##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ending September 30, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
  LIBERATOR MEDICAL HOLDINGS, INC.
  NEVADA
    
    87-0267292(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)
   Securities registered under Section 12(g) of the Exchange Act:
    
    Common Stock,
$.001 par value
 o
 x o
 x
 o x
    x o




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##### 



LIBERATOR MEDICAL HOLDINGS, INC.
 TABLE OF CONTENTS
 PART IItem 1.
    
    Description of Business
    
    
    1Item 2.
    
    Description of Property
    
    
    14Item 3.
    
    Legal Proceedings
    
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    15PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
    
    
    15Item 6.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    17Item 7.
    
    Financial Statements
    
    
    21Item 8.
    
    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    22Item 8A.
    
    Controls and Procedures
    
    
    22Item 8B.
    
    Other Information
    
    
    23PART IIIItem 9.
    
    Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act
    
    
    24Item 10.
    
    Executive Compensation
    
    
    25Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    29Item 12.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    30Item 13.
    
    Exhibits
    
    
    30Item 14.
    
    Principal Accountant Fees and Services
    
    
    31Signatures
    
    
    32EX-14.1 Code of Business Conduct and EthicsEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO




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PART I
 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
   
 Item 1. Description of Business
 Background of the Company
    1




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Background of Liberator Medical Supply, Inc.
  Market
  2




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Target Market
    
    Diagnosed
    
    Undiagnosed
    
    Current Market SizeRespiratory
    
    16 million
    
    16 million
    
    $3.5 billionDiabetes
    
    17 million
    
    6 million
    
    $91.8 billionMastectomy
    
    3.2 million
    
    N/A
    
    $1.1 billionOstomy
    
    
    600,000
    
    
    N/A
    
    $1.2 billionTotal
    
    36.2 million
    
    24 million
    
    $97.6 billion
 Source: Center for Disease Control 2005
 Respiratory Diseases
  3




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Diabetes
  Mastectomy Supplies
   Ostomy Products
  4




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Power Mobility Sales
 .
 Retail Sales Store and Internet Sales
   5




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Sales and Marketing
    Pharmacy Opportunities
  Suppliers
  6




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Products
  Competitive Analysis
 Diabetes
   Mastectomy
  Ostomy
  7




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Urological
  Retail Stores
  Internet Sales Competition
   Litigation
  Technology Systems
  8




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www.liberatormedical.com
 Employees
  Risks and Uncertainties
  9




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Risks Relating to Our Business as a Result of the Liberator Medical Acquisition
      10




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11




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
    
    changes in reimbursement guidelines and amounts;
    
    changes in regulations affecting the healthcare industry;
    
    changes in the mix or cost of our products;
    
    the timing of customer orders;
    
    the timing and cost of our advertising campaigns; and
    
    the timing of the introduction or acceptance of new products
and services offered by us or our competitors.
   
    
    diversion of the attention of senior management from
important business matters;
    
    amortization of substantial intangible assets;
    
    difficulty in retaining key personnel of an acquired business;
    
    failure to assimilate operations of an acquired business;
    
    failure to retain the customers of an acquired business;
    
    possible operating losses and expenses of an acquired business;
    
    exposure to legal claims for activities of an acquired
business prior to acquisition; and
    
    incurrence of debt and related interest expense.
  12




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Risks Relating to Ownership of Our Common Stock
 We cannot assure you that there will be an active trading market for our common stock and it could
be difficult for holders of our common stock to liquidate their shares.
  We do not anticipate paying dividends in the foreseeable future, which could make our stock less
attractive to potential investors.
  Future sales or the potential for sale of a substantial number of shares of our common stock could
cause our market value to decline and could impair our ability to raise capital through subsequent
equity offerings.
  13




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Trading in our shares is subject to certain penny stock regulation, which could have a negative
effect on the price of our shares in the public trading market.
  
    
    make a special suitability determination for purchasers of penny stocks;
    
    receive the purchasers written consent to the transaction prior to the
purchase; and
    
    deliver to a prospective purchaser of a penny stock, prior to the first
transaction, a risk disclosure document relating to the penny stock market.
  
