##### 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, 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
  o þ
   Class
    
    Outstanding as of August 12, 2009Common Stock, $.001
    
    32,306,711




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Condensed Consolidated Financial Statements
    
    
    1Balance Sheets as of June 30, 2009 (unaudited) and September 30, 2008
    
    
    1Statements of Operations for the three and nine months ended June 30, 2009 and 2008 (unaudited)
    
    
    2Statement of Changes in Stockholders Equity for the nine months ended June 30, 2009 (unaudited)
    
    
    3Statements of Cash Flows for the nine months ended June 30, 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
    
    
    19Item 6.
    
    Exhibits
    
    
    19SIGNATURES
    
    
    20EX-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 30,2009
    
    
    2008(Unaudited)AssetsCurrent AssetsCash
    
    $
    3,488,557
    
    
    $
    1,173,018Accounts receivable, net of allowance for
doubtful accounts of $2,097,825 and $1,055,606,
respectively
    
    
    3,493,813
    
    
    
    2,405,102Prepaid expenses
    
    
    46,590
    
    
    
    321,182Inventory, net of allowance for obsolete
inventory of $50,000 and $50,000, respectively
    
    
    1,235,058
    
    
    
    785,884Deferred advertising, current portion
    
    
    1,658,265
    
    
    
    769,851Other
    
    
    2,953
    
    
    
    1,848Total Current Assets
    
    
    9,925,236
    
    
    
    5,456,885Property and EquipmentProperty and Equipment, net of accumulated
depreciation of $928,717 and $714,641,
respectively
    
    
    1,062,112
    
    
    
    815,833Other AssetsDeferred advertising, net of current portion
    
    
    1,435,418
    
    
    
    660,524Deferred loan costs
    
    
    466,337
    
    
    
    492,821Deposits
    
    
    114,690
    
    
    
    100,089Total Other Assets
    
    
    2,016,445
    
    
    
    1,253,434Total Assets
    
    $
    13,003,793
    
    
    $
    7,526,152Liabilities and Stockholders EquityCurrent LiabilitiesAccounts payable
    
    $
    2,120,278
    
    
    $
    900,448Accrued liabilities
    
    
    431,377
    
    
    
    289,848Stockholder loan
    
    
    1,664,649
    
    
    
    1,664,649Convertible notes payable, net of unamortized
discount of $406,570 and $56,833, respectively
    
    
    3,734,356
    
    
    
    772,163Capital lease obligations, current portion
    
    
    78,093
    
    
    
    50,816Deferred rent liability, current portion
    
    
    56,244
    
    
    
    48,261Total Current Liabilities
    
    
    8,084,997
    
    
    
    3,726,185Long-Term LiabilitiesConvertible notes payable, net of unamortized
discount of $111,773 and $748,921, respectively
    
    
    2,406,926
    
    
    
    2,788,704Capital lease obligations, net of current portion
    
    
    90,772
    
    
    
    82,155Deferred rent liability, net of current portion
    
    
    172,045
    
    
    
    214,215Total Long-Term Liabilities
    
    
    2,669,743
    
    
    
    3,085,074Total Liabilities
    
    
    10,754,740
    
    
    
    6,811,259Stockholders EquityCommon stock, $.001 par value, 200,000,000
shares authorized, 32,392,311 and 32,050,366
shares issued at June 30, 2009 and September 30,
2008, respectively
    
    
    32,392
    
    
    
    32,050Additional paid-in capital
    
    
    11,617,104
    
    
    
    11,177,266Accumulated deficit
    
    
    (9,359,865
    )
    
    
    (10,494,423
    )2,289,631
    
    
    
    714,893Less: Treasury stock, at cost (85,600 shares)
    
    
    (40,578
    )
    
    
    Total Stockholders Equity
    
    
    2,249,053
    
    
    
    714,893Total Liabilities and Stockholders Equity
    
    $
    13,003,793
    
    
    $
    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 nine months ended June 30, 2009 and 2008
(Unaudited)
 Three Months Ended June 30,
    
    
    Nine Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Sales
    
    $
    6,950,415
    
    
    $
    2,444,400
    
    
    $
    18,119,489
    
    
    $
    5,299,159Cost of Sales
    
    
    2,505,869
    
    
    
    889,683
    
    
    
    6,425,280
    
    
    
    1,924,885Gross Profit
    
    
    4,444,546
    
    
    
    1,554,717
    
    
    
    11,694,209
    
    
    
