##### 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 December 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(State or other jurisdiction of 
incorporation or organization)
    
    87-0267292(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 February 10, 2010Common Stock, $.001
    
    33,933,666




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Condensed Consolidated Financial Statements
    
    
    3Balance Sheets as of December 31, 2009 (unaudited) and September 30, 2009
    
    
    3Statements of Operations for the three months ended December 31, 2009
and 2008 (unaudited)
    
    
    4Statement of Changes in Stockholders Equity for the three months ended
December 31, 2009 (unaudited)
    
    
    5Statements of Cash Flows for the three months ended December 31, 2009
and 2008 (unaudited)
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4T.
    
    Controls and Procedures
    
    
    21PART II  OTHER INFORMATION
    
    
    22Item 1.
    
    Legal Proceedings
    
    
    22Item 1A.
    
    Risk Factors
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3.
    
    Defaults Upon Senior Securities
    
    
    22Item 4.
    
    Other Information
    
    
    22Item 5.
    
    Exhibits
    
    
    22SIGNATURES
    
    
    23EX-31.1EX-31.2EX-32.1EX-32.2
  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
 December 31,
    
    
    September 30,2009
    
    
    2009(unaudited)AssetsCurrent AssetsCash
    
    $
    2,881
    
    
    $
    3,798Restricted cash
    
    
    1,053
    
    
    
    500Accounts receivable, net of allowances of $2,717 and $2,327, respectively
    
    
    4,664
    
    
    
    3,850Inventory, net of allowance for obsolete inventory of $110 and $110, respectively
    
    
    933
    
    
    
    902Deferred advertising, current portion
    
    
    2,678
    
    
    
    2,016Debt issuance costs, current portion
    
    
    242
    
    
    
    347Other
    
    
    246
    
    
    
    136Total Current Assets
    
    
    12,697
    
    
    
    11,549Property and EquipmentProperty and Equipment, net of accumulated depreciation of $1,116 and $1,021,
respectively
    
    
    1,726
    
    
    
    1,041Other AssetsDeferred advertising, net of current portion
    
    
    2,305
    
    
    
    1,739Debt issuance costs, net of current portion
    
    
    
    
    
    
    7Deposits
    
    
    258
    
    
    
    123Total Other Assets
    
    
    2,563
    
    
    
    1,869Total Assets
    
    $
    16,986
    
    
    $
    14,459Liabilities and Stockholders EquityCurrent LiabilitiesAccounts payable
    
    $
    2,834
    
    
    $
    2,089Accrued liabilities
    
    
    560
    
    
    
    716Credit line facility
    
    
    750
    
    
    
    Stockholder loan
    
    
    1,315
    
    
    
    1,515Convertible notes payable, net of unamortized discount of $247 and $292, respectively
    
    
    6,286
    
    
    
    3,893Capital lease obligations, current portion
    
    
    77
    
    
    
    80Deferred rent liability, current portion
    
    
    38
    
    
    
    60Total Current Liabilities
    
    
    11,860
    
    
    
    8,353Long-Term LiabilitiesConvertible notes payable, net of unamortized discount of $0 and $90, respectively
    
    
    
    
    
    
    2,447Capital lease obligations, net of current portion
    
    
    53
    
    
    
    70Deferred rent liability, net of current portion
    
    
    185
    
    
    
    165Deferred tax liability
    
    
    503
    
    
    
    Total Long-Term Liabilities
    
    
    741
    
    
    
    2,682Total Liabilities
    
    
    12,601
    
    
    
    11,035Stockholders EquityCommon stock, $.001 par value, 200,000 shares authorized; 33,298 and 32,462 shares
issued, respectively; 33,209 and 32,377 shares outstanding at December 31, 2009
and September 30, 2009, respectively
    
    
    33
    
    
    
    32Additional paid-in capital
    
    
    11,820
    
    
    
    11,705Accumulated deficit
    
    
    (7,418
    )
    
    
    (8,272
    )4,435
    
    
    
    3,465Less: Treasury stock, at cost; 89 and 85 shares at December 31, 2009 and September 30,
2009, respectively
    
    
    (50
    )
    
    
    (41
    )Total Stockholders Equity
    
    
    4,385
    
    
    
    3,424Total Liabilities and Stockholders Equity
    
    $
    16,986
    
    
    $
    14,459
  3




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the three months ended December 31, 2009 and 2008
(Unaudited)
 2009
    
    
    2008Sales
    
    $
    9,158
    
    
    $
    5,342Cost of Sales
    
    
    3,248
    
    
    
    1,841Gross Profit
    
    
    5,910
    
    
    
    3,501Operating ExpensesPayroll, taxes and benefits
    
    
    2,169
    
    
    
    1,065Advertising
    
    
    806
    
    
    
    298Bad debts
    
    
    655
    
    
    
    679Depreciation
    
    
    95
    
    
    
    66General and administrative
    
    
    1,025
    
    
    
    882Total Operating Expenses
    
    
    4,750
    
    
    
    2,990Income from Operations
    
    
    1,160
    
    
    
    511Other Income (Expense)Interest expense
    
    
    (243
    )
    
    
    (273
    )Interest income
    
    
    3
    
    
    
    8Total Other Income (Expense)
    
    
    (240
    )
    
    
    (265
    )Income before Income Taxes
    
    
    920
    
    
    
    246Provision for Income Taxes
    
    
    66
    
    
    
    Net Income
    
    $
    854
    
    
    $
    246Basic earnings per share:Weighted average shares outstanding
    
    
    32,848
    
    
    
    32,049Earnings per share
    
    $
    0.03
    
    
    $
    0.01Diluted earnings per share:Weighted average shares outstanding
    
    
    51,350
    
    
    
    35,970Earnings per share
    
    $
    0.02
    
    
    $
    0.01
  4




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders Equity
For the three months ended December 31, 2009
(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
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    125Common stock issued for interest on convertible debt
    
    
    19
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Common stock issued upon conversion of debt
    
    
    300
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150Common stock issued for exercise of warrants
    
    
    355
    
    
    
    1
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    163Common stock issued for employee stock purchase plan
    
    
    162
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    73Purchase common treasury stock
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Deferred income taxes related to convertible notes
payable
    
    
    
    
    
    
    
    
    
    
    (440
    )
    
    
    
    
    
    
    
    
    
    
    (440
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    854
    
    
    
    
    
    
    
    854Balance at December 31, 2009
    
    
    33,209
    
    
    $
    33
    
    
    $
    11,820
    
    
    $
    (7,418
    )
    
    $
    (50
    )
    
    $
    4,385
  5




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the three months ended December 31, 2009 and 2008
(Unaudited)
 2009
    
    
    2008Cash flow from operating activities:Net Income
    
    $
    854
    
    
    $
    246Adjustments to reconcile net income to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    905
    
    
    
    357Equity based compensation
    
    
    133
    
    
    
    136Provision for doubtful accounts and sales returns
    
    
    763
    
    
    
    679Non-cash interest related to convertible notes payable
    
    
    180
    
    
    
    162Deferred income taxes
    
    
    63
    
    
    
    Amortization of non-cash debt issuance costs
    
    
    9
    
    
    
    10Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,576
    )
    
    
    (1,190
    )Deferred advertising
    
    
    (2,037
    )
    
    
    (680
    )Inventory
    
    
    (31
    )
    
    
    (275
    )Other assets
    
    
    (150
    )
    
    
    80Accounts payable
    
    
    744
    
    
    
    928Accrued expenses
    
    
    (179
    )
    
    
    6Deferred rent
    
    
    (2
    )
    
    
    (12
    )Net Cash Flow Provided by (Used in) Operating Activities
    
    
    (324
    )
    
    
    447Cash flow from investing activities:Purchase of property and equipment
    
    
    (780
    )
    
    
    (29
    )Purchase of certificates of deposit
    
    
    (553
    )
    
    
    Net Cash Flow Used in Investing Activities
    
    
    (1,333
    )
    
    
    (29
    )Cash flow from financing activities:Proceeds from issuance of convertible notes
    
    
    
    
    
    
    2,500Costs associated with issuance of convertible notes
    
    
    
    
    
    
    (310
    )Proceeds from the exercise of warrants
    
    
    163
    
    
    
    Proceeds from employee stock purchase plan
    
    
    56
    
    
    
    Proceeds from credit line facility
    
    
    750
    
    
    
    Purchase of treasury stock
    
    
    (9
    )
    
    
    (3
    )Payments of debt and capital lease obligations
    
    
    (220
    )
    
    
    (16
    )Net Cash Flow Provided by Financing Activities
    
    
    740
    
    
    
    2,171Net increase (decrease) in cash
    
    
    (917
    )
    
    
    2,589Cash at beginning of period
    
    
    3,798
    
    
    
    1,173Cash at end of period
    
    $
    2,881
    
    
    $
    3,762Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    105
    
    
    $
    93Cash paid for income taxes
    
    $
    12
    
    
    $
    Supplemental schedule of non-cash investing and financing activities:Capital expenditures funded by capital lease borrowings
    
    $
    
    
    
    $
    17Common stock issued for interest expense
    
    $
    45
    
    
    $
    Common stock issued for conversion of debt
    
    $
    150
    
    
    $
    
  6




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Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Unaudited Condensed Consolidated Financial Statements
December 31, 2009
 Note 1  Basis of Presentation
     Note 2  Summary of Significant Accounting Policies
  Recent Accounting Pronouncements
  Derivatives and Hedging
 Financial Instruments
  Fair Value Measurements and Disclosures
 7




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Subsequent Events
 The Hierarchy of Generally Accepted Accounting
Principles Generally
Accepted Accounting Principles
 Measuring
Liabilities at Fair Value
 Multiple-Deliverable Revenue Arrangements,
 Note 3  Property and Equipment
  Estimated
    
    
    December 31,
    
    
    September 30,Life
    
    
    2009
    
    
    2009Leased equipment
    
    5 years
    
    $
    582
    
    
    $
    582Transportation equipment
    
    3 years
    
    
    95
    
    
    
    95Warehouse equipment
    
    5 years
    
    
    64
    
    
    
    56Office furniture
    
    5 years
    
    
    339
    
    
    
    150Computer equipment
    
    3 years
    
    
    150
    
    
    
    87Telephone equipment
    
    5 years
    
    
    33
    
    
    
    33Rental equipment
    
    7 years
    
    
    18
    
    
    
    18Web Site
    
    3 years
    
    
    6
    
    
    
    6Server Software
    
    3 years
    
    
    158
    
    
    
    130Training guides
    
    3 years
    
    
    3
    
    
    
    3Leasehold improvements
    
    5 years
    
    
    901
    
    
    
    889Signage
    
    3 years
    
    
    13
    
    
    
    13Fixed assets under construction
    
    
    
    
    
    
    480
    
    
    
    Total property and equipment
    
    
    
    
    
    
    2,842
    
    
    
    2,062Less: accumulated depreciation
    
    
    
    
    
    
    (1,116
    )
    
    
    (1,021
    )Property and equipment, net
    
    
    
    
    
    $
    1,726
    
    
    $
    1,041
  Note 4  Deposits
  December 31,
    
    
    September 30,2009
    
    
    2009Deposits on leased equipment
    
    $
    14
    
    
    $
    9Building rent deposits
    
    
    64
    
    
    
    67Utility deposits
    
    
    9
    
    
    
    9Deposits on software development
    
    
    25
    
    
    
    25Deposits for building expansion
    
    
    66
    
    
    
    3Deposits for professional fees
    
    
    80
    
    
    
    10Total deposits
    
    $
    258
    
    
    $
    123
 8




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Note 5  Stockholder Loan
  Note 6  Credit Line Facility
    Note 7  Convertible Notes Payable
 April 2008 Convertible Notes
   Amount DueFebruary 2010
    
    $
    263March 2010
    
    
    50April 2010
    
    
    138Total April 2008 Convertible Notes Due
    
    $
    451
  May 2008 Convertible Note
 9




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October 2008 Convertible Note
     10




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Oct08April08 Notes
    
    
    May08 Note
    
    
    Note
    
    
    TotalsNotes Payable, face amount
    
    $
    452
    
    
    $
    3,500
    
    
    $
    2,500
    
    
    $
    6,452Discounts on Notes:Valuation of Warrants
    
    
    (126
    )
    
    
    (610
    )
    
    
    (86
    )
    
    
    (822
    )Intrinsic Value of Conversion Rights
    
    
    
    
    
    
    (303
    )
    
    
    (86
    )
    
    
    (389
    )Accumulated Amortization
    
    
    126
    
    
    
    735
    
    
    
    103
    
    
    
    964Total Discounts
    
    
    
    
    
    
    (178
    )
    
    
    (69
    )
    
    
    (247
    )Accrued Interest
    
    
    45
    
    
    
    17
    
    
    
    19
    
    
    
    81Convertible Notes Payable, net
    
    $
    497
    
    
    $
    3,339
    
    
    $
    2,450
    
    
    $
    6,286
  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
 Note 8  Capital Lease Obligations
   AmountYear ending September 30:2010
    
    $
    752011
    
    
    622012
    
    
    13Total minimum lease payments
    
    
    150Less: Interest on capitalized lease obligations
    
    
    (20
    )Present value of capitalized lease obligations
    
    
    130Less: Current portion
    
    
    (77
    )Capitalized lease obligations, net of current portion
    
    $
    53
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Note 9  Stockholders Equity
 Warrants
  Shares
    
    Expiration Date7,188
    
    April 201031,250
    
    May 20102,070,904
    
    June 2010337,500
    
    July 201012,500
    
    August 201025,000
    
    November 2010
  Shares
    
    Expiration Date6,250
    
    July 2010234,375
    
    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 2013497,000
    
    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
    %
 12




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Risk-free interest rate:
    
    
    3.24
    %Expected term:
    
    5
    yearsExpected dividend yield:
    
    
    0.00
    %Expected volatility:
    
    
    27.97
    %
  Risk-free interest rate:
    
    
    1.90
    %Expected term:
    
    3
    yearsExpected dividend yield:
    
    
    0.00
    %Expected volatility:
    
    
    35.19
    %
  WeightedAvg.ExerciseWarrants:
    
    Shares
    
    
    PriceBalance at September 30, 2009
    
    
    10,458,093
    
    
    $
    1.07Issued
    
    
    
    
    
    
    Exercised
    
    
    (512,500
    )
    
    
    1.00Expired
    
    
    
    
    
    
    Balance at December 31, 2009
    
    
    9,945,593
    
    
    $
    1.07
 Options
  Employee & Director Stock Options
   Compensation  Stock
Compensation,
 13




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##### Table of Contents



2009
    
    2008Risk-free interest rate:
    
    
    1.38
    %
    
    
    1.82
    %Expected term:
    
    
    3
    years
    
    
    3
    yearsExpected dividend yield:
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility:
    
    
    66.35
    %
    
    
    36.05
    %
   WeightedAvg.
    
    
    AggregateExercise
    
    
    Intrinsic2007 Stock Plan:
    
    Shares
    
    
    Price
    
    
    ValueOptions outstanding at September 30, 2009
    
    
    1,580,000
    
    
    $
    0.81Granted
    
    
    100,000
    
    
    
    2.27Exercised
    
    
    
    
    
    
    Expired or forfeited
    
    
    
    
    
    
    Options outstanding at December 31, 2009
    
    
    1,680,000
    
    
    $
    0.90
    
    
    $
    2,144,100Options exercisable at December 31, 2009
    
    
    600,000
    
    
    $
    0.73
    
    
    $
    862,500
 2009 Employee Stock Purchase Plan
 st th
  14




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Note 10  Diluted Earnings per Common Share
  For the Quarters EndedDecember 31,2009
    
    
    2008Numerator:Net income  basic
    
    $
    854
    
    
    $
    377Effect of dilutive securities:Convertible debt
    
    
    69
    
    
    
    Net income  diluted
    
    $
    923
    
    
    $
    377Denominator:Weighted average shares outstanding  basic
    
    
    32,848
    
    
    
    32,049Effect of dilutive securities:Stock options
    
    
    9,750
    
    
    
    3,921Convertible debt
    
    
    8,752
    
    
    
    Weighted average shares outstanding  diluted
    
    
    51,350
    
    
    
    35,970Earnings per share  basic
    
    $
    0.03
    
    
    $
    0.01Earnings per share  diluted
    
    $
    0.02
    
    
    $
    0.01
  2009
    
    
    2008Stock options
    
    
    100
    
    
    
    975Warrants
    
    
    
    
    
    
    10,668Convertible Debt
    
    
    
    
    
    
    8,650Totals
    
    
    100
    
    
    
    20,293
 Note 11  Income Taxes
   15




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Note 12  Commitments
  AmountYear ending September 30:2010
    
    $
    4322011
    
    
    6612012
    
    
    6082013
    
    
    1612014
    
    
    121$
    1,983
  16




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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-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
   Results of Operations
  2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %Sales
    
    $
    9,158
    
    
    
    100.0
    
    
    $
    5,342
    
    
    
    100.0Cost of Sales
    
    
    3,248
    
    
    
    35.5
    
    
    
    1,841
    
    
    
    34.5Gross Profit
    
    
    5,910
    
    
    
    64.5
    
    
    
    3,501
    
    
    
    65.5Operating Expenses
    
    
    4,750
    
    
    
    51.9
    
    
    
    2,990
    
    
    
    56.0Income from Operations
    
    
    1,160
    
    
    
    12.7
    
    
    
    511
    
    
    
    9.6Other Income (Expense)
    
    
    (240
    )
    
    
    (2.6
    )
    
    
    (265
    )
    
    
    (5.0
    )Income Before Income Taxes
    
    
    920
    
    
    
    10.0
    
    
    
    246
    
    
    
    4.6Income Taxes
    
    
    66
    
    
    
    0.7
    
    
    
    
    
    
    
    Net Income
    
    $
    854
    
    
    
    9.3
    
    
    $
    246
    
    
    
    4.6
 Revenues:
  Gross Profit:
  17




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##### Table of Contents



Operating Expenses:
  2009
    
    
    2008Amount
    
    
    %
    
    
    Amount
    
    
    %Operating Expenses:Payroll, taxes and benefits
    
    $
    2,169
    
    
    
    23.7
    
    
    $
    1,065
    
    
    
    20.0Advertising
    
    
    806
    
    
    
    8.8
    
    
    
    298
    
    
    
    5.6Bad debts
    
    
    655
    
    
    
    7.2
    
    
    
    679
    
    
    
    12.7Depreciation
    
    
    95
    
    
    
    1.0
    
    
    
    66
    
    
    
    1.2General and administration
    
    
    1,025
    
    
    
    11.2
    
    
    
    882
    
    
    
    16.5Total Operating Expenses
    
    $
    4,750
    
    
    
    51.9
    
    
    $
    2,990
    
    
    
    56.0
  Income from Operations:
  Other Income (Expense)
  Liquidity and Capital Resources
  For the Quarters EndedDecember 31,2009
    
    
    2008Cash Flows:Net cash provided by (used in) operating activities
    
    $
    (324
    )
    
    $
    447Net cash used in investing activities
    
    
    (1,333
    )
    
    
    (29
    )Net cash provided by financing activities
    
    
    740
    
    
    
    2,171Net increase (decrease) in cash
    
    
    (917
    )
    
    
    2,589Cash at beginning of period
    
    
    3,798
    
    
    
    1,173Cash at end of period
    
    $
    2,881
    
    
    $
    3,762
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Operating Activities
  Investing Activities
  Financing Activities
   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
    
    Increase our accounts receivable collection efforts.
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
    
    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 investor relations firm to further enhance our exposure and opportunities
for long-term capital requirements;
    
    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, 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;
    
    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 with changing market conditions.
  Contractual Obligations
  Payments due by periodTotals
    
    
    FY 2010
    
    
    FY 2011
    
    
    FY 2012
    
    
    FY 2013
    
    
    FY 2014Convertible debt obligations (1)
    
    $
    6,642
    
    
    $
    4,101
    
    
    $
    2,541
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating leases
    
    
    1,983
    
    
    
    432
    
    
    
    661
    
    
    
    608
    
    
    
    161
    
    
    
    121Capital lease obligations
    
    
    150
    
    
    
    75
    
    
    
    62
    
    
    
    13
    
    
    
    
    
    
    
    Purchase commitment (2)
    
    
    514
    
    
    
    84
    
    
    
    120
    
    
    
    120
    
    
    
    120
    
    
    
    70Total contractual obligations
    
    $
    9,289
    
    
    $
    4,692
    
    
    $
    3,384
    
    
    $
    741
    
    
    $
    281
    
    
    
    191
 
 (1)
    
    The convertible debt obligations that are due in fiscal year 2010 include $452,000 of
convertible notes that are convertible into shares of our common stock at a conversion
price of $0.50 per share and $3,500,000 of convertible notes that are convertible into
shares of our common stock at a conversion price of $0.80 per share. Based on the current
price of our common stock, we anticipate that the majority of this debt will be converted
into shares of common stock at some point during fiscal year 2010. If for some reason the
notes are not converted, we believe we have sufficient financial resources to meet our debt
obligations.(2)
    
    The purchase commitment consists of a long distance service agreement that requires us
to purchase a minimum of $10,000 per month, partially offset by rebates for the first five
months of calendar year 2010, of long distance service through April 2014. Off-Balance Sheet Arrangements
  Critical Accounting Policies
  Effect of Inflation
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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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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 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)October 131, 2009(1)
    
    
    
    
    
    $
    November 130, 2009(1)
    
    
    4,000
    
    
    $
    2.26December 131, 2009(1)
    
    
    
    
    
    $
    Total
    
    
    4,000
    
    
    $
    2.26
    
    
    
    89,600
    
    
    $
    0
 
 (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 $9,055
was used to purchase 4,000 shares during the three
months ended December 31, 2009.(2)
    
    As of December 31, 2009, 89,600 cumulative shares
have been purchased under our stock repurchase program
for $49,634. The stock repurchase program ended on
December 31, 2009 and no additional shares have been
authorized to be repurchased. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Other Information
  
 Item 5. Exhibits
 
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SIGNATURES
  /s/ LIBERATOR MEDICAL HOLDINGS, INC.Registrant /s/ Mark A. Libratore

Mark A. Libratore
    
    President
    
    February 11, 2010/s/ Robert J. Davis

Robert J. Davis
    
    Chief Financial Officer
    
    February 11, 2010
 23