been eliminated.
MEDICARE AND MEDICAID REVENUES
Sales include amounts estimated by management to be reimbursable by Medicare,
Medicaid and other third-party programs under applicable payment formulas in
effect. Medicare and Medicaid account for approximately 95% and 90% of
Health's revenue or 26% and 24% of combined revenues for the years ended
December 31, 1994 and 1993, respectively.
Billings to the Medicare Part B program are subject to examination and
adjustment by the Medicare carriers. In the opinion of management, the
amounts included in the financial statements as contractual allowances contain
adequate provisions for adjustments, if any, that may result from carrier
audits.
F-20<PAGE>
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTS RECEIVABLE
Accounts receivable are due primarily from Medicare, Medicaid, other
third-party payors, long-term care facilities, and home health agencies.
Credit is extended based on an evaluation of the customer's qualification for
third-party payment and the customer's financial condition. Generally,
collateral is not required. Contractual allowances and credit losses are
provided for in the combined financial statements and have been within
management's expectations.
INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is determined using
straight-line and accelerated methods over the estimated useful lives of the
assets. Estimated useful lives for furniture and equipment are between five
and seven years. Expenditures for repairs and maintenance are charged to
expense as incurred.
INTANGIBLE ASSETS
Intangible assets, consisting of noncompete agreements and goodwill, are
amortized on the straight-line basis over five and ten years, respectively.
CASH AND CASH EQUIVALENTS
The Companies consider all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
F-21<PAGE>
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following at December 31:
1994 1993
------------------------
Automobiles and trucks $ 173,336 $ 171,707
Office equipment 128,616 116,754
Office furniture 59,483 59,483
Medical equipment 46,958 46,958
Computer equipment and software 602,781 487,681
Leasehold improvements 4,520 4,520
Land improvements 9,842 9,842
------------------------
1,025,536 906,945
Less accumulated depreciation (682,397) (540,867)
------------------------
$ 343,139 $ 356,078
------------------------
------------------------
3. COMMITMENTS AND CONTINGENCIES
The Companies have a noncancelable operating lease for land, building and
improvements used in operations, which expires in October 1995. The Companies
have an operating lease for one vehicle which expires during 1995. The
Companies have a five-year agreement to lease certain operating facilities
commencing September 1992.
The future minimum rental commitments under noncancelable operating leases are
as follows:
1995 $ 226,056
1996 101,981
1997 70,027
---------
$ 398,064
---------
---------
Rent expense was $215,956 and $243,281 for the years ended December 31, 1994
and 1993, respectively.
F-22<PAGE>
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE
Notes payable at December 31, consists of the following:
1994 1993
---------------------
Note payable with a bank, due July 1995, $825
payable monthly (including interest at 7.95%),
collateralized by automobile $ 4,951 $ 14,851
Note payable with a bank, due July 1995, $850
payable monthly (including interest at 7.95%),
collateralized by automobile 5,100 15,301
---------------------
10,051 30,152
Less current portion (10,051) (20,101)
---------------------
$ - $ 10,051
---------------------
---------------------
The Companies have a $1 million line of credit with a bank, at the prime
interest, interest payable monthly, principal due on demand, which is
unsecured. At December 31, 1994 and 1993, there was no outstanding balance on
this line of credit.
Interest paid during the years ended December 31, 1994 and 1993 was $4,650 and
$15,783, respectively.
5. RELATED PARTY TRANSACTIONS
The Companies paid management fees of $100,000 to a related entity in both
1994 and 1993.
The Companies lease office and warehouse space from a stockholder. The rental
payments made during fiscal years 1994 and 1993 were $96,127 and $94,442,
respectively.
F-23<PAGE>
<PAGE>
AMERICARE HEALTH SERVICES CORP.
AMERICARE GROUP PURCHASING CORP.
ATLANTIC MEDICAL SUPPLY CO., INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. EMPLOYEE BENEFIT PLAN
The Companies have a 401(k) profit-sharing plan (the Plan) which covers all
eligible employees of the Companies. Eligible employees can contribute up to
15% of eligible compensation to the Plan. The Companies provides a match of
up to 2% of each employee's salary. Expenses related to the Plan for the
years ended December 31, 1994 and 1993 were $25,984 and $26,591, respectively.
7. INCOME TAXES
The Companies elected to be taxed under Subchapter S of the Internal Revenue
Code and, consequently, are not subject to federal income tax; the
stockholders include the Companies' taxable income in their individual income
tax returns.