    3,374,274Operating ExpensesPayroll, taxes and benefits
    
    
    1,517,704
    
    
    
    650,715
    
    
    
    3,857,069
    
    
    
    1,808,261Advertising
    
    
    615,512
    
    
    
    107,674
    
    
    
    1,371,890
    
    
    
    256,521Bad debts
    
    
    373,182
    
    
    
    271,751
    
    
    
    1,861,162
    
    
    
    577,686Depreciation
    
    
    80,346
    
    
    
    45,900
    
    
    
    214,075
    
    
    
    137,700General and administrative
    
    
    785,325
    
    
    
    530,829
    
    
    
    2,445,375
    
    
    
    1,757,040Total Operating Expenses
    
    
    3,372,069
    
    
    
    1,606,869
    
    
    
    9,749,571
    
    
    
    4,537,208Income (Loss) from Operations
    
    
    1,072,477
    
    
    
    (52,152
    )
    
    
    1,944,638
    
    
    
    (1,162,934
    )Other Income (Expense)Interest Expense
    
    
    (267,232
    )
    
    
    (167,049
    )
    
    
    (812,407
    )
    
    
    (280,438
    )Interest Income
    
    
    3,084
    
    
    
    1,366
    
    
    
    16,767
    
    
    
    1,366Total Other Income (Expense)
    
    
    (264,148
    )
    
    
    (165,683
    )
    
    
    (795,640
    )
    
    
    (279,072
    )Income (Loss) before Income Taxes
    
    
    808,329
    
    
    
    (217,835
    )
    
    
    1,148,998
    
    
    
    (1,442,006
    )Provision for Income Taxes
    
    
    14,440
    
    
    
    
    
    
    
    14,440
    
    
    
    --Net Income (Loss)
    
    $
    793,889
    
    
    $
    (217,835
    )
    
    $
    1,134,558
    
    
    $
    (1,442,006
    )Basic earnings (loss) per share:Weighted average shares outstanding
    
    
    32,132,943
    
    
    
    32,050,366
    
    
    
    32,067,847
    
    
    
    31,683,081Earnings (loss) per share
    
    $
    0.02
    
    
    $
    (0.01
    )
    
    $
    0.04
    
    
    $
    (0.05
    )Diluted earnings (loss) per share:Weighted average shares outstanding
    
    
    37,334,188
    
    
    
    32,050,366
    
    
    
    35,990,375
    
    
    
    31,683,081Earnings (loss) per share
    
    $
    0.02
    
    
    $
    (0.01
    )
    
    $
    0.03
    
    
    $
    (0.05
    )
  2




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders Equity
For the nine months ended June 30, 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
    
    
    
    
    
    
    
    
    
    
    57,951
    
    
    
    
    
    
    
    
    
    
    
    57,951Warrants issued with convertible debt
    
    
    
    
    
    
    
    
    
    
    192,246
    
    
    
    
    
    
    
    
    
    
    
    192,246Common stock issued for interest on convertible debt
    
    
    171,945
    
    
    
    172
    
    
    
    104,811
    
    
    
    
    
    
    
    
    
    
    
    104,983Common stock issued upon conversion of convertible
debt
    
    
    170,000
    
    
    
    170
    
    
    
    84,830
    
    
    
    
    
    
    
    
    
    
    
    85,000Purchase common treasury stock
    
    
    (85,600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,578
    )
    
    
    (40,578
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,134,558
    
    
    
    
    
    
    
    1,134,558Balance at June 30, 2009
    
    
    32,306,711
    
    
    $
    32,392
    
    
    $
    11,617,104
    
    
    $
    (9,359,865
    )
    
    $
    (40,578
    )
    
    $
    2,249,053
  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, 2009 and 2008
(Unaudited)
 2009
    
    
    2008Cash flow from operating activities:Net Income (Loss)
    
    $
    1,134,558
    
    
    $
    (1,442,006
    )Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:Depreciation and amortization
    
    
    1,457,997
    
    
    
    385,962Equity based compensation
    
    
    365,333
    
    
    
    601,991Bad debt expense
    
    
    1,861,162
    
    
    
    577,686Non-cash interest related to convertible notes payable
    
    
    564,923
    
    
    
    93,255Amortization of non-cash loan issuance costs
    
    
    28,931
    
    
    
    4,491Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,949,873
    )
    
    
    (1,505,831
    )Prepaid expenses and other current assets
    
    
    (33,895
    )
    
    
    (8,254
    )Deposits
    
    
    (14,601
    )
    
    
    (2,498
    )Inventory
    
    
    (449,174
    )
    
    
    (206,232
    )Accounts payable
    
    
    1,219,830
    
    
    
    600,008Accrued expenses
    
    
    112,033
    
    
    
    11,743Deferred rent
    
    
    (34,187
    )
    
    
    (31,486
    )Deferred loan costs
    
    
    342,935
    
    
    
    98,289Deferred advertising
    
    
    (2,907,230
    )
    
    
    (683,234
    )Net Cash Flow Provided by (Used in) Operating Activities
    
    
    698,742
    
    
    
    (1,506,116
    )Cash flow from investing activities:Purchase of property and equipment
    
    
    (369,390
    )
    
    
    (137,559
    )Net Cash Flow Used in Investing Activities
    
    
    (369,390
    )
    
    
    (137,559
    )Cash flow from financing activities:Proceeds from sale of stock
    
    
    
    
    
    
    686,200Proceeds from issuance of convertible notes
    
    
    2,500,000
    
    
    
    4,304,000Proceeds from notes payable
    
    
    
    
    
    
    53,000Broker commissions
    
    
    (203,056
    )
    
    
    (356,500
    )Legal and other fees paid
    
    
    (122,609
    )
    
    
    (199,370
    )Purchase of treasury stock
    
    
    (40,578
    )
    
    
    Payments of long-term debt and capital lease obligations
    
    
    (147,570
    )
    
    
    (328,840
    )Net Cash Flow Provided by Financing Activities
    
    
    1,986,187
    
    
    
    4,158,490Net increase in cash
    
    
    2,315,539
    
    
    
    2,514,815Cash at beginning of period
    
    
    1,173,018
    
    
    
    176,820Cash at end of period
    
    $
    3,488,557
    
    
    $
    2,691,635Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    289,739
    
    
    $
    154,799Cash paid for income taxes
    
    $
    21,260
    
    
    $
    Supplemental schedule of non-cash investing and financing activities:Capital expenditures funded by capital lease borrowings
    
    $
    90,965
    
    
    $
    54,083Common stock issued for interest expense
    
    $
    104,983
    
    
    $
    Common stock issued for conversion of debt
    
    $
    85,000
    
    
    $
    25,000
  4




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Unaudited Condensed Consolidated Financial Statements
June 30, 2009
 Note 1  Basis of Presentation
     Note 2  Summary of Significant Accounting Policies
  Recent Accounting Pronouncements
 Disclosures about Derivative Instruments and Hedging  Activities, an amendment of FASB Statement No. 133
 Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly Interim Disclosures
about Fair Value of Financial Instruments Recognition and
Presentation of Other-Than-Temporary Impairments
 5




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Subsequent Events
 Accounting for Transfers of Financial Assets an
amendment to SFAS No. 140
 Amendments to FASB Interpretation No. 46(R)
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles The Hierarchy of Generally Accepted Accounting Principles
 Note 3  Property and Equipment
  Estimated
    
    
    June 30,
    
    
    September 30,Life
    
    
    2009
    
    
    2008Leased equipment
    
    5 years
    
    $
    582,226
    
    
    $
    491,261Transportation equipment
    
    3 years
    
    
    94,510
    
    
    
    94,510Warehouse equipment
    
    5 years
    
    
    41,951
    
    
    
    7,053Office furniture
    
    5 years
    
    
    142,211
    
    
    
    79,056Computer equipment
    
    3 years
    
    
    60,911
    
    
    
    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
    
    
    111,606
    
    
    
    93,386Training guides
    
    3 years
    
    
    3,125
    
    
    
    3,125Leasehold improvements
    
    5 years
    
    
    884,018
    
    
    
    647,659Signage
    
    3 years
    
    
    12,986
    
    
    
    12,986Fixed assets under construction
    
    
    
    
    
    
    
    
    
    
    7,850Total property and equipment
    
    
    
    
    
    
    1,990,829
    
    
    
    1,530,474Less: accumulated depreciation
    
    
    
    
    
    
    (928,717
    )
    
    
    (714,641
    )Property and equipment, net
    
    
    
    
    
    $
    1,062,112
    
    
    $
    815,833
 6




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##### Table of Contents



Note 4  Deposits
  June 30,
    
    
    September 30,2009
    
    
    2008Deposits on leased equipment
    
    $
    9,279
    
    
    $
    11,024Building rent deposits
    
    
    66,369
    
    
    
    60,597Utility deposits
    
    
    7,412
    
    
    
    6,198Deposits on software development
    
    
    20,465
    
    
    
    13,515Deposits for building expansion
    
    
    1,165
    
    
    
    Deposits for professional fees
    
    
    10,000
    
    
    
    Deposit on catalog printing
    
    
    
    
    
    
    8,755Total deposits
    
    $
    114,690
    
    
    $
    100,089
 Note 5  Convertible Notes Payable
 April 2008 Convertible Notes
     May 2008 Convertible Note
  7




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October 2008 Convertible Note
     April08 Notes
    
    
    May08 Note
    
    
    TotalsNotes Payable, face amount
    
    $
    601,500
    
    
    $
    3,500,000
    
    
    $
    4,101,500Discounts on Notes:Valuation of Warrants
    
    
    (126,140
    )
    
    
    (609,595
    )
    
    
    (735,735
    )Intrinsic Value of Conversion Rights
    
    
    
    
    
    
    (303,345
    )
    
    
    (303,345
    )Accumulated Amortization
    
    
    126,140
    
    
    
    506,370
    
    
    
    632,510Total Discounts
    
    
    
    
    
    
    (406,570
    )
    
    
    (406,570
    )Accrued Interest
    
    
    21,878
    
    
    
    17,548
    
    
    
    39,426Convertible Notes Payable, net
    
    $
    623,378
    
    
    $
    3,110,978
    
    
    $
    3,734,356
  April08 NotesNotes Payable, face amount
    
    $
    779,000Discounts on Notes:Valuation of Warrants
    
    
    (126,140
    )Accumulated Amortization
    
    
    69,307Total Discounts
    
    
    (56,833
    )Accrued Interest
    
    
    49,996Convertible Notes Payable, net
    
    $
    772,163
 8




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##### Table of Contents



Oct08 NoteNotes Payable, face amount
    
    $
    2,500,000Discounts on Notes:Valuation of Warrants
    
    
    (86,264
    )Intrinsic Value of Conversion Rights
    
    
    (86,265
    )Accumulated Amortization
    
    
    60,756Total Discounts
    
    
    (111,773
    )Accrued Interest
    
    
    18,699Convertible Notes Payable, net
    
    $
    2,406,926
  May08 NoteNotes Payable, face amount
    
    $
    3,500,000Discounts on Notes:Valuation of Warrants
    
    
    (609,595
    )Intrinsic Value of Conversion Rights
    
    
    (303,345
    )Accumulated Amortization
    
    
    164,019Total Discounts
    
    
    (748,921
    )Accrued Interest
    
    
    37,625Convertible Notes Payable, net
    
    $
    2,788,704
 Note 6  Capital Lease Obligations
   AmountYear ending September 30:2009
    
    $
    25,9692010
    
    
    100,4742011
    
    
    62,4452012
    
    
    13,307Total minimum lease payments
    
    
    202,195Less: Interest on capitalized lease obligations
    
    
    (33,330
    )Present value of capitalized lease obligations
    
    
    168,865Less: Current portion
    
    
    (78,093
    )Capitalized lease obligations, net of current portion
    
    $
    90,772
  9




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##### Table of Contents



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 June 30, 2009
    
    
    10,468,093
 Employee Stock Options
    WeightedAvg.Exercise2007 Plan Employee Stock Options:
    
    Shares
    
    
    PriceOptions outstanding at September 30, 2008
    
    
    490,000
    
    
    $
    0.77Granted
    
    
    480,000
    
    
    
    0.60Exercised
    
    
    
    
    
    
    Expired or forfeited
    
    
    (10,000
    )
    
    
    0.75Options outstanding at June 30, 2009
    
    
    960,000
    
    
    $
    0.68Options exercisable at June 30, 2009
    
    
    480,000
    
    
    $
    0.77
 10




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##### Table of Contents



Risk-free interest rate:
    
    
    1.82
    %Expected term:
    
    3 yearsExpected dividend yield:
    
    
    0.00Expected volatility:
    
    
    36.05
    %
  2009 Employee Stock Purchase Plan
 st th
  Note 8  Diluted Earnings (Loss) per Common Share
  For the three months ended June 30,2009
    
    
    2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Per Share
    
    
    
    
    
    
    Average
    
    
    Per ShareNet Income
    
    
    Shares
    
    
    Amount
    
    
    Net Loss
    
    
    Shares
    
    
    AmountBasic earnings (loss) per share
    
    $
    793,889
    
    
    
    32,132,943
    
    
    $
    0.02
    
    
    $
    (217,835
    )
    
    
    32,050,366
    
    
    $
    (0.01
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    3,922,533
    
    
    
    
    
    
    
    
    
    
    
    Convertible debt
    
    
    18,692
    
    
    
    1,278,712
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) per share
    
    $
    812,581
    
    
    
    37,334,188
    
    
    $
    0.02
    
    
    $
    (217,835
    )
    
    
    32,050,366
    
    
    $
    (0.01
    )
 11




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##### Table of Contents



For the nine months ended June 30,2009
    
    
    2008Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Per Share
    
    
    
    
    
    
    Average
    
    
    Per ShareNet Income
    
    
    Shares
    
    
    Amount
    
    
    Net Loss
    
    
    Shares
    
    
    AmountBasic earnings (loss) per share
    
    $
    1,134,558
    
    
    
    32,067,847
    
    
    $
    0.04
    
    
    $
    (1,442,006
    )
    
    
    31,683,081
    
    
    $
    (0.05
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    3,922,528
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) per share
    
    $
    1,134,558
    
    
    
    35,990,375
    
    
    $
    0.03
    
    
    $
    (1,442,006
    )
    
    
    31,683,081
    
    
    $
    (0.05
    )
  For the Three Months EndedJune 30,2009
    
    
    2008Stock options
    
    
    960,000
    
    
    
    4,151,009Warrants
    
    
    10,468,093
    
    
    
    3,949,009Convertible Debt
    
    
    7,708,334
    
    
    
    Totals
    
    
    19,136,427
    
    
    
    8,100,018
 For the Nine Months EndedJune 30,2009
    
    
    2008Stock options
    
    
    960,000
    
    
    
    4,151,009Warrants
    
    
    10,468,093
    
    
    
    3,949,009Convertible Debt
    
    
    8,911,334
    
    
    
    Totals
    
    
    20,339,427
    
    
    
    8,100,018
 Note 9
 Income Taxes
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##### Table of Contents



Note 10  Commitments
  AmountFiscal year ending September 30:2009
    
    $
    84,0062010
    
    
    344,2532011
    
    
    361,4702012
    
    
    313,662$
    1,103,391
  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 or increase 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.
    
    We completed the expansion and build out of our 25,000 square foot leased facility and the
build out of an additional 5,800 square foot facility next door to our current facility. We
also leased an additional 3,500 square foot facility adjacent to one of our current facilities
for future use.
    
    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.
  Contractual Commitments
  16




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##### Table of Contents



Off-Balance Sheet Arrangements
  Certain Risk Factors
   
    
    Historically, we have incurred significant net losses every year since the inception of
LMS. Fiscal year 2009 is the first year we expect to incur positive
net income. No assurances can be given, however, that this will be
the case.
    
    The Company has aggressive marketing plans that require the Company to spend substantial
sums. The Company may 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.
    
    Since its inception, Medicare has frequently changed, increased or reduced, or even
eliminated, compensation for various medical supplies and devices. The current
administration has promised sweeping healthcare reform, which ultimately may affect
current medical supplies and device compensation structures. Although there is the
prospect of new Federal healthcare programs offering to cover the estimated 40 million
uninsured with insurance coverage for medical supplies and devices, any potential
financial gains this may create for the Company could be offset by simultaneous cuts to
reimbursement programs.
 Critical Accounting Policies
  Effect of Inflation
  17




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##### Table of Contents



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)April 130, 2009(1)
    
    
    4,900
    
    
    $
    0.37May 131, 2009(1)
    
    
    12,500
    
    
    $
    0.55June 130, 2009(1)
    
    
    5,000
    
    
    $
    0.50Total
    
    
    22,400
    
    
    $
    0.50
    
    
    
    85,600
    
    
    $
    459,422
 
 (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 $11,249 was used to purchase 22,400 shares during
the three months ended June 30, 2009.(2)
    
    As of June 30, 2009, 85,600 cumulative shares have been purchased
under our stock repurchase program for $40,578, and an approximate
dollar value of shares in the amount of $459,422 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
  
 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 12, 2009/s/ Robert J. Davis

Robert J. Davis
    
    Chief Financial Officer
    
    August 12, 2009
 20