UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 FORM 10-K/A
Amendment No. 1 (Mark One) þ
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934 For the fiscal year ended
December 31, 2009 or o
 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934 For the
transition period from __________________ to ____________________
Commission file number: 000-52422 HASCO Medical, Inc.(Exact name of registrant as specified in its charter)  Florida
 
 65-0924471(State or other jurisdiction ofincorporation or organization)
 
 (I.R.S. Employer Identification No.)  1416 West I-65 Service Road S., Mobile, AL
 
 36693(Address of
 principal executive offices)
 
 (Zip Code)Registrants
 telephone number, including area code:
 
 (251) 633-4133 Securities registered under Section 12(b) of the Act: Title of each class
 
 Name of each exchange on which registeredNone
 
 Not applicable Securities registered under Section 12(g) of
the Act: Common stock(Title of class) Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. o Yes þ
No Indicate by
check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o Yes þ
No Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No o   Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o

Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company:

Large accelerated
 filer
 o
 Accelerated
 filer
 oNon-accelerated
 filer
 o
 Smaller
 reporting company
 þ(Do not
 check if smaller reporting company)Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act) Yes o No þ

State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of the last
business day of the registrants most recently completed second fiscal quarter.
$4,994,472 on June 30, 2009.

Indicate the
number of shares outstanding of each of the registrants classes of common
stock, as of the latest practicable date. 733,553,142 shares of common stock
are issued and outstanding as of March 31, 2010.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder
the following documents if incorporated by reference and the Part of the Form
10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1)
Any annual report to security holders; (2) Any proxy or information statement;
and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the
Securities Act of 1933. The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal year ended
December 24, 1980). None.

EXPLANATORY NOTE

Hasco Medical, Inc. (which may be referred to as the "Company," "we," "us,"
or "our") filed its Quarterly Report on Form 10-K for the year ended December 31, 2009, filed with the U.S.
Securities and Exchange Commission (the "SEC") on March 31, 2010 (the "Original Filing"). The Original Filing
did not reflect the impact of transactions that occurred in fiscal 2008 related to the recording of an intangible asset that was
created as a part of the purchase price allocation at the time of the acquisition of Southern Medical & Mobility, Inc., in
June 2008, and the subsequent write off of the intangible asset in December 2008. The intangible asset amounted to $2,553,417 and
was expensed in fiscal year 2008. The amount was equivalent to the purchase price allocation in excess of the net book value at
the time of the acquisition, which was attributed to the then-existing customer relationships. The impact on the consolidated financial
statements is a reclassification in the equity section of the balance sheet which decrease retained earnings with a corresponding
increase in additional paid in capital. There is no other change to the consolidated financial statements. The consolidated balance
sheet was restated to reflect the adjustment for the acquisition of Southern Medical & Mobility, Inc.  See Note 13
to the consolidated financial statements for details.

i

HASCO MEDICAL, INC. 
FORM 10-K 
TABLE OF CONTENTS

Page No.Part IItem 1.
 Business.
 1Item 1A.
 Risk
 Factors.
 6Item 1B.
 Unresolved
 Staff Comments.
 9Item 2.
 Properties.
 9Item 3.
 Legal
 Proceedings.
 9Item 4.
 Submission
 of Matters to a Vote of Security Holders.
 9Part IIItem 5.
 Market for
 Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
 of Equity Securities.
 9Item 6.
 Selected
 Financial Data.
 10Item 7.
 Managements
 Discussion and Analysis of Financial Condition and Results of Operations.
 10Item 7A.
 Quantitative
 and Qualitative Disclosures About Market Risk.
 21Item 8.
 Financial
 Statements and Supplementary Data.
 21Item 9.
 Changes In
 and Disagreements With Accountants on Accounting and Financial Disclosure.
 21Item 9A.(T)
 Controls and
 Procedures.
 22Item 9B.
 Other
 Information.
 23Part IIIItem 10.
 Directors,
 Executive Officers and Corporate Governance.
 23Item 11.
 Executive
 Compensation.
 27Item 12.
 Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters.
 29Item 13.
 Certain
 Relationships and Related Transactions, and Director Independence.
 30Item 14.
 Principal
 Accountant Fees and Services.
 31Part IVItem 15.
 Exhibits,
 Financial Statement Schedules.
 32ii

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION

Certain
statements in this annual report contain or may contain forward-looking
statements that are subject to known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These forward-looking
statements were based on various factors and were derived utilizing numerous
assumptions and other factors that could cause our actual results to differ
materially from those in the forward-looking statements. These factors include,
but are not limited to, our ability to raise sufficient capital to fund our
ongoing operations and satisfy our obligations as they become due, our ability
to implement our strategic initiatives, economic, political and market
conditions and fluctuations, government and industry regulation, interest rate
risk, U.S. and global competition, and other factors. Most of these factors are
difficult to predict accurately and are generally beyond our control. You
should consider the areas of risk described in connection with any
forward-looking statements that may be made herein. Readers are cautioned not
to place undue reliance on these forward-looking statements and readers should
carefully review this annual report in its entirety, including the risks
described in Part I. Item 1A. Risk Factors. Except for our ongoing obligations
to disclose material information under the Federal securities laws, we
undertake no obligation to release publicly any revisions to any forward-looking
statements, to report events or to report the occurrence of unanticipated
events. These forward-looking statements speak only as of the date of this
annual report, and you should not rely on these statements without also
considering the risks and uncertainties associated with these statements and
our business.

OTHER PERTINENT INFORMATION

When
used in this annual report, the terms HASCO,  we, our, and us refers to
Hasco Medical, Inc., a Florida corporation, and our subsidiary.

iii

PART I

ITEM 1.
 DESCRIPTION OF BUSINESSOVERVIEW

HASCO
Medical, Inc., formerly BBC Graphics of Palm Beach Inc, was incorporated in May
1999 under the laws of the State of Florida. We operated as a provider of advertising
and graphic design services. In June 2009, we changed our name to HASCO
Medical, Inc.

From
our formation in May 1999 through April 2006, we were in the business of
providing advertising and graphic design services to our clients. On October 1,
2004, we were administratively dissolved by the State of Florida pursuant to
Sections 607.1420 and 607.1421 of the Florida Business Corporation Act. On
April 29, 2006, we were reinstated as an active Florida corporation pursuant to
Section 607.1422 of the Florida Business Corporation Act. As of that date, we
discontinued our advertising and graphics design business.

