<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

   
                                   FORM 10-Q/A
                                 AMENDMENT NO. 3
                           (Amending Part I - Item 1)
    

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                     For the Quarter Ended December 31, 1996


                           Commission File No. 0-26288


                              CONTOUR MEDICAL, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

           Nevada                                      77-0163521
------------------------------             ----------------------------------
(State or Other Jurisdiction of           (IRS Employer Identification Number)
Incorporation or Organization)


                                6025 Shiloh Road
                            Alpharetta, Georgia 30005
                     ----------------------------------------
                    (Address of Principal Executive Offices)


                                (770) 886-2600
               ----------------------------------------------------
               (Registrant's Telephone Number, Including Area Code)





Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes [ X ]   No [   ]

There were 6,046,793 shares of the Registrant's $.001 par value Common Stock
outstanding as of December 31, 1996.






<PAGE>   2

                              CONTOUR MEDICAL, INC.

                                   FORM 10-Q/A

                                      INDEX
                                     -------


Part I.  Financial Information
------   ---------------------

Item 1.  Financial Statements                                            Page

         Consolidated Balance Sheets as of December 31, 1996
         and June 30, 1996                                                3-4

         Consolidated Statements of Operations for the Three
         and Six Months Ended December 31, 1996 and 1995                  5-6

         Consolidated Statement of Stockholders' Equity
         for the Six Months Ended December 31, 1996                       7-8

         Consolidated Statements of Cash Flows for the
         Six Months Ended December 31, 1996 and 1995                     9-10

         Notes to Consolidated Financial Statements                     11-16
   
         Signature                                                         
    
                                                                           17
                                    -2-


                                                                             





<PAGE>   3
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet



<TABLE>
<CAPTION>
                                            December 31,    June 30,
                                                1996          1996
                                            ------------   -----------
<S>                                         <C>            <C>       
                                             (Unaudited)

ASSETS

Current:
  Cash                                      $   184,382    $   146,219
  Accounts receivable - trade
    Related parties (Note 4)                  2,095,575      1,918,000
    Other                                     8,116,172      2,527,676
  Inventories (Note 5)                        6,509,354      2,876,792
  Refundable income taxes                            --         21,406
  Prepaid expenses and other                    803,937         51,519
  Due from parent (Note 4)                      974,612        618,897
                                            -----------    -----------
      Total Current Assets                   18,684,032      8,160,509
                                            -----------    -----------
Property and Equipment, less
accumulated depreciation (Note 6)             1,915,935      1,223,195
                                            -----------    -----------
Other Assets:
  Goodwill                                   10,116,391      1,286,165
  Deposit on equipment                          577,245        416,184
  Other                                         469,250        172,215
                                            -----------    -----------
      Total Other Assets                     11,162,886      1,874,564
                                            -----------    -----------
                                            $31,762,853    $11,258,268
</TABLE>




          See accompanying notes to consolidated financial statements.


                                      -3-





<PAGE>   4
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet




<TABLE>
<CAPTION>
                                             December 31,     June 30,
                                                1996            1996
                                             ------------   ------------
<S>                                          <C>            <C>
                                             (Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Notes payable to banks -
   credit lines (Note 7)                     $ 3,815,722    $ 1,391,535
  Accounts payable                             3,228,155      2,036,652
  Accrued expenses                               906,700        366,716
  Current maturities of long-term
   debt (Note 7)                              10,990,700        433,658
                                             -----------    -----------
      Total Current Liabilities               18,941,277      4,228,561

Long-term debt, less current
maturities (Note 7)                            1,008,141      1,352,937
                                             -----------    -----------
      Total Liabilities                       19,949,417      5,581,498

Convertible debentures, 9% interest
due monthly through July 1, 2003               5,000,000             --
                                             -----------    -----------
Stockholders' Equity:
  Preferred stock - Series A conver-
   tible, $.001 par value, shares
   authorized 1,265,000; issued
   600,000, outstanding 185,000 and
   600,000 respectively, at aggregate
   liquidation preference                        794,281      2,528,000
  Common stock $.001 par - shares
   authorized 76,000,000; issued
   6,046,793 and 4,802,280 (net of
   $765 discount)                                  5,282          4,449
  Additional paid-in capital                   5,696,369      2,911,696
  Retained earnings                              317,504        232,625
                                             -----------    -----------
      Total stockholders' equity               6,813,436      5,676,770

                                             $31,762,853    $11,258,268
</TABLE>


         See accompanying notes to consolidated financial statements.


                                      -4-





<PAGE>   5
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations



<TABLE>
<CAPTION>
                                                   Six Months Ended
                                            December 31,      December 31,
                                                1996             1995
                                            ------------     ------------
<S>                                         <C>              <C> 
                                            (Unaudited)      (Unaudited)

SALES TO NON-RELATED PARTIES                $22,967,078      $3,097,349

SALES TO RELATED PARTIES                      2,948,238       1,653,000
                                            -----------      ----------
NET SALES                                    25,915,316       4,750,349

COST OF SALES                                18,471,484       3,420,339

GROSS PROFIT                                  7,443,832       1,330,010

OPERATING EXPENSES                            6,141,502         984,944

OTHER INCOME (EXPENSE)                       (1,133,391)          3,220
                                            -----------      ----------

INCOME BEFORE INCOME TAXES                      168,939         348,286

INCOME TAX EXPENSE                               64,197         118,417
                                            -----------      ----------

NET INCOME                                  $   104,742      $  229,869

NET INCOME PER COMMON SHARE                 $       .02      $      .05

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES                                        5,838,369       4,613,841

NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENTS                           $       .01

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS           8,961,026
</TABLE>







          See accompanying notes to consolidated financial statements.


                                      -5-





<PAGE>   6
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations



<TABLE>
<CAPTION>
                                                 Three Months Ended
                                            December 31,    December 31,
                                               1996             1995
                                            -----------     ------------
<S>                                         <C>             <C>
                                            (Unaudited)      (Unaudited)

SALES TO NON-RELATED PARTIES                $11,890,548      $ 1,605,220

SALES TO RELATED PARTIES                      1,112,238          907,000
                                            -----------      -----------
NET SALES                                    13,002,786        2,512,220

COST OF SALES                                 9,197,949        1,831,267
                                            -----------      -----------
GROSS PROFIT                                  3,804,837          680,953

OPERATING EXPENSES                            2,957,419          495,343

OTHER INCOME (EXPENSE)                         (305,741)             132
                                            -----------      -----------
INCOME BEFORE INCOME TAXES                      541,677          185,742

INCOME TAX EXPENSE                              205,837           63,152
                                            -----------      -----------
NET INCOME                                  $   335,840      $   122,590

NET INCOME PER COMMON SHARE                 $       .06      $       .03

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES                                        5,959,837        4,613,841

NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENTS                           $       .04

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE EQUIVALENTS           8,961,026
</TABLE>


















         See accompanying notes to consolidated financial statements.


                                      -6-




<PAGE>   7
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                 Consolidated Statement of Stockholders' Equity



<TABLE>
<CAPTION>
                                                           Additional
                                    Common Stock            Paid-in
                                  Shares     Amount         Capital
                                 ---------   ------        ----------
<S>                              <C>         <C>           <C>       
Balance, June 30, 1996           5,214,223   $4,449        $2,911,696

Exercise of common stock
 warrants                          296,820      297           625,209

Conversions of preferred
 stock                             415,000      415         1,659,564

Conversion dividend                 20,750       21                --

Preferred dividends in
 arrears                                --       --                --
                                                                 
Stock issued for guarantee         100,000      100           499,900

Net income                              --       --                --

Balance, December 31, 1996       6,046,793   $5,282        $5,696,369

</TABLE>
























          See accompanying notes to consolidated financial statements.


                                      -7-





<PAGE>   8
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                 Consolidated Statement of Stockholders' Equity




<TABLE>
<CAPTION>
                                   Convertible
                                 Preferred Stock
                                 -----------------        Retained
                                Shares       Amount       Earnings
                               --------     --------     -----------
<S>                            <C>         <C>           <C>      
Balance, June 30, 1996          600,000    $ 2,528,000    $ 232,625

Conversions of preferred
stock                          (415,000)    (1,660,000)          --

Payment of Preferred Dividend        --        (88,519)      (5,063)

Preferred dividends in
 arrears                             --         14,800      (14,800)

Net income                           --             --      104,742

Balance, December 31, 1996      185,000    $   794,281    $ 317,504
</TABLE>














          See accompanying notes to consolidated financial statements.


                                      -8-






<PAGE>   9
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows




<TABLE>
<CAPTION>
                                                  Six Months Ended
                                            December 31,     December 31,
                                               1996             1995
                                            ------------     ------------
<S>                                         <C>              <C>
                                            (Unaudited)      (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)                          $   104,742       $ 229,869

Adjustments to reconcile net income 
  (loss) to net cash provided (used) by
   operating activities:

   Depreciation & Amortization                 385,807          70,447
   Tax benefit from NOL                             --         118,417

     (Increase) decrease in accounts
       receivable                           (5,766,071)       (422,373)
     (Increase) decrease in inventories     (3,632,562)       (338,279)
     (Increase) decrease in other
       current assets and other assets      (9,540,741)        (68,834)
     Increase (decrease) in accounts
       payable                               1,191,503         188,124
     Increase (decrease) in accrued
       expenses and other liabilities          539,984          55,996
                                           -----------       ---------
       Net cash provided by operating
         activities                        (16,717,338)       (396,502)

CASH FLOW FROM INVESTING ACTIVITIES:

  Acquisition of equipment                  (1,150,723)       (412,497)
     (Increase)Decrease in due from           (355,715)        227,388
        Parent                             -----------       ---------

      Net cash used by investing
        activities                          (1,506,438)       (185,159)

</TABLE>














         See accompanying notes to consolidated financial statements.


                                      -9-





<PAGE>   10
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                   Six Months Ended
                                             December 31,    December 31,
                                                1996             1995
                                            ------------     ------------
                                            (Unaudited)      (Unaudited)

<S>                                         <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES:

Acquisition Notes Issued                    $ 10,850,000      $      --
Convertible Debentures Issued                  5,000,000             --
Net borrowing (payments) on loans              1,786,433        211,619
Proceeds from exercise of options                     --         50,000
Payment of short-swing liability
  by shareholder                                      --         36,513
Exercise of Warrants                             625,506             --
                                            ------------      ---------

Net cash provided by financing
  activities                                  18,261,939        298,150
                                            ------------      ---------
NET INCREASE (DECREASE) IN CASH                   38,163        (53,642)

CASH BEGINNING OF PERIOD                         146,219         96,235
                                            ------------      ---------

CASH END OF PERIOD                          $    184,382      $  42,593

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION AND NON-CASH
ACTIVITIES:

  Cash paid for interest                    $    362,244      $  66,061

  Cash paid for income tax                  $         --      $     930
</TABLE>















         See accompanying notes to consolidated financial statements.


                                      -10-





<PAGE>   11
                     CONTOUR MEDICAL, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Unaudited)

1.       BASIS OF PRESENTATION

         The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included. It is suggested that these condensed financial statements be read
in conjunction with the financial statements and notes thereto included in the
June 30, 1996 audited financial statements for Contour Medical, Inc. The results
of operations for the periods ended December 31, 1996 and 1995 are not
necessarily indicative of the operating results for the full year.

   
         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Contour Fabricators, Inc. ("CFI"),
Contour Fabricators of Florida, Inc. ("CFFI") and, since March 1, 1996,
AmeriDyne Corporation ("AmeriDyne"), and effective July 1, 1996, Atlantic
Medical Supply Company, Inc. ("Atlantic") collectively referred to as the
Company. All material intercompany accounts and transactions have been
eliminated. The Company is a majority-owned subsidiary of Retirement Care
Associates, Inc. ("Parent").
    

   
         On March 1, 1996, the Company acquired AmeriDyne through a merger which
was accounted for as a purchase. The Company issued 369,619 shares of its common
stock and paid $250,000 to the sole stockholder of AmeriDyne in connection with
this purchase.
    

         On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic, 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 (the "Atlantic Notes") for
all of the outstanding stock of Atlantic. The Atlantic 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 Atlantic Notes, they are convertible into shares of common
stock of Parent.

         In addition, on August 9, 1996, the Company acquired the remaining
minority interest of Facility Supply, Inc., a majority owned subsidiary of
Atlantic. The acquisition was made retroactively to July 1, 1996. The Company
paid $50,000 in cash and $350,000 in promissory notes (the "Facility Notes") for
the remaining outstanding stock of Facility Supply, Inc. The Facility 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 Facility Notes, they are convertible into
shares of common stock of Parent.

         In return for the Parent's guarantee of the Atlantic and Facility
Notes, with which the Company could not have completed the Atlantic acquisition,
the Company has agreed to compensate the Parent $500,000, such amount to be
satisfied by the issuance of 100,000 shares of Contour Common Stock valued at
$5.00 per share. The Company believes this valuation represents market value and
approximates the average trading price of Contour Common Stock during the time
the Atlantic acquisition was negotiated.

   
    

   
2.       RESTATEMENT:

         During Contour's fiscal year 1997 year-end audit, certain adjustments
to Contour's previously issued financial statements were discovered to be
necessary. These adjustments, together with additional amounts, have been
applied to the financial statements of Contour for the quarter ended December
31, 1996 as restatements and corrections. The following table gives a brief
description of such restatements and corrections:

<TABLE>
<CAPTION>
Description:                                             Amount:
------------                                             -------
<S>                                                     <C> 
Accrual of interest on Atlantic
   Medical Acquisition Notes                            $205,634
Less:  Adjustment to Income Taxes                       $(78,771)

Decrease in Net Income:                                 $126,863

Decrease in Net Income per Share:                       $    .02
</TABLE>

Contour further advises the Staff that no adjustments or restatements of
Contour's financial statements for the quarter ended March 31, 1997 were
required under APB 20
    

                                      -11-
<PAGE>   12
3.       CHANGE IN METHOD OF ACCOUNTING FOR TAXES AND INCOME

         Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
recognition of estimated income taxes payable or refundable on income tax
returns for the current year and for the estimated future tax effect
attributable to temporary differences and carry forwards. Measurement of
deferred income tax assets being reduced by available tax benefits not expected
to be realized.

   
4.       CHANGE IN YEAR END
    

         The Company changed its fiscal year end from December 31 to June 30
during 1995. Atlantic also changed its fiscal year end from December 31 to June
30 during 1996.

   
5.       RELATED PARTY TRANSACTIONS
    

         During 1995, the Company began distributing medical supplies to health
care facilities owned, leased or managed by the Parent. Sales to these
facilities approximated $2,948,238 for the six month period ended December 31,
1996, and $1,112,238 for the three month period ended December 31, 1996. Trade
accounts receivable of $2,095,575 and $1,918,000 were outstanding as of December
31, 1996 and June 30, 1996, respectively, as related to health care facility
sales to the Parent. Additionally, the Company had an outstanding loan
receivable due from its Parent of approximately $975,000 at December 31, 1996,
which is due within 45 days of advance with interest at prime and $619,000 at
June 30, 1996, which is due on demand with no stated interest rate.

   
6.       INVENTORIES
    

         Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                       December 31,      June 30,
                                           1996            1996
                                       -----------      ----------
                                       (Unaudited)      (Unaudited)
<S>                                    <C>              <C>
      Raw Materials                     $  330,823      $  330,699
      Work in process                       62,985          96,647
      Finished goods                     6,115,546       2,449,446
                                        ----------      ----------
                                        $6,509,354      $2,876,792
</TABLE>

All inventories are pledged as collateral.

   
7.       PROPERTY AND EQUIPMENT
    

         Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                            December 31,        June 30,
                            Useful Lives        1996              1996
                            ------------    ------------       ----------
<S>                         <C>             <C>                <C>
Land & Land Improvements        --           $   59,842        $   50,000
Building                     5-45 years         596,247           596,247
Computer Equipment           3-7  years       1,074,945            --
Machinery and equipment      3-7  years       2,349,616         1,798,520
Furniture and fixtures       5-7  years         234,257           146,536
Leasehold improvements       5    years         290,563           251,352
Vehicles                     3-5  years         188,202            72,245
                                             ----------        ----------
                                              4,793,672         2,914,900
Less accumulated depre-
 ciation                                      2,877,737         1,691,705
                                             ----------        ----------
                                             $1,915,935        $1,223,195
</TABLE>


                                      -12-



<PAGE>   13
Certain property and equipment are pledged as collateral (see Note 8).

   
8.       NOTES PAYABLE
    

         Notes payable at December 31, 1996 and June 30, 1996 consisted of the
following:

<TABLE>
<CAPTION>
                                                December 31,      June 30,
                                                   1996             1996
                                                -----------      ---------
<S>                                             <C>              <C>
Note payable to sellers of Atlantic Medical
Supply Company, Inc. at 7%, principal and
interest due on January 10,1997, in event
of default convertible into common stock
of Parent                                       $10,500,000             --

Note payable to sellers of Facility 
Supply, Inc. at 7%, principal and interest
due on January 10, 1997, in event 
of default convertible into common stock
of Parent.                                          350,000             --

Note payable to bank, interest at prime plus 
1% (9.25% at June 30, 1996), principal of 
$5,000 plus interest due monthly through
June 2000, collateralized by equipment                   --        217,559

Note payable to bank, interest at prime plus 
 .75% (9.00% at June 30, 1996) principal of 
$7,605 plus interest due monthly through 
May 2000, collateralized by equipment and
real property                                       457,251        496,171

Mortgage payable to bank, bearing interest
at 8.58%, principal and interest of
$6,793, due monthly through December 2003,
collateralized by equipment and real property       434,789        456,233

Mortgage payable to bank, interest at prime 
plus .75% (9.00% at June 30, 1996) principal 
of $1,190 plus interest due monthly through 
December 2000, collateralized by equipment and
real property                                        57,141         64,284

Borrowings under $7,000,000 line of credit, 
interest at 30 day libor plus 200bp (7.44% 
at September 30, 1996), payable monthly, 
collateralized by accounts receivable and
inventory. Principal due October 31, 1997         3,815,722             --

Borrowings under $100,000 line of credit, 
interest at prime plus .75% (9.00% 
at June 30, 1996), payable monthly, 
collateralized by accounts receivable,
inventory, equipment, and real property                  --         65,000

Note payable to bank, interest at 8.75%
principal and interest at $1,282 due monthly
through April 2001, collateralized by equipment      55,301         60,436
</TABLE>




                                      -13-
<PAGE>   14
<TABLE>
<S>                                                 <C>           <C>
Borrowings under $500,000 line of credit, 
interest at prime plus .25% (8.5% at June 
30, 1996) payable monthly, collateralized
by accounts receivable, inventory and 
equipment, and guarantees by Parent                          --       433,535

Note payable to leasing institution,
interest at 14.6%, monthly installments of
$309 plus sales tax. Matures June 1997,
collateralized by computer equipment                      1,206         2,924

Note payable to equipment company, interest at
11%, monthly installments of $533 including
interest.  Matures December 1997,
collateralized by equipment                               6,027         8,805

Note payable to stockholder, interest at 10%,
principal and interest of $5,693, due monthly
through March 1999                                      137,126       163,646

Note payable to bank, interest at 9%, principal 
and interest of $3,600 due monthly through May 
1997, collateralized by accounts receivable,
inventory, furniture, fixtures, equipment, 
machinery, bank accounts, and guarantees of
Parent                                                       --        38,924

Note payable to bank, interest at 9%, principal
and interest of $5,266 due monthly through
October 1997, collateralized by accounts 
receivable, inventory, furniture, fixtures, 
equipment, machinery, bank accounts, and
guarantees of Parent                                         --   $   212,613

Borrowings under $975,000 line of credit, interest 
at prime plus 1.25% (9.5% at June 30, 1996). 
Principal is due on demand but no later than May 
15, 1997.  Collateralized by accounts receivable, 
inventory, furniture, fixtures, equipment, 
machinery, bank accounts, and guarantees of
Parent                                                       --       958,000
                                                    -----------   -----------
                                                    $15,814,563   $ 3,178,130
Less current maturities                              14,806,422     1,825,193
                                                    -----------   -----------
                                                    $ 1,008,141   $ 1,352,937
</TABLE>

         Certain of the above agreements contain financial and operating
covenants, including requirements that the Company maintain certain net worth
levels and satisfy current and debt-to-net-worth ratios. The Company was in
compliance with all debt covenants as of December 31, 1996.