F-24<PAGE>
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
As discussed elsewhere herein, on August 6, 1996, the Company acquired all of
the issued and outstanding shares of the common stock of Atlantic Medical
Supply Company, Inc. for payment of $1,400,000 in cash and promissory notes
held by the sellers in the amount of $10,500,000. The acquisition was made
effective retroactively to July 1, 1996. The Company obtained the cash for
this transaction from a $5,000,000 debenture placement that was completed on
July 12, 1996. The promissory notes bear interest at 7% per annum and are due
in full on January 10, 1997. In the event of a default in the payment of the
promissory notes, they are convertible into shares of common stock of
Retirement Care Associates, Inc., the Company's majority shareholder.
The acquisition has been accounted for as a purchase, with assets acquired and
liabilities assumed recorded at fair value, and the results of Atlantic
Medical Supply Company, Inc.'s operations included in the Company's
consolidated financial statements from the retroactively effective date of
acquisition.
The accompanying consolidated financial statements illustrate the effect of
the acquisition ("Proforma") on the Company's financial position and results
of operations. The consolidated balance sheet as of June 30, 1996 is based on
the historical balance sheets of the Company and Atlantic Medical Supply
Company, Inc. on June 30, 1996, and assumes the acquisition took place on that
date. The consolidated statements of income for the year ended June 30, 1996
are prepared based on the historical statements of income of the Company and
Atlantic Medical Supply Company, Inc. for the year ended June 30, 1996.
The proforma consolidated financial statements may not be indicative of the
actual results of the acquisition. In particular, the proforma consolidated
financial statements are based on management's current estimate of the
allocation of the purchase price, the actual allocations of which may differ.
The accompanying consolidated proforma consolidated financial statements
should be read in conjunction with the historical financial statements of the
Company and Atlantic Medical Supply Company, Inc.
F-25
<PAGE>
CONTOUR MEDICAL INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1996
CONTOUR ATLANTIC PROFORMA
MEDICAL INC. MEDICAL PRO FORMA ADJUSTMENTS CONSOLI-
AND SUBSID- SUPPLY PURCHASE ACQUISITION DATED
IARIES COMPANY INC. DR CR TOTAL
----------- ----------- ----------- ----------- -----------
ASSETS
Current:
Cash $ 146,219 $ 123,777 $ 4,675,000 $4,692,000 $ 252,996
(2) (1)(5)
Accounts receiv-
able-trade 4,445,676 5,558,670 - - 10,004,346
Inventories 2,876,792 3,000,278 - - 5,877,070
Refundable income
taxes 21,406 112,736 - - 134,142
Prepaid expenses
and other 51,519 70,817 - - 122,336
Deferred tax
benefit 297,618 297,618
Due from parent 618,897 - - - 618,897
----------- ----------- ----------- ---------- -----------
Total Current
Assets 8,160,509 9,163,896 4,675,000 4,692,000 17,307,405
Property and Equip-
ment, Net 1,223,195 592,718 - - 1,815,913
Other Assets:
Goodwill 1,286,165 792,442 6,389,420 - 8,468,027
(3)
Deposit on equipment 416,184 - - - 416,184
Deposits - 30,506 - - 30,506
Other 172,215 212,168 325,000 - 709,383
(2)
----------- ----------- ----------- ---------- -----------
Total Other
Assets 1,874,564 1,035,116 6,714,420 - 9,624,100
----------- ----------- ----------- ---------- -----------
$11,258,268 $10,791,730 $11,389,420 $4,692,000 $28,747,418
----------- ----------- ----------- ---------- -----------
----------- ----------- ----------- ---------- -----------
(Continued)
F-26<PAGE>
<PAGE>
CONTOUR MEDICAL INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1996
(Continued)
CONTOUR ATLANTIC PROFORMA
MEDICAL INC. MEDICAL PRO FORMA ADJUSTMENTS CONSOLI-
AND SUBSID- SUPPLY PURCHASE ACQUISITION DATED
IARIES COMPANY INC. DR CR TOTAL
----------- ----------- ----------- ----------- -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to
banks $ 1,456,535 $ 3,292,000 $ 3,292,000 $ - $ 1,456,535
(5)
Accounts payable 2,036,652 1,520,914 - - 3,557,566
Accrued expenses 366,716 337,566 - - 704,282
Current maturities
of long-term debt 368,658 46,127 - 10,500,000 10,914,785
(1)
----------- ----------- ----------- ----------- -----------
Total Current
Liabilities 4,228,561 5,196,607 3,292,000 10,500,000 16,633,168
Long-term debt,
less current
maturities 1,352,937 27,363 - - 1,380,300
Minority interest
in subsidiary 57,180 57,180
----------- ----------- ----------- ----------- ---------
Total
Liabilities 5,581,498 5,281,150 3,292,000 10,500,000 18,070,648
Convertible Subor-
dinated Debentures - - - 5,000,000 5,000,000
(2)
Stockholders' Equity
Preferred stock 2,528,000 - - - 2,528,000
Common stock 4,449 3,165 3,165 - 4,449
(4)
Additional paid-in
capital 2,911,696 2,347,835 2,347,835 - 2,911,696
(4)
Retained earnings 232,625 3,159,580 3,159,580 - 232,625
(4)
----------- ----------- ----------- ----------- ----------
Total stock-
holders' equity 5,676,770 5,510,580 5,510,580 - 5,676,770
----------- ----------- ----------- ----------- -----------
$11,258,268 $10,791,730 $ 8,802,580 $15,500,000 $28,747,418
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
F-27<PAGE>
<PAGE>
CONTOUR MEDICAL INC.
PRO FORMA STATEMENTS OF OPERATIONS
Year Ended June 30, 1996
CONTOUR ATLANTIC
MEDICAL INC. MEDICAL
AND SUBSID- SUPPLY PRO FORMA
IARIES COMPANY INC. PRO FORMA PRO FORMA CONSOLIDATED
(9) SUBTOTAL ADJUSTMENTS TOTAL
----------- ----------- ----------- ----------- -----------
Sales $14,542,421 $26,241,495 $40,783,916 $ - $40,783,916
Cost of Sales 10,491,103 18,317,508 28,808,611 - 28,808,611
----------- ----------- ----------- ----------- -----------
Gross Profit 4,051,318 7,923,987 11,975,305 - 11,975,305
Selling, general
and administrative
expenses 3,185,620 7,050,450 10,236,070 163,805 10,399,875
(6)
----------- ----------- ----------- ----------- -----------
Income (loss)
from operations 865,698 873,537 1,739,235 (163,805) 1,575,430
Other income
(expenses):
Interest (170,951) (252,284) (423,235) (936,444) (1,359,679)
(7)
Other 144,453 14,216 158,669 - 158,669
----------- ----------- ----------- ----------- -----------
(26,498) (238,068) (264,566) (9,367,444) (1,201,010)
----------- ----------- ----------- ----------- -----------
Income (loss)
before taxes
on income 839,200 635,469 1,474,669 (1,100,249) 374,420
Taxes on income 312,166 252,765 564,931 (422,651) 142,280
(8)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 527,034 $ 382,704 $ 909,738 $ (677,598)$ 232,141
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
F-28<PAGE>
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
Reference is made to the "Introduction" at page F-25
NOTE B - PROFORMA ADJUSTMENTS
The proforma adjustments to the consolidated balance sheet are as follows:
(1) To record the purchase of 100% of the issued and outstanding
stock of Atlantic Medical Supply Company, Inc. for a purchase price consisting
of $1,400,000 cash and promissory notes of $10,500,000.
(2) To record the proceeds from the placement of $5,000,000 in
convertible debentures, less transaction fees of $325,000.
(3) To record goodwill of $6,552,210, which represents the difference
between the purchase price of $11,900,000 in cash and notes and the net assets
of Atlantic Medical Supply Company, Inc. of $5,347,790. The goodwill will be
amortized over a 40 year life.
(4) To record the elimination of Atlantic Medical Supply Company,
Inc. shareholder equity.
(5) To record the repayment of $3,292,000, representing the total
outstanding balance on Atlantic Medical Supply Company, Inc.'s line of credit.
The proforma adjustments to the consolidated statements of operations are as
follows:
(6) To record the amortization of goodwill of $6,552,210 over a 40
year period.
(7) To record the elimination of interest expense $252,284 incurred
at Atlantic Medical Supply Company, Inc. on its line of credit; to record
interest expense of $450,000, representing interest at 9% per annum on
$5,000,000 convertible debentures; and to record interest expense of $735,000,
representing interest at 7% per annum on $10,500,000 promissory notes.
(8) To record income tax changes for proforma adjustments at a 38%
effective tax rate.
(9) Includes twelve months of results for Atlantic Medical Supply
Company, Inc. and twelve months of results for Facility Supply, Inc., acquired
by Atlantic Medical Supply Company, Inc. in December, 1995.
F-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, hereunto duly authorized.
CONTOUR MEDICAL, INC.
Dated: October 21, 1996 By /s/ Donald F. Fox
Donald F. Fox, President