On
May 19, 2006, pursuant to a Stock Purchase Agreement between our company,
Bluepoint Financial, LLC (Bluepoint) and Suzanne Mitchell, our former
president and chief executive officer (the Stock Purchase Agreement), Ms.
Mitchell sold Bluepoint 14,800,000 shares of our common stock which she owned
for a purchase price of $1.00. In addition, we sold 22,524,000 shares of our
common stock to Bluepoint for a purchase price of $40,000. Upon closing of
these transactions, Ms. Mitchell and our remaining officers and directors
resigned from their positions and appointed Robert Druzak, a principal of
Bluepoint, as a director and as our president and chief executive officer.

We
were organized under the laws of the State of Florida in May 1999. Our
principal executive offices are located at 1416 West I-65 Service Road S.,
Mobile, AL 36693, and our telephone number is (251) 633-4133. In May 2009, we
changed our fiscal year end from September 30 to December 31.

Based
on our proposed business activities, we were a blank check company. The
United States Securities and Exchange Commission (the SEC) defines a blank
check company as any development stage company that is issuing a penny stock,
within the meaning of Section 3(a)(51) of the Exchange Act of 1934, as amended,
(the Exchange Act) and that has no specific business plan or purpose, or has
indicated that its business plan is to merge with an unidentified company or
companies. Under SEC Rule 12b-2 under the Securities Act of 1933, as amended
(the Securities Act), BBC also qualified as a shell company, until the
reverse merger because we had no or nominal assets (other than cash) and no or
nominal operations. Many states have enacted statutes, rules and regulations
limiting the sale of securities of blank check companies in their respective
jurisdictions.

On
January 12, 2009 HASCO Holdings, LLC acquired 65,324,000 shares of HASCO
Medical, Inc. common stock for total consideration of $150,000. HASCO Holdings,
LLC thereby purchased beneficial ownership of 75% of the outstanding shares of
common stock of the Company. HASCO Holdings, LLC acquired the common shares of
the Company from two shareholders, Robert Druzak, and John R. Signorello.

On
May 12, 2009, HASCO Medical, Inc. (i) closed a share exchange transaction,
pursuant to which HASCO Medical, Inc. became the 100% parent of SOUTHERN
MEDICAL & MOBILITY, and (ii) assumed the operations of SOUTHERN MEDICAL
& MOBILITY.

On
May 12, 2009, we completed the acquisition of Southern Medical & Mobility,
Inc. (SMM) pursuant to the terms of the Agreement and Plan of Merger (the Merger
Agreement) among HASCO, SMM and Southern Medical Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company. Under the terms of
the Merger Agreement Southern Medical Acquisition, Inc. was merged into
Southern Medical & Mobility, Inc., and Southern Medical & Mobility,
Inc. became our wholly-owned subsidiary. The shareholder of Southern Medical
& Mobility, Inc. was issued a total of 554,676,000 shares of our common
stock in exchange for their Southern Medical & Mobility, Inc. share.

After
the merger and transactions that occurred at the same time as the merger, there
were 642,176,000 shares of our common stock outstanding, of which 620,000,000,
approximately 96.5%, were held by HASCO Holdings, LLC, the former sole
shareholder of Southern Medical & Mobility, Inc.

Prior
to the merger, we were a shell company with no business operations.

1

For
accounting purposes, the Merger was treated as a reverse acquisition with
Southern Medical & Mobility, Inc. being the accounting acquirer. Therefore,
the Companys historical financial statements reflect those of Southern Medical
& Mobility, Inc.

HASCO
Medical, Inc., through the reverse merger of its wholly-owned subsidiary with
and into Southern Medical & Mobility, is a low cost, quality provider of a
broad range of home healthcare services that serve patients in Alabama,
Florida, and Mississippi. We have two major service lines: home respiratory
equipment and durable/ home medical equipment. Our objective is to be a leading
provider of home health care products and services in the markets we operate.

The
following table provides examples of the services and products in each service
line:

Service Line
 
 Examples of Services and ProductsHome
 respiratory equipment
 
 Provision of
 oxygen systems, obstructive sleep apnea equipment, and nebulizers.Home medical
 equipment
 
 Provision of
 patient safety items, ambulatory aids and in-home equipment, such as
 wheelchairs and hospital beds.Business

The
Company provides home health care services and products consisting primarily of
the rental and sale of home medical equipment and home health care supplies.
These services and products are paid for primarily by Medicare, Medicaid, and
other third-party payors. The Companys objective is to be a leading provider
of home health care products and services in the markets in which it operates.

Services and Products

The
Company provides a diversified range of home health care services and products.

Home Medical Equipment and Medical Supplies.
The Company provides a variety of equipment and supplies to serve the needs of
home care patients. Revenues from home medical equipment and supplies are
derived principally from the rental and sale of wheelchairs, power chairs,
hospital beds, ambulatory aids, bathroom aids and safety equipment, and
rehabilitation equipment. Sales of home medical equipment and medical supplies
account for 63% and 58% of the Companys revenues in 2009 and 2008,
respectively.

Home Respiratory Equipment.
The Company provides a wide variety of home respiratory equipment primarily to
patients with severe and chronic pulmonary diseases. Patients are referred to
the Company most often by primary care and pulmonary physicians as well as by
hospital discharge planners and case managers. After reviewing pertinent
medical records on the patient and confirming insurance coverage information, a
Company service technician visits the patients home to deliver and to prepare
the prescribed equipment. Company representatives coordinate the prescribed
regimen with the patients physician and train the patient and caregiver in the
correct use of the equipment. For patients renting equipment, Company
representatives also make periodic follow-up visits to the home to provide
additional instructions, perform required equipment maintenance, and deliver
oxygen and other supplies.

The primary
respiratory services that the Company provides are:


 Oxygen systemsto assist patients with
 breathing. There are two types of oxygen systems: (i) oxygen concentrators,
 which are stationary units that filter ordinary room air to provide a
 continuous flow of oxygen; and (ii) high pressure oxygen cylinders, which are
 used primarily for portability as an adjunct to oxygen concentrators. Oxygen
 systems are prescribed by physicians for patients with chronic obstructive
 pulmonary disease, cystic fibrosis, and neurologically-related respiratory
 problems.
 Nebulizers to assist patients with
 breathing. Nebulizer compressors are used to administer aerosolized
 medications (such as albuterol) to patients with asthma, bronchitis, chronic
 obstructive pulmonary disease, and cystic fibrosis.
 Respiratory assist devicesto force air
 through respiratory passage-ways during sleep. These treatments, which
 utilize continuous positive airway pressure (CPAP) or bi-level positive
 airway pressure therapy, are used on adults with obstructive sleep apnea
 (OSA), a condition in which a patients normal breathing patterns are
 disturbed during sleep.2

Operations

Organization

Management is
focused on revenue development and cost control, and decision-making to improve
responsiveness and ensure quality. The Company currently operates from a single
location.