         The aggregate maturities of long-term debt are as follows as of
December 31, 1996:

<TABLE>
         <S>                                 <C>
         1997                                $ 11,099,183
         1998                                   3,273,405
         1999                                     303,777
         2000                                     491,884
         2001                                      83,674
</TABLE>




                                      -14-



<PAGE>   15

          Statement of Financial Accounting Standards No. 107, "Disclosure About
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. Fair value is defined as
the price at which a financial instrument could be liquidated in an orderly
manner over a reasonable time period under present market conditions. The rates
of the Company's fixed obligations approximate those rates of the adjustable
loans. Therefore, the fair value of those loans has been estimated to be
approximately equal to their carrying value.

Commitments and Contingencies:

          The Company is obligated under various noncancelable leases for
equipment and office space. Future minimum lease commitments under operating
leases were as follows as of December 31, 1996.

<TABLE>
      <S>                       <C>   
      1997                      $  389,974
      1998                         412,224
      1999                         385,974
      2000                         307,224
      2001                         305,062
</TABLE>

EMPLOYMENT AGREEMENT - The Company has entered into an employment agreement with
a key executive for a five-year period ending June 1998. The agreement provides
for annual base compensation of $100,000.

LITIGATION - During 1994, the Company was a defendant in an employment injury
lawsuit filed by one of its employees. The Company settled this dispute for
approximately $30,000.

The Company was a defendant in a lawsuit filed by one of its former employees
for wrongful discharge of employment. During the year ended December 31, 1993,
the Company settled this dispute for $85,000.

   
9.       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."

   
10.      ACQUISITION:
    

         Effective March 1, 1996, the Company acquired all of the outstanding
common stock of AmeriDyne for approximately $2.475 million in cash and stock.
AmeriDyne distributes medical supplies to hospitals, clinics, physicians,
pharmacies, nursing homes and other health care providers.

         The purchase price exceeded the fair value of the net assets acquired
by approximately $1.3 million. The acquisition was accounted for as a purchase.
The resulting goodwill is being amortized on the straight-line basis over 40
years.

         On August 6, 1996, the Company acquired all of the outstanding stock of
Atlantic. The acquisition was made retroactively to July 1, 1996. The Company
paid $1.4 million in cash and $10.5 million in promissory notes (the "Atlantic
Notes") for all of the outstanding stock of Atlantic. The Atlantic 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 Atlantic Notes, they are convertible into
shares of common stock of Parent.

         In addition, on August 9, 1996, the Company acquired the remaining
minority interest of Facility Supply, Inc., a majority owned subsidiary of
Atlantic.


                                      -15-




<PAGE>   16

         The acquisition was made retroactively to July 1, 1996. The Company
paid $50,000 in cash and $350,000 in promissory notes (the "Facility Notes") for
the remaining outstanding stock of Facility Supply, Inc. The Facility 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 Facility Notes, they are convertible into
shares of common stock of Parent.

         In return for the Parent's guarantee of the Atlantic Notes and Facility
Notes, with which the Company could not have completed the Atlantic acquisition,
the Company has agreed to compensate the Parent $500,000, such amount to be
satisfied by the issuance of 100,000 shares of Contour Common Stock valued at
$5.00 per share. The Company believes this valuation represents market value and
approximates the average trading price of the Company's common stock during the
time the Atlantic acquisition was negotiated.

         The following unaudited pro forma consolidated results of operations
presents information as if the acquisitions had occurred at the beginning of the
fiscal year in 1995. The pro forma information is provided for information
purposes only. It is based on historical information and does not necessarily
reflect the results that would have occurred nor is it necessarily indicative of
future results of operations of the combined enterprise.

<TABLE>
<CAPTION>
                                      Unaudited          Unaudited
                                   Six Months Ended      Year Ended
                                  December 31, 1995     June 30, 1996
          <S>                     <C>                  <C>         
          Sales                     $  23,219,482      $ 34,333,727
          Net Income                $     645,332      $    585,784*
          Per share                 $        0.14      $       0.10

</TABLE>

* Full year earnings reflect a write down of approximately $1.1 million recorded
in Atlantic's historical financial statements for events occurring prior to July
1, 1995.

   
    

                                      -16-



<PAGE>   17
                                   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:  March 11, 1998                    By: /s/ Donald F. Fox
                                            -----------------------------------
                                            Donald F. Fox, President, Treasurer
                                               and Chief Financial Officer
    


                                      -17-