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U.S. 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 December 31, 1997
Commission File No. 0-26288
CONTOUR MEDICAL, INC.
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(Exact Name of Registrant as Specified in its Charter)
Nevada 77-0163521
- ------------------------------ ----------------------------------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
6025 Shiloh Road,
Alpharetta, Ga 30005
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(Address of Principal Executive Offices)
(770) 886-2600
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(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 8,293,331 shares of the Registrant's $.001 par value Common Stock
outstanding as of December 31, 1997.
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CONTOUR MEDICAL, INC.
FORM 10-Q
INDEX
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Part I: Financial Information
- ------ ---------------------
Item 1. Financial Statements Page
Consolidated Balance Sheets as of December 31, 1997
and June 30, 1997 3-4
Consolidated Statements of Operations for the Six
Months ended December 31, 1997 and 1996 5
Consolidated Statements of Operations for the Three
Months Ended December 31, 1997 and 1996 6
Consolidated Statement of Stockholder's Equity
for the Six Months Ended December 31, 1997 7-8
Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1997 and 1996 9-10
Notes to Consolidated Financial Statements 11-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-17
Part II: Other Information
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
2
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, June 30,
1997 1997
------------ -----------
(Unaudited)
ASSETS
Current:
Cash $ 128,777 $ 311,657
Accounts receivable - trade
Related parties (Note 3) 8,156,936 5,135,189
Other 10,954,452 7,811,635
Inventories 8,525,411 5,130,142
Refundable income taxes 559,209 572,875
Prepaid expenses and other 571,773 237,687
Due from parent (Note 3) 1,031,925 973,164
----------- -----------
Total Current Assets 29,928,483 20,172,349
----------- -----------
Property and Equipment, less
accumulated depreciation (Note 4) 2,603,849 1,492,918
----------- -----------
Other Assets:
Goodwill 9,960,843 10,109,927
Deposit on equipment 0 311,453
Other 585,803 434,529
----------- -----------
Total Other Assets 10,546,646 10,855,909
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$43,078,978 $32,521,176
See accompanying notes to consolidated financial statements
3
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, June 30,
1997 1997
------------- -----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 5,959,335 3,839,548
Accrued expenses 713,987 728,784
Current maturities of long-term
debt (Note 5) 13,607,339 6,079,086
---------- ----------
Total Current Liabilities 20,280,661 10,647,418
Long-term debt, less current
maturities (Note 5) 6,020,150 5,473,841
---------- ----------
Total Liabilities 26,300,811 16,121,259
Stockholders' Equity:
Preferred stock - Series A conver-
tible, $.001 par value, shares
authorized 1,265,000; issued
600,000, outstanding 135,000,
at aggregate liquidation preference 623,414 623,414
Common stock $.001 par - shares
authorized 76,000,000; issued
8,293,331 and 8,127,376 (net of
$765 discount) 7,500 7,334
Additional paid-in capital 16,116,667 15,796,188
Retained earnings 30,586 (27,019)
---------- -----------
Total stockholders' equity 16,778,167 16,399,917
$43,078,978 $32,521,176
See accompanying notes to consolidated financial statements
4
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Six Months Ended
December 31, December 31,
1997 1996
---------- ----------
(Unaudited) (Unaudited)
SALES TO NON-RELATED PARTIES $21,243,689 $22,967,078
SALES TO RELATED PARTIES 5,827,045 2,948,238
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27,070,734 25,915,316
COST OF SALES 20,247,842 18,471,484
----------- -----------
GROSS PROFIT 6,822,892 7,443,832
OPERATING EXPENSES 6,309,061 6,141,502
OTHER INCOME (EXPENSES) (443,814) (1,133,391)
----------- -----------
INCOME BEFORE INCOME TAXES 70,017 168,939
INCOME TAX EXPENSE 12,412 64,197
----------- -----------
NET INCOME $ 57,605 $ 104,742
NET INCOME PER COMMON SHARE $ .00 $ .02
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 8,210,354 5,838,369
See accompanying notes to consolidated financial statements
5
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended
December 31, December 31,
1997 1996
---------- ----------
(Unaudited) (Unaudited)
SALES TO NON-RELATED PARTIES $10,320,899 $11,890,548
SALES TO RELATED PARTIES 2,965,000 1,112,238
----------- -----------
13,285,899 13,002,786
COST OF SALES 9,879,317 9,197,949
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GROSS PROFIT 3,406,582 3,804,837
OPERATING EXPENSES 3,399,641 2,957,419
OTHER INCOME (EXPENSES) (214,759) (305,741)
------------ -----------
INCOME (LOSS) BEFORE INCOME TAXES (207,818) 541,677
INCOME TAX EXPENSE 0 205,837
------------ -----------
NET INCOME (LOSS) $ (207,818) $ 335,840
NET INCOME (LOSS) PER COMMON SHARE $ (.03) $ .06
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 8,171,460 5,959,837
See accompanying notes to consolidated financial statements
6
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
Additional
Common Stock Paid-in
Shares Amount Capital
--------- ------ -----------
Balance, June 30, 1997 8,127,376 $7,334 $15,796,188
Exercise of common stock
warrants 119,788 120 232,209
Non-qualified options exercised
for common stock 46,167 46 88,270
Balance, December 31, 1997 8,293,331 7,500 16,116,667
========== ======== ===========
See accompanying notes to consolidated financial statements
7
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
(Unaudited)
Convertible
Preferred Stock
------------------- Retained
Shares Amount Earnings(Deficit)
------- -------- ----------------
Balance, June 30, 1997 135,000 $623,414 $ (27,019)
Net income -- -- 27,605
Balance, December 31, 1997 135,000 $623,414 $ 30,586
======= ======== =========
See accompanying notes to consolidated financial statements
8
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended
December 31, December 31,
1997 1996
---------- ----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 57,605 $ 104,742
Adjustments to reconcile net income
to net cash provided (used)
by operating activities:
Depreciation & Amortization 450,231 385,807
Tax benefit from NOL -- --
(Increase) decrease in accounts
receivable (6,164,564) (5,766,071)
(Increase) decrease in inventories (3,395,269) (3,632,562)
(Increase) decrease in other
current assets and other assets (471,694) (9,540,741)
Increase (decrease) in accounts
payable 2,119,787 1,191,503
Increase (decrease) in accrued
expenses and other liabilities (14,797) 539,984
----------- ----------
Net cash provided by
operating activities (7,418,701) (16,717,338)
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of equipment (1,412,078) (1,150,723)
Deposit on equipment 311,453 --
(Increase) decrease in due
from parent (58,761) (355,715)
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Net cash used by investing
activities (1,159,386) (1,506,438)
See accompanying notes to consolidated financial statements
9
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended
December 31, December 31,
1997 1996
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition Notes Issued $ -- $10,850,000
Convertible Debentures Issued -- 5,000,000
Net borrowing (payments) on loans 8,074,562 1,786,433
Proceeds from exercise of options -- --
Payment of short-swing liability
by shareholder -- --
Exercise of Warrants 232,329 625,506
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Net cash provided by financing
activities 8,306,891 18,261,939
------------ ----------
NET INCREASE (DECREASE) IN CASH (182,880) 38,163
CASH BEGINNING OF PERIOD 311,657 146,219
------------ ----------
CASH END OF PERIOD $ 128,777 $ 184,382
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION AND NON-CASH
ACTIVITIES:
Cash paid for interest $ 609,707 $ 362,244
Cash paid for income tax $ -- $ --
See accompanying notes to consolidated financial statements.
10
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CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited condensed consolidated 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, 1997, audited financial
statements for Contour Medical, Inc. The results of operations for the
periods ended December 31, 1997 and 1996 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 Medical -
Michigan, Inc. (formerly Contour Fabricators, Inc.) ("CFI"), Contour Medical
of Central Florida, Inc. (formerly Contour Fabricators of Florida, Inc.)
("CFFI") and, since March 1, 1996, AmeriDyne Corporation ("AmeriDyne"), and
effective July 1, 1996 Atlantic Medical Supply Company, Inc. ("Atlantic")
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").
On June 27, 1997, the Company sold all of its manufacturing assets,
including equipment, accounts receivable, customer lists, prepaid assets,
deposits, inventory and other assets. These assets were sold for $3,350,000
in cash to an unrelated third party, RawCar, L.L.P. The Company retained all
liabilities related to the assets sold. Upon completion of this sale, the
Company ceased all manufacturing activity.
2.CHANGE IN METHOD OF ACCOUNTING FOR TAXES AND INCOME
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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 assets being reduced by available tax benefits not
expected to be realized.
3.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 $5,827,045 for the six month period ended December 31,
1997 and $2,965,000 for the three month period ended December 31, 1997. Trade
accounts receivable of $8,156,936 and $5,135,189 were outstanding as of
December 31, 1997 and June 30, 1997, respectively, as related to the sale of
medical supplies to the Parent. Additionally, the Company had an outstanding
loan receivable due from its Parent of $1,031,925 at December 31, 1997, which
is due within 45 days from the date of such loan and bears interest at the
prime rate.
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4.PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following:
Useful Lives December 31, 1997 June 30, 1997
------------ ------------------ -------------
Land & Land Improvements -- 16,000 $ 9,841
Building and Improvements 5-45 years 1,164 6,159
Machinery and equipment 3-7 years 1,628,650 1,442,614
Furniture and fixtures 5-7 years 996,147 498,876
Leasehold improvements 5 years 708,085 74,717
Vehicles 3-5 years 179,092 84,853
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3,529,138 2,117,060
Less accumulated depreciation (925,293) 624,142
---------- ----------
$2,603,845 $1,492,918
All property and equipment are pledged as collateral (see Notes 5 and 7).
5.NOTES PAYABLE
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Notes payable at December 31, 1997 and June 30, 1997 consisted of the
following:
December 31, June 30,
1997 1997
------------ --------
Borrowings under $15,000,000 line of credit,
interest at 30 day libor plus 200bp (7.94%
at December 31, 1997), payable monthly,
collateralized by accounts receivable,
inventory and guarantees by Retirement
Care Associates, Inc. Principal due
October 31, 1998 13,294,091 5,886,545
Convertible debentures, interest at 9.00%
Payable monthly, principal due July 1, 2003,
Convertible into shares of common stock 5,000,000 5,000,000
Borrowings under $1,250,000 line of credit,
interest at prime (8.50% at December 31, 1997),
principal of $20,833 plus interest due monthly,
collateralized by accounts receivable,
inventory, furniture, fixtures, equipment,
machinery, bank accounts and guarantees
of Retirement Care Associates 1,250,000 750,000
Note payable to stockholder, interest at 10%,
principal and interest of $5,693, due monthly
through March 1999 79,955 109,252
Note payable to equipment company, interest at
14.0%, monthly installments of $405 including
interest. Matures October 1998 collataralized
by equipment 3,444 5,546
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Note payable to equipment company, interest at
11%, monthly installments of $533 including
interest. Matures December 1997,
collateralized by equipment -- 3,093
----------- -----------
$19,627,489 $11,552,927
Less current maturities (13,607,339) (6,079,086)
----------- -----------
$ 6,020,150 $ 5,473,841
The aggregate maturities of long-term debt are as follows as of December 31,
1997:
1998 $13,607,339
1999 270,143
2000 249,996
2001 249,996
2002 249,996
Thereafter 5,000,019
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments," requires
that the Company disclose estimated fair values for its financial instruments.
Fair value is defined as the price at which a financial instrument could be
liquidated in an orderly manner over a reasonable time period under present
market conditions. The rates of the Company's fixed obligations approximate
those rates of the adjustable loans. Therefore, the fair value of those loans
has been estimated to be approximately equal to their carrying value.
6.LEASE COMMITMENTS
-----------------
The Company is obligated under various non-cancelable leases for
equipment and office space. Future minimum lease commitments under operating
leases were as follows as of December 31, 1997.
1998 $823,473
1999 759,080
2000 765,375
2001 627,044
2002 540,590
Employment Agreement - The Company has entered into an employment
agreement with a key executive for a five-year period ending June 1998. The
agreement provides for annual base compensation of $100,000.
Litigation - During 1997 the Company was a defendant in a lawsuit filed
by one of its customers in a contractual dispute. On October 27, 1997 the
Company settled this suit for approximately $66,000.
7. INCOME TAXES:
------------
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
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As of June 30, 1997, the Company had net operating loss carry-forwards
for tax purposes, expiring at various dates ending July 30, 2012, of
approximately $1.1 million which includes approximately $516,000 attributable
to Contour Medical, Inc. for the period prior to January 1, 1993. Due to
certain change of ownership requirements of Section 382 of the Internal
Revenue Code, utilization of the Company's operating losses is expected to be
limited to approximately $414,000 per year. The deferred tax asset related to
the tax benefit of these losses has been offset by a valuation allowance due
to uncertainty of realization. The valuation allowance increased
approximately $89,000 during 1997.
The income tax benefit arising from the utilization of the net operating
losses attributable to CMI will be credited to additional paid-in capital when
recognized. During the three month period ending December 31, 1997, the
income tax benefit of utilizing net operating losses attributable to CMI was
approximately $82,000.
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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 DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1996
- -----------------------------------------------------------------------------
As a result of the factors discussed below, for the three months ended
December 31, 1997, the Company had a net loss of $(207,818) compared to net
income of $335,840 for the three months ended December 31, 1996.
Sales increased by $283,113 for the three months ended December 31, 1997
as compared to the three months ended December 31, 1996. Revenues in the
quarter ended December 31, 1996 included sales from the Company's
manufacturing operations of approximately $1.4 million. The Company sold its
manufacturing assets and discontinued manufacturing operations in June, 1997.
All of the Company's sales generated in the quarter ended December 31, 1997
were attributable to its distribution of medical supplies. The increase of
approximately $1.7 million was the result of an increase in sales to the
Company's parent.
Gross profit for the three months ended December 31, 1997, was
$3,406,582 or 25.6% of sales, as compared to $3,804,837 or 29.2% 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 margins
typically earned on the distribution of bulk medical supplies as compared to
the gross profit margins historically earned by the Company's manufacturing
enterprise, the assets of which were sold in June, 1997. Following the sale
of its manufacturing assets, the Company ceased all manufacturing activities.
Operating expenses for the three month period ending December 31, 1997,
were $3,399,641 as compared to $2,957,919 in 1996. Operating expenses
increased $442,222 from the same period last year. Approximately $300,000 of
the increase relates to expenses incurred in the start-up of two new
distribution centers in Randolph, Massachusetts and Portland, Oregon. All the
costs associated with the start-up of these facilities were incurred in the
three month period ending December 31, 1997. The balance of the increase, or
approximately $142,000, relates to the additional costs incurred as a result
of the consolidation of the Company's administrative support functions to the
new corporate office building in Atlanta, Georgia. The largest components of
operating expenses are indirect labor (including sales salaries and
commissions), occupancy expense, depreciation and amortization, and insurance.
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996
As a result of the factors discussed below, for the six months ended
December 31, 1997, the Company had net income of $57,605 compared to $104,742
for the six months ended December 31, 1996.
Sales increased by $1,155,418 for the six months ended December 31, 1997
as compared to the six months ended December 31, 1996. Revenues in the six
months ended December 31, 1996 included sales from the Company's manufacturing
operation of approximately $2.5 million. The Company sold its manufacturing
assets and discontinued manufacturing operations in June 1997. All of the
Company's revenue in the six months ended December 31, 1997 were attributable
to
15
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its distribution of medical supplies. The increase of approximately $3.6
million was the result of an increase in sales to the Company's parent of
approximately $2.8 million, with the balance of the increase or approximately
$800,000, due to the expansion of the Company's customer base.
Gross profit for the six months ended December 31, 1997, was $6,822,892
or 25.2% of sales, as compared to $7,443,832 or 28.7% 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 margins typically earned
on the distribution of bulk medical supplies as compared to the gross profit
margins historically earned by the Company's manufacturing enterprise, the
assets of which were sold in June, 1997. Following the sale of its
manufacturing assets, the Company ceased all manufacturing activities.
Operating expenses for the six month period ending December 31, 1997
were $6,309,061 as compared to $6,141,502 in 1996. The operating expenses
increased from the same period last year as a result of expenses incurred in
the start-up of two new distribution centers in Randolph, Massachusetts and
Portland, Oregon. The costs associated with the start-up of these two
facilities were incurred in the three month period from October through
November. The balance of the increase relates to additional costs incurred as
a result of the consolidation of the Company's administrative support
functions to the new corporate office building in Atlanta, Georgia.
Indirect labor, including sales salaries and commissions were
approximately $3,153,487, an increase of $196,000 compared to the same period
last year. Occupancy expense, depreciation and amortization and insurance
costs decreased to approximately $1,550,891, a decrease of $16,000 compared to
the same period last year.
Other income and expenses are made up of interest expense, debts
recovered that were previously written off, service charge income, and gains
and losses on the disposition of assets. Interest expense for the six month
period ending December 31, 1997 was $608,144 compared to $686,000 for the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1997, the Company had $9,647,822 of working capital as
compared to $9,524,931 on June 30, 1997.
Operating activities for the six months ended December 31, 1997, utilized
cash of $7,418,701 as compared to operating activities during the six months
ended December 31, 1996, which utilized cash of $16,717,338. The decreased
use of cash was primarily due to the acquisition of Atlantic Medical Supply in
1996.
The cash flows utilized for investing activities of $1,159,386 during
the six months ended December 31, 1997, were a result of the acquisition of
additional equipment for two new distribution centers and costs associated
with the completion of the construction of the new corporate office.
Cash flow of $8,306,891 was provided from financing activities in 1997,
whereas in 1996, cash flows from financing activities provided cash of
$18,261,939. During the six months ended December 31, 1996, $5,000,000 was
provided from debenture borrowings, $10,950,000 was provided by acquisition
notes and $625,506 was provided by the exercise of stock warrants to fund the
acquisition of Atlantic.
16
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On November 11, 1997, the Company increased its revolving line of credit
with Barnett Bank by $5 million to a total of $15 million. As of December 31,
1997, $13,294,091 had been borrowed against the line for short-term working
capital and expansion needs.
On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. ("Atlantic"), a distributor of
disposable medical supplies and a provider of third-party billing services to
the nursing home and home health care markets. The acquisition was made
retroactively to July 1, 1996. The Company paid $1.4 million in cash and
promissory notes totaling $10.5 million (the "Atlantic Promissory Notes") for
the stock of Atlantic, and subsequently paid an additional $50,000 in cash and
issued a promissory note for $350,000 to acquire a minority interest in a
subsidiary of Atlantic Medical Supply, Inc. The cash for this transaction
came from the $5 million debenture placement that was completed on July 12,
1996. The Company paid the Atlantic Promissory Notes from the proceeds of a
$9.75 million loan from its parent, payable in accordance with the terms of a
promissory note that was convertible into shares of the Company's Common Stock
at the option of the note holder. The Company's parent simultaneously
converted this promissory note into 1,950,000 shares of Contour Common Stock.
The balance of the Atlantic Promissory Notes was paid by borrowing under the
Company's lines of credit.
The Company plans to open three additional distribution centers around
the United States during the next nine months. Total capital expenditures
anticipated to fund this expansion will approximate $1 million. The Company
has received commitments from leasing and financing organizations in amounts
sufficient to meet these anticipated needs.
The Company presently does not anticipate any commitments for any other
material capital expenditures.
SEASONALITY AND INFLATION
- -------------------------
The Company'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. During the quarter ended December 31,
1997, the Company issued securities in a transaction which was not registered
under the Securities Act of 1933, as amended (the "Act"), as follows:
During the quarter ended December 31, 1997, the Company issued an
aggregate of 77,788 shares of its Common Stock in private transactions to
eight accredited investors upon the exercise of warrants for an aggregate of
$174,501 in cash. With respect to these sales, the Company relied on Section
4(2) of the Act. The purchasers are sophisticated investors and represented
that they were purchasing the shares for investment only and not for the
purpose of resale or distribution. The appropriate restrictive legend was
placed on the certificates and stop transfer instructions were issued to the
transfer agent.
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ITEM 3.DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5.OTHER INFORMATION.
On February 17, 1997, the Company entered into an Agreement and
Plan of Merger and Reorganization (the "Merger Agreement") by and among Sun
Healthcare Group, Inc. ("Sun"), Nectarine Acquisition Corporation, by a
wholly-owned subsidiary of Sun, and the Company, pursuant to which the
subsidiary of Sun would be merged with and into the Company. The Merger
Agreement was subsequently amended on August 21, 1997.
Subject to the terms and condition of the Merger Agreement
(including, without limitation, approval of the stockholders of the Company),
upon the effective time of the Merger, Sun will pay $8.50 in cash and/or Sun
common stock, at Sun's election, for each outstanding share of the Common
Stock of the Company not presently owned by Retirement Care (other than shares
of Common Stock held in the treasury of the Company, owned by Sun or its
subsidiary or held by persons who exercise their dissenters' rights under
Nevada law). As a result of the Merger, the Company will become a wholly-
owned subsidiary of Sun.
The Merger is subject to approval by the shareholders of Sun and
the stockholders of the Company. The merger remains subject to other customary
conditions. The Merger will be effective promptly following approval by the
Sun shareholders and the Company's stockholders, assuming satisfaction of the
other conditions to the Merger.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K.
(a)EXHIBIT 27 FINANCIAL DATA SCHEDULE Filed herewith electronically
(b)REPORTS ON FORM 8-K.
The Company filed a Report on Form 8-K dated November 25, 1997,
reporting information under Item 5 - Other Events and Item 7 - Financial
Statements, Pro Forma Financial Information and Exhibits, concerning
amendments to the Agreement and Plan of Merger with Sun Healthcare Group, Inc.
and a related Option Agreement.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTOUR MEDICAL, INC.
Date: February 17, 1998 By:/s/ Donald F. Fox
Donald F. Fox, President,
Treasurer and Chief Financial
Officer
18
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
27. Financial Data Schedule Filed herewith electronically
<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>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 128,777
<SECURITIES> 0
<RECEIVABLES> 19,111,388
<ALLOWANCES> 0
<INVENTORY> 8,525,411
<CURRENT-ASSETS> 29,928,483
<PP&E> 2,603,849
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,078,978
<CURRENT-LIABILITIES> 20,280,661
<BONDS> 0
<COMMON> 7,500
0
623,414
<OTHER-SE> 16,147,253
<TOTAL-LIABILITY-AND-EQUITY> 43,078,978
<SALES> 27,070,734
<TOTAL-REVENUES> 27,070,734
<CGS> 20,247,842
<TOTAL-COSTS> 6,309,061
<OTHER-EXPENSES> 443,814
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 70,017
<INCOME-TAX> 12,412
<INCOME-CONTINUING> 57,605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,605
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