The Company
provides, through its corporate office management, support, compliance
oversight and training, marketing and managed care expertise, sales training
and support, and financial and information systems. Services performed at the
corporate office include financial and accounting functions, treasury,
corporate compliance, human resources, reimbursement oversight, sales and
marketing support, clinical policy and procedure development, regulatory affairs
and licensure, and information system design. The Companys patient service
center provides centralized order intake and revenue qualification.

Commitment
to Quality

The Company
maintains quality and performance improvement programs related to the proper
implementation of its service standards.

Training
and Retention of Quality Personnel.

Management
recognizes that the Companys business depends on its personnel. The Company
attempts to recruit knowledgeable talent for all positions including account
executives that are capable of gaining new business from the local medical
community. In addition, the Company provides sales training and orientation to
all employees.

Management
Information Systems

Management
believes that periodic refinement and upgrading of its management information
systems, which permit management to closely monitor operating activities is
important to the Companys business. The Companys financial systems provide,
among other things, monthly budget analyses, trended financial data, and
financial comparisons to prior periods. These systems also provide a means for
management to monitor key statistical data such as accounts receivable, payor
mix, cash collections, revenue mix and expense trends. Additionally, Medicare
and other third party claims are billed electronically through the Companys
systems thereby facilitating and improving the timeliness of accounts
receivable collections. The Company also maintains a communication network that
provides company-wide access to email and the Internet.

Corporate
Compliance

The Companys
goal is to operate its business with honesty and integrity and in compliance
with the numerous laws and regulations that govern its operations. The
Companys corporate compliance program is designed to help accomplish these
goals through employee training and education, a confidential disclosure
program, written policy guidelines, periodic reviews, compliance audits, and
other programs.

Revenues

The
Company derives substantially all of its revenues from third-party payors
including Medicare, private insurers, and Medicaid. Medicare is a
federally-funded and administered health insurance program that provides
coverage for beneficiaries who require certain medical services and products.
Medicaid is a state-administered reimbursement program that provides
reimbursement for certain medical services and products. Amounts paid under
these programs are based upon fixed rates. Revenues are recorded at the
expected reimbursement rates when the services are provided, merchandise is
delivered, or equipment is rented to patients. Revenues are recorded at net
realizable amounts estimated to be paid by customers and third party payors.
Although amounts earned under the Medicare and Medicaid programs are subject to
review by such third-party payors, subsequent adjustments to such
reimbursements are historically insignificant as these reimbursements are based
on fixed fee schedules. In the opinion of management, adequate provision has
been made for any adjustment that may result from such reviews. Any differences
between estimated settlements and final determinations are reflected in
operations in the period known.

3

Sales
revenues and related services include all product sales to patients and are
derived from the sale of respiratory therapy equipment, and the sale of home
health care equipment and medical supplies, and the sale of supplies and the
provision of services related to the delivery of these products. Sales revenues
are recognized at the time of delivery and recorded at the expected payment
amount based upon the type of product and the payor when the Company has
obtained the properly completed Certificate for Medical Necessity (CMN) from
the health care provider, when applicable. Rentals and other patient revenues
are derived from the rental of equipment related to the provision of
respiratory therapy, and home health care equipment. All rentals of the
equipment are provided by the Company on a month-to-month basis and revenue is
recorded at the expected payment amount based upon the type of rental and the
payor when the Company has obtained the properly completed CMN from the health
care provider, when applicable. Certain pieces of equipment are subject to capped
rental arrangements, whereby title to the equipment transfers to the patient at
the end of the capped rental payment period.

Once
initial delivery of rental equipment is made to the patient, a monthly billing
cycle is established based on the initial date of delivery. The Company
recognizes rental revenue ratably over the monthly service period and defers
revenue for the portion of the monthly bill which is unearned. The fixed
monthly rental encompasses the rental of the product, delivery, set-up,
instruction, maintenance, repairs, and providing backup systems when needed,
and as such, no separate revenue is earned from the initial equipment delivery
and setup process. Routine maintenance and servicing of the equipment is the
responsibility of the Company for as long as the patient is renting the
equipment.

Sales
taxes collected from customers and remitted to governmental authorities are
accounted for on a net basis, and therefore, are excluded from revenues in the
statements of operations.

Because
the Company derives a significant portion of its revenues from Medicare and
Medicaid reimbursement, material changes in Medicare and Medicaid reimbursement
have a material impact on its revenues and, consequently, on its business
operations and financial results. Reimbursement levels typically are subject to
downward pressure as the federal and state governments and managed care payors
seek to reduce payments.

Management
is working to counter the adverse impact of the reimbursement reductions
currently in effect as well as any future reimbursement reductions through a
variety of initiatives designed to grow revenues, improve productivity, and
reduce costs. The magnitude of the adverse impact that reimbursement reductions
will have on the Companys future operating results and financial condition
will depend upon the success of the Companys revenue growth and cost reduction
initiatives. Nevertheless, the adverse impact could be material.

Collections

The
Company has three key initiatives in place to maintain and/or improve
collections of accounts receivable: (i) proper staffing and training; (ii)
process redesign and standardization; and (iii) billing center specific goals
geared toward improved cash collections and reduced accounts receivable.

Net
patient accounts receivable at December 31, 2009 was $241,190 compared to net
patient accounts receivable of $356,801 at December 31, 2008.

We
derive a substantial majority of our revenue from reimbursement by third-party
payors. We accept assignment of insurance benefits from customers and, in most
instances, invoice and collect payments directly from Medicare, Medicaid and
private insurance carriers, as well as from customers under co-insurance
provisions. The following table sets forth, for the periods indicated, the
percentage of our revenues derived from different types of payors.

