##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to
 Commission File Number 000-05663
 LIBERATOR MEDICAL HOLDINGS, INC.
  NEVADA
    
    87-0267292(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 2979 SE Gran Park Way, Stuart, Florida 34997  (Address of principal executive offices) (Zip Code)
 (772) 287-2414  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
 Class
    
    Outstanding as of May 14, 2009Common Stock, $.001
    
    32,122,266




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    1Item 1. Condensed Consolidated Financial Statements
    
    
    1Balance Sheets as of March 31, 2009 (unaudited) and September 30, 2008
    
    
    1Statements of Operations for the three and six months ended March 31, 2009 and 2008 (unaudited)
    
    
    2Statement of Changes in Stockholders Equity for the six months ended March 31, 2009 (unaudited)
    
    
    3Statements of Cash Flows for the six months ended March 31, 2009 and 2008 (unaudited)
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4T. Controls and Procedures
    
    
    18PART II  OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
 March 31,
    
    
    September 30,2009
    
    
    2008(Unaudited)AssetsCurrent AssetsCash
    
    $
    2,945,510
    
    
    $
    1,173,018Accounts receivable, net of allowance for
doubtful accounts of $2,030,958 and $1,055,606,
respectively
    
    
    3,400,620
    
    
    
    2,405,102Prepaid expenses
    
    
    112,154
    
    
    
    321,182Inventory, net of allowance for obsolete
inventory of $50,000 and $50,000, respectively
    
    
    967,186
    
    
    
    785,884Deferred advertising, current portion
    
    
    1,416,977
    
    
    
    769,851Other
    
    
    32,723
    
    
    
    1,848Total Current Assets
    
    
    8,875,170
    
    
    
    5,456,885Property and EquipmentProperty and Equipment, net of accumulated
depreciation of $848,370 and $714,641,
respectively
    
    
    953,549
    
    
    
    815,833Other AssetsDeferred advertising, net of current portion
    
    
    1,227,044
    
    
    
    660,524Deferred loan costs
    
    
    578,339
    
    
    
    492,821Deposits
    
    
    121,121
    
    
    
    100,089Total Other Assets
    
    
    1,926,504
    
    
    
    1,253,434Total Assets
    
    $
    11,755,223
    
    
    $
    7,526,152Liabilities and Stockholders EquityCurrent LiabilitiesAccounts payable
    
    $
    1,829,735
    
    
    $
    900,448Accrued liabilities
    
    
    386,027
    
    
    
    289,848Stockholder loan
    
    
    1,664,649
    
    
    
    1,664,649Convertible notes payable, net of unamortized
discount of $2,339 and $56,833, respectively
    
    
    794,887
    
    
    
    772,163Capital lease obligations, current portion
    
    
    64,059
    
    
    
    50,816Deferred rent liability, current portion
    
    
    54,226
    
    
    
    48,261Total Current Liabilities
    
    
    4,793,583
    
    
    
    3,726,185Long-Term LiabilitiesConvertible notes payable, net of unamortized
discount of $654,025 and $748,921, respectively
    
    
    5,422,670
    
    
    
    2,788,704Capital lease obligations, net of current portion
    
    
    86,311
    
    
    
    82,155Deferred rent liability, net of current portion
    
    
    184,683
    
    
    
    214,215Total Long-Term Liabilities
    
    
    5,693,664
    
    
    
    3,085,074Total Liabilities
    
    
    10,487,247
    
    
    
    6,811,259Stockholders EquityCommon stock, $.001 par value, 200,000,000
shares authorized, 32,050,366 shares issued,
31,987,166 and 32,050,366 shares outstanding at
March 31, 2009 and September 30, 2008,
respectively
    
    
    32,050
    
    
    
    32,050Additional paid-in capital
    
    
    11,419,010
    
    
    
    11,177,266Accumulated deficit
    
    
    (10,153,754
    )
    
    
    (10,494,423
    )1,297,306
    
    
    
    714,893Less: Treasury stock, at cost (63,200 shares)
    
    
    (29,330
    )
    
    
    Total Stockholders Equity
    
    
    1,267,976
    
    
    
    714,893Total Liabilities and Stockholders Equity
    
    $
    11,755,223
    
    
    $
    7,526,152
  1




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the three and six months ended March 31, 2009 and 2008
(Unaudited)
 Three Months Ended March 31,
    
    
    Six Months Ended March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Sales
    
    $
    5,827,234
    
    
    $
    1,425,293
    
    
    $
    11,169,074
    
    
    $
    2,854,759Cost of Sales
    
    
    2,078,285
    
    
    
    513,577
    
    
    
    3,919,411
    
    
    
    1,035,202Gross Profit
    
    
    3,748,949
    
    
    
    911,716
    
    
    
    7,249,663
    
    
    
    1,819,557Operating ExpensesPayroll, taxes and benefits
    
    
    1,274,261
    
    
    
    590,062
    
    
    
    2,339,364
    
    
    
    1,157,547Advertising
    
    
    458,585
    
    
    
    77,195
    
    
    
    756,378
    
    
    
    144,861Bad debts
    
    
    808,999
    
    
    
    151,019
    
    
    
    1,487,981
    
    
    
    305,935Depreciation
    
    
    67,419
    
    
    
    45,900
    
    
    
    133,729
    
    
    
    91,800General and administrative
    
    
    777,885
    
    
    
    630,407
    
    
    
    1,660,050
    
    
    
    1,230,197Total Operating Expenses
    
    
    3,387,149
    
    
    
    1,494,583
    
    
    
    6,377,502
    
    
    
    2,930,340Income (Loss) from Operations
    
    
    361,800
    
    
    
    (582,867
    )
    
    
    872,161
    
    
    
    (1,110,783
    )Other Income (Expense)Interest Expense
    
    
    (272,663
    )
    
    
    (62,131
    )
    
    
    (545,175
    )
    
    
    (113,389
    )Interest Income
    
    
    5,810
    
    
    
    
    
    
    
    13,683
    
    
    
    Total Other Income (Expense)
    
    
    (266,853
    )
    
    
    (62,131
    )
    
    
    (531,492
    )
    
    
    (113,389
    )Income (Loss) before Income Taxes
    
    
    94,947
    
    
    
    (644,998
    )
    
    
    340,669
    
    
    
    (1,224,172
    )Provision for Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    94,947
    
    
    $
    (644,998
    )
    
    $
    340,669
    
    
    $
    (1,224,172
    )Basic earnings (loss) per share:Weighted average shares outstanding
    
    
    32,020,904
    
    
    
    31,864,212
    
    
    
    32,035,299
    
    
    
    31,583,528Earnings (loss) per share
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.04
    )Diluted earnings (loss) per share:Weighted average shares outstanding
    
    
    35,941,071
    
    
    
    31,864,212
    
    
    
    35,955,466
    
    
    
    31,583,528Earnings (loss) per share
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.04
    )
  2




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders Equity
For the six months ended March 31, 2009
(Unaudited)
 TotalCommon
    
    
    Common
    
    
    Paid in
    
    
    Accumulated
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    EquityBalance at September 30, 2008
    
    
    32,050,366
    
    
    $
    32,050
    
    
    $
    11,177,266
    
    
    $
    (10,494,423
    )
    
    $
    
    
    
    $
    714,893Options issued to employees
    
    
    
    
    
    
    
    
    
    
    49,498
    
    
    
    
    
    
    
    
    
    
    
    49,498Warrants issued with convertible debt
    
    
    
    
    
    
    
    
    
    
    192,246
    
    
    
    
    
    
    
    
    
    
    
    192,246Purchase common treasury sock
    
    
    (63,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,330
    )
    
    
    (29,330
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340,669
    
    
    
    
    
    
    
    340,669Balance at March 31, 2009
    
    
    31,987,166
    
    
    $
    32,050
    
    
    $
    11,419,010
    
    
    $
    (10,153,754
    )
    
    $
    (29,330
    )
    
    $
    1,267,976
  3




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the six months ended March 31, 2009 and 2008
(Unaudited)
 2009
    
    
    2008Cash flow from operating activities:Net Income (Loss)
    
    $
    340,669
    
    
    $
    (1,224,172
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    838,427
    
    
    
    236,661Equity based compensation
    
    
    271,835
    
    
    
    269,252Bad debt expense
    
    
    1,487,981
    
    
    
    305,935Non-cash interest related to convertible note payable
    
    
    321,918
    
    
    
    4,359Amortization of loan issuance costs
    
    
    20,369
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,483,499
    )
    
    
    (652,727
    )Prepaid expenses and other current assets
    
    
    (44,184
    )
    
    
    218,169Deposits
    
    
    (21,032
    )
    
    
    (2,335
    )Inventory
    
    
    (181,302
    )
    
    
    (3,938
    )Accounts payable
    
    
    929,287
    
    
    
    380,156Accrued expenses
    
    
    139,979
    
    
    
    6,384Deferred rent
    
    
    (23,567
    )
    
    
    (20,991
    )Deferred loan costs
    
    
    239,496
    
    
    
    Deferred advertising
    
    
    (1,918,344
    )
    
    
    (237,031
    )Net Cash Flow Used in Operating Activities
    
    
    (81,967
    )
    
    
    (720,278
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    (223,923
    )
    
    
    (135,294
    )Net Cash Flow Used in Investing Activities
    
    
    (223,923
    )
    
    
    (135,294
    )Cash flow from financing activities:Proceeds from sale of stock
    
    
    
    
    
    
    686,075Proceeds from issuance of convertible notes
    
    
    2,500,000
    
    
    
    175,295Broker commissions
    
    
    (203,056
    )
    
    
    Legal and other fees paid
    
    
    (122,609
    )
    
    
    Purchase of treasury stock
    
    
    (29,330
    )
    
    
    Payments of long-term debt and capital lease obligations
    
    
    (66,623
    )
    
    
    (78,391
    )Net Cash Flow Provided by Financing Activities
    
    
    2,078,382
    
    
    
    782,979Net (decrease) increase in cash
    
    
    1,772,492
    
    
    
    (72,593
    )Cash at beginning of period
    
    
    1,173,018
    
    
    
    176,820Cash at end of period
    
    $
    2,945,510
    
    
    $
    104,227Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    179,457
    
    
    $
    109,030Supplemental schedule of non-cash investing and financing activities:Capital expenditures funded by capital lease borrowings
    
    $
    47,522
    
    
    $
    
  4




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Unaudited Condensed Consolidated Financial Statements
March 31, 2009
 Note 1  Basis of Presentation
    Note 2  Summary of Significant Accounting Policies
  Recently Adopted Accounting Pronouncements
 Fair Value
Measurements Effective
Dates of FASB Statement No. 157 Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 5




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The Hierarchy of Generally Accepted Accounting
Principles
 Recent Accounting Pronouncements
 Business Combinations
 Non-controlling Interests in Consolidated Financial
Statements  an Amendment of ARB No. 51
 Accounting for Collaborative
Arrangements
 Disclosures about Derivative Instruments and Hedging Activities.
 Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
 6




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##### Table of Contents



Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities  Equity Method Investment Accounting Considerations
 Note 3  Property and Equipment
  Estimated
    
    
    March 31,
    
    
    September 30,Life
    
    
    2009
    
    
    2008Leased equipment
    
    5 years
    
    $
    538,784
    
    
    $
    491,261Transportation equipment
    
    3 years
    
    
    94,510
    
    
    
    94,510Warehouse equipment
    
    5 years
    
    
    11,077
    
    
    
    7,053Office furniture
    
    5 years
    
    
    135,795
    
    
    
    79,056Computer equipment
    
    3 years
    
    
    60,912
    
    
    
    38,478Telephone equipment
    
    5 years
    
    
    33,456
    
    
    
    31,281Rental equipment
    
    7 years
    
    
    18,329
    
    
    
    18,329Web Site
    
    3 years
    
    
    5,500
    
    
    
    5,500Server Software
    
    3 years
    
    
    110,936
    
    
    
    93,386Training guides
    
    3 years
    
    
    3,125
    
    
    
    3,125Leasehold improvements
    
    5 years
    
    
    647,659
    
    
    
    647,659Signage
    
    3 years
    
    
    12,986
    
    
    
    12,986Fixed assets under construction
    
    
    
    
    
    
    128,850
    
    
    
    7,850Total property and equipment
    
    
    
    
    
    
    1,801,919
    
    
    
    1,530,474Less: accumulated depreciation
    
    
    
    
    
    
    (848,370
    )
    
    
    (714,641
    )Property and equipment, net
    
    
    
    
    
    $
    953,549
    
    
    $
    815,833
  Note 4  Deposits
  March 31,
    
    
    September 30,2009
    
    
    2008Deposits on leased equipment
    
    $
    20,173
    
    
    $
    11,024Building rent deposits
    
    
    60,597
    
    
    
    60,597Utility deposits
    
    
    7,086
    
    
    
    6,198Deposit on software development
    
    
    13,515
    
    
    
    13,515Deposit for building expansion
    
    
    19,750
    
    
    
    Deposit on catalog printing
    
    
    
    
    
    
    8,755Total deposits
    
    $
    121,121
    
    
    $
    100,089
 Note 5  Convertible Notes Payable
 Short-term Convertible Notes Payable
  7




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##### Table of Contents



March 31,
    
    
    September 30,2009
    
    
    2008Notes Payable, face amount
    
    $
    742,500
    
    
    $
    779,000Discounts on Notes:Valuation of Warrants
    
    
    (126,140
    )
    
    
    (126,140
    )Accumulated Amortization
    
    
    123,801
    
    
    
    69,307Total Discounts
    
    
    (2,339
    )
    
    
    (56,833
    )Accrued Interest
    
    
    54,726
    
    
    
    49,996Convertible Notes Payable, net
    
    $
    794,887
    
    
    $
    772,163
 Long-term Convertible Notes Payable
   8




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##### Table of Contents



May08 Note
    
    
    Oct08 Note
    
    
    TotalsNotes Payable, face amount
    
    $
    3,500,000
    
    
    $
    2,500,000
    
    
    $
    6,000,000Discounts on Notes:Valuation of Warrants
    
    
    (609,595
    )
    
    
    (86,264
    )
    
    
    (695,859
    )Intrinsic Value of Conversion Rights
    
    
    (303,345
    )
    
    
    (86,265
    )
    
    
    (389,610
    )Accumulated Amortization
    
    
    392,253
    
    
    
    39,191
    
    
    
    431,544Total Discounts
    
    
    (520,687
    )
    
    
    (133,338
    )
    
    
    (654,025
    )Accrued Interest
    
    
    42,791
    
    
    
    33,904
    
    
    
    76,695Convertible Notes Payable, net
    
    $
    3,022,104
    
    
    $
    2,400,566
    
    
    $
    5,422,670
  May08 Note
    
    
    Oct08 Note
    
    
    TotalsNotes Payable, face amount
    
    $
    3,500,000
    
    
    $
    
    
    
    $
    3,500,000Discounts on Notes:Valuation of Warrants
    
    
    (609,595
    )
    
    
    
    
    
    
    (609,595
    )Intrinsic Value of Conversion Rights
    
    
    (303,345
    )
    
    
    
    
    
    
    (303,345
    )Accumulated Amortization
    
    
    164,019
    
    
    
    
    
    
    
    164,019Total Discounts
    
    
    (748,921
    )
    
    
    
    
    
    
    (748,921
    )Accrued Interest
    
    
    37,625
    
    
    
    
    
    
    
    37,625Convertible Notes Payable, net
    
    $
    2,788,704
    
    
    $
    
    
    
    $
    2,788,704
 Note 6  Capital Lease Obligations
  9




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AmountYear ending September 30:2009
    
    $
    44,4842010
    
    
    85,5652011
    
    
    47,5362012
    
    
    5,808Total minimum lease payments
    
    
    183,393Less: Interest on capitalized lease obligations
    
    
    (33,023
    )Present value of capitalized lease obligations
    
    
    150,370Less: Current portion
    
    
    (64,059
    )Capitalized lease obligations, net of current portion
    
    $
    86,311
  Note 7  Stockholders Equity
 Warrants
  Risk-free interest rate:
    
    
    1.90
    %Expected term:
    
    3 yearsExpected dividend yield:
    
    
    0.00
    %Expected volatility:
    
    
    35.19
    %
  AmountBalance at September 30, 2008
    
    
    9,234,759Issued
    
    
    1,433,334Exercised
    
    
    Expired
    
    
    (200,000
    )Balance at March 31, 2009
    
    
    10,468,093
 Employee Stock Options
   10




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##### Table of Contents



WeightedAvg.Exercise2007 Plan Employee Stock Options:
    
    Shares
    
    
    PriceOptions outstanding at September 30, 2008
    
    
    490,000
    
    
    $
    0.77Granted
    
    
    485,000
    
    
    
    0.60Exercised
    
    
    
    
    
    
    Expired or forfeited
    
    
    
    
    
    
    Options outstanding at March 31, 2009
    
    
    975,000
    
    
    $
    0.68Options exercisable at March 31, 2009
    
    
    367,500
    
    
    $
    0.77
   Risk-free interest rate:
    
    
    1.82
    %Expected term:
    
    3 yearsExpected dividend yield:
    
    
    0.00Expected volatility:
    
    
    36.05
    %
  Note 8  Diluted Earnings (Loss) per Common Share
  For the three months ended March 31,2009
    
    
    2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Per Share
    
    
    
    
    
    
    Average
    
    
    Per ShareNet Income
    
    
    Shares
    
    
    Amount
    
    
    Net Loss
    
    
    Shares
    
    
    AmountBasic earnings (loss) per share
    
    $
    94,947
    
    
    
    32,020,904
    
    
    $
    0.00
    
    
    $
    (644,998
    )
    
    
    31,864,212
    
    
    $
    (0.02
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    3,920,167
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) per share
    
    $
    94,947
    
    
    
    35,941,071
    
    
    $
    0.00
    
    
    $
    (644,998
    )
    
    
    31,864,212
    
    
    $
    (0.02
    )
 For the six months ended March 31,2009
    
    
    2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Per Share
    
    
    
    
    
    
    Average
    
    
    Per ShareNet Income
    
    
    Shares
    
    
    Amount
    
    
    Net Loss
    
    
    Shares
    
    
    AmountBasic earnings (loss) per share
    
    $
    340,669
    
    
    
    32,035,299
    
    
    $
    0.01
    
    
    $
    (1,224,172
    )
    
    
    31,583,528
    
    
    $
    (0.04
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    3,920,167
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) per share
    
    $
    340,669
    
    
    
    35,955,466
    
    
    $
    0.01
    
    
    $
    (1,224,172
    )
    
    
    31,583,528
    
    
    $
    (0.04
    )
 11




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##### Table of Contents



For the Three and Six Months EndedMarch 31,2009
    
    
    2008Stock options
    
    
    975,000
    
    
    
    4,151,009Warrants
    
    
    10,468,093
    
    
    
    3,949,009Convertible Debt
    
    
    9,193,334
    
    
    
    Totals
    
    
    20,636,427
    
    
    
    8,100,018
 Note 9  Income Taxes
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##### Table of Contents



Note 10  Commitments
  AmountFiscal year ending September 30:2009
    
    $
    148,7902010
    
    
    309,8222011
    
    
    325,3182012
    
    
    282,290$
    1,066,220
  Note 11  Subsequent Events
  AmountFiscal year ending September 30:2009
    
    $
    13,8212010
    
    
    34,4302011
    
    
    36,1522012
    
    
    31,372$
    115,775
 13




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Managements Discussion and Analysis of Financial Condition and Results of Operations and
other parts of this quarterly report on Form 10-Q contain forward-looking statements that involve
risks and uncertainties. Forward-looking statements can also be identified by words such as
intends, anticipates, expects, believes, plans, predicts, and similar terms.
Forward-looking statements are not guarantees of future performance and our actual results may
differ significantly from the results discussed in the forward-looking statements. Factors that
might cause such differences include, but are not limited to, those set forth below under Certain
Risk Factors. The following discussion should be read in conjunction with our unaudited
consolidated financial statements and notes thereto included in this Form 10-Q and the audited
financial statements of the Company, included in our Report on Form 10-KSB for the year ended
September 30, 2008, filed with the Securities and Exchange Commission and managements discussion
and analysis contained therein. We assume no obligation to revise or update any forward-looking
statements for any reason, except as required by law.
 Overview
   Results of Operations
 Revenues:
  Gross Profit:
  Operating Expenses:
  14




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##### Table of Contents



Interest Expense:
  Net Income:
  Liquidity and Capital Resources
  Financing Activities
  Outlook
   15




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##### Table of Contents




    
    Maintain our current rate of advertising;
    
    Increase our customer base;
    
    Continue to service our current customer base and increase the retention rate;
    
    Increase our accounts receivable collection efforts.
  
    
    Identified and presented to many large funding sources, soliciting terms for long-term capital
in the form of debt, equity or a combination of both.
    
    Retained an investment banking firm to assist us in obtaining additional capital.
    
    Identified products and related target customers through extensive market research.
    
    Established efficient and cost effective methods to reach qualified customers.
    
    Established an infrastructure of management and knowledgeable staff to support substantial
growth in sales with a minimal amount of additional staff members.
    
    Leased a 25,000 square foot facility which has only been built out 83 percent to accommodate
our current operations including room for growth. The other 17 percent is being built out for
additional warehouse space. We also leased an additional 8,500 square foot facility next door
to our current facility from our current landlord. We expect to finish the build out of this
facility during the third quarter of FY 2009.
    
    Created a HIPPA compliant IT infrastructure and staff to accommodate additional growth in sales.
    
    Established a marketing plan that can be monitored for effectiveness and is flexible enough to
adjust to changing market conditions.
    
    Tested our advertising methods and established methods of testing additional advertising
methods to meet changing market conditions.
    
    Signed an agreement with a general contractor for a 5,515 square foot expansion of our current
facility, which will provide space for enhanced call center operations for sales, operations,
and customer support.
  16




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##### Table of Contents



Contractual Commitments
  Off-Balance Sheet Arrangements
  Certain Risk Factors
   
    
    We have incurred significant net losses every year since the inception of LMS.
    
    The Company has aggressive marketing plans that require the Company to spend substantial
sums. The Company will need additional capital to continue its business plan.
    
    Our future operating results remain difficult to predict.
    
    Sales of a significant portion of our products depend on the continued availability of
reimbursement of our customers by government and private insurance plans.
    
    Our ability to operate at a profit is highly dependent on recurring orders from
customers, as to which there is no assurance.
    
    We may not be able to market our diabetes products or otherwise to operate our diabetes
supply business segment at a profit because of marketing costs, competition, or other
reasons not now foreseen.
    
    We could be liable for harm caused by products that we sell.
    
    Competition from other sellers of products sold by us is intense and expected to increase.
    
    If we or our suppliers do not comply with applicable government regulations, we may be
prohibited from selling our products.
    
    We may make acquisitions that will strain our financial and operational resources.
  17




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##### Table of Contents



Critical Accounting Policies
  Effect of Inflation
  
 Item 3. Qualitative and Quantitative Disclosure about Market Risk
  
 Item 4T. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Controls
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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    Total Number of
    
    
    Approximate DollarTotal
    
    
    
    
    
    
    Shares Purchased as
    
    
    Value of Shares thatNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    May Yet BeShares
    
    
    Price Paid
    
    
    Announced Plans or
    
    
    Purchased Under thePurchased
    
    
    per Share
    
    
    Programs(2)
    
    
    Plans or Programs(2)January 131, 2009(1)
    
    
    18,000
    
    
    $
    0.53February 128, 2009(1)
    
    
    6,600
    
    
    $
    0.46March 131, 2009(1)
    
    
    32,000
    
    
    $
    0.42Total
    
    
    56,600
    
    
    $
    0.46
    
    
    
    63,200
    
    
    $
    470,670
 
 (1)
    
    In December 2008, we opened a separate money market account with an
investment bank pursuant to which we transferred $50,000 into the
account, of which $26,007 was used to purchase 56,600 shares during
the three months ended March 31, 2009.(2)
    
    As of March 31, 2009, 63,200 cumulative shares have been purchased
under our stock repurchase program for $29,330, and an approximate
dollar value of shares in the amount of $470,670 may be purchased
under the program through December 2009. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  19




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##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
 
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SIGNATURES
  /s/ LIBERATOR MEDICAL HOLDINGS, INC.Registrant /s/ Mark A. Libratore

Mark A. Libratore
    
    President
    
    May 15, 2009/s/ Robert J. Davis

Robert J. Davis
    
    Chief Financial Officer
    
    May 15, 2009
 21