<PAGE>
                   U. S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
   
                                  FORM 10-K/A
                                 Amendment No.1
                     (Amending Part II - Items 7, 8 and 9)
     
[X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
 
             For the Fiscal Year ended:  June 30, 1996
 
             OR
 
[ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 
             For the transition period from:

                           Commission File No. 0-26288

                               CONTOUR MEDICAL, INC.
      -----------------------------------------------------
            (Exact Name of Registrant as Specified in its Charter)
 
             NEVADA                                      77-0163521
-------------------------------                 -------------------------
(State or Other Jurisdiction of                  (I.R.S. Employer Identi-
Incorporation or Organization)                      fication Number)
 
                              3340 Scherer Drive
                         St. Petersburg, Florida  33716
   -----------------------------------------------------------
         (Address of Principal Executive Offices, Including Zip Code)
 
Registrant's telephone number, including area code:  (813) 572-0089
 
Securities registered pursuant to Section 12(b) of the Act:  None.
 
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 Par Value
 
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 reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes [X]  No [ ]

As of September 9, 1996, 5,946,793 shares of common stock were outstanding.
The aggregate market value of the common stock of the Registrant held by
nonaffiliates on that date was approximately $13,260,000.
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
<PAGE>
                                    PART II
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

     The following table sets forth certain operating data as a percentage of
sales for the periods indicated:

                                    SIX
                                   MONTHS
                      YEAR ENDED    ENDED        YEAR ENDED DECEMBER 31,
                       JUNE 30,    JUNE 30,  ---------------------------------
                         1996        1995     1994      1994     1993    1992
                      ----------   --------  ------    ------   ------  ------
Sales                   100.0%     100.0%    100.0%    100.0%   100.0%  100.0%
Cost of Sales            72.1%      71.3%     73.8%     64.5%    57.0%   51.0%
Gross Profit             27.9%      28.7%     26.2%     35.5%    43.0%   49.0%
Operating Expenses       23.1%      23.6%     34.1%     40.1%    44.9%   43.6%
Net Income (Loss) 
 Before Income
  Taxes (Benefit)         5.8%       4.6%    (24.8%)   (13.4%)   (3.5%)   3.0%
Income Taxes 
 (Benefit)                2.1%       1.5%       --        --     (1.4%)   0.7%
Net Income (Loss)         3.6%       3.1%    (24.8%)   (13.4%)   (2.0%)   2.3%

YEAR ENDED JUNE 30, 1996 COMPARED TO THE TWELVE MONTHS ENDED JUNE 30, 1995

     As a result of the factors discussed below, the Company had net income of
$527,034 for the year ended June 30, 1996, as compared to a net loss of $9,997
for the twelve months ended June 30, 1995.
   
     Sales for the year ended June 30, 1996 increased to $14,542,421 as
compared to $5,585,004 for the twelve months ended June 30, 1995, due to
growth in sales volume of the existing product lines and the addition of the
Company's new product line, bulk medical supplies.  Approximately $4,844,000
of the sales increase is attributable to sales of bulk medical supplies and
prepacked kits to nursing homes managed or operated by the Company's majority
shareholder; the AmeriDyne acquisition on March 1, 1996, resulted in
additional sales of bulk medical supplies of approximately $3,617,000.  The
balance of the sales increase, or approximately $496,000, resulted from
increased sales of manufactured foam products and polyethylene bags.

     Gross profit for the year ended June 30, 1996, was $4,051,318 or 27.8% of
sales as compared to $1,739,553 or 31.1% of sales for the twelve months ended
June 30, 1995.  The gross profit percentage decreased in 1996 as compared to
the comparable period in 1995 because the sales mix for 1996 was substantially
higher in bulk medical supplies, which have a lower gross profit than the
manufactured products.  Approximately $980,000 of the increase in gross profit
for the period ended June 30, 1996 was a result of the additional sales
generated from the AmeriDyne acquisition.

     Operating expenses for the year ended June 30, 1996, increased to
$3,185,620 as compared to $1,632,015 for the same period in 1995.  Total
operating expenses increased approximately $1,553,000 as a result of the
increased revenues, but as a percentage of sales they decreased to
approximately 23% of sales in 1996 versus 29% of sales in the same period in
1995.  The AmeriDyne acquisition increased
                               -2-
<PAGE>
operating expenses by $635,000 for the year ended June 30, 1996.  The largest
components of operating expenses are indirect labor (including sales salaries
and commissions), occupancy expense, depreciation and amortization, and
insurance. Operating expenses decreased as a percentage of sales due to the
Company's addition of bulk medical supplies to its product line.  While the
distribution of these products produces lower gross margins, this enterprise
requires lower operating expenses to support revenues than the Company's
manufacturing business.  As revenues from the sales of bulk medical supplies
have increased at a significantly faster rate than manufacturing (593% growth
in distribution revenues during the twelve months ended June 30, 1996 compared
to the twelve months ended June 30, 1995 versus 12% growth in manufacuturing
revenues during the same period), operating expenses as a percentage of total
revenues consequently has declined.

     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 year ended
June 30, 1996 was approximately $171,000 compared to $39,000 for the same
period in the previous year.  Interest expense increased primarily as a result
of the AmeriDyne acquisition and an increase in the Company's line of credit
during the year from $250,000 to $500,000.  Service charge income and
recoveries of bad debts were approximately $144,000 in the year ended June 30,
1996 compared to $22,000 in the same period the previous year.  These
increases were primarily due to the acquisition of AmeriDyne.

     For fiscal year ended June 30, 1996, the Company recorded an allowance
for bad debts of $410,000 when there had been no such allowance recorded in
prior periods primarily as a result of the AmeriDyne acquisition on March 1,
1996.  AmeriDyne maintained an allowance for bad debts of $400,000 at the time
AmeriDyne was acquired by the Company.

     Net income before taxes for the year ended June 30, 1996, was $839,200 as
compared to $44,721 for the twelve months ended June 30, 1995.  The AmeriDyne
acquisition contributed approximately $295,000 to net income before taxes for
the year ended June 30, 1996.
    
SIX MONTHS ENDED JUNE 30, 1995, COMPARED TO SIX MONTHS ENDED JUNE 30, 1994

     As a result of the factors discussed below, the Company had net income of
$111,373 for the six months ended June 30, 1995, as compared to a net loss of
$478,798 for the six months ended June 30, 1994.

     Sales for the six months ended June 30, 1995, increased to $3,568,459 as
compared to $1,929,200 during the same period in 1994, due to growth in sales
volume of the existing product lines and the addition of bulk medical supply
sales.  Approximately $1,426,000 of the sales increase was attributable to
sales of bulk medical supplies and pre-packaged kits to nursing homes managed
or operated by the Company's parent.  These sales, which started during April
1995 represent a new market for the Company.  Approximately $175,000 of these
nursing home sales represents sales of the Company's prepackaged kits and the
remainder of the nursing home sales represents sales of bulk medical supplies.
The remaining $213,000 of the overall sales increase was due to an increased
demand for the Company's existing product line.

     Gross profit for the six months ended June 30, 1995, was $1,024,083 or
28.7% of sales as compared to $505,500 or 26.2% of sales for the six months
ended June 30, 1994.  The gross profit percentage remained relatively constant
in 1995 as compared to the comparable period in 1994 because the product mix
in both periods
                               -3-
<PAGE>
included about the same percentage of REDI NURSE kits which have a lower gross
profit than the manufactured products.  The 1995 period included approximately
$1,251,000 in sales of bulk medical supplies which also have a lower gross
profit, and the 1994 period margin was reduced due to the costs of developing
and shipping numerous prototype kits for customer evaluation and introduction
prior to FDA approvals.  In prior years, the Company had higher gross profit
margins because most of the Company's sales were of products manufactured by
the Company.

     Operating expenses for the six months ended June 30, 1995, increased to
$841,275 as compared to $657,199 for the same period in 1994.  Total operating
expenses increased approximately $184,000 as a result of the increased
staffing necessary to service the increased volumes, but as a percentage of
sales they decreased to approximately 24% of sales in 1995 versus 34% of sales
in the same period in 1994.

     Net income before taxes for the six months ended June 30, 1995, was
$166,091 as compared to a net loss before income taxes for the six months
ended June 30, 1994, of $478,798, after deducting offering costs of $305,731. 

1994 COMPARED TO 1993

     As a result of the factors discussed below, the Company had a net loss of
$529,182 in 1994 as compared to a net loss of $73,536 in 1993.

     Sales for 1994 increased by 9% to $3,945,745 as compared to $3,618,359 in
1993 due to growth in sales of existing product lines and increasing sales in
the new REDI NURSE product lines which were introduced during March - April
1994.