Year Ended December 31,Payors
 
 2009
 
 2008Medicare and
 Medicaid programs
 
 
 36
 %
 
 64
 %Private
 insurance
 
 
 43
 
 
 29Direct
 payment
 
 
 21
 
 
 7100
 %
 
 100
 %4

An
important indicator of the Companys accounts receivable collection efforts is
the monitoring of the days sales outstanding (DSO). The Company monitors DSO
trends for the Company as part of the management of the billing and collections
process. An increase in DSO usually results from slow-down in the timeliness of
payment processing by payors. A decline in DSO usually results from process
improvements or more timely payment processing by payors. Management uses DSO
trends to monitor, evaluate and improve the performance of the billing process.
The table below shows the Companys DSO for the periods indicated and is calculated
by dividing patient accounts receivable by the average daily revenue for the
previous 90 days, net of bad debt expense:

2009
 
 2008DSO
 62 days
 
 67 daysThe
Company attempts to minimize DSO by screening new patient cases for adequate
sources of reimbursement and by providing complete and accurate claims data to
relevant payor sources. The Companys level of DSO and net patient receivables
is affected by the extended time required to obtain necessary billing
documentation.

Sales and Marketing

The
Company has increased its focus on sales and marketing efforts over the past
several years in an effort to improve revenues. During this time, management
implemented changes designed to improve the effectiveness of the Companys
selling efforts. These include revisions to the Account Executive commission
plans and a restructuring of the sales organization. Management believes these
actions have resulted in a more focused sales management team.

The
Companys sales and marketing focus for 2009 and beyond includes: (i)
increasing the Companys mix of Medicare and profitable managed care business;
(ii) strengthening its sales and marketing efforts through a variety of
programs and initiatives; and (iii) expanding managed care revenue through
greater management attention and prioritization of payors to secure managed
care contracts at acceptable levels of profitability. Improvement in the
Companys ability to grow revenues will be critical to the Companys success.
Management will continue to review and monitor progress with its sales and
marketing efforts.

Competition

The
home health care industry is consolidating but remains highly fragmented and
competition varies significantly from market to market. There are still
relatively few barriers to entry in the local markets served by the Company,
and the Company could encounter competition from new market entrants.
Management believes that the competitive factors most important in the
Companys lines of business are quality of service, reputation with referral
sources, ease of doing business with the provider, ability to develop and to
maintain relationships with referral sources, clinical expertise, and the range
of services offered.

Home
medical equipment and home health care supply companies in our market compete
primarily on the basis of service, not pricing, since reimbursement levels are
established by fee schedules promulgated by Medicare and Medicaid or by the
individual determinations of private insurance companies. Furthermore,
marketing efforts are typically directed toward referral sources that generally
do not share financial responsibility for the payment of services provided to
customers. The relationships between a home medical equipment company and its
customers and referral sources are highly personal. There is no compelling
incentive for either physicians or the patients to alter the relationship, so
long as the home respiratory company is providing responsive, professional and
high-quality service.

Third-party
payors and their case managers actively monitor and direct the care delivered
to their beneficiaries. Accordingly, relationships with such payors and their
case managers and inclusion within preferred provider and other networks of
approved or accredited providers has become a prerequisite in many cases to the
Companys ability to serve many of the patients it treats. Similarly, the
ability of the Company and its competitors to align themselves with other
healthcare service providers may increase in importance as managed care
providers and provider networks seek out providers who offer a broad range of
services, substantially discounted prices, and geographic coverage.

Employees

As
of December 31, 2009, we had 27 employees. None of our employees are covered by
collective bargaining agreements. We believe that the relations between our
management and employees are good.

5

ITEM 1.A
 RISK FACTORSYou
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this annual report that are not historic facts are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially from those set forth in or implied by forward-looking
statements. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In that case, the
trading price of our common stock could decline, and you may lose all or part
of your investment.

THE COST OF HEALTHCARE IS FUNDED
SUBSTANTIALLY BY GOVERNMENT AND PRIVATE INSURANCE PROGRAMS. IF THIS FUNDING IS
REDUCED OR BECOMES LIMITED OR UNAVAILABLE TO OUR CUSTOMERS, OUR BUSINESS MAY BE
ADVERSELY IMPACTED.

Third-party
payers include Medicare, Medicaid and private health insurance providers.
Third-party payers are increasingly challenging prices charged for healthcare
services. We cannot assure you that our services will be considered
cost-effective by third-party payers, that reimbursement will be available or
that payer reimbursement policies will not have a material adverse effect on our
ability to sell our services on a profitable basis, if at all. We cannot
control reimbursement rates, including Medicare market basket or other rate
adjustments, or policies for a significant portion of our business.

POSSIBLE CHANGES IN THE CASE MIX OF PATIENTS,
AS WELL AS PAYER MIX AND PAYMENT METHODOLOGIES, MAY HAVE A MATERIAL ADVERSE
EFFECT ON OUR PROFITABILITY.

The
sources and amounts of our patient revenues will be determined by a number of
factors, including the mix of patients and the rates of reimbursement among
payers. Changes in the case mix of the patients as well as payer mix among
private pay, Medicare and Medicaid may significantly affect our profitability.
In particular, any significant increase in our Medicaid population or decrease
in Medicaid payments could have a material adverse effect on our financial
position, results of operations and cash flow, especially if states operating
these programs continue to limit, or more aggressively seek limits on,
reimbursement rates or service levels.

AN ECONOMIC DOWNTURN, STATE BUDGET PRESSURES,
RISING UNEMPLOYMENT AND CONTINUED DEFICIT SPENDING BY THE FEDERAL GOVERNMENT
MAY RESULT IN A REDUCTION IN REIMBURSEMENT AND COVERED SERVICES.

An
economic downturn can have a detrimental effect on our revenues. Historically,
state budget pressures have translated into reductions in state spending. Given
that Medicaid outlays are a significant component of state budgets, we can
expect continuing cost containment pressures on Medicaid outlays for our
services in the states in which we operate. In addition, an economic downturn,
coupled with increased unemployment, may also impact the number of enrollees in
managed care programs as well as the profitability of managed care companies,
which could result in reduced reimbursement rates.

The
existing federal deficit, as well as deficit spending by the government as the
result of adverse developments in the economy, the war in Iraq and Afghanistan
or other reasons, can lead to continuing pressure to reduce government
expenditures for other purposes, including governmentally funded programs in
which we participate, such as Medicare and Medicaid. Such actions in turn may
adversely affect our results of operations.

LEGISLATIVE AND REGULATORY ACTIONS RESULTING
IN CHANGES IN REIMBURSEMENT RATES OR METHODS OF PAYMENT FROM MEDICARE AND
MEDICAID, OR IMPLEMENTATION OF OTHER MEASURES TO REDUCE REIMBURSEMENT FOR OUR
SERVICES, MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES AND OPERATING
MARGINS.

