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, 1996
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)
3340 Scherer Drive
St. Petersburg, Florida 33716
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(Address of Principal Executive Offices)
(813) 572-0089
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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 6,046,793 shares of the Registrant's $.001 par value Common Stock
outstanding as of December 31, 1996.
CONTOUR MEDICAL, INC.
FORM 10-Q
INDEX
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Part I. Financial Information
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Item 1. Financial Statements Page
Consolidated Balance Sheets as of December 31, 1996
and June 30, 1996 3-4
Consolidated Statements of Operations for the Three
and Six Months Ended December 31, 1996 and 1995 5-6
Consolidated Statement of Stockholder's Equity
for the Six Months Ended December 31, 1996 7
Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1996 and 1995 9-10
Notes to Consolidated Financial Statements 11-17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18-20
Part II. Other Information
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Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
-2-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, June 30,
1996 1996
------------ ----------
(Unaudited)
ASSETS
Current:
Cash $ 184,382 $ 146,219
Accounts receivable - trade
Related parties (Note 4) 2,095,575 1,918,000
Other 9,975,645 2,527,676
Inventories (Note 5) 6,509,354 2,876,792
Refundable income taxes -- 21,406
Prepaid expenses and other 556,817 51,519
Due from parent (Note 4) 974,612 618,897
----------- ----------
Total Current Assets 20,296,385 8,160,509
----------- ----------
Property and Equipment, less
accumulated depreciation (Note 6) 1,915,935 1,223,195
----------- ----------
Other Assets:
Goodwill 9,459,078 1,286,165
Deposit on equipment 577,245 416,184
Other 469,250 172,215
----------- ----------
Total Other Assets 10,505,573 1,874,564
----------- ----------
$32,717,893 $11,258,268
See accompanying notes to consolidated financial statements.
-3-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, June 30,
1996 1996
------------- -----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks -
credit lines (Note 7) $ 3,815,722 $ 1,391,535
Accounts payable 3,228,155 2,036,652
Accrued expenses 1,072,049 366,716
Current maturities of long-term
debt (Note 7) 10,990,700 433,658
---------- ----------
Total Current Liabilities 19,106,626 4,228,561
Long-term debt, less current
maturities (Note 7) 1,008,141 1,352,937
---------- ----------
Total Liabilities 20,114,767 5,581,498
Convertible debentures, 9% interest
due monthly through July 1, 2003 5,000,000 --
---------- ----------
Stockholders' Equity:
Preferred stock - Series A conver-
tible, $.001 par value, shares
authorized 1,265,000; issued
185,000, at aggregate liquidation
preference 794,281 2,528,000
Common stock $.001 par - shares
authorized 76,000,000; issued
6,046,793 and 4,802,280 (net of
$765 discount) 5,282 4,449
Additional paid-in capital 5,696,369 2,911,696
Retained earnings 1,107,194 232,625
---------- ----------
Total stockholders' equity 7,603,126 5,676,770
$32,717,893 $11,258,268
See accompanying notes to consolidated financial statements.
-4-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Six Months Ended
December 31, December 31,
1996 1995
------------ ------------
(Unaudited) (Unaudited)
SALES $25,915,316 $4,750,349
COST OF SALES 18,271,484 3,420,339
GROSS PROFIT 7,643,832 1,330,010
OPERATING EXPENSES 5,894,577 984,944
OTHER INCOME (EXPENSE) (304,823) 3,220
----------- ----------
INCOME BEFORE INCOME TAXES 1,444,432 348,286
INCOME TAX EXPENSE 550,000 118,417
----------- ----------
NET INCOME $ 894,432 $ 229,869
NET INCOME PER COMMON SHARE $ .15 $ .05
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 5,838,369 4,613,841
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENTS $ .10
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS 8,961,026
See accompanying notes to consolidated financial statements.
-5-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended
December 31, December 31,
1996 1995
---------- ----------
(Unaudited) (Unaudited)
SALES $13,002,786 $ 2,512,220
COST OF SALES 9,197,949 1,831,267
----------- -----------
GROSS PROFIT 3,804,837 680,953
OPERATING EXPENSES 2,957,419 495,343
OTHER INCOME (EXPENSE) (100,107) 132
------------ -----------
INCOME BEFORE INCOME TAXES 747,311 185,742
INCOME TAX EXPENSE 284,608 63,152
------------ -----------
NET INCOME $ 462,703 $ 122,590
NET INCOME PER COMMON SHARE $ .08 $ .03
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES 5,959,837 4,613,841
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENTS $ .05
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS 8,961,026
See accompanying notes to consolidated financial statements.
-6-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Additional
Common Stock Paid-in
Shares Amount Capital
--------- ------ ----------
Balance, June 30, 1996 5,214,223 $4,449 $2,911,696
Exercise of common stock
warrants 296,820 297 625,209
Conversions of preferred
stock 415,000 415 1,659,564
Conversion dividend 20,750 21 --
Preferred dividends in
arrears -- -- --
Stock issued for guarantee 100,000 100 499,900
Net income -- -- --
Balance, December 31, 1996 6,046,793 $5,282 $5,696,369
See accompanying notes to consolidated financial statements.
-7-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Convertible
Preferred Stock
----------------- Retained
Shares Amount Earnings
-------- -------- -----------
Balance, June 30, 1996 600,000 $2,528,000 $232,625
Conversions of preferred
stock (415,000) (1,660,000) --
Payment of Preferred Dividend -- ( 88,519) ( 5,063)
Preferred dividends in
arrears -- 14,800 (14,800)
Net income -- -- 894,432
Balance, December 31, 1996 185,000 $ 794,281 $1,107,194
See accompanying notes to consolidated financial statements.
-8-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended
December 31, December 31,
1996 1995
---------- ----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 894,432 $ 229,869
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Depreciation & Amortization 385,807 70,447
Tax benefit from NOL -- 118,417
(Increase) decrease in accounts
receivable (7,625,544) (422,373)
(Increase) decrease in inventories (3,632,562) (338,279)
(Increase) decrease in other
current assets and other assets (8,636,307) (68,834)
Increase (decrease) in accounts
payable 1,191,503 188,124
Increase (decrease) in accrued
expenses and other liabilities 705,333 55,996
----------- ---------
Net cash provided by operating
activities (17,611,770) (396,502)
CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of equipment (1,150,723) (412,497)
(Increase)Decrease in due from (355,715) 227,388
Parent ------------ ---------
Net cash used by investing
activities (1,506,438) (185,159)
See accompanying notes to consolidated financial statements.
-9-
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended
December 31, December 31,
1996 1995
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition Notes Issued $ 10,850,000 $ --
Convertible Debentures Issued 5,000,000 --
Net borrowing (payments) on loans 1,786,433 211,619
Proceeds from exercise of options -- 50,000
Payment of short-swing liability
by shareholder -- 36,513
Exercise of Warrants 625,506 --
------------ ---------
Net cash provided by financing
activities 18,261,939 298,150
------------ ---------
NET INCREASE (DECREASE) IN CASH 38,163 (53,642)
CASH BEGINNING OF PERIOD 146,219 96,235
------------ ---------
CASH END OF PERIOD $ 184,382 $ 42,593
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION AND NON-CASH
ACTIVITIES:
Cash paid for interest $ 362,244 $ 66,061
Cash paid for income tax $ -- $ 930
See accompanying notes to consolidated financial statements.
-10-
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, 1996 audited financial statements for
Contour Medical, Inc. The results of operations for the periods ended
December 31, 1996 and 1995 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"), 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 March 1, 1996, Contour Medical, Inc. acquired AmeriDyne through a
merger which was accounted for as a purchase. The Company issued 369,619
shares of its common stock and paid $250,000 to the sole stockholder of
AmeriDyne in connection with this purchase.
On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. (Atlantic Medical), 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
$10.5 million in promissory notes for all of the outstanding stock of Atlantic
Medical. 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 Parent.
In addition, on August 9, 1996, the Company acquired the remaining
minority interest of Facility Supply, Inc., a majority owned subsidiary of
Atlantic Medical. The acquisition was made retroactively to July 1, 1996.
The Company paid $50,000 in cash and $350,000 in promissory notes for the
remaining outstanding stock of Facility Supply, Inc. 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 Parent.
-11-
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 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. Atlantic also changed its fiscal year end from December 31 to
June 30 during 1996.
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 $2,948,238 for the six month period ended December 31,
1996, and $1,112,238 for the three month period ended December 31, 1996. Trade
accounts receivable of $2,095,575 and $1,918,000 were outstanding as of
December 31, 1996 and June 30, 1996, respectively, as related to health care
facility sales to the Parent. Additionally, the Company had an outstanding
loan receivable due from its Parent of approximately $975,000 at December 31,
1996, which is due within 45 days of advance with interest at prime and
$619,000 at June 30, 1996, which is due on demand with no stated interest
rate.
5. INVENTORIES
Inventories are summarized as follows:
December 31, June 30,
1996 1996
----------- ----------
(Unaudited) (Unaudited)
Raw Materials $ 330,823 $ 330,699
Work in process 62,985 96,647
Finished goods 6,115,546 2,449,446
---------- ----------
$6,509,354 $2,876,792
All inventories are pledged as collateral.
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
-12-
December 31, June 30,
Useful Lives 1996 1996
------------ ---------- ----------
Land & Land Improvements -- $ 59,842 $ 50,000
Building 5-45 years 596,247 596,247
Computer Equipment 3-7 years 1,074,945 --
Machinery and equipment 3-7 years 2,349,616 1,798,520
Furniture and fixtures 5-7 years 234,257 146,536
Leasehold improvements 5 years 290,563 251,352
Vehicles 3-5 years 188,202 72,245
---------- ----------
4,793,672 2,914,900
Less accumulated depre-
ciation 2,877,737 1,691,705
---------- ----------
$1,915,935 $1,223,195
Certain property and equipment are pledged as collateral (see Note 7).
7. NOTES PAYABLE
Notes payable at December 31, 1996 and June 30, 1996 consisted of the
following:
December 31, June 30,
1996 1996
----------- ---------
Note payable to sellers of Atlantic Medical
Supply Company, Inc. at 7%, principal and
interest due on January 10,1997, in event
of default convertible into common stock
of Parent $10,500,000 --
Note payable to sellers of Facility
Supply, Inc. at 7%, principal and
interest due on January 10, 1997, in event
of default convertible into common stock
of Parent. 350,000 --
Note payable to bank, interest at prime plus
1% (9.25% at June 30, 1996), principal of
$5,000 plus interest due monthly through
June 2000, collateralized by equipment -- 217,559
Note payable to bank, interest at prime plus
.75% (9.00% at June 30, 1996) principal of
$7,605 plus interest due monthly through
May 2000, collateralized by equipment and
real property 457,251 496,171
Mortgage payable to bank, bearing interest
at 8.58%, principal and interest of $6,793,
due monthly through December 2003,
collateralized by equipment and real property 434,789 456,233
-13-
Mortgage payable to bank, interest at prime
plus .75% (9.00% at June 30, 1996) principal
of $1,190 plus interest due monthly through
December 2000, collateralized by equipment and
real property 57,141 64,284
Borrowings under $7,000,000 line of credit,
interest at 30 day libor plus 200bp (7.44%
at September 30, 1996), payable monthly,
collateralized by accounts receivable and
inventory. Principal due October 31, 1997 3,815,722 --
Borrowings under $100,000 line of credit,
interest at prime plus .75% (9.00%
at June 30, 1996), payable monthly,
collateralized by accounts receivable,
inventory, equipment, and real property -- 65,000
Note payable to bank, interest at 8.75%
principal and interest at $1,282 due monthly
through April 2001, collateralized by equipment 55,301 60,436
Borrowings under $500,000 line of credit,
interest at prime plus .25% (8.5% at June
30, 1996) payable monthly, collateralized
by accounts receivable, inventory and
equipment, and guarantees by
Parent -- 433,535
Note payable to leasing institution,
interest at 14.6%, monthly installments of
$309 plus sales tax. Matures June 1997,
collateralized by computer equipment 1,206 2,924
Note payable to equipment company, interest at
11%, monthly installments of $533 including
interest. Matures December 1997,
collateralized by equipment 6,027 8,805
Note payable to stockholder, interest at 10%,
principal and interest of $5,693, due monthly
through March 1999 137,126 163,646
Note payable to bank, interest at 9%, principal
and interest of $3,600 due monthly through May
1997, collateralized by accounts receivable,
inventory, furniture, fixtures, equipment,
machinery, bank accounts, and guarantees of
Parent -- 38,924
-14-
Note payable to bank, interest at 9%, principal
and interest of $5,266 due monthly through
October 1997, collateralized by accounts
receivable, inventory, furniture, fixtures,
equipment, machinery, bank accounts, and
guarantees of Parent -- $ 212,613
Borrowings under $975,000 line of credit, interest
at prime plus 1.25% (9.5% at June 30, 1996).
Principal is due on demand but no later than May
15, 1997. Collateralized by accounts receivable,
inventory, furniture, fixtures, equipment,
machinery, bank accounts, and guarantees of
Parent -- 958,000
----------- ----------
$15,814,563 $ 3,178,130
Less current maturities 14,806,422 1,825,193
----------- ----------
$ 1,008,141 $ 1,352,937
Certain of the above agreements contain 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 December 31, 1996.
The aggregate maturities of long-term debt are as follows as of December 31,
1996:
1997 $ 11,099,183
1998 3,273,405
1999 303,777
2000 491,884
2001 83,674
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.
Commitments and Contingencies:
The company is obligated under various noncancelable leases for equipment and
office space. Future minimum lease commitments under operating leases were as
follows as of December 31, 1996.
-15-
1997 $ 389,974
1998 412,224
1999 385,974
2000 307,224
2001 305,062
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 1994, the Company was a defendant in an employment injury
lawsuit filed by one of its employees. The Company settled this dispute for
approximately $30,000.
The Company was a defendant in a lawsuit filed by one of its former employees
for wrongful discharge of employment. During the year ended December 31,
1993, the Company settled this dispute for $85,000.
8. 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."
9. ACQUISITION:
Effective March 1, 1996, the Company acquired all of the outstanding
common stock of AmeriDyne Corporation (AmeriDyne) for approximately $2.475
million in cash and stock. AmeriDyne distributes medical supplies to
hospitals, clinics, physicians, pharmacies, nursing homes and other health
care providers.
The purchase price exceeded the fair value of the net assets acquired by
approximately $1.3 million. The acquisition was accounted for as a purchase.
The resulting goodwill is being amortized on the straight-line basis over 40
years.
On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic Medical Supply Company, Inc. (Atlantic Medical), 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
$10.5 million in promissory notes for all of the outstanding stock of Atlantic
Medical. 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 Parent.
The following unaudited pro forma consolidated results of operations
presents information as if the acquisitions had occurred at the beginning of
the fiscal year in 1995. The pro forma information is provided for
information purposes only. It is based on historical information and does not
necessarily reflect the results that would have occurred nor is it necessarily
indicative of future results of operations of the combined enterprise.
-16-
Unaudited Unaudited
Six Months Ended Year Ended
December 31, 1995 June 30, 1996
Sales $ 23,219,482 $ 34,333,727
Net Income $ 645,332 $ 585,784*
Per share $ 0.14 $ 0.10
* Full year earnings reflect write down of approximately $1.1 million for
events occurring prior to July 1, 1995.
-17-
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, 1996 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1995
As a result of the factors discussed below, for the three months ended
December 31, 1996, the Company had net income of $462,703 compared to $122,590
for the three months ended December 31, 1995.
Sales increased by $10,490,566 for the three months ended December 31,
1996 as compared to the three months ended December 31, 1995. Approximately
$3,615,356 of the increase resulted from sales by AmeriDyne and approximately
$6,026,045 of the increase resulted from sales by Atlantic.
Gross profit for the three months ended December 31, 1996, was $3,804,837
or 29.3% of sales, as compared to $680,953 or 27% of sales, for the same
period of the previous year. The increase in gross profit as a percentage of
sales is primarily the result of higher gross profit margins on business'
acquired.
Operating expenses for the three month period ending December 31, 1996,
were $2,957,419 as compared to $495,343 in 1995. The operating expenses
increased approximately 600% as the result of the acquisitions, although as a
percent of sales the increase represented only a 3% increase.
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1995
As a result of the factors discussed below, for the six months ended
December 31, 1996, the Company had net income of $ 844,432 compared to
$229,869 for the six months ended December 31, 1995.
Sales increased by $21,164,967 for the six months ended December 31, 1996
as compared to the six months ended December 31, 1995. Approximately
$6,841,356 of the increase resulted from sales by AmeriDyne and approximately
$13,422,045 of the increase resulted from sales by Atlantic.
Gross profit for the six months ended December 31, 1996, was $7,643,832
or 29.4% of sales, as compared to $1,330,010 or 28% of sales, for the same
period of the previous year. The increase in gross profit as a percentage of
sales is primarily the result of higher gross profit margins on business'
acquired.
Operating expenses for the six month period ending December 31, 1996,
were $5,894,578 as compared to $984,944 in 1995. The operating expenses
increased approximately 600% as the result of the acquisitions, although as a
percent of sales the increase represented only a 2% increase.
-18-
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $1,189,758 of working capital as
compared to $3,931,948 on June 30, 1996.
Operating activities for the six months ended December 31, 1996, utilized
cash of $17,611,770 as compared to operating activities during the six months
ended December 31, 1995, which utilized cash of $ 396,502. The increased use
of cash was primarily due to increases in inventory, accounts receivable and
other assets due primarily, in the aggregate, to the acquisition of Atlantic.
The cash flows used by investing activities of $ 1,506,723 during the
six months ended December 31, 1996, were a result of the draw of $355,715 by
the Company's parent and by the use of $1,150,723 for the acquisition and
deposits of additional equipment.
Cash flow of $18,261,939 was provided from financing activities in 1996,
whereas in 1995 cash flows from financing activities provided cash of
$298,150. During the six months ended December 31, 1996, $5,000,000 was
provided from debenture borrowings, was provided by acquisition notes
$10,950,000 and $625,506 was provided by the exercise of stock warrants.
The Company currently maintains a total of $7 million revolving line of
credit with its banks for short-term working capital needs. As of December
31, 1996, $3,815,722 had been borrowed against these lines.
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 $1,400,000 in cash and
promissory notes totaling $10,500,000 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,
Facility Supply, Inc. The promissory notes bore interest at 7% per annum and
were due in full on January 10, 1997. In the event of a default in the
payment of the promissory notes, they were convertible into shares of common
stock of the Parent. The cash for this transaction came from a $5 million
debenture placement that was completed on July 12, 1996.
On January 10, 1997, the Company retired all outstanding notes due the
sellers of Atlantic Medical Supply Company, Inc. and Facility Supply, Inc.,
respectively, in the aggregate principal amount of $10,850,000, along with
accrued interest. The retirement of these notes was funded by a loan of
$9,750,000 from the Parent, with the balance funded from the Company's
existing line of credit with Barnett Bank. The loan from the Parent Company
was evidenced by a convertible promissory note bearing interest at 9% per
annum and payable upon demand. This note was convertible into 1,950,000
shares of the Company's Common Stock, and on January 10, 1997, the Parent
exercised this conversion right.
The Company presently does not anticipate any commitments for material
capital expenditures.
-19-
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
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
(a) Exhibit 27 Financial Data Schedule Filed herewith
Electronically
(b) Reports on Form 8-K. None
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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 13, 1997 By/s/ Donald F. Fox
Donald F. Fox, President, Treasurer
and Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically