##### 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 June 30, 2010
 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 August 12, 2010Common Stock, $.001
    
    44,568,208




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Condensed Consolidated Financial Statements
    
    
    1Balance Sheets as of June 30, 2010 (unaudited) and September 30, 2009
    
    
    1Statements of Operations for the three and nine months ended June 30, 2010 and 2009 (unaudited)
    
    
    2Statement of Changes in Stockholders Equity for the nine months ended June 30, 2010 (unaudited)
    
    
    3Statements of Cash Flows for the nine months ended June 30, 2010 and 2009 (unaudited)
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4T.
    
    Controls and Procedures
    
    
    20PART II  OTHER INFORMATION
    
    
    21Item 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    21Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3.
    
    Defaults Upon Senior Securities
    
    
    21Item 4.
    
    <Removed and Reserved>
    
    
    21Item 5.
    
    Other Information
    
    
    21Item 6.
    
    Exhibits
    
    
    21SIGNATURES
    
    
    22EX-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
 June 30,
    
    
    September 30,2010
    
    
    2009(unaudited)AssetsCurrent Assets:Cash
    
    $
    6,889
    
    
    $
    3,798Restricted cash
    
    
    1,060
    
    
    
    500Accounts receivable, net of allowances of $3,622 and $2,327, respectively
    
    
    6,511
    
    
    
    3,850Inventory, net of allowance for obsolete inventory of $227 and $110, respectively
    
    
    2,037
    
    
    
    902Deferred advertising, current portion
    
    
    4,595
    
    
    
    2,016Deferred taxes, current portion
    
    
    413
    
    
    
    Other current assets
    
    
    662
    
    
    
    483Total Current Assets
    
    
    22,167
    
    
    
    11,549Property and equipment, net of accumulated depreciation of $1,384 and $1,021,
respectively
    
    
    1,912
    
    
    
    1,041Deferred advertising, net of current portion
    
    
    3,927
    
    
    
    1,739Intangible assets, net of accumulated amortization of $3 and $0, respectively
    
    
    204
    
    
    
    Other noncurrent assets
    
    
    226
    
    
    
    130Total Assets
    
    $
    28,436
    
    
    $
    14,459Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    5,606
    
    
    $
    2,089Accrued liabilities
    
    
    798
    
    
    
    716Stockholder loan
    
    
    865
    
    
    
    1,515Convertible notes payable, net of unamortized discount of $26 and $292,
respectively
    
    
    2,493
    
    
    
    3,893Other current liabilities
    
    
    136
    
    
    
    140Total Current Liabilities
    
    
    9,898
    
    
    
    8,353Convertible notes payable, net of unamortized discount of $0 and $90, respectively
    
    
    
    
    
    
    2,447Deferred tax liability
    
    
    457
    
    
    
    Other noncurrent liabilities
    
    
    176
    
    
    
    235Total Liabilities
    
    
    10,531
    
    
    
    11,035Stockholders Equity:Common stock, $.001 par value, 200,000 shares authorized; 44,637 and 32,462 shares
issued, respectively; 44,547 and 32,377 shares outstanding at June 30, 2010, and
September 30, 2009, respectively
    
    
    45
    
    
    
    32Additional paid-in capital
    
    
    24,274
    
    
    
    11,705Accumulated deficit
    
    
    (6,364
    )
    
    
    (8,272
    )17,955
    
    
    
    3,465Less: Treasury stock, at cost; 89 and 85 shares at June 30, 2010, and September 30,
2009, respectively
    
    
    (50
    )
    
    
    (41
    )Total Stockholders Equity
    
    
    17,905
    
    
    
    3,424Total Liabilities and Stockholders Equity
    
    $
    28,436
    
    
    $
    14,459
  1




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Liberator Medical Holdings, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Operations
For the three and nine months ended June 30, 2010 and 2009
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Sales
    
    $
    10,619
    
    
    $
    6,950
    
    
    $
    29,428
    
    
    $
    18,119Cost of Sales
    
    
    3,677
    
    
    
    2,506
    
    
    
    10,312
    
    
    
    6,425Gross Profit
    
    
    6,942
    
    
    
    4,444
    
    
    
    19,116
    
    
    
    11,694Operating ExpensesPayroll, taxes and benefits
    
    
    2,569
    
    
    
    1,518
    
    
    
    7,357
    
    
    
    3,857Advertising
    
    
    1,336
    
    
    
    616
    
    
    
    3,255
    
    
    
    1,373Bad debts
    
    
    1,020
    
    
    
    373
    
    
    
    2,603
    
    
    
    1,861Depreciation and amortization
    
    
    179
    
    
    
    80
    
    
    
    449
    
    
    
    214General and administrative
    
    
    896
    
    
    
    785
    
    
    
    2,991
    
    
    
    2,445Total Operating Expenses
    
    
    6,000
    
    
    
    3,372
    
    
    
    16,655
    
    
    
    9,750Income from Operations
    
    
    942
    
    
    
    1,072
    
    
    
    2,461
    
    
    
    1,944Other Income (Expense)Interest Expense
    
    
    (150
    )
    
    
    (267
    )
    
    
    (621
    )
    
    
    (812
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Interest Income
    
    
    8
    
    
    
    3
    
    
    
    16
    
    
    
    17Total Other Income (Expense)
    
    
    (142
    )
    
    
    (264
    )
    
    
    (607
    )
    
    
    (795
    )Income before Income Taxes
    
    
    800
    
    
    
    808
    
    
    
    1,854
    
    
    
    1,149Provision for (benefit from) Income Taxes
    
    
    2
    
    
    
    14
    
    
    
    (54
    )
    
    
    14Net Income
    
    $
    798
    
    
    $
    794
    
    
    $
    1,908
    
    
    $
    1,135Basic earnings per share:Weighted average shares outstanding
    
    
    41,569
    
    
    
    32,133
    
    
    
    36,438
    
    
    
    32,068Earnings per share
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    0.04Diluted earnings per share:Weighted average shares outstanding
    
    
    54,783
    
    
    
    37,334
    
    
    
    51,764
    
    
    
    35,990Earnings per share
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.04
    
    
    $
    0.03
  2




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Liberator Medical Holdings, Inc. and Subsidiaries
 
 Condensed Consolidated Statement of Changes in Stockholders Equity
For the nine months ended June 30, 2010
(Unaudited)
 TotalCommon
    
    
    Common
    
    
    Paid in
    
    
    Accumulated
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    Equity (Deficit)Balance at September 30, 2009
    
    
    32,377
    
    
    $
    32
    
    
    $
    11,705
    
    
    $
    (8,272
    )
    
    $
    (41
    )
    
    $
    3,424Options issued to employees
    
    
    
    
    
    
    
    
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    280Common stock issued for interest on convertible debt
    
    
    19
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Common stock issued upon conversion of debt
    
    
    5,578
    
    
    
    6
    
    
    
    4,096
    
    
    
    
    
    
    
    
    
    
    
    4,102Common stock issued for exercise of warrants
    
    
    1,749
    
    
    
    2
    
    
    
    1,554
    
    
    
    
    
    
    
    
    
    
    
    1,556Common stock issued for employee stock purchase plan
    
    
    162
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    73Common stock issued for cash, net of issuance costs
    
    
    4,666
    
    
    
    5
    
    
    
    6,588
    
    
    
    
    
    
    
    
    
    
    
    6,593Purchase common treasury stock
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Deferred income taxes related to convertible notes payable
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    (67
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,908
    
    
    
    
    
    
    
    1,908Balance at June 30, 2010
    
    
    44,547
    
    
    $
    45
    
    
    $
    24,274
    
    
    $
    (6,364
    )
    
    $
    (50
    )
    
    $
    17,905
  3




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
For the nine months ended June 30, 2010 and 2009
(Unaudited)
 2010
    
    
    2009Cash flow from operating activities:Net Income
    
    $
    1,908
    
    
    $
    1,135Adjustments to reconcile net income to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    3,670
    
    
    
    1,458Equity based compensation
    
    
    303
    
    
    
    365Provision for doubtful accounts and sales returns
    
    
    2,759
    
    
    
    1,861Non-cash interest related to convertible notes payable
    
    
    402
    
    
    
    565Deferred income taxes
    
    
    (21
    )
    
    
    Amortization of non-cash debt issuance costs
    
    
    23
    
    
    
    29Loss on disposal of assets
    
    
    2
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (5,420
    )
    
    
    (2,950
    )Deferred advertising
    
    
    (7,988
    )
    
    
    (2,907
    )Inventory
    
    
    (1,135
    )
    
    
    (449
    )Other assets
    
    
    (320
    )
    
    
    294Accounts payable
    
    
    3,516
    
    
    
    1,220Accrued expenses
    
    
    (51
    )
    
    
    112Deferred rent
    
    
    (3
    )
    
    
    (34
    )Net Cash Flow (Used in) Provided by Operating Activities
    
    
    (2,355
    )
    
    
    699Cash flow from investing activities:Purchase of property and equipment
    
    
    (1,324
    )
    
    
    (369
    )Proceeds from the sale of assets
    
    
    5
    
    
    
    Purchase of patented technology
    
    
    (207
    )
    
    
    Purchase of certificates of deposit
    
    
    (559
    )
    
    
    Net Cash Flow Used in Investing Activities
    
    
    (2,085
    )
    
    
    (369
    )Cash flow from financing activities:Proceeds from the sale of common stock
    
    
    7,000
    
    
    
    Costs associated with the sale of common stock
    
    
    (407
    )
    
    
    Proceeds from issuance of convertible notes
    
    
    
    
    
    
    2,500Costs associated with issuance of convertible notes
    
    
    
    
    
    
    (326
    )Proceeds from the exercise of warrants
    
    
    1,556
    
    
    
    Proceeds from employee stock purchase plan
    
    
    102
    
    
    
    Purchase of treasury stock
    
    
    (9
    )
    
    
    (41
    )Payments of debt and capital lease obligations
    
    
    (711
    )
    
    
    (148
    )Net Cash Flow Provided by Financing Activities
    
    
    7,531
    
    
    
    1,985Net increase in cash
    
    
    3,091
    
    
    
    2,315Cash at beginning of period
    
    
    3,798
    
    
    
    1,173Cash at end of period
    
    $
    6,889
    
    
    $
    3,488Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    323
    
    
    $
    290Cash paid for income taxes
    
    $
    20
    
    
    $
    21Supplemental schedule of non-cash investing and financing activities:Capital expenditures funded by capital lease borrowings
    
    $
    
    
    
    $
    91Common stock issued for interest expense
    
    $
    45
    
    
    $
    105Common stock issued for conversion of debt
    
    $
    4,102
    
    
    $
    85
  4




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Liberator Medical Holdings, Inc. and Subsidiaries
 
 Notes To The Unaudited Condensed Consolidated Financial Statements
June 30, 2010
 Note 1  Basis of Presentation
    Note 2  Summary of Significant Accounting Policies
  Recently Adopted Accounting Pronouncements
 Fair Value Measurements and Disclosures,
 Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities
  5




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Recently Issued Accounting Pronouncements Not Yet Adopted
     Revenue
Recognition; Multiple-Element Arrangements.
 6




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Note 3  Property and Equipment
  Estimated
    
    
    June 30,
    
    
    September 30,Life
    
    
    2010
    
    
    2009Leased equipment
    
    5 years
    
    $
    582
    
    
    $
    582Transportation equipment
    
    3 years
    
    
    72
    
    
    
    95Warehouse equipment
    
    5 years
    
    
    98
    
    
    
    56Office furniture
    
    5 years
    
    
    473
    
    
    
    150Computer equipment
    
    3 years
    
    
    231
    
    
    
    87Telephone equipment
    
    5 years
    
    
    77
    
    
    
    33Rental equipment
    
    7 years
    
    
    18
    
    
    
    18Web Site
    
    3 years
    
    
    6
    
    
    
    6Software
    
    3 years
    
    
    222
    
    
    
    130Training guides
    
    3 years
    
    
    3
    
    
    
    3Leasehold improvements
    
    5 years
    
    
    1,494
    
    
    
    889Signage
    
    3 years
    
    
    21
    
    
    
    13Total property and equipment
    
    
    
    
    
    
    3,296
    
    
    
    2,062Less: accumulated depreciation
    
    
    
    
    
    
    (1,384
    )
    
    
    (1,021
    )Property and equipment, net
    
    
    
    
    
    $
    1,912
    
    
    $
    1,041
  Note 4  Acquired Intangible Assets
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationAmortized intangible assetsPatented technology
    
    $
    207
    
    
    
    (3
    )
  AmountYear ending September 30:2010
    
    $
    42011
    
    
    152012
    
    
    152013
    
    
    152014
    
    
    15$
    64
 Note 5  Stockholder Loan
  Note 6  Credit Line Facility
  7




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Note 7  Convertible Notes Payable
 April 2008 Convertible Notes
    May 2008 Convertible Note
    8




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October 2008 Convertible Note
     Oct 08 NoteNotes Payable, face amount
    
    $
    2,500Discounts on Notes:Valuation of Warrants
    
    
    (86
    )Intrinsic Value of Conversion Rights
    
    
    (86
    )Accumulated Amortization
    
    
    146Total Discounts
    
    
    (26
    )Accrued Interest
    
    
    19Convertible Notes Payable, net
    
    $
    2,493
  April 08 Notes
    
    
    May 08 Note
    
    
    TotalsNotes Payable, face amount
    
    $
    601
    
    
    $
    3,500
    
    
    $
    4,101Discounts on Notes:Valuation of Warrants
    
    
    (126
    )
    
    
    (610
    )
    
    
    (736
    )Intrinsic Value of Conversion Rights
    
    
    
    
    
    
    (303
    )
    
    
    (303
    )Accumulated Amortization
    
    
    126
    
    
    
    621
    
    
    
    747Total Discounts
    
    
    
    
    
    
    (292
    )
    
    
    (292
    )Accrued Interest
    
    
    40
    
    
    
    44
    
    
    
    84Convertible Notes Payable, net
    
    $
    641
    
    
    $
    3,252
    
    
    $
    3,893
  Oct 08 NoteNotes Payable, face amount
    
    $
    2,500Discounts on Notes:Valuation of Warrants
    
    
    (86
    )Intrinsic Value of Conversion Rights
    
    
    (86
    )Accumulated Amortization
    
    
    82Total Discounts
    
    
    (90
    )Accrued Interest
    
    
    37Convertible Notes Payable, net
    
    $
    2,447
 9




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Note 8  Capital Lease Obligations
   AmountYear ending September 30:2010
    
    $
    252011
    
    
    622012
    
    
    13Total minimum lease payments
    
    
    100Less: Interest on capitalized lease obligations
    
    
    (10
    )Present value of capitalized lease obligations
    
    
    90Less: Current portion
    
    
    (68
    )Capitalized lease obligations, net of current portion
    
    $
    22
  Note 9  Stockholders Equity
 Sale of Common Stock
    Warrants
  Shares
    
    Expiration Date331,250
    
    July 201012,500
    
    August 201025,000
    
    November 2010
 10




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Shares
    
    Expiration Date6,250
    
    July 2010139,875
    
    August 201075,625
    
    September 2010169,167
    
    October 2010145,000
    
    November 201031,250
    
    December 20106,250
    
    January 2011
  Risk-free interest rate:
    
    4.11%Expected term:
    
    5 yearsExpected dividend yield:
    
    0.00%Expected volatility:
    
    27.97%
  Shares
    
    Expiration Date263,000
    
    February 2013100,000
    
    March 2013487,000
    
    April 2013
  Risk-free interest rate:
    
    Range of 2.39% to 2.93%Expected term:
    
    5 yearsExpected dividend yield:
    
    0.00%Expected volatility:
    
    27.97%
   Risk-free interest rate:
    
    3.24%Expected term:
    
    5 yearsExpected dividend yield:
    
    0.00%Expected volatility:
    
    27.97%
 11




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Risk-free interest rate:
    
    1.90%Expected term:
    
    3 yearsExpected dividend yield:
    
    0.00%Expected volatility:
    
    35.19%
  Risk-free interest rate:
    
    2.34%Expected term:
    
    5 yearsExpected dividend yield:
    
    0.00%Expected volatility:
    
    63.66%
  WeightedAvg.ExerciseWarrants:
    
    Shares
    
    
    PriceBalance at September 30, 2009
    
    
    10,458,093
    
    
    $
    1.07Issued
    
    
    233,333
    
    
    
    2.50Exercised
    
    
    (1,906,125
    )
    
    
    1.00Expired
    
    
    (826,467
    )
    
    
    1.00Balance at June 30, 2010
    
    
    7,958,834
    
    
    $
    1.13
 Options
  Employee and Director Stock Options
   Compensation  Stock
Compensation,
 12




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##### Table of Contents



2010
    
    2009Risk-free interest rate:
    
    1.32%
    
    1.82%Expected term:
    
    3 years
    
    3 yearsExpected dividend yield:
    
    0.00%
    
    0.00%Expected volatility:
    
    68.59%
    
    36.05%
   WeightedAvg.
    
    
    AggregateExercise
    
    
    Intrinsic2007 Stock Plan:
    
    Shares
    
    
    Price
    
    
    ValueOptions outstanding at September 30, 2009
    
    
    1,580,000
    
    
    $
    0.81Granted
    
    
    200,000
    
    
    
    2.00Exercised
    
    
    
    
    
    
    Expired or forfeited
    
    
    
    
    
    
    Options outstanding at June 30, 2010
    
    
    1,780,000
    
    
    $
    0.95
    
    
    $
    1,069,700Options exercisable at June 30, 2010
    
    
    900,000
    
    
    $
    0.81
    
    
    $
    635,000
 2009 Employee Stock Purchase Plan
 st th
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Note 10  Diluted Earnings per Common Share
  For the three months ended
    
    
    For the nine months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income  basic
    
    $
    798
    
    
    $
    794
    
    
    $
    1,908
    
    
    $
    1,135Effect of dilutive securities:Convertible debt
    
    
    30
    
    
    
    19
    
    
    
    126
    
    
    
    Net income  diluted
    
    $
    828
    
    
    $
    813
    
    
    $
    2,034
    
    
    $
    1,135Denominator:Weighted average shares outstanding  basic
    
    
    41,569
    
    
    
    32,133
    
    
    
    36,438
    
    
    
    32,068Effect of dilutive securities:Stock options and warrants
    
    
    7,765
    
    
    
    3,922
    
    
    
    8,371
    
    
    
    3,922Convertible debt
    
    
    5,449
    
    
    
    1,279
    
    
    
    6,955
    
    
    
    Weighted average shares outstanding  diluted
    
    
    54,783
    
    
    
    37,334
    
    
    
    51,764
    
    
    
    35,990Earnings per share  basic
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.05
    
    
    $
    0.04Earnings per share  diluted
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.04
    
    
    $
    0.03
  For the three months ended
    
    
    For the nine months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock options
    
    
    200
    
    
    
    960
    
    
    
    200
    
    
    
    960Warrants
    
    
    233
    
    
    
    10,468
    
    
    
    233
    
    
    
    10,468Convertible debt
    
    
    
    
    
    
    7,708
    
    
    
    
    
    
    
    8,911Totals
    
    
    433
    
    
    
    19,136
    
    
    
    433
    
    
    
    20,339
 Note 11  Income Taxes
  14




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Note 12  Commitments
  AmountYear ending September 30:2010
    
    $
    1502011
    
    
    6762012
    
    
    6212013
    
    
    2712014
    
    
    204$
    1,922
  15




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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 in Part II,
Item 1A,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-K for the year ended
September 30, 2009, 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
   Executive Summary
     16




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##### Table of Contents



Results of Operations
  For the three months ended June 30,
    
    
    For the nine months ended June 30,2010
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Sales
    
    $
    10,619
    
    
    
    100.0
    
    
    $
    6,950
    
    
    
    100.0
    
    
    $
    29,428
    
    
    
    100.0
    
    
    $
    18,119
    
    
    
    100.0Cost of Sales
    
    
    3,677
    
    
    
    34.6
    
    
    
    2,506
    
    
    
    36.1
    
    
    
    10,312
    
    
    
    35.0
    
    
    
    6,425
    
    
    
    35.5Gross Profit
    
    
    6,942
    
    
    
    65.4
    
    
    
    4,444
    
    
    
    63.9
    
    
    
    19,116
    
    
    
    65.0
    
    
    
    11,694
    
    
    
    64.5Operating Expenses
    
    
    6,000
    
    
    
    56.5
    
    
    
    3,372
    
    
    
    48.5
    
    
    
    16,655
    
    
    
    56.6
    
    
    
    9,750
    
    
    
    53.8Income from Operations
    
    
    942
    
    
    
    8.9
    
    
    
    1,072
    
    
    
    15.4
    
    
    
    2,461
    
    
    
    8.4
    
    
    
    1,944
    
    
    
    10.7Other Income (Expense)
    
    
    (142
    )
    
    
    (1.3
    )
    
    
    (264
    )
    
    
    (3.8
    )
    
    
    (607
    )
    
    
    (2.1
    )
    
    
    (795
    )
    
    
    (4.4
    )Income before Income Taxes
    
    
    800
    
    
    
    7.5
    
    
    
    808
    
    
    
    11.6
    
    
    
    1,854
    
    
    
    6.3
    
    
    
    1,149
    
    
    
    6.3Income Tax Expense (Benefit)
    
    
    2
    
    
    
    0.0
    
    
    
    14
    
    
    
    0.2
    
    
    
    (54
    )
    
    
    (0.2
    )
    
    
    14
    
    
    
    0.1Net Income
    
    $
    798
    
    
    
    7.5
    
    
    $
    794
    
    
    
    11.4
    
    
    $
    1,908
    
    
    
    6.5
    
    
    $
    1,135
    
    
    
    6.3
 Revenues:
  Gross Profit:
  Operating Expenses:
  For the three months ended June 30,
    
    
    For the nine months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    
    
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Operating Expenses:Payroll, taxes, & benefits
    
    $
    2,569
    
    
    
    24.2
    
    
    $
    1,518
    
    
    
    21.8
    
    
    $
    7,357
    
    
    
    25.0
    
    
    $
    3,857
    
    
    
    21.3Advertising
    
    
    1,336
    
    
    
    12.6
    
    
    
    616
    
    
    
    8.9
    
    
    
    3,255
    
    
    
    11.1
    
    
    
    1,373
    
    
    
    7.6Bad debts
    
    
    1,020
    
    
    
    9.6
    
    
    
    373
    
    
    
    5.4
    
    
    
    2,603
    
    
    
    8.8
    
    
    
    1,861
    
    
    
    10.3Depreciation and amortization
    
    
    179
    
    
    
    1.7
    
    
    
    80
    
    
    
    1.2
    
    
    
    449
    
    
    
    1.5
    
    
    
    214
    
    
    
    1.2General and administration
    
    
    896
    
    
    
    8.4
    
    
    
    785
    
    
    
    11.3
    
    
    
    2,991
    
    
    
    10.2
    
    
    
    2,445
    
    
    
    13.5Total Operating Expenses
    
    $
    6,000
    
    
    
    56.5
    
    
    $
    3,372
    
    
    
    48.5
    
    
    $
    16,655
    
    
    
    56.6
    
    
    $
    9,750
    
    
    
    53.8
  Other Income (Expense)
  17




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##### Table of Contents



Liquidity and Capital Resources
  For the nine months endedJune 30,2010
    
    
    2009Cash Flows:Net cash (used in) provided by operating activities
    
    $
    (2,355
    )
    
    $
    699Net cash used in investing activities
    
    
    (2,085
    )
    
    
    (369
    )Net cash provided by financing activities
    
    
    7,531
    
    
    
    1,985Net increase in cash
    
    
    3,091
    
    
    
    2,315Cash at beginning of period
    
    
    3,798
    
    
    
    1,173Cash at end of period
    
    $
    6,889
    
    
    $
    3,488
     Operating Activities
  Investing Activities
  Financing Activities
   18




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##### Table of Contents



Outlook
   
    
    Continue our advertising and marketing efforts;
    
    Increase our customer base;
    
    Continue to service our current customer base and increase the retention rate;
    
    Continue to invest in the expansion of our infrastructure and workforce; and
    
    Increase our accounts receivable collection efforts.
  
    
    Completed the private placement of shares of our common stock to a single institutional
investor for gross proceeds of $7.0 million;
    
    Identified products and related target customers through extensive market research;
    
    Expanded our advertising and marketing efforts on the Internet to reach qualified customers in
an efficient and cost-effective manner;
    
    Established an infrastructure of management and knowledgeable staff to support substantial
growth in sales with a minimal amount of additional staff members, maximizing our revenue per
employee;
    
    Completed the build out of an additional 24,000 square foot facility to house our expanding
workforce and support our continued growth;
    
    Appointed three independent members and an investor to our Board of Directors;
    
    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; and
    
    Tested our advertising methods and established methods of testing additional advertising
methods to meet changing market conditions.
  19




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Contractual Obligations
  Payments due by periodTotals
    
    
    FY 2010
    
    
    FY 2011
    
    
    FY 2012
    
    
    FY 2013
    
    
    FY 2014Convertible debt obligations (1)
    
    $
    2,578
    
    
    $
    37
    
    
    $
    2,541
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    
    1,922
    
    
    
    150
    
    
    
    676
    
    
    
    621
    
    
    
    271
    
    
    
    204Capital lease obligations
    
    
    100
    
    
    
    25
    
    
    
    62
    
    
    
    13
    
    
    
    
    
    
    
    Purchase commitment (2)
    
    
    460
    
    
    
    30
    
    
    
    120
    
    
    
    120
    
    
    
    120
    
    
    
    70Total contractual obligations
    
    $
    5,060
    
    
    $
    242
    
    
    $
    3,399
    
    
    $
    754
    
    
    $
    391
    
    
    
    274
 (1)
    
    The convertible debt obligation that is due in fiscal year 2011 is a
$2,500,000 note payable that is convertible into shares of our common
stock at a conversion price of $0.75 per share.(2)
    
    The purchase commitment consists of a long distance service agreement
that requires us to purchase a minimum of $10,000 per month of long
distance service through April 2014.
 Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Effect of Inflation
  
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
  
 Item 4T. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Change in Internal Controls
  20




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4.
 
 Item 5. Other Information
  
 Item 6. Exhibits
 
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##### Table of Contents



SIGNATURES
  /s/ LIBERATOR MEDICAL HOLDINGS, INC.Registrant /s/ Mark A. Libratore

Mark A. Libratore
    
    President
    
    August 16, 2010/s/ Robert J. Davis

Robert J. Davis
    
    Chief Financial Officer
    
    August 16, 2010
 22