In
fiscal 2009, 36% percent of our total net revenues were generated from Medicare
and Medicaid and Local Government programs. The healthcare industry is
experiencing a trend toward cost containment, as the government seeks to
stabilize or reduce reimbursement and utilization rates. For example, Congress
currently has under discussion a number of healthcare reform measures, some of
which include reimbursement changes to home health and hospice that can, if
enacted, negatively impact HASCO and other providers. The legislative
environment is presently very fluid, and the Company is monitoring the
situation closely.

6

In
addition, the timing of payments made under these programs is subject to
regulatory action and governmental budgetary constraints. For certain Medicaid
programs, the time period between submission of claims and payment has
increased. Further, within the statutory framework of the Medicare and Medicaid
programs, there are a substantial number of areas subject to administrative
rulings and interpretations that may further affect payments made under those
programs. Additionally, the federal and state governments may in the future
reduce the funds available under those programs or require more stringent
utilization and quality reviews of providers. Moreover, we cannot assure you
that adjustments from regulatory actions or Medicare or Medicaid audits,
including the payment of fines or penalties to the federal or state
governments, will not have a material adverse effect on our liquidity or
profitability.

WE CONDUCT BUSINESS IN A HEAVILY REGULATED
INDUSTRY, AND CHANGES IN REGULATIONS AND VIOLATIONS OF REGULATIONS MAY RESULT
IN INCREASED COSTS OR SANCTIONS.

Our
business is subject to extensive federal, state and, in some cases, local
regulation. Compliance with these regulatory requirements, as interpreted and
amended from time to time, can increase operating costs or reduce revenue and
thereby adversely affect the financial viability of our business. Because these
laws are amended from time to time and are subject to interpretation, we cannot
predict when and to what extent liability may arise. Failure to comply with
current or future regulatory requirements could also result in the imposition
of various remedies, including fines, the revocation of licenses or
decertification. Unanticipated increases in operating costs or reductions in
revenue could adversely affect our liquidity.

WE ARE SUBJECT TO PERIODIC AUDITS AND
REQUESTS FOR INFORMATION BY THE MEDICARE AND MEDICAID PROGRAMS OR GOVERNMENT
AGENCIES, WHICH HAVE VARIOUS RIGHTS AND REMEDIES AGAINST US IF THEY ASSERT THAT
WE HAVE OVERCHARGED THE PROGRAMS OR FAILED TO COMPLY WITH PROGRAM REQUIREMENTS.

The
operation of our business is subject to federal and state laws prohibiting
fraud by healthcare providers, including laws containing criminal provisions,
which prohibit filing false claims or making false statements in order to
receive payment or obtain certification under Medicare and Medicaid programs,
or failing to refund overpayments or improper payments. Violation of these
criminal provisions is a felony punishable by imprisonment and/or fines. We may
also be subject to fines and treble damage claims if we violate the civil
provisions that prohibit knowingly filing a false claim or knowingly using
false statements to obtain payment. State and federal governments are devoting
increased attention and resources to anti-fraud initiatives against healthcare
providers. The Health Insurance Portability and Accountability Act of 1996 and
the Balanced Budget Act of 1997 expanded the penalties for healthcare fraud,
including broader provisions for the exclusion of providers from the Medicare
and Medicaid programs.

We
have established policies and procedures that we believe are sufficient to
ensure that we will operate in substantial compliance with these anti-fraud and
abuse requirements. While we believe that our business practices are consistent
with Medicare and Medicaid programs criteria, those criteria are often vague
and subject to change and interpretation. The imposition of fines, criminal
penalties or program exclusions could have a material adverse effect on our
financial condition, results of operations and cash flows.

WE FACE ADDITIONAL FEDERAL REQUIREMENTS THAT
MANDATE MAJOR CHANGES IN THE 
TRANSMISSION AND RETENTION OF HEALTH INFORMATION AND IN NOTIFICATION
REQUIREMENTS FOR ANY HEALTH INFORMATION SECURITY BREACHES.

The
Health Insurance Portability and Accountability Act of 1996 (HIPPA) was
enacted to ensure that employees can retain and at times transfer their health
insurance when they change jobs and to simplify healthcare administrative
processes. The enactment of HIPAA expanded protection of the privacy and
security of personal medical data and required the adoption of standards for
the exchange of electronic health information. Among the standards that the
Secretary of Health and Human Services has adopted pursuant to HIPAA are
standards for electronic transactions and code sets, unique identifiers for
providers, employers, health plans and individuals, security and electronic
signatures, privacy and enforcement. Although HIPAA was intended to ultimately
reduce administrative expenses and burdens faced within the healthcare industry,
we believe that implementation of this law has resulted in additional costs.
Failure to comply with HIPAA could result in fines and penalties that could
have a material adverse effect on us.

The
Health Information Technology for Economic and Clinical Health Act (HITECH
Act), effective February 22, 2010, sets forth health information security
breach notification requirements. A week after the effective date, covered
entities and business associates were required to submit reports to the US Department
of Health and Human Services (HHS) of any breaches that occurred during the
last quarter of 2009. The HITECH Act requires patient notification for all
breaches, media notification of breaches of over

7

500 patients
and at least annual reporting of all breaches to the Secretary of HHS. The
HITECH Act also includes 4 tiers of sanctions for breaches ($100 to $1.5
million). Failure to comply with HITECH could result in fines and penalties
that could have a material adverse effect on us.

THE COMPANY DEPENDS ON RETAINING AND
OBTAINING PROFITABLE MANAGED CARE CONTRACTS, AND THE COMPANYS BUSINESS MAY BE
MATERIALLY ADVERSELY AFFECTED IF IT IS UNABLE TO RETAIN OR OBTAIN SUCH MANAGED
CARE CONTRACTS.

As
managed care plays a significant role in markets in which the Company operates,
the Companys success will, in part, depend on retaining and obtaining
profitable managed care contracts. There can be no assurance that the Company
will retain or obtain such managed care contracts. In addition, reimbursement
rates under managed care contracts are likely to continue to experience
downward pressure as a result of payors efforts to contain or reduce the costs
of health care by increasing case management review of services, by increasing
retrospective payment audits, and by negotiating reduced contract pricing.
Therefore, even if the Company is successful in retaining and obtaining managed
care contracts, it will experience declining profitability unless the Company
also decreases its cost for providing services and increases higher margin
services.

WE MAY UNDERTAKE ACQUISITIONS THAT COULD
SUBJECT US TO UNANTICIPATED LIABILITIES AND THAT COULD FAIL TO ACHIEVE EXPECTED
BENEFITS.

Our strategy
is to increase our market share through internal growth and strategic
acquisitions. Consideration for the acquisitions has generally consisted of
cash, unsecured non-interest bearing obligations and the assumption of certain
liabilities.

The
implementation of an acquisition strategy entails certain risks, including
inaccurate assessment of disclosed liabilities, the existence of undisclosed
liabilities, regulatory compliance issues associated with the acquired
business, entry into markets in which we may have limited or no experience,
diversion of managements attention and human resources from our underlying
business, difficulties in integrating the operations of an acquired business or
in realizing anticipated efficiencies and cost savings, failure to retain key
management or operating personnel of the acquired business, and an increase in
indebtedness and a limitation in the ability to access additional capital on
favorable terms. The successful integration of an acquired business may be
dependent on the size of the acquired business, condition of the customer
billing records, and complexity of system conversions and execution of the
integration plan by local management. If we do not successfully integrate the
acquired business, the acquisition could fail to achieve its expected revenue
contribution or there could be delays in the billing and collection of claims
for services rendered to customers, which may have a material adverse effect on
our financial position and operating results.

THE MARKET IN WHICH THE COMPANY OPERATES IS
HIGHLY COMPETITIVE, AND IF THE COMPANY IS UNABLE TO COMPETE SUCCESSFULLY, ITS
BUSINESS WILL BE MATERIALLY ADVERSELY AFFECTED.

The
home health care market is highly fragmented. There are relatively few barriers
to entry in the local market served by the Company, and it could encounter
competition from new market entrants. The majority of the Companys competition
comes from local independent operators or hospital-based facilities. Some of
the Companys present and potential competitors are significantly larger than
the Company and have, or may obtain, greater financial and marketing resources
than the Company.

THE PROVISION OF HEALTHCARE SERVICES ENTAILS
AN INHERENT RISK OF LIABILITY, AND THE COMPANYS INSURANCE MAY NOT BE
SUFFICIENT TO EFFECTIVELY PROTECT THE COMPANY FROM ALL CLAIMS.

The
provision of healthcare services entails an inherent risk of liability. Certain
participants in the home healthcare industry may be subject to lawsuits that
may involve large claims and significant defense costs. It is expected that the
Company periodically will be subject to such suits as a result of the nature of
its business. The Company currently maintains product and professional
liability insurance intended to cover such claims in amounts which management
believes are in keeping with industry standards. There can be no assurance that
the Company will be able to obtain liability insurance coverage in the future
on acceptable terms, if at all. There can be no assurance that claims in excess
of the Companys insurance coverage will not arise. A successful claim against
the Company in excess of the Companys insurance coverage could have a material
adverse effect upon the operations, financial condition or prospects of the
Company. Claims against the Company, regardless of their merit or eventual
outcome, may also have a material adverse effect upon the Companys ability to
attract patients or to expand its business.

8

ITEM 1B.
 UNRESOLVED STAFF COMMENTSNot
applicable to a smaller reporting company.

ITEM 2.
 PROPERTIESWe
currently lease approximately 12,000 square feet (including common area
allocation) of general office and warehouse space in Mobile, Alabama from an
unrelated third party which serves as our principal executive office at an
annual base rent of approximately $66,000. The lease expires in June 2013.

ITEM 3.
 LEGAL PROCEEDINGSWe
are not a party to any pending or threatened litigation.

ITEM 4.
 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNone.

PART II

ITEM 5.
 MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESMarket Price of and Dividends on Common
Equity and Related Stockholder Matters

Our
common stock is quoted on the pink sheets operated by Pink Sheets, LLC. Our
shares are listed under the symbol HASC.

The
following sets forth, for the fiscal quarters indicated, the high and low
closing prices per share of our common stock as reported on the pink sheets.
The quotations reflect inter dealer prices, without retail mark-up, mark-down
or commissions and may not represent actual transactions.

Year Ended
 December 31, 2009
 High
 LowFirst
 Quarter
 $0.0006
 $0.0006Second
 Quarter
 0.007
 0.007Third
 Quarter
 0.007
 0.007Fourth
 Quarter
 N/A
 N/AYear Ended
 December 31, 2008First
 Quarter
 $0.35
 $0.35Second
 Quarter
 0.35
 0.34Third
 Quarter
 0.35
 0.35Fourth
 Quarter
 0.35
 0.0005Holders

As
of March 31, 2010, we had 63 stockholders of record of our common stock. Such
numbers of record stockholders was derived from the records maintained by our
transfer agent, Olde Monmouth Stock Transfer Company, Inc.

9

Dividend Policy

We
have never paid cash dividends on our common stock after the reverse merger. Payment of dividends is
within the sole discretion of our Board of Directors and will depend, among
other factors, upon our earnings, capital requirements and our operating and
financial condition. Under Florida law, we may declare and pay dividends on our
capital stock either out of our surplus, as defined in the relevant Florida
statutes, or if there is no such surplus, out of our net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year. If,
however, the capital of our company, computed in accordance with the relevant
Florida statutes, has been diminished by depreciation in the value of our
property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets, we are prohibited
from declaring and paying out of such net profits any dividends upon any shares
of our capital stock until the deficiency in the amount of capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets shall have been repaired.

Recent Sales of Unregistered Securities

In
January, 2010 we sold 4,000,000 shares of common stock to a Director at a price
of $0.007 per share, the fair value at the time of the transaction. The
proceeds of the transaction was $28,000. The issuance was exempt from
registration under the Securities Act of 1933 in reliance on an exemption
provided by Section 4(2) of that act.

In
March 2010, we issued 3,200,000 shares of our common stock to our four officers
and three directors for services rendered. The Company valued these common
shares at the fair market value on the date of grant at $.007 per share or
$22,400 and has been recorded as stock-based compensation. The recipients were
accredited investors and the issuances were exempt from registration under the
Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of
that act.

In
March, 2010, we issued 12,857,142 shares of our common stock valued at $90,000
in satisfaction of debt in the amount of $90,000, which is related to services
rendered to the Company by a related party. The recipient was an accredited
investor and the issuance was exempt from registration under the Securities Act
of 1933 in reliance on an exemption provided by Section 4(2) of that act.

ITEM 6.
 SELECTED FINANCIAL DATANot
applicable to a smaller reporting company.

ITEM 7.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS.The
following discussion of our financial condition and results of operation for the fiscal years
ended December 31, 2009 and 2008 should be read in conjunction with the
selected consolidated financial data, the financial statements and the notes to
those statements that are included elsewhere in this report). Our discussion
includes forward-looking statements based upon current expectations that
involve risks and uncertainties, such as our plans, objectives, expectations
and intentions. Actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a result of a
number of factors, including those set forth under the Item 1A. Risk Factors,
Cautionary Notice Regarding Forward-Looking Statements and Business sections in
this Form 10-K. We use words such as anticipate, estimate, plan,
project, continuing, ongoing, expect, believe, intend, may,
will, should, could, and similar expressions to identify forward-looking
statements.

Overview

From
our formation in May 1999 through April 2006, we were in the business of
providing advertising and graphic design services to our clients. On October 1,
2004, we were administratively dissolved by the State of Florida pursuant to
Sections 607.1420 and 607.1421 of the Florida Business Corporation Act. On
April 29, 2006, we were reinstated as an active Florida corporation pursuant to
Section 607.1422 of the Florida Business Corporation Act. As of that date, we
discontinued our advertising and graphics design business.

10

We
were organized under the laws of the State of Florida in May 1999. Our
principal executive offices are located at 1416 West I-65 Service Road S.,
Mobile, AL 36693, and our telephone number is (251) 633-4133.

On
January 12, 2009 HASCO Holdings, LLC acquired 65,324,000 shares of HASCO
Medical, Inc. common stock for total consideration of $150,000. HASCO Holdings,
LLC thereby purchased beneficial ownership of 75% of the outstanding shares of
common stock of the Company. HASCO Holdings, LLC acquired the common shares of
the Company from two shareholders, Robert Druzak, and John R. Signorello.

On
May 12, 2009, HASCO Medical, Inc. (i) closed a share exchange transaction,
pursuant to which HASCO Medical, Inc. became the 100% parent of SOUTHERN
MEDICAL & MOBILITY, and (ii) assumed the operations of SOUTHERN MEDICAL
& MOBILITY.

On
May 12, 2009, we completed the acquisition of Southern Medical & Mobility,
Inc. (SMM) pursuant to the terms of the Agreement and Plan of Merger (the
Merger Agreement) among HASCO, SMM and Southern Medical Acquisition, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Company. Under the
terms of the Merger Agreement Southern Medical Acquisition, Inc. was merged
into Southern Medical & Mobility, Inc., and Southern Medical &
Mobility, Inc. became our wholly-owned subsidiary. The shareholder of Southern
Medical & Mobility, Inc. was issued a total of 554,676,000 shares of our
common stock in exchange for their Southern Medical & Mobility, Inc. share.

After
the merger and transactions that occurred at the same time as the merger, there
were 642,176,000 shares of our common stock outstanding, of which 620,000,000,
approximately 96.5%, were held by HASCO Holdings, LLC, the former sole
shareholder of Southern Medical & Mobility, Inc.

Prior
to the merger, we were a shell company with no business operations.

HASCO
Medical, Inc., through the reverse merger of its wholly-owned subsidiary with
and into Southern Medical & Mobility, is a low cost, quality provider of a
broad range of home healthcare services that serve patients in Alabama,
Florida, and Mississippi. We have two major service lines: home respiratory
equipment and durable/ home medical equipment. Our objective is to be a leading
provider of home health care products and services in the markets we operate.

For
accounting purposes, the Merger was treated as a reverse acquisition with
Southern Medical & Mobility, Inc. being the accounting acquirer. Therefore,
the Companys historical financial statements reflect those of Southern Medical
& Mobility, Inc.

Critical Accounting Policies

The
discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates based on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

A
summary of significant accounting policies is included in Note 1 to the audited
consolidated financial statements included for the year ended December 31, 2009
and notes thereto contained in this report as filed with the Securities and
Exchange Commission. Management believes that the application of these policies
on a consistent basis enables us to provide useful and reliable financial
information about the Companys operating results and financial condition.

Our
consolidated financial statements include a summary of the significant
accounting policies and methods used in the preparation of our consolidated
financial statements. Management believes the following critical accounting
policies affect the significant judgments and estimates used in the preparation
of the financial statements.

11

Use
of Estimates - Managements Discussion and Analysis or Plan of Operations is
based upon our audited consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues, and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis,
management evaluates these estimates, including those related to allowances for
doubtful accounts receivable and the carrying value of and equipment and
long-lived assets. Management bases these estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

Revenue
Recognition - The Company follows the guidance of the FASB ASC 605-10-S99
Revenue Recognition Overall  SEC Materials. The Company records revenue when
persuasive evidence of an arrangement exists, services have been rendered or
product delivery has occurred, the sales price to the customer is fixed or
determinable, and collectability is reasonably assured. The following policies
reflect specific criteria for the various revenues streams of the Company:


 Revenues
 from sales of products are generally recognized when products are shipped
 unless the Company has obligations remaining under sales or licensing
 agreements, in which case revenue is either deferred until all obligations
 are satisfied or recognized ratably over the term of the contract.
 Revenue from
 services is recorded as it is earned. Customers are generally billed every
 two weeks based on the units of production for the project. Each project has
 an estimated total which is based on the estimated units of production and
 agreed upon billing rates.
 Amounts
 billed in advance of services being provided are recorded as deferred
 revenues and recognized in the consolidated statement of operations as
 services are provided.Stock
Based Compensation - In December 2004, the Financial Accounting Standards
Board, or FASB, issued FASB ASC Topic 718: Compensation  Stock Compensation
(ASC 718). Under ASC 718, companies are required to measure the compensation
costs of share-based compensation arrangements based on the grant-date fair
value and recognize the costs in the financial statements over the period
during which employees are required to provide services. Share-based compensation
arrangements include stock options, restricted share plans, performance-based
awards, share appreciation rights and employee share purchase plans. Companies
may elect to apply this statement either prospectively, or on a modified
version of retrospective application under which financial statements for prior
periods are adjusted on a basis consistent with the pro forma disclosures
required for those periods under ASC 718. Upon adoption of ASC 718, the Company
elected to value employee stock options using the Black-Scholes option
valuation method that uses assumptions that relate to the expected volatility
of the Companys common stock, the expected dividend yield of our stock, the
expected life of the options and the risk free interest rate. Such compensation
amounts, if any, are amortized over the respective vesting periods or period of
service of the option grant.