 Item 2. Description of Property
  
 Item 3. Legal Proceedings
  14




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Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities
  High
    
    
    LowQuarter Ended September 30, 2007
    
    $
    2.75
    
    
    $
    1.10
     15




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Recent Sales of Unregistered Securities
  16




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Item 6. Managements Discussion and Analysis or Plan of Operation
     17




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Results of Operations
  2007
    
    
    2007
    
    
    2006
    
    
    2006Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentSales
    
    
    2,250,368
    
    
    
    100.0
    
    
    
    2,841,458
    
    
    
    100.0Cost of Sales
    
    
    951,298
    
    
    
    42.3
    
    
    
    1,363,327
    
    
    
    47.9Gross Profit
    
    
    1,299,070
    
    
    
    57.7
    
    
    
    1,478,202
    
    
    
    52.0Selling and G & A Expenses
    
    
    3,371,657
    
    
    
    149.8
    
    
    
    3,773,442
    
    
    
    132.8Income (Loss) from Operations
    
    
    (2,072,587
    )
    
    
    (92.1
    )
    
    
    (2,295,240
    )
    
    
    (80.8
    )Other Income (Expense)
    
    
    104,345
    
    
    
    4.6
    
    
    
    
    
    
    
    Income (Loss) Before Income Taxes
    
    
    (1,968,242
    )
    
    
    (87.5
    )
    
    
    (2,295,240
    )
    
    
    (80.8
    )Income Taxes
    
    
    -0-Net Income (Loss)
    
    
    (1,968,242
    )
    
    
    (87.5
    )
    
    
    (2,295,240
    )
    
    
    (80.8
    )
     18




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Liquidity and Capital Resources
    Financing Activities
  Outlook
  19




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
    
    Obtain additional funding through a combination of debt and equity;
    
    Increase advertising;
    
    Increase our customer base;
    
    Continue to service our current customer base and increasing the retention rate;
    
    Increasing 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 two investment relations firms to further enhance our 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.
    
    Leased a 25,000 square foot facility which has only been built out 50 percent to
accommodate our current operations including room for growth. The other 50 percent will be
built out in stages as additional growth requires the additional office space.
    
    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.
 20




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
    
    Tested our advertising methods and established methods of testing additional
advertising methods to meet with changing market conditions.
    Contractual Commitments
  Off-Balance Sheet Arrangements
  
 Item 7. Financial Statements
  Report of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheet  September 30, 2007
    
    F-2Consolidated Statements of Operations  Nine Months Ended
September 30, 2007, and year ended December 31, 2006
    
    F-3Consolidated Statements of Shareholders Equity  Nine Months
Ended September 30, 2007, and year ended December 31, 2006
    
    F-4Consolidated Statements of Cash Flows  Nine Months Ended
September 30, 2007, and year ended December 31, 2006
    
    F-5Notes to Consolidated Financial Statements
    
    F-7
 21




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Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
  22




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Changes in Internal Controls
  
    
    The Company has started a search for a consulting firm with an adequate number of
individuals with U.S. GAAP knowledge to assist in the establishment of policies and
procedures and to review the financial results to insure that accurate consolidated
financial statements are prepared and reviewed on a timely basis.
    
    The Company is also planning to hire additional accounting personnel to assure that
account reconciliations, account analysis, and journal entries are reviewed on a timely
basis.
  
 Item 8B. Other Information
  23




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PART III
 
 Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance with Section 16(a) of the Exchange Act
  Name
    
    Age
    
    Position(s) with the CompanyMark Libratore
    
    
    56
    
    
    President, Chief Executive Officer, DirectorRobert Davis
    
    
    61
    
    
    Chief Financial OfficerJohn Leger
    
    
    53
    
    
    Chief Operating Officer
      24




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Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  Board Committees and Designated Directors.
  
 Item 10. Executive Compensation
 Compensation Discussion and Analysis
  25




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Compensation Philosophy and Objectives
  
    
    To offer a total compensation package to the Named Executive Officers that is
competitive in the marketplace for executive talent.
    
    To motivate the Named Executive Officers to achieve our business objectives by
providing incentive compensation awards that take into account our overall performance and
that measure performance against those business objectives.
    
    To provide equity-based, long-term compensation arrangements that creates meaningful
incentives for the Named Executive Officers to maximize our near and long-term future
performance that aligns their interests with our shareholders and encourage the Named
Executive Officers to remain with the Company.
  Employment and Consulting Agreements
  Summary Compensation Table
  Change in PensionValue andNon-QualifiedNon-Equity
    
    DeferredIncentive Plan
    
    Compensation
    
    All OtherName and Principal Position(s)
    
    Year
    
    Salary($)
    
    Compensation ($)
    
    Earnings ($)
    
    Compensation ($)
    
    Total($)Mark A. Libratore
    
    
    2007
    
    
    $
    95,000
    
    
    
    
    
    
    
    
    
    
    $
    17,907
    
    
    $
    112,907President and Chief Executive
    
    
    2006
    
    
    $
    134,929
    
    
    
    
    
    
    
    
    
    
    $
    13,775
    
    
    $
    148,704OfficerRobert Davis
    
    
    2007
    
    
    $
    65,769
    
    
    
    
    
    
    
    
    
    
    $
    2,458
    
    
    $
    68,227Chief Financial Officer
    
    
    2006
    
    
    $
    87,159
    
    
    
    
    
    
    
    
    
    
    $
    3,422
    
    
    $
    90,581John Leger
    
    
    2007
    
    
    $
    91,346
    
    
    
    
    
    
    
    
    
    
    $
    2,458
    
    
    $
    93,804Chief Operating Officer
    
    
    2006
    
    
    $
    89,139
    
    
    
    
    
    
    
    
    
    
    $
    3,422
    
    
    $
    92,561
 26




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All Other Compensation Table
  Outstanding Equity Awards at 2007 Fiscal Year End
  Potential Payments Upon Termination
 Employment and Consulting Agreements.
  2007 Stock Plan
    27




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Director Compensation
  How Compensation is Determined
  28




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Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
   Name and Address
    
    Number of Shares
    
    
    Percent (1)5% Beneficial Owners:Shaihesh C. Zaveri
    
    
    1,710,342
    
    
    
    5.61
    %and Mayuri S. Zaveri
6559 N. Country Club Rd.
Mattoon, IL 61938Directors and Executive Officers:Mark A. Libratore(3)(4)(5)
    
    
    16,375,000
    
    
    
    53.71
    %2979 SE Gran Park Way
Stuart, FL 34997Robert Davis(2)(4)
    
    
    100,000
    
    
    
    2979 SE Gran Park Way
Stuart, FL 34997John Leger(2)(4)
    
    
    100,000
    
    
    
    2979 SE Gran Park Way
Stuart, FL 34997All directors and executive
    
    
    16,575,000
    
    
    
    54.33
    %Officers as a group (3 persons)
 
 (1)
    
    Percentage ownership is based on 30,464,014 shares outstanding after the acquisition of
Liberator Medical. Percentage is calculated for each individual listed based upon their
beneficial ownership of shares.(2)
    
    Less than one percent (1%).(3)
    
    Director.(4)
    
    Officer.(5)
    
    Includes 25,000 shares underlying options exercisable by Mr. Libratore. 29




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Item 12. Certain Relationships and Related Transactions, and Director Independence
  
 Item 13. Exhibits
  Number
    
    Description14.1
    
    
    Code of Business Conduct and Ethics (1)31.1
    
    
    Section 302 Certificate of Chief Executive Officer (1)31.2
    
    
    Section 302 Certificate of Chief Financial Officer (1)32.1
    
    
    Section 906 Certificate of Chief Executive Officer (1)32.2
    
    
    Section 906 Certificate of Chief Financial Officer (1)
 
 (1)
    
    Filed herewith. 30




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Item 14. Principal Accountant Fees and Services
  Services
    
    2007
    
    2006Audit Fees
    
    $
    0
    
    
    $
    32,050Audit-Related Fees
    
    $
    
    
    
    $Tax Fees
    
    $
    
    
    
    $
    5,533All Other Fees
    
    $
    
    
    
    $Total Fees
    
    $
    0
    
    
    $
    37,583
  31




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SIGNATURES
  LIBERATOR MEDICAL HOLDINGS, INC.Dated: January 18, 2008
    By:
    /s/ Mark A. LibratoreMark A. Libratore, President,Chief Executive Officer and Director  Signatures
    
    Titles
    
    Date/s/ Mark A. Libratore

Mark A. Libratore
    
    President, Chief Executive
Officer and Director
    
    January 18, 2008/s/ Robert J. Davis

Robert J. Davis
    
    Chief Financial Officer
    
    January 18, 2008
 32




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INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Report of Wieseneck, Andres & Company, P.A.
    
    
    F-3Consolidated Balance Sheet  September 30, 2007
    
    
    F-4Consolidated Statements of Operations  Nine Months Ended September 30, 2007, and year ended December 31, 2006
    
    
    F-5Consolidated Statements of Shareholders Equity  Nine Months Ended September 30, 2007, and year ended December 31, 2006
    
    
    F-6Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2007, and year ended December 31, 2006
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
 F-1




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Report of Independent Registered Public Accounting Firm
 
      
 F-2




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Wieseneck, Andres & Company, P.A.
 Certified Public Accountants  772 U.S. HIGHWAY 1, SUITE 100
NORTH PALM BEACH, FLORIDA 33408
(561) 626-0400
 
  
      
 F-3




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Liberator Medical Holdings, Inc. and Subsidiaries
Consolidated Balance Sheet
September 30, 2007
 2007AssetsCurrent AssetsCash
    
    $
    176,820Accounts receivable, net of allowance for doubtful
accounts of $304,009
    
    
    483,863Prepaid expenses
    
    
    802,045Inventory, net of allowance for obsolete inventory
of $50,000
    
    
    298,854Deferred advertising, current portion
    
    
    173,723Other
    
    
    700Total Current Assets
    
    
    1,936,005Property and EquipmentProperty and Equipment, net of accumulated
depreciation of $501,210
    
    
    727,998Other AssetsDeferred advertising, net of current portion
    
    
    138,891Deposits
    
    
    80,986Total Other Assets
    
    
    219,877Total Assets
    
    $
    2,883,880Liabilities and Stockholders DeficiencyCurrent LiabilitiesAccounts payable
    
    $
    399,609Accrued liabilities
    
    
    203,623Stockholder loan
    
    
    1,676,435Notes payable, current portion
    
    
    265,777Capital lease obligations, current portion
    
    
    30,715Deferred rent liability, current portion
    
    
    41,982Total Current Liabilities
    
    
    2,618,141Long-Term LiabilitiesLong-term debt and capital lease obligations, net of
current portion
    
    
    65,827Deferred rent liability, net of current portion
    
    
    262,111Total Long-Term Liabilities
    
    
    327,938Total Liabilities
    
    
    2,946,079Stockholders DeficiencyCommon stock, $.001 par value, 200,000,000 shares
authorized,
30,464,014 shares issued and outstanding
    
    
    30,464Additional paid-in capital
    
    
    9,092,858Accumulated deficit
    
    
    (9,185,521
    )Total Stockholders Deficiency
    
    
    (62,199
    )Total Liabilities and Stockholders Deficiency
    
    $
    2,883,880
  F-4




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Liberator Medical Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
For the nine months ended September 30, 2007 and the year ended December 31, 2006
 2007
    
    
    2006Sales
    
    $
    2,250,368
    
    
    $
    2,841,529Cost of Sales
    
    
    951,298
    
    
    
    1,363,327Gross Profit
    
    
    1,299,070
    
    
    
    1,478,202General and Administrative ExpensesPayroll, payroll taxes and benefits
    
    
    1,364,523
    
    
    
    1,740,063Advertising
    
    
    133,690
    
    
    
    161,177Insurance
    
    
    32,103
    
    
    
    47,821Interest
    
    
    217,108
    
    
    
    241,142Rent
    
    
    291,867
    
    
    
    402,354Professional fees
    
    
    422,847
    
    
    
    192,491Bad debts
    
    
    347,938
    
    
    
    363,861Administrative
    
    
    557,391
    
    
    
    617,857Taxes
    
    
    4,190
    
    
    
    6,676Total General and Administrative Expenses
    
    
    3,371,657
    
    
    
    3,773,442Loss from Operations
    
    
    (2,072,587
    )
    
    
    (2,295,240
    )Other Income/ExpenseForgiveness of Debt
    
    
    107,776
    
    
    
    Loss on Sale of Assets
    
    
    (3,490
    )
    
    
    Interest Income
    
    
    59
    
    
    
    Total Other Income
    
    
    104,345
    
    
    
    Loss before Income Taxes
    
    
    (1,968,242
    )
    
    
    (2,295,240
    )Provision for Income Taxes
    
    
    
    
    
    
    Net Loss
    
    $
    (1,968,242
    )
    
    $
    (2,295,240
    )Weighted average basic and diluted common
shares outstanding
    
    
    27,265,116
    
    
    
    25,447,956Basic and diluted loss per common share
    
    $
    (0.07
    )
    
    $
    (0.09
    )
  F-5




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Liberator Medical Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders Deficiency
For the nine months ended September 30, 2007 and the year ended December 31, 2006
 Par $.001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    Common
    
    
    Paid in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance at January 1, 2006
    
    
    20,986,419
    
    
    $
    20,986
    
    
    $
    4,314,925
    
    
    $
    (4,685,762
    )
    
    $
    (281,647
    )Sale of common stock, net of
$7,400 cost of sale
    
    
    379,999
    
    
    
    380
    
    
    
    381,553
    
    
    
    
    
    
    
    381,933Warrants exercised
    
    
    257,666
    
    
    
    258
    
    
    
    249,075
    
    
    
    
    
    
    
    249,333Stock issued for services
    
    
    100,000
    
    
    
    100
    
    
    
    44,700
    
    
    
    
    
    
    
    44,800Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,295,240
    )
    
    
    (2,295,240
    )Balance at December 31, 2006
    
    
    21,724,084
    
    
    $
    21,724
    
    
    $
    4,990,253
    
    
    $
    (6,981,002
    )
    
    $
    (1,969,025
    )Sale of common stock, prior
to merger
    
    
    1,234,375
    
    
    
    1,234
    
    
    
    450,266
    
    
    
    
    
    
    
    451,500Common stock issued on
conversion of debt
    
    
    2,489,497
    
    
    
    2,490
    
    
    
    1,884,866
    
    
    
    
    
    
    
    1,887,356Stockholder Equity of Cardiff
Communications, Inc. at merger
    
    
    2,963,179
    
    
    
    2,963
    
    
    
    154,122
    
    
    
    (245,554
    )
    
    
    (88,469
    )Prior years retained earnings -
Liberator Services Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,277
    
    
    
    9,277Debt conversion at offering
    
    
    75,000
    
    
    
    75
    
    
    
    43,425
    
    
    
    
    
    
    
    43,500Shares issued for cash
    
    
    720,629
    
    
    
    721
    
    
    
    565,383
    
    
    
    
    
    
    
    566,104Shares issued for services
    
    
    1,257,250
    
    
    
    1,257
    
    
    
    1,004,543
    
    
    
    
    
    
    
    1,005,800Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,968,242
    )
    
    
    (1,968,242
    )Balance at September 30, 2007
    
    
    30,464,014
    
    
    $
    30,464
    
    
    $
    9,092,858
    
    
    $
    (9,185,521
    )
    
    $
    (62,199
    )
  F-6




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Liberator Medical Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2007 and the year ended December 31, 2006
 2007
    
    
    2006Cash flow from operating activitiesCash received from customers
    
    $
    2,129,751
    
    
    $
    2,950,175Cash paid to employees and suppliers of goods
and services
    
    
    (3,066,456
    )
    
    
    (4,372,376
    )Interest Income
    
    
    60
    
    
    
    25Interest paid
    
    
    (193,578
    )
    
    
    (203,602
    )Net Cash Flows Used in Operating Activities
    
    
    (1,130,223
    )
    
    
    (1,625,778
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    (17,536
    )
    
    
    (405,605
    )Net Cash Flows Used in Investing Activities
    
    
    (17,536
    )
    
    
    (405,605
    )Cash flows from financing activitiesProceeds from sale of stock
    
    
    640,504
    
    
    
    434,133Proceeds from warrants exercised
    
    
    
    
    
    
    249,333Broker Commissions
    
    
    (180,450
    )
    
    
    (7,400
    )Proceeds from long-term debt
    
    
    877,655
    
    
    
    1,372,755Payments of long-term debt and capital lease obligations
    
    
    (137,439
    )
    
    
    (112,401
    )Net Cash Flows Provided by Financing
Activities
    
    
    1,200,270
    
    
    
    1,936,420Net increase (decrease) in cash
    
    
    52,511
    
    
    
    (94,963
    )Cash at beginning of period
    
    
    124,309
    
    
    
    219,272Cash at end of period
    
    $
    176,820
    
    
    $
    124,309
  F-7




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2007 and the year ended December 31, 2006
 2007
    
    
    2006Net Loss
    
    $
    (1,968,242
    )
    
    $
    (2,295,240
    )Add items not requiring outlay of cash:Depreciation and amortization
    
    
    137,650
    
    
    
    120,367Equity shares issued for services rendered
    
    
    263,755
    
    
    
    44,800Bad debt expense
    
    
    347,938
    
    
    
    385,001Inventory Reserve
    
    
    50,000
    
    
    
    Loss on abandonment of leasehold
improvements
    
    
    
    
    
    
    12,777Loss on sale of assets
    
    
    3,490
    
    
    
    Changes in operating assets and liabilities:Decrease in net accounts receivable
    
    
    213,088
    
    
    
    124,265(Increase) Decrease in prepaid expenses
    
    
    (47,345
    )
    
    
    19,434(Increase) Decrease in deposits
    
    
    (15,935
    )
    
    
    21,324Decrease (Increase) in inventory
    
    
    8,813
    
    
    
    (37
    )(Decrease) Increase in accounts payable
    
    
    (97,035
    )
    
    
    214,314Increase in accrued expenses
    
    
    109,806
    
    
    
    65,525(Decrease) Increase in accrued interest
    
    
    (34,535
    )
    
    
    37,540Increase in other current assets
    
    
    (700
    )
    
    
    Increase (Decrease) in deferred rent
    
    
    9,797
    
    
    
    (232,848
    )Increase in deferred advertising
    
    
    (110,768
    )
    
    
    (143,000
    )Net Cash Flows Used in Operating Activities
    
    $
    (1,130,223
    )
    
    $
    (1,625,778
    )Non cash financing and investing transactionsThe Company issued common shares and options to satisfy
obligations
    
    $
    1,005,800
    
    
    $
    The Company has capitalized the lessors portion of the cost
of the build-out of the new corporate headquarters in the
amount of $253,700
    
    $
    
    
    
    $
    253,700Acquisition of equipment through capital lease obligations
    
    $
    24,977
    
    
    $
    94,435Common shares issued upon conversion of debt
    
    $
    1,887,356
    
    
    $
    
  F-8




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
 Note 1  Nature of the Business
 Corporate History
     F-9




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
  Note 2  Summary of Significant Accounting Policies
    Cash Equivalents
  Accounts Receivable
   Inventories
  Deferred Advertising Costs
  F-10




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
 Property and Equipment
  Revenue Recognition
   Shipping and Handling Costs
  Income Taxes
   F-11




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
  Use of Estimates
  Reclassifications
  Leases
  Recent Accounting Pronouncements
 , The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115.
 SFAS Fair Value Measures.
  F-12




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
  Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51 (FASB No. 160)
 F-13




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
 NOTE 3  Property and Equipment
  Estimated LifeLeased equipment
    
    5 years
    
    $
    412,215Transportation equipment
    
    3 years
    
    
    94,510Office furniture
    
    5 years
    
    
    61,560Computer equipment
    
    3 years
    
    
    26,045Telephone equipment
    
    5 years
    
    
    30,147Rental equipment
    
    7 years
    
    
    18,329Web Site
    
    3 years
    
    
    5,500Server Software
    
    3 years
    
    
    30,807Training guides
    
    3 years
    
    
    3,125Leasehold improvements
    
    5 years
    
    
    533,984Signage
    
    3 years
    
    
    12,986Total property and equipment
    
    
    
    
    
    
    1,229,208Less accumulated depreciation
and amortization
    
    
    
    
    
    
    501,210$
    727,998
  NOTE 4  Deposits
  2007Deposits on leased equipment
    
    $
    9,904Building rent deposits
    
    
    50,859Utility deposits
    
    
    5,723Deposit on software development
    
    
    4,500Deposit on construction contract
    
    
    10,000Total deposits
    
    $
    80,986
 NOTE 5  Short-term Notes Payable
  F-14




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Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
   2007Note payable due June 5, 2007, bearing interest at 8%
    
    $
    201,359Note payable due October 20, 2007, bearing interest at 7%
    
    
    52,129Note payable due on demand, bearing interest at 8%
    
    
    12,289Total short-term notes payable
    
    $
    265,777
 NOTE 6  Long-term Debt
  Capital Leases Payable
 Stockholder Notes Payable
 2007Capital leases payable
    
    $
    96,542Stockholder notes payable
    
    
    1,676,435Total long-term debt
    
    
    1,772,977Less current portion
    
    
    1,707,150Net long-term debt
    
    $
    65,827
 F-15




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
  AmountYear ending September 30:2008
    
    $
    1,729,1752009
    
    
    40,4892010
    
    
    31,2992011
    
    
    10,655$
    1,811,618Less: Interest on capitalized lease
obligations
    
    
    38,641$
    1,772,977
 NOTE 7  Stock Grant
  NOTE 8  Stockholder Transactions
 Warrants
  AmountBalance at December 31, 2006
    
    
    33,333Issued in 2007
    
    
    3,084,342Exercised
    
    
    Expired
    
    
    (33,333
    )Balance at September 30, 2007
    
    
    3,084,342
  Options
  F-16




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
  Sale of Common Stock
  Debt Conversion
  NOTE 9  Basic and Diluted Loss per Common Share
  NOTE 10  Income Taxes
   September 30, 2007Loss carry forward for tax purposes
    
    $
    5,100,000Deferred tax asset (35%)
    
    $
    1,785,000Valuation allowance
    
    
    (1,785,000
    )Net deferred tax asset
    
    $
    0
 F-17




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##### Table of Contents



Liberator Medical Holdings, Inc. and Subsidiaries
Notes To The Consolidated Financial Statements
September 30, 2007
 NOTE 11  Related Party Transactions
  NOTE 12  Commitments
  AmountYear ending September 30:2008
    
    $
    329,2292009
    
    
    273,8662010
    
    
    251,6802011
    
    
    264,2602012
    
    
    229,300$
    1,348,335
  NOTE 13  401 (K) Plan
   NOTE 14  Concentration of Credit Risk
  NOTE 15  Going Concern
  F-18