     Gross profit for 1994 was $1,399,820 or 35.5% of sales, as compared to
$1,557,109 or 43.0% of sales, in fiscal year 1993.  The lower gross profit in
1994 resulted from a change in the sales mix of products and the fact that
profit margins on the REDI NURSE lines (introduced during March-April 1994)
are lower since those products are assembled as opposed to being manufactured.

     Operating expenses in 1994 were $1,580,385 as compared to $1,623,465 in
1993.  The operating expenses decreased primarily due to a reduction of
litigation related fees and expenses of approximately $55,000.

     The net loss before income taxes in 1994 was $529,182 after deducting
offering costs totaling $305,731, as compared to a net loss before income
taxes in 1993 of $125,325.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1996, the Company had $3,931,948 of working capital as
compared to working capital of $2,973,748 at June 30, 1995.  The increase in
working capital was primarily due to the AmeriDyne acquisition which was
completed during March, 1996.

     Operating activities for the year ended June 30, 1996 utilized cash of
$124,047 as compared to operating activities during the six months ended June
30, 1995, which utilized cash of $1,030,398.

     Inventories increased by approximately $1,579,000 from June 30, 1995 as a
result of increased inventory levels needed to serve the growing nursing home
market, and approximately $1,240,000 of the increase resulted from the
AmeriDyne acquisition.  Accounts receivable and accounts payable have
increased due to the increased level of sales and inventories.
                               -4-
<PAGE>
     Cash flows from investing activities used cash of $521,456 for the year
ended June 30, 1996 as a result of the repayment of $550,004 from the
Company's parent which was offset by the use of $749,163 for the acquisition
of additional equipment and $322,297 for the AmeriDyne acquisition.

     Cash flow of $695,487 was provided from financing activities in fiscal
1996 versus $2,163,773 in 1995.  For the year ended June 30, 1996, $608,956
was provided from net bank borrowings, $50,000 was provided by the exercise of
stock options and $36,531 was provided by payment of a short-swing liability
by a shareholder.

     Operating activities for the six month period ended June 30, 1995,
utilized cash of $1,030,398 as compared to $120,699 for the same period in
1994.  The increased utilization of cash resulted primarily from higher
receivable and inventory levels, net of increased accounts payable, necessary
to support the increase in sales.  Operating activities for the years ended
December 31, 1994, and 1993 utilized cash of $28,133 and $209,284,
respectively.

     Investing activities for the six months ended June 30, 1995, utilized
$1,701,945 of cash, of which $533,054 was for the acquisition of equipment and
$1,168,901 was advanced to the Company's majority shareholder as compared to
$6,597 of cash used during the six months ended June 30, 1994, which was
expended for equipment.  The cash flows for the years ended December 31, 1994
and 1993, were used substantially for the acquisition of additional equipment
as needed.

     Cash flow of $2,689,372 was provided from financing activities for the
six months ended June 30, 1995, as compared to cash utilized during the six
months ended June 30, 1994, of $17,468.  During the six months ended June 30,
1995, cash of $2,216,447 was provided from the issuance of preferred stock and
exercise of stock options, and $482,622 was provided from equipment financing
at favorable long-term rates, utilization of credit line funds of $189,671,
all of which was reduced by repayments on bank loans and advances to the
Company's majority shareholder totaling of $199,328.  For the year ended
December 31, 1994, cash flow of $62,833 was provided from financing
activities, whereas in 1993 cash flow of $448,944 was provided due to the sale
of preferred stock of $430,500.

     At June 30, 1996, the Company has a mortgage payable with Michigan
National Bank with an outstanding balance of $456,233, bearing interest at
8.58% with monthly payments of $6,793, including interest, collateralized by
real estate; and a second mortgage with a balance of $64,284 with monthly
principal payments of $1,190 and interest at prime plus .75% (9.0% at June 30,
1996); and a loan secured by equipment with a balance of $496,171, bearing
interest at prime plus .75% with monthly payments of $11,380 including
interest.  The Company secured an equipment loan with Fidelity Bank with an
outstanding balance of $217,559 as of June 30, 1996, interest at prime plus 1%
(9.25% at June 30, 1996), principal of $5,000 plus interest, collateralized by
equipment.  At June 30, 1996, the Company had a note payable with Republic
Bank with a balance of $60,436, interest at 8.75%, with principal and interest
of $1,282 due monthly, collateralized by accounts receivable, inventory and
equipment of the Florida subsidiary.

     As of June 30, 1996, the Company maintained a total of $1,575,000 in
lines of credit with its banks for short-term working capital needs, and
$1,456,535 had been borrowed against these lines.  On August 5, 1996, the
Company's line of credit with Republic Bank was increased from $500,000 to
$1,750,00.  On September 20, 1996, the Company replaced all of its existing
lines of credit with a $7,000,000 revolving line of credit with Barnett Bank,
secured by inventory and accounts receivable and bearing interest at the
30-day LIBOR rate plus 2%.  Management believes that the Company's working
capital, together with anticipated
                               -5-
<PAGE>
net income from operations and unused lines of credit, will be adequate to
meet the Company's needs for liquidity for at least the next twelve months. 
If additional short-term capital is needed, management believes that
Retirement Care, the Company's majority shareholder, would pay down the amount
it owes to the Company.

     The Company completed a $5 million debenture placement on July 12, 1996.
These debentures bear interest at 9% per annum and are to be repaid in monthly
installments beginning on July 1, 1999, with full payment due by July 1, 2003. 
The debentures are convertible into shares of the Company's Common Stock.  The
two debentures, each in the amount of $2.5 million, were purchased by
Renaissance U.S. Growth and Income Trust, PLC, a fund listed on the London
Stock Exchange, and by Renaissance Capital Growth & Income Fund III, Inc., a
closed-end, publicly traded fund that invests in emerging growth companies. 
Both of these investment funds are managed by Renaissance Capital Group, Inc.,
of Dallas, Texas.

     On August 6, 1996, the Company acquired all of the oustanding 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
effective 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 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 Retirement Care
Associates, Inc., the Company's majority shareholder.  The cash for this
transaction came from the $5 million debenture placement that was completed on
July 12, 1996.  The Company intends to pay the promissory notes from the
proceeds of an offering of the Company's securities to be conducted by the
Company.

     The Company presently does not anticipate any commitments for 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 past three years.

     In addition, the Company does not believe that inflation has had a
material effect on its results from operations during the past three years. 
There can be no assurance, however, that the Company's business will not be
affected by inflation in the future.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Independent Auditors' Reports appear at pages F-1 through F-3, and
the Financial Statements and Notes to Financial Statements appear at pages F-4
through F-33 hereof.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
   
     In August 1997, the accounting firm of Coopers & Lybrand, L.L.P. resigned
as the Company's independent accountants and notified the Company that its
report on its audit of the Company's financial statements for the fiscal year
ended June 30, 1996 should no longer be relied upon.
                               -6-
<PAGE>
     The Company engaged the accounting firm of Cherry, Bekaert & Holland,
L.L.P. to reaudit the Company's financial statements for the fiscal year ended
June 30, 1996.

     These changes in the Company's independent accountants was previously
reported in a Current Report on Form 8-K dated August 21, 1997 (as amended by
an amendment to the Current Report on Form 8-K/A dated as of August 21, 1997)
and a Current Report on Form 8-K dated as of September 18, 1997.
    
                               -7-
<PAGE>
                REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Contour Medical, Inc.
St. Petersburg, Florida

We have audited the accompanying consolidated balance sheet of Contour
Medical, Inc. (a subsidiary of Retirement Care Associates, Inc.) and
Subsidiaries (the Company) as of June 30, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended. 
These financial statements are the responsibility of the Company's 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 consolidated financial position of Contour Medical,
Inc. and Subsidiaries as of June 30, 1996, and the consolidated results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ Cherry, Bekaert & Holland, L.L.P.
Cherry, Bekaert & Holland, L.L.P.
Greensboro, North Carolina

October 9, 1997
                               F-1
<PAGE>
        REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Contour Medical, Inc.
St. Petersburg, Florida

We have audited the accompanying consolidated balance sheet of Contour
Medical, Inc. (a subsidiary of Retirement Care Associates, Inc.) and
Subsidiaries as of June 30, 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for the six months ended June
30, 1995 and year ended December 31, 1994.  These financial statements are the
responsibility of the Company's 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.  These 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Contour
Medical, Inc. and Subsidiaries as of June 30, 1995 and the results of their
operations and their cash flows for the six months ended June 30, 1995 and
year then ended December 31, 1994 in conformity with generally accepted
accounting principles. 

/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP

Orlando, Florida
August 18, 1995, except for the stock split
  discussed in Note 10 which is as of March 15, 1996
                               F-2
<PAGE>
                   INDEPENDENT AUDITORS' REPORT

Board of Directors
Contour Medical, Inc.
St. Petersburg, Florida

We have audited the accompanying consolidated statements of operations,
changes in stockholders' equity and cash flows of Contour Medical, Inc. and
Subsidiaries for the year ended December 31, 1993.  These consolidated
financial statements are the responsibility of the management of Contour
Medical, Inc.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
 
We conducted our audit in accordance with generally accepted auditing
standards.  These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of operations,
changes in stockholders' equity, and cash flows 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 consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Contour Medical, Inc. and Subsidiaries for the year ended December
31, 1993 in conformity with generlaly accepted accounting principles. 

/s/ Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
January 21, 1994

100 South Ashley Drive, Suite 1650, Tampa, Florida 33602
813/229-2321
813/229-2359 FAX

PENDER NEWKIRK & COMPANY - CERTIFIED PUBLIC ACCOUNTANTS

Member of Private Companies Practice Section
and SEC Practice Section of American Institute
of Certified Public Accountants
                               F-3
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and 1995
                                               1996          1995
ASSETS                                      -----------   ----------
Cash                                        $   146,219   $   96,235
Accounts receivable:
 Related parties                              1,918,000      943,094
 Trade, net of allowance for bad debts
   of approximately $410,000 in 1996          2,527,676      760,703
Inventories                                   2,876,792    1,297,394
Refundable income taxes                          21,406       10,680
Deferred income taxes                           164,048            -
Prepaid expenses and other                       51,519       74,319
Due from parent                                 618,897    1,168,901
                                            -----------   ----------
                                              8,324,557    4,351,326
Property and equipment, less                -----------   ----------
  accumulated depreciation                    1,223,195      592,243
                                            -----------   ----------
Other assets:
 Deposit on equipment                           416,184      228,282
 Other                                            8,167        4,575
 Goodwill, net of accumulated amorti-     
   ation of approximately $11,000 in 1996     1,286,165            0
                                            -----------   ----------
                                              1,710,516      232,857
                                            -----------   ----------
                                            $11,258,268   $5,176,426
                                            ===========   ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current maturities of long-term debt       $ 1,825,193   $  414,077
 Accounts payable                             2,036,652      882,524
 Accrued expenses                               366,716       80,977
                                            -----------   ----------
                                              4,228,561    1,377,578
Long-term debt, less current maturities       1,352,937      907,711
                                            -----------   ----------
  Total liabilities                           5,581,498    2,285,289
                                            -----------   ----------
Stockholders' equity:
 Preferred stock - Series A convertible;
   $.001 par value, shares authorized -
   1,265,000; issued and outstanding -
   600,000 at aggregate liquidation
   preference                                 2,528,000    2,400,000
 Common stock; $.001 par value, shares
   authorized - 76,000,000; issued and
  outstanding 5,214,223 and 4,573,600,
  respectively, (net of $765 discount)            4,449        3,808
 Additional paid-in capital                   2,911,696      781,738
 Retained earnings (deficit)                    232,625     (294,409)
                                            -----------   ---------- 
  Total stockholders' equity                  5,676,770    2,891,137
                                            -----------   ---------- 
                                            $11,258,268   $5,176,426

The accompanying notes are an integral part of these financial statements.
                                   F-4
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

                                        SIX MONTHS
                           YEAR ENDED     ENDED     YEAR ENDED DECEMBER 31,
                            JUNE 30,     JUNE 30,  ------------------------
                              1996         1995        1994        1993
                           -----------  ----------  ----------  -----------
Sales                      $14,542,421  $3,568,459  $3,945,745  $3,618,359
 
Cost of sales               10,491,103   2,544,376   2,545,925   2,061,250
                           -----------  ----------  ----------  ----------
   Gross profit              4,051,318   1,024,083   1,399,820   1,557,109
 
Selling, general and
  administrative expenses    3,185,620     841,275   1,550,385   1,538,465
Litigation settlements               0           0      30,000      85,000
                           -----------  ----------  ----------  ----------
  Income (loss) from
   operations                  865,698     182,808    (180,565)    (66,356)
                           -----------  ----------  ----------  ---------- 
 Other income (expenses):
 Offering costs                      0           0    (305,731)          0
 Interest                     (170,951)    (39,098)    (53,627)    (63,758)
 Other                         144,453      22,381      10,741       4,789
                           -----------  ----------  ----------  ----------
                               (26,498)    (16,717)   (348,617)    (58,969)
                           -----------  ----------  ----------  ----------
Income (loss) before taxes
  on income (benefit)          839,200     166,091    (529,182)   (125,325)
 
Taxes on income (benefit)      312,166      54,718           0     (51,789)
                           -----------  ----------  ----------  ----------
Net income (loss)          $   527,034  $  111,373  $ (529,182) $  (73,536)
                           ===========  ==========  ==========  ==========

Earnings (loss) per
  common share             $      0.09  $     0.02  $    (0.20) $    (0.05)
                           ===========  ==========  ==========  ==========

Weighted average common
  shares and share
  equivalents outstanding    4,804,292   4,786,126   2,688,927   1,434,466
                           ===========  ==========  ==========  ==========

The accompanying notes are an integral part of these financial statements.
                               F-5
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                   SUBSCRIBED
                              COMMON STOCK        COMMON STOCK    ADDITIONAL
                          --------------------  ----------------   PAID-IN
                            SHARES     AMOUNT    SHARES   AMOUNT   CAPITAL
                          ----------  --------  --------  ------  ---------
Balance, January 1, 1993       6,900  $  6,900         0  $    0  $       0
 Acquisition of CMI       16,315,034    16,315   150,000      75    517,939  
 Recapitalization             (6,900)  (23,215)        0     (75)  (517,939)  
 Issuance of stock           180,045        33  (150,000)      0      4,967  
 Contribution of stock             0         0         0       0          0  
 1-for-13 reverse stock 
   split                 (15,226,227)      (30)        0       0         30  
 Conversion of Class A 
   preferred stock           365,704       366         0       0     27,226  
 Conversion of Class C 
   preferred stock           846,669       847         0       0    404,356  
 Issuance of Class E 
   preferred stock in 
   exchange for common
   stock                    (172,986)      (87)        0       0   (295,656)  
 Net loss                          0         0         0       0          0
                         -----------  --------  --------  ------  ---------  
Balance, December 31,
 1993                      2,308,239     1,129         0       0    140,923
 Conversion of Class A 
  preferred stock            219,182       220         0       0     39,557
 Conversion of Class B 
  preferred stock             33,333        33         0       0        (33)
 Converson of Class D 
  preferred stock and 
  warrants                   238,450       238         0       0     75,212
 Conversion of Class E 
  preferred stock            172,986       173         0       0    295,569 
 Conversion of Class One 
  preferred stock          2,000,000     2,000         0       0    370,844
  Net loss                         0         0         0       0          0
                         -----------  --------  --------  ------  ---------  
Balance, December 31, 
 1994                      4,972,190     3,793         0       0    922,072
 Issuance of Series A 
  preferred stock                  0         0         0       0   (214,997)
 Exercise of common 
  stock options               15,385        15         0       0     19,985
 Correction of Class A 
  preferred stock conver-
  sion                           255         0         0       0          0
 Redemption of Class A 
  warrants                         0         0         0       0        (40)
 Tax benefit from utiliza-
  tion of net operating 
  loss carryforward                0         0         0       0     54,718
 Retirement of treasury 
  stock                     (414,230)        0         0       0          0
 Net income                        0         0         0       0          0
                         -----------  --------  --------  ------   ---------  
                               F-6
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED

                                                   SUBSCRIBED
                              COMMON STOCK        COMMON STOCK    ADDITIONAL
                          --------------------  ----------------   PAID-IN
                            SHARES     AMOUNT    SHARES   AMOUNT   CAPITAL
                          ----------  --------  --------  ------  ----------
Balance, June 30, 1995     4,573,600     3,808         0       0     781,738
 Issuance of stock           352,018       353         0       0   2,045,753
 Exercise of common stock 
  options                     25,000        25         0       0      49,975 
 1.05-for-1 forward stock 
  split                      247,601       247         0       0        (247)
 Correction of preferred 
  stock                       16,004        16         0       0         (16)
 Short-swing liability from 
  a shareholder                    0         0         0       0      36,531
 Preferred dividends in
  arrears                          0         0         0       0    (128,000)
 Tax benefit from utiliza-
  tion of net operating
  loss carryforward                0         0         0       0     125,962
 Net income                        0         0         0       0           0
                         -----------  --------  --------  ------  ----------
Balance, June 30, 1996     5,214,223  $  4,449         0  $    0  $2,911,696 

The accompanying notes are an integral part of these financial statements.
                               F-7
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 
                                                                    
                                                             CONVERTIBLE
                                                           PREFERRED STOCK
                            RETAINED     TREASURY STOCK       SERIES A
                            EARNINGS   -----------------  -----------------
                           (DEFICIT)    SHARES    AMOUNT  SHARES    AMOUNT
                          -----------  ---------  ------  -------  --------
Balance, January 1, 1993  $   287,099          0  $   0        0  $       0
 Acquisition of CMI        (1,039,673)         0      0        0          0
 Recapitalization           1,039,673          0      0        0          0
 Issuance of stock                  0          0      0        0          0
 Contribution of stock              0  5,385,000      0        0          0
 1-for-13 reverse stock 
  split                             0 (4,970,770)     0        0          0
 Conversion of Class A 
  preferred stock             (27,592)         0      0        0          0
 Conversion of Class C 
  preferred stock                   0          0      0        0          0
 Issuance of Class E 
  preferred stock in
  exchange for common  
  stock                             0          0      0        0          0
 Net loss                     (73,536)         0      0        0          0
                          -----------  ---------  -----  -------  ---------
Balance, December 31, 1993    185,971    414,230      0        0          0
 Conversion of Class A 
  preferred stock             (14,777)         0      0        0          0
 Conversion of Class B 
  preferred stock                   0          0      0        0          0
 Converson of Class D 
  preferred stock 
  and warrants                (47,794)         0      0        0          0
 Conversion of Class E 
  preferred stock                   0          0      0        0          0
 Conversion of Class One 
  preferred stock                   0          0      0        0          0
 Net loss                    (529,182)         0      0        0          0
                          -----------  ---------  -----  -------  ---------
Balance, December 31, 1994   (405,782)   414,230      0        0          0
 Issuance of Series A 
  preferred stock                   0          0      0  600,000  2,400,000
 Exercise of common 
  stock options                     0          0      0        0          0
 Correction of Class A 
  preferred stock 
  conversion                        0          0      0        0          0
 Redemption of Class A 
  warrants                          0          0      0        0          0
 Tax benefit from utili-
  zation of net operating 
  loss carryforward                 0          0      0        0          0
 Retirement of treasury 
  stock                             0   (414,230)     0        0          0
 Net income                    11,373          0      0        0          0
                            ---------  ---------  -----  -------  --------- 
                               F-8
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 
                                                                    
                                                             CONVERTIBLE
                                                           PREFERRED STOCK
                            RETAINED     TREASURY STOCK       SERIES A
                            EARNINGS   -----------------  -----------------
                           (DEFICIT)    SHARES    AMOUNT  SHARES    AMOUNT
                          -----------  ---------  ------  -------  --------
Balance, June 30, 1995       (294,409)         0      0  600,000  2,400,000
 Issuance of stock                  0          0      0        0          0
 Exercise of common stock 
  options                           0          0      0        0          0
 1.05-for-1 forward stock 
  split                             0          0      0        0          0
 Correction of preferred 
  stock                             0          0      0        0          0 
 Short-swing liability 
  from a shareholder                0          0      0        0          0
 Preferred dividends in
  arrears                           0          0      0        0    128,000
 Tax benefit from utili-
  zation of net operating 
  loss carryforward                 0          0      0        0          0
 Net income                   527,034          0      0        0          0
                           ----------  ---------  -----  -------  ---------
Balance, June 30, 1996     $  232,625          0  $   0  600,000 $2,528,000

The accompanying notes are an integral part of these financial statements.
                                   F-9
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED

                                    REDEEMABLE CUMULATIVE      CONVERTIBLE
                                       PREFERRED STOCK       PREFERRED STOCK
                                           CLASS D              CLASS ONE
                                    --------------------  --------------------
                                      SHARES    AMOUNT      SHARES    AMOUNT
                                    ---------  ---------  ---------  ---------
Balance, January 1, 1993                    0  $       0          0  $      0
 Acquisition of CMI                 1,000,000          0          0         0
 Recapitalization                           0          0          0         0
 Issuance of stock                     74,176    400,500          0         0
 Contribution of stock                      0          0          0         0
 1-for-13 reverse stock split               0          0          0         0
 Conversion of Class A 
  preferred stock                           0          0          0         0
 Issuance of Class E preferred stock
  in exchange for common stock              0          0          0         0
 Net loss                                   0          0          0         0
                                    ---------  ---------  ---------  --------

Balance, December 31, 1993          1,074,176    400,500          0         0
 Conversion of Class A 
  preferred stock                           0          0          0         0
 Conversion of Class B 
  preferred stock                           0          0          0         0
 Converson of Class D preferred
  stock and warrants               (1,074,176)  (400,500) 2,000,000   372,844
 Conversion of Class E 
  preferred stock                           0          0          0         0
 Conversion of Class One 
  preferred stock                           0          0 (2,000,000) (372,844)
 Net loss                                   0          0          0         0
                                    ---------  ---------  --------- ---------

Balance, December 31, 1994                  0          0          0         0 
 Issuance of Series A 
  preferred stock                           0          0          0         0
 Exercise of common stock options           0          0          0         0
 Correction of Class A 
  preferred stock conversion                0          0          0         0
 Redemption of Class A warrants             0          0          0         0
 Tax benefit from utilization of
  net operating loss carryforward           0          0          0         0
 Retirement of treasury stock               0          0          0         0
 Net income                                 0          0          0         0
                                    ---------  ---------  ---------  --------

The accompanying notes are an integral part of these financial statements. 
                                 F-10
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED

                                    REDEEMABLE CUMULATIVE      CONVERTIBLE
                                       PREFERRED STOCK       PREFERRED STOCK
                                           CLASS D              CLASS ONE
                                    --------------------  --------------------
                                      SHARES    AMOUNT      SHARES    AMOUNT
                                    ---------  ---------  ---------  ---------
Balance, June 30, 1995                      0          0          0         0
 Issuance of stock                          0          0          0         0
 Exercise of common stock options           0          0          0         0
 1.05-for-1 forward stock split             0          0          0         0
 Correction of preferred stock              0          0          0         0
 Short-swing liability from 
  a shareholder                             0          0          0         0
 Preferred dividends in arrears             0          0          0         0
 Tax benefit from utilization of
  net operating loss carryforward           0          0          0         0
 Net income                                 0          0          0         0
                                    ---------  ---------  ---------  --------
Balance, June 30, 1996                      0  $       0          0  $      0

The accompanying notes are an integral part of these financial statements. 
                               F-11
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                                   CONVERTIBLE                  CONVERTIBLE
                                 PREFERRED STOCK              PREFERRED STOCK
                                     CLASS A                      CLASS B
                             ------------------------    ---------------------
                              SHARES         AMOUNT        SHARES     AMOUNT
                             ---------     ----------    ---------   ---------
Balance, January 1, 1993             0      $     0            0     $      0
 Acquisition of CMI             36,325       33,919            2      100,000
 Recapitalization                    0      (33,919)           0     (100,000)
 Issuance of stock             334,319       25,000            0            0
 Contribution of stock               0            0            0            0
 1-for-13 reverse stock 
  split                              0            0            0            0
 Conversion of Class A 
  preferred stock             (271,119)           0            0            0
 Issuance of Class E 
  preferred stock in 
  exchange for common stock          0            0            0            0  
   
 Net loss                            0            0            0            0
                             ---------     --------     ---------    --------

Balance, December 31, 1993      99,525       25,000            2            0
 Conversion of Class A 
  preferred stock              (99,525)     (25,000)           0            0 
 Conversion of Class B 
  preferred stock                    0            0           (2)           0
 Converson of Class D 
  preferred stock and 
  warrants                           0            0            0            0 
 Conversion of Class E 
  preferred stock                    0            0            0            0
 Conversion of Class 
  One preferred stock                0            0            0            0
 Net loss                            0            0            0            0
                             ---------     --------     ---------    --------

Balance, December 31, 1994           0            0            0            0
 Issuance of Series A 
  preferred stock                    0            0            0            0
 Exercise of common stock 
  options                            0            0            0            0
 Correction of Class A 
  preferred stock conversion         0            0            0            0
 Redemption of Class A 
  warrants                           0            0            0            0
 Tax benefit from utiliza-
  tion of net operating 
  loss carryforward                  0            0            0            0
 Retirement of treasury stock        0            0            0            0
 Net income                          0            0            0            0
                             ---------     --------     ---------    --------
                                   F-12
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                                   CONVERTIBLE                CONVERTIBLE
                                 PREFERRED STOCK            PREFERRED STOCK
                                     CLASS A                    CLASS B
                             ------------------------    ---------------------
                              SHARES         AMOUNT        SHARES     AMOUNT
                             ---------     ----------    ---------   ---------
Balance, June 30, 1995               0            0             0            0
 Issuance of stock                   0            0             0            0
 Exercise of common stock 
  options                            0            0             0            0
 1.05-for-1 forward stock 
  split                              0            0             0            0
 Correction of preferred 
  stock                              0            0             0            0
 Short-swing liability from 
  a shareholder                      0            0             0            0
 Tax benefit from utiliza-
  tion of net operating 
  loss carryforward                  0            0             0            0
 Net income                          0            0             0            0
                             ---------     --------      ---------    --------
Balance, June 30, 1996               0     $      0             0     $      0

The accompanying notes are an integral part of these financial statements. 
                               F-13
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                             CONVERTIBLE CUMULATIVE           CLASS C  
                                 PREFERRED STOCK          PREFERRED STOCK
                                     CLASS C                 SERIES E
                           -----------------------    ---------------------
                              SHARES       AMOUNT       SHARES      AMOUNT
                           ---------   ----------     ---------   ---------
Balance, January 1, 1993            0    $       0             0    $    0
 Acquisition of CMI           666,669            0       325,000         0
 Recapitalization                   0      (74,797)            0         0
 Issuance of stock                  0            0             0         0
 Issuance of stock in 
  satisfaction of loans       180,000      480,000             0         0
 Conversion of Class A 
  preferred stock                   0            0             0         0
 Conversion of Class C 
  preferred stock            (846,669)    (405,203)            0         0   
 Issuance of Class E 
  preferred stock in 
  exchange for common stock         0            0             0         0
 Acquisition and retirement 
  of stock                          0            0      (325,000)        0     

 Net loss                           0            0             0         0
                             ---------  ----------     ---------  --------

Balance, December 31, 1993          0            0             0         0
 Conversion of Class A 
  preferred stock                   0            0             0         0
 Conversion of Class B 
  preferred stock                   0            0             0         0  
 Converson of Class D 
  preferred stock and warrants      0            0             0         0
 Conversion of Class E 
  preferred stock                   0            0             0         0
 Conversion of Class One 
  preferred stock                   0            0             0         0

 Net loss                           0            0             0         0     
                             ---------  ----------     ---------  --------

Balance, December 31, 1994          0            0             0         0
 Issuance of Series A 
  preferred stock                   0            0             0         0
 Exercise of common stock 
  options                           0            0             0         0
 Correction of Class A 
  preferred stock conversion        0            0             0         0
 Redemption of Class A 
  warrants                          0            0             0         0
 Tax benefit from utilization 
  of net operating loss
  carryforward                      0            0             0         0
 Retirement of treasury stock       0            0             0         0
 Net income                         0            0             0         0
                             ---------   ----------     ---------   -------
                                   F-14
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                                   CONVERTIBLE                CONVERTIBLE
                                 PREFERRED STOCK            PREFERRED STOCK
                                     CLASS A                    CLASS B
                             ------------------------    ---------------------
                              SHARES         AMOUNT        SHARES     AMOUNT
                             ---------     ----------    ---------   ---------
Balance, June 30, 1995              0              0             0          0
 Issuance of stock                  0              0             0          0
 Exercise of common stock 
  options                           0              0             0          0
 1.05-for-1 forward stock 
  split                             0              0             0          0
 Correction of preferred 
  stock                             0              0             0          0
 Short-swing liability from 
  a shareholder                     0              0             0          0
 Preferred dividends in
  arrears                           0              0             0          0
 Tax benefit from utiliza-
  tion of net operating loss   
  carryforward                      0              0             0          0
 Net income                         0              0             0          0
                             ---------     ----------     ---------    ------
Balance, June 30, 1996              0      $       0             0     $    0

The accompanying notes are an integral part of these financial statements. 
                               F-15
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                                    SUBSCRIBED               CONVERTIBLE 
                                 PREFERRED STOCK           PREFERRED STOCK
                                     CLASS A                   CLASS E 
                             ------------------------    -------------------
                              SHARES         AMOUNT       SHARES     AMOUNT
                             ---------     ----------    ---------   -------
Balance, January 1, 1993            0      $       0             0   $     0
 Acquisition of CMI           309,319        289,728             0         0
 Recapitalization                   0       (289,728)            0         0
 Issuance of stock           (309,319)             0             0         0
 Issuance of stock in 
  satisfaction of loans             0              0             0         0
 Conversion of Class A 
  preferred stock                   0              0             0         0
 Conversion of Class C 
  preferred stock                   0              0             0         0
 Issuance of Class E 
  preferred stock in 
  exchange for common stock         0              0       172,986   295,742
 Acquisition and retirement 
  of stock                          0              0             0         0
 Net loss                           0              0             0         0   
                            ---------     ----------     ---------   -------

Balance, December 31, 1993          0              0       172,986   295,742 
 Conversion of Class A 
  preferred stock                   0              0             0         0
 Conversion of Class B 
  preferred stock                   0              0             0         0
 Converson of Class D 
  preferred stock and warrants      0              0             0         0
 Conversion of Class E 
  preferred stock                   0              0      (172,986) (295,742)
 Conversion of Class One 
  preferred stock                   0              0             0         0
 Net loss                           0              0             0         0
                             ---------    ----------     ---------   -------

Balance, December 31, 1994          0              0             0         0
 Issuance of Series A 
  preferred stock                   0              0             0         0
 Exercise of common stock 
  options                           0              0             0         0
 Correction of Class A 
  preferred stock conversion        0              0             0         0
 Redemption of Class A 
  warrants                          0              0             0         0
 Tax benefit from utilization
  of net operating loss 
  carryforward                      0              0             0         0
 Retirement of treasury stock       0              0             0         0
 Net income                         0              0             0         0
                            ---------     ----------     ---------  --------
                                   F-16
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                                    SUBSCRIBED               CONVERTIBLE 
                                 PREFERRED STOCK           PREFERRED STOCK
                                     CLASS A                   CLASS E 
                             ------------------------    -------------------
                              SHARES         AMOUNT       SHARES     AMOUNT
                             ---------     ----------    ---------   -------
Balance, June 30, 1995              0              0             0         0
 Issuance of stock                  0              0             0         0
 Exercise of common stock 
  options                           0              0             0         0
 1.05-for-1 forward stock 
  split                             0              0             0         0
 Correction of preferred 
  stock                             0              0             0         0
 Short-swing liability from 
  a shareholder                     0              0             0         0
 Tax benefit from utilization 
  of net operating loss 
  carryforward                      0              0             0         0
 Net income                         0              0             0         0
                             ---------     ----------     ---------   ------
Balance, June 30, 1996              0      $       0             0    $    0

The accompanying notes are an integral part of these financial statements. 
                               F-17
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             SIX MONTHS
                                  YEAR ENDED   ENDED   YEAR ENDED DECEMBER 31,
                                   JUNE 30,   JUNE 30  ---------------------
                                     1996       1995       1994       1993
                                 ----------- ---------- ---------- ----------
Cash flows from operating 
 activities:                        
  Net income (loss)              $   527,034 $  111,373 $(529,182) $ (73,536)
  Adjustments to reconcile 
   net income (loss) to net cash       
   used in operating activities:    
   Depreciation and amortization     255,757     51,670    98,684     53,397
   Offering costs                          0          0   305,731          0
   Tax benefit from utilization 
    of net operating loss           
    carryforward                     207,990     54,718         0          0
   Cash provided by (used in):                                  
    Accounts receivable           (1,364,353)(1,123,856)  (34,558)   (12,505)
    Inventories                     (318,832)  (908,317)   33,978     50,654
    Refundable income taxes          (10,726)    (2,500)   90,941    (99,121)
    Prepaid expenses and other        32,059    (61,325)   (6,189)    (6,805)
    Accounts payable                 402,534    767,004    23,263    (74,444)
    Accrued expenses                 144,490     80,835   (10,801)   (46,924)
                                  ---------- ---------- ---------- ---------
     Net cash used in operating 
     activities                     (124,047)(1,030,398)  (28,133)  (209,284)
                                  ---------- ---------- ---------- ---------
Cash flows from investing 
 activities:                        
  Purchases of property and 
   equipment                        (749,163)  (304,762)  (46,181)  (123,917)
  Cash acquired from acquisition           0          0         0        778
  Decrease (increase) in due 
    from parent                      550,004 (1,168,901)        0          0
  Deposit on equipment                     0   (228,282)        0          0
  Decrease (increase) in 
   other assets                            0          0       555     (1,055)
  Acquisition of AmeriDyne, 
   net of cash acquired             (322,297)         0         0          0
                                  ---------- ---------- ---------- ---------
     Net cash used in investing 
     activities                     (521,456)(1,701,945)  (45,626)  (124,194)
                                  ---------- ---------- ---------- ---------
Cash flows from financing 
 activities:                        
  Deferred offering costs                  0          0   (59,990)  (138,136)
  Proceeds from issuance of notes 
   payable to bank                 1,295,635          0         0     80,000
  Proceeds (repayments) on notes 
   payable to bank                  (686,679)   189,671  (42,177)    100,000
  Increase (decrease) in due to 
   parent                                  0   (165,000) 165,000           0
                                   F-18
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED 

                                    SUBSCRIBED               CONVERTIBLE 
                                 PREFERRED STOCK           PREFERRED STOCK
                                     CLASS A                   CLASS E 
                             ------------------------    -------------------
                              SHARES         AMOUNT       SHARES     AMOUNT
                             ---------     ----------    ---------   -------
  Proceeds from issuance of 
   long-term debt                    0        482,622           0          0
  Payments of long-term debt         0        (34,328)          0          0
  Payments on loans to 
   stockholder                       0              0           0    (23,420)
  Proceeds from issuance of 
   stock                             0              0           0    430,500
  Proceeds from issuance of 
   preferred stock, net of
   offering costs                    0      2,196,447           0          0
  Exercise of stock options     50,000         20,000           0          0
  Redemption of Class A 
   warrants                          0            (40)          0          0
  Payment of short-swing 
   liability by a shareholder   36,531              0           0          0
                              --------  -------------   ----------  --------
     Net cash provided by 
     financing activities      695,487      2,689,372       62,833   448,944
                              --------  -------------   ----------  -------- 
Net increase (decrease) 
in cash                         49,984        (42,971)     (10,926)  115,466
                                                         
Cash, beginning of period       96,235        139,206      150,132    34,666
                              --------  -------------   ----------  --------
Cash, end of period           $146,219  $      96,235   $  139,206  $150,132

The accompanying notes are an integral part of these financial statement. 
                               F-19
<PAGE>
CONTOUR MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation - 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 AmeriDyne Corporation (AmeriDyne), collectively referred to as "the 
Company."  All material intercompany accounts and transactions have been 
eliminated in the consolidation.  CMI is a majority owned subsidiary of 
Retirement Care Associates, Inc. (Parent Company).

Inventories - Inventories are valued at the lower of cost (first-in,
first-out) or market.  AmeriDyne inventories are valued at the lower of
average cost or market.

Property and Equipment - Property and equipment are stated at cost.  
Depreciation is computed over the estimated useful lives of the assets by 
accelerated methods for financial reporting and income tax purposes.

Goodwill - The Company has classified as goodwill the cost in excess of fair
value of the net assets (including tax attributes) of AmeriDyne acquired in a
purchase transaction.  Goodwill is being amortized on the straight-line method
over 40 years.  Amortization charged to continuing operations amounted to 
$11,261 for the year ended June 30, 1996.  The Company periodically reviews 
goodwill to assess recoverability, and any impairment would be recognized in 
operating results if a permanent diminution in value were to occur.

Offering Costs - Fees, costs and expenses related to offerings of securities
are deferred and charged against the proceeds therefrom or, if the offering is
unsuccessful, charged to operations.  Costs of $257,185 related to a proposed
public offering were deferred at December 31, 1993 and charged to operations
in the second quarter of 1994, when the offering was abandoned.  Deferred
costs at December 31, 1994, related to the private placement discussed in Note
9, were charged against the proceeds therefrom in 1995.

Change in Method of Accounting for Income Taxes - 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 carryforwards.  Measurement of deferred income tax is based on
enacted tax laws including tax rates, with the measurement of deferred income
tax assets being reduced by available tax benefits not expected to be
realized.

Revenue Recognition - Sales are recognized upon shipment of products to
customers.

Earnings (Loss) Per Share - Earnings (loss) per common share are based on the
weighted average number of common shares outstanding and dilutive common stock
equivalent shares outstanding during each period, after giving effect to the
one-for-thirteen reverse stock split which occurred in 1993, and the
1.05-for-1 forward stock split which occurred in 1996.  Common stock
equivalents for 1996, 1995, 1994 and 1993 have not been included, since the
effect would be antidilutive.  Cumulative dividends in arrears of $96,000 and
$32,000 related to the Company's Class A preferred stock (see Note 9) have
been deducted from 1996 and 1995 net income for the calculation of earnings
per common share, respectively.
                               F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

1.  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, Continued:

Change in Year-End - The Company changed its fiscal year-end from December 31
to June 30 during 1995.  Accordingly, the June 30, 1995 statements of
operations, stockholders' equity and cash flows are for the six months then
ended.

Use of Estimates - The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of
consolidated assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements.  Estimates
also affect the reported amounts of consolidated revenues and expenses during
the reporting period.  Actual results could differ from those estimates.

New Pronouncements - The Financial Accounting Standards Board has released
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."  SFAS No.121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.  This standard would be effective for the
company's fiscal year ended June 30, 1997.

The Financial Accounting Standards Board also released SFAS No. 123,
"Accounting for Stock Based Compensation."  SFAS No. 123 encourages, but does
not require, companies to recognize compensation expense based on the fair
value of grants of stock, stock options, and other equity investments to
employees.  Although expense recognition for employee stock-based compensation
is not mandatory, SFAS No. 123 requires that companies not adopting must
disclose pro forma net income and earnings per share.  The Company will
continue to apply the prior accounting rules and make pro forma disclosures. 
This standard would be effective for the Company's fiscal year ending June 30,
1997.

2.   ORGANIZATION AND BUSINESS ACQUISITION:

Contour Fabricators, Inc., incorporated in March 1974 and located in Grand 
Blanc, Michigan, manufactures orthopedic devices used in rehabilitative
therapy procedures and positioning aids for imaging procedures.  Contour
Fabricators of Florida, Inc., incorporated in December 1984 and located in St.
Petersburg, Florida, manufactures disposable medical products, which consist
primarily of plastic and foam items for use in surgical and other special
medical procedures. 

Contour Medical, Inc. (formerly Associated Healthcare Industries, Inc.) was
incorporated in Nevada in April 1987 as a "blank check" company and in 1989
conducted an initial public offering.  In May 1993, effective as of January 1,
1993, the stockholders of CFI and CFFI received, in exchange for all their
shares, the following from CMI:  1,000,000 shares of Class D redeemable 
preferred stock, 666,669 shares of Class C convertible preferred stock and 
666,666 Class D warrants.  Through December 31, 1992, CMI was a development 
stage company in the health care industry.  As a result of this acquisition,
the stockholders of CFI and CFFI had effectively acquired CMI and control 
thereof.  Accordingly, this acquisition was accounted for as a reverse 
acquisition and the financial statements have been prepared as if the 
entities had operated as a single entity effective as of January 1, 1993.  
The operating results of CMI are included in the accompanying consolidated 
financial statements since January 1, 1993. 
                               F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

2.   ORGANIZATION AND BUSINESS ACQUISITION, Continued:

Beginning in 1995, CMI established a medical supply distribution business to
service Parent Company health care facilities.  CMI also distributes medical
supplies to other nursing home operators and health care providers.

3.   RELATED PARTY TRANSACTIONS:

During 1995, CMI began distributing medical supplies to health care facilities
owned, leased or managed by the Parent Company.  Sales to these facilities
approximated $5,456,000 for the year ended June 30, 1996, and $1,426,000 for
the six-month period ended June 30, 1995.  Trade accounts receivable of 
approximately $1,918,000 and $943,000 related to these health care facility 
sales are outstanding as of June 30, 1996 and 1995, respectively.  
Additionally, the Company had an outstanding loan receivable due from its 
Parent Company of approximately $619,000 and $1,169,000 as of June 30, 1996 
and 1995, respectively, which is due on demand with no stated interest rate.

4.   INVENTORIES:

Inventories at June 30, 1996 and 1995 consisted of the following:

                                                 1996              1995       
     Raw materials                         $    330,699      $    259,952 
     Work in process                             96,647            58,704 
     Finished goods                           2,449,446           978,738 
                                           $  2,876,792      $  1,297,394 

All inventories are pledged as collateral (see Note 6).

5.   PROPERTY AND EQUIPMENT:

Property and equipment at June 30, 1996 and 1995 consisted of the following:
            
                             Useful Lives           1996             1995      
                                                                     
Land                                            $    50,000      $    50,000
Building                       5-45 yrs.            596,247          596,247 
Machinery and equipment         3-7 yrs.          1,798,520        1,034,568 
Furniture and fixtures          5-7 yrs.            146,536          124,651
Leasehold improvements            5 yrs.            251,352           13,923
Vehicles                        3-5 yrs.             72,245            9,109 
                                                  2,914,900        1,828,498
Less accumulated depreciation                     1,691,705        1,236,255 
                                                $ 1,223,195      $   592,243 

All property and equipment are pledged as collateral (see Note 6).

6.   NOTES PAYABLE:

Notes payable at June 30, 1996 and 1995 consisted of the following:
                               F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6.  NOTES PAYABLE, Continued:
                                                        1996          1995
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  $    300,000
                                                                       
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 accounts 
receivable, inventory, equipment and real 
property                                                496,171       182,622 
                                                                       
Mortgage payable to bank, bearing interest
at 8.58%, principal and interest of $6,793
due monthly through December 2003, 
collateralized by accounts receivable, 
inventory, equipment and real property                  456,233       491,662
                                                                     
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 accounts receivable, 
inventory, equipment and real property                   64,284        78,571 
                                                                      
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             0 

Note payable to bank, interest at prime plus
1% (10% at June 30, 1995), principal and
interest of $1,667 due monthly through
August 1996, collateralized by accounts
receivable, inventory and equipment                           0        23,333 
                                                                      
Note payable to bank, interest at 8.75%, 
principal and interest at $1,282 due
monthly through April 2001, collateralized 
by equipment                                             60,436             0
                                                                      
Borrowings under  $250,000 line of credit, 
interest at prime plus 1% (10% at June 30, 
1995) payable monthly, collateralized by 
accounts receivable and inventory                             0       245,600 
                                                                       
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 Retirement Care Associates, Inc.      433,535             0
                               F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6.  NOTES PAYABLE, Continued:

Note payable to leasing institution, interest 
at 14.6%, monthly installments of $309 plus 
sales tax.  Matures June 1997, collateralized 
by computer equipment                                     2,924             0 
                                                                      
Note payable to equipment company, interest at 
11%, monthly installments of $533 including 
interest.  Matures December 1997, 
collateralized by equipment                               8,805             0 

Note payable to stockholder, interest at 10%, 
principal and interest of $5,693, due monthly 
through March 1999.                                $    163,646        $    0 
                                                                       
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 Retirement Care Associates, Inc.           38,924             0
                                                                      
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 Retirement Care Associates, Inc.          212,613             0 

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 Retirement Care Associates, Inc.          958,000             0

                                                      3,178,130     1,321,788 

Less current maturities                              (1,825,193)     (414,077) 
                                                                      
                                                  $   1,352,937   $   907,711 

Certain of the above agreements contain financial and operating covenants,
including requirements that the Company maintain certain net worth levels, and
current and debt-to-net worth ratios.  The Company was in compliance with all
debt covenants as of June 30, 1996.

The aggregate maturities of long-term debt are as follows as of June 30, 1996:
                                                                       
               1997                               $    1,825,193
               1998                                      468,665              
               1999                                      303,777              
               2000                                      491,884              
               2001                                       83,674
                               F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6.  NOTES PAYABLE, Continued:

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 these loans
has been estimated to be approximately equal to their carrying value.

7.   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 June 30, 1996.

               1997                                     $    389,974 
               1998                                          412,224 
               1999                                          385,974 
               2000                                          307,224 
               2001                                          305,062 

Total rental expense was approximately $349,600, $145,500, $203,000, and 
$189,500 for the year ending June 30, 1996, the six-month period ended June 
30, 1995, and the years ended December 31, 1994 and 1993, respectively.

Employment Agreement - The Company has entered into an employment agreement
with a key executive for a five-year period ending in 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."

The components of the provisions for income taxes for the year ended June 30,
1996 are as follows:
                               F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

8.  INCOME TAXES, Continued:

     Current:
       Federal                            $  161,951
       State                                  28,101

         Total current                       190,052

     Deferred:
       Federal                               104,266
       State                                  17,848

         Total deferred                      122,114

         Total tax provision              $  312,166

Deferred tax assets for the year ended June 30, 1996 are as follows:

     Deferred tax assets:
       Allowance for bad debts            $  164,048
       Net operating losses                  355,108

         Total gross deferred tax assets     519,158

     Less valuation allowance               (355,108)

         Net deferred tax assets          $  164,048

As of June 30, 1996, the Company had net operating loss carryforwards for tax
purposes, expiring during the years 2007 and 2009, of approximately $944,000,
which includes approximately $516,000 attributable to Contour Medical, inc. 
(CMI) 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 decreased approximately
$112,000 during 1996.

The income tax benefit arising from any utilization of the net operating
losses attributable to CMI will be credited to additional paid-in capital when
recognized.  During 1996, the income tax benefit of utilization of net
operating losses attributable to CMI of approximately $126,000 were credited
to paid-in capital.

The following summary reconciles differences from taxes at the federal
statutory rate with the effective rate:
                               F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

8.  INCOME TAXES, Continued:
                                            Six
                                  Year     Months
                                  Ended     Ended
                                 June 30,  June 30,   Year Ended December 31,
                                   1996      1996       1994         1993
Taxes on Income (benefit)
  at statutory rate               34.00%     34.00%    (34.00)%     (34.00)%
State income taxes, net of
  federal tax benefit              3.60%      3.10%         0          1.00%
Carryforward of net
  operating loss                      0     (9.90)%         0             0
Carryback of net
  operating loss                      0          0          0        (8.30)%
Losses not available for
  carryback                           0          0      34.00%            0
Other                            (0.04)%      5.00%         0             0

                                 37.56%      32.20%      0.00%      (41.30)%

9.   CAPITAL STOCK:

Stock Bonus Plan - In March 1993, the Company adopted a non-qualified employee
stock bonus plan.  The Plan provides for the granting of up to 1,000,000
options for the purchase of the Company's common stock to eligible employees
at purchase prices of at least $.01 per share.  Options awarded under the Plan
vest over a three-year period from the date of grant and are exercisable over
a five-year period from the date of grant.

Changes in options outstanding are summarized as follows:
                                                              Option Price
                                                    Shares      per Share      

     Balance, January 1, 1993                       15,386        $1.30 
       Granted                                     250,000        $2.00 
                                                   
     Balance, December 31, 1993                    265,386      $1.30-$2.00 
       Granted                                     100,000        $2.25 
                                                                       
     Balance, December 31, 1994                    365,386      $1.30-$2.25 
       Granted                                      50,000        $3.90 
       Exercised                                   (15,385)       $1.30 
       Canceled                                         (1)       $1.30 
                                                                       
     Balance, June 30, 1995                        400,000      $2.00-$3.90 
       Granted                                      45,000        $4.11 
       Exercised                                   (25,000)       $2.00 
       Stock split                                  23,500                     
                                             
     Balance, June 30, 1996                        443,500      $1.88-$4.11 

All of the above options were granted with an exercise price above fair market
value at the date of grant.  In addition, 351,249 options were exercisable at
June 30, 1996.  In addition, 959,615 common shares are reserved for future
issuance under this plan.
                               F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

9.  CAPITAL STOCK, Continued:

Stock Option Plan - In February 1996, the Company adopted the 1996 Stock
Option Plan (the "1996 Plan").  The 1996 Plan must be approved by the
Company's shareholders within 12 months of February 1, 1996.  The 1996 Plan
allows the Board of Directors to grant stock options from time to time to
employees, officers and directors of the Company and consultants to the
Company.  The Board of Directors has the right to determine, at the time of
option, whether the option will be an Incentive Stock Option or an option
which is not an Incentive Stock Option.  Vesting provisions are determined by
the Board of Directors at the time the options are granted.  The 1996 Plan
provides for the granting of up to 315,000 options for the purchase of the
Company's common stock.

Changes in options outstanding are summarized as follows:
                                                           Option Price  
                                        Shares              per Share
  
     Balance, June 30, 1995                 -                     -
          Granted                       160,000             $4.643-$5.75 
          Stock split                     4,250                           
                                                 
     Balance, June 30, 1996             164,250             $4.643-$5.75 

All of the above options were granted with an exercise price above fair market
value at the time of grant.  In addition, none of the options were exercisable
at June 30, 1996 and 315,000 common shares are reserved for future issuance 
under this plan.

Stock Split - In March 1993, the Board of Directors authorized a 1-for-13 
reverse stock split of its common stock effective June 30, 1993.  All common
shares and per share amounts have been retroactively adjusted to give effect 
to the reverse stock split.  In February 1996, the Board of Directors 
authorized a 1.05-for-1 forward stock split of its common stock effective 
March 1996.  All common shares and per share amounts have been retroactively
adjusted to give effect to the forward stock split.

Stock Warrants - At June 30, 1996, the Company had 969,225 stock warrants
outstanding.  Information relating to these warrants is summarized as follows: 

                                                   Number of
                                                     Common      Exercise
                     Expiration       Number of    Shares Per    Price Per
   Type                 Date           Warrants     Warrant      Warrant       
                      
 Class B              July 1996        119,225        1.05        $4.50 
 Class C              Feb. 1999        300,000        1.05        $4.50 
 Consultant           Oct. 1997        300,000        1.05        $1.50 
 Consultant           Oct. 1999        200,000        1.05        $3.00
 Consultant           Oct. 1997         50,000        1.05        $3.00 

The Class B warrants are redeemable by the Company under certain
circumstances.  Of the total outstanding warrants, 969,225 were exercisable at
June 30, 1996.  In addition, 1,017,686 common shares are reserved for future
issuance related to these warrants.
                               F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

9.  CAPITAL STOCK, Continued:

Change of Control - On September 30, 1994, Retirement Care Associates, Inc.
(Retirement Care) acquired 889,002 shares of the Company's outstanding common
stock and 2,000,000 shares of the Company's Class One Convertible Preferred 
Stock from three persons who were officers and directors of the Company.  
Subsequently, Retirement Care converted the Class One Convertible Preferred 
Stock into 2,100,000 shares of common stock.

Class One Convertible Preferred Stock - During 1994, the holders of 1,000,000
shares of Class D Redeemable Cumulative Preferred Stock exchanged their shares
for 2,000,000 shares of newly created no par Class One Convertible Preferred
stock.  The Class One Preferred Stock had a liquidation preference of $3.00
per share.  Each Class One Preferred Share was convertible into 1.05 shares of
the Company's common stock.  All 2,000,000 shares of Class One Preferred Stock
were converted into 2,100,000 shares of common stock in November 1994.

Class A Convertible Preferred Stock - During 1994, 99,525 shares of Class A
Convertible Preferred stock were converted into 230,141 shares of common
stock.  The conversion included a stock dividend of $14,777 for dividends in
arrears through the date of conversion.

Class B Convertible Preferred Stock - During 1994, two shares of Class B
Convertible Preferred Stock were converted into 35,000 shares of common stock.

Class D Redeemable Cumulative Preferred Stock - In April 1994, 74,176 shares
of Class D Redeemable Cumulative Preferred Stock and 148,345 Class D Warrants
were converted into 250,354 shares of common stock and 119,225 Class B
warrants.  In addition, 1,000,000 shares of Class D Redeemable Cumulative
Preferred stock and 846,667 Class D warrants were converted into 2,000,000
shares of a new Class One Convertible Preferred Stock.  In November 1994, the
Class One shares were converted into 2,100,000 shares of common stock.  These
conversions included a stock dividend of $47,794 for dividends in arrears
through the date of conversion.

Class E Convertible Preferred Stock - In April 1994, 172,986 shares of Class E
Convertible Preferred Stock were converted into 181,635 shares of common
stock.

Series A Convertible Preferred Stock and Class C Warrants - During 1995, the
Company completed a private placement of its securities consisting of 60 units
sold at a price of $40,000 per unit.  Each unit sold in the private placement
consisted of 10,000 shares of the Company's Series A Convertible Preferred
Stock and 5,000 Class C Redeemable Common Stock Purchase Warrants.  Each share
of Series A Preferred Stock has a $4 liquidation preference and is convertible
into 1.05 shares of the Company's common stock beginning in May 1996. 
Additionally, the holders of the Series A Preferred Stock are entitled to
receive annual cash dividends (payable semiannually) of 4% of the liquidation
preference of the stock, or $.16 per share, on a cumulative basis from the
date of issuance.  At June 30, 1996, cumulative dividends in arrears related
to the Series A Preferred Stock amounted to $128,000 ($.21 per share).  The
Series A Preferred Stock may be redeemed by the Company at $4 per share plus
dividends in arrears beginning in May 1999.  In addition, 1,328,250 common
shares are reserved for future issuance upon conversion of the total
authorized Series A preferred stock. 
                               F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

9.  CAPITAL STOCK, Continued:

Preferred Stock Cancellation - Subsequent to the conversion of the preferred
stock classes, the Company canceled the Class A, Class B, Class C, Class E and
Class One Convertible Preferred Stock and the Class D Redeemable Convertible
Preferred Stock.

Issuance of Stock in Satisfaction of Loans - During the year ended December
31, 1993, the Company issued 180,000 shares of Class C Convertible Cumulative
Preferred Stock in satisfaction of $480,000 of loans payable to stockholders. 
All of the Class C Preferred Stock of 846,669 shares were converted into
889,002 shares of common stock in 1993.

Shares Reserved - At June 30, 1996, the Company has reserved common stock for
future issuance under all of the above arrangements amounting to 3,620,551.

10.  MAJOR CUSTOMERS:

Sales to significant customers were as follows:

     Year ending December 31,       Number of Customers       Sales Volume
             1994                            1                $    531,000
             1993                            2                     692,000 

As a result of the increased sales volume due to sales to related parties of
approximately $5,456,000 and $1,426,000 (see Note 3), there were no sales to
significant other customers during the year ended June 30, 1996 and the six-
month period ended June 30, 1995, respectively.
                               F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

11.  SUPPLEMENTAL CASH FLOW INFORMATION:

                                              Six
                                 Year        Months
                                 Ended        Ended
                                June 30,     June 30,  Year Ended December 31,
                                  1996        1996         1994        1993
                  
Cash paid for interest         $  170,951    $39,065     $ 53,627    $ 65,251 
                                                        
Cash paid for income taxes     $      930    $ 2,500     $  5,000    $ 40,054 

  Noncash financing and
    investing activities:                                                      
                                 
     Issuance of 369,618
       shares of common stock
       for purchase of Ameri-
       Dyne Corporation  (see 
       Note 12)                $2,100,000    $     0     $      0    $      0 

     Conversion of 1,074,176
       shares of Class D pre-
       ferred stock and
       995,012 Class D 
       Warrants into 250,372 
       shares of common stock 
       and 2,000,000 shares of
       Class One preferred 
       stock (see Note 9)               0          0     400,500            0

     Issuance of 180,000 
       shares of Class C pre-
       ferred stock as payment
       of stockholder loans
       (see Note 9)                     0          0           0      480,000 

     Deferred offering costs
       charged to additional
       paid-in capital as an 
       offset to private 
       placement offering 
       proceeds (see Note 9)            0     11,444           0            0 

                               $2,100,000    $11,444    $400,500     $480,000 

As discussed in Note 2, the stockholders of CFI and CFFI exchanged all of
their shares of stock for shares of stock of CMI.  As a result of this
transaction,  the following assets and liabilities of CMI were acquired
effective January 1, 1993 which were recorded at predecessor basis:

     Cash                                           $       778
     Other assets                                        54,897
     Accounts payable and accrued expenses             (137,372)
                                         
     Capital deficit assumed                        $   (81,697)

                               F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

12.  AMERIDYNE 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.  The consolidated statement of income includes the results of
operations of AmeriDyne for the period from March 1, 1996 through June 30,
1996.

The following unaudited pro forma consolidated results of operations presents
information as if the acquisition had occurred at the beginning of the fiscal
year.  The pro forma information is provided for information purposes only. 
It is based on historical information and does not necessarily reflect the
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined enterprise.

                                                  Unaudited Year Ended
                                                     June 30, 1996             

     Sales                                          $ 21,406,882
     Net income                                     $    348,880
     Per share                                      $       0.05        

13.  SUBSEQUENT EVENTS:

On July 12, 1996, the Company completed a $5 million debenture placement. 
These debentures bear interest at 9% per annum and are to be repaid in monthly
installments beginning on July 1, 1999, with full payment due by July 1, 2003. 
The debentures are convertible into shares of the Company's common stock.

On September 20, 1996, the Company replaced all of its existing lines of
credit with a $7 million revolving line of credit, secured by inventory and
accounts receivable, and bearing interest at the 30-day LIBOR rate plus 2%.

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 the
Parent Company. 

The following unaudited pro forma consolidated results of operations presents
information as if the acquisition had occurred at the beginning of the fiscal
year.  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.
                               F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

13.  SUBSEQUENT EVENTS, Continued:
                                                        Unaudited
                                                        Year Ended
                                                       June 30, 1996

          Sales                                        $ 34,333,727
          Net Income                                   $    585,784
          Per share                                    $       0.10
                               F-33
<PAGE>
                               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:  October 14, 1997             By:/s/ Donald F. Fox
                                 Donald F. Fox, President,
                                 Treasurer and Chief Financial Officer