Accounts
Receivable -Management performs
ongoing evaluations of its accounts receivable. Due to the nature of the industry
and the reimbursement environment in which the Company operates, certain
estimates are required to record net revenues and accounts receivable at their
net realizable values. Inherent in these estimates is the risk that they will
have to be revised or updated as additional information becomes available.
Specifically, the complexity and uncertainty of reimbursement amounts for
certain services from certain payors may result in adjustments to amounts
originally recorded. Such adjustments are typically identified and recorded at
the point of cash application, claim denial or account review. Management
performs periodic analyses to evaluate accounts receivable balances to ensure
that recorded amounts reflect estimated net realizable value. Specifically, management
considers historical realization data, accounts receivable aging trends, and
other operating trends. Also considered are relevant business conditions such
as governmental and managed care payor claims processing procedures and system
changes. Accounts receivable are reduced by an allowance for doubtful accounts
which provides for those accounts from which payment is not expected to be
received, although services were provided and revenue was earned. Upon
determination that an account is uncollectible, it is written-off and charged
to the allowance.

Inventory
is valued at the lower of cost or market, on an average cost basis and includes
primarily finished goods.

12

Long-Lived
Assets - The Company reviews for impairment whenever events or circumstances
indicate that the carrying amount of assets may not be recoverable, pursuant to
guidance established in ASC 360-10-35-15, Impairment
or Disposal of Long-Lived Assets. The Company reviews, long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be fully recoverable, or at least
annually. The Company recognizes an impairment loss when the sum of expected
undiscounted future cash flows is less than the carrying amount of the asset.
The amount of impairment is measured as the difference between the assets
estimated fair value and its book value.

Reimbursement by Third Party Payors

We
derive substantially all of our revenues from reimbursement by third party
payors, including Medicare, Medicaid, and private insurers. Our business has
been, and may continue to be, significantly impacted by changes mandated by
Medicare legislation.

Under
existing Medicare laws and regulations, the sale and rental of our products
generally are reimbursed by the Medicare program according to prescribed fee
schedule amounts calculated using statutorily-prescribed formulas. The Balanced
Budget Act of 1997 (BBA) granted authority to the Secretary of the Department
of Health and Human Services (DHHS) to increase or reduce the reimbursement for
home medical equipment, including oxygen, by up to 15% each year under an
inherent reasonableness procedure. The regulation implementing the inherent reasonableness
authority establishes a process for adjusting payments for certain items and
services covered by Medicare Part B when the existing payment amount is
determined to be grossly excessive or deficient. The regulation lists factors
that may be used by the Centers for Medicare and Medicaid Services (CMS), the
agency within the DHHS responsible for administering the Medicare program, and
its contractors to determine whether an existing reimbursement rate is grossly
excessive or deficient and to determine what a realistic and equitable payment
amount is. Also, under the regulation, CMS and its contractors will not
consider a payment amount to be grossly excessive or deficient and make an
adjustment if they determine that an overall payment adjustment of less than
15% is necessary to produce a realistic and equitable payment amount. The
implementation of the inherent reasonableness procedure itself does not trigger
payment adjustments for any items or services and to date, no payment
adjustments have occurred or been proposed under this inherent reasonableness
procedure.

In
addition to its inherent reasonableness authority, CMS has the discretion to
reduce the reimbursement for home medical equipment (HME) to an amount based on
the payment amount for the least costly alternative (LCA) treatment that meets
the Medicare beneficiarys medical needs. LCA determinations may be applied to
particular products and services by CMS and its contractors through the
informal notice and comment process used in establishing local coverage
policies for HME. Using either its inherent reasonableness authority or LCA
determinations, CMS and its contractors may reduce reimbursement levels for
certain items and services covered by Medicare Part B, including products and
services we offer which could have a material adverse effect on our revenues,
profit margins, profitability, operating cash flows and results of operations.
With respect to its LCA policies, on October 16, 2008, a U.S. District Court in
the District of Columbia held that CMS did not have the authority to implement
LCA determinations in setting payment amounts for covered inhalation drugs.
DHHS filed its notice of appeal on December 10, 2008. We cannot predict whether
this court decision will be overturned or whether CMS or its contractors will
continue to apply LCA policies in the future to inhalation drugs or other HME
products we offer to Medicare beneficiaries.

Recent
legislation, each of which has been signed into law, including the Medicare
Improvement for Patients and Providers Act of 2008 (MIPPA), Medicare, Medicaid
and State Childrens Health Insurance Program Extension Act of 2007 (SCHIP
Extension Act), the Deficit Reduction Act of 2005 (DRA) and the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), contain
provisions that negatively impact reimbursement for the primary HME products
that we provide. MIPPA retroactively delayed the implementation of competitive
bidding for eighteen months and decreased the 2009 fee schedule payment amounts
by 9.5 percent for product categories included in competitive bidding. The
SCHIP Extension Act reduced Medicare reimbursement amounts for covered Medicare
Part B drugs, including inhalation drugs that we provide, beginning April 1,
2008. The DRA caps the Medicare rental period for oxygen equipment at 36 months
of continuous use, after which time title of the equipment would transfer to
the beneficiary. For purposes of this cap, the DRA provides for a new 36-month rental
period that began January 1, 2006 for all oxygen equipment. With the passage of
MIPPA, transfer of title of oxygen equipment at the end of the 36-month rental
cap was repealed, although the rental cap remained in place. The MMA
significantly reduced reimbursement for inhalation drug therapies beginning in
2005, reduced payment amounts for five categories of HME, including oxygen,
beginning in 2005, froze payment amounts for other covered HME items through
2007, established a competitive acquisition program for HME and implemented
quality standards and accreditation requirements for HME suppliers. MIPPA, the
SCHIP Extension Act, DRA and MMA provisions (each of which is discussed in more
detail below), when fully implemented, will have a material adverse effect on
our revenues, profit margins, profitability, operating cash flows and results
of operations. We cannot predict the impact that any federal legislation
enacted in the future will have on our revenues, profit margins, profitability,
operating cash flows and results of operations.

13

Changes
in the law or new interpretations of existing laws could have a dramatic effect
on permissible activities, the relative costs associated with doing business
and the amount of reimbursement by government and other third-party payors.
Reimbursement from Medicare and other government programs is subject to federal
and state statutory and regulatory requirements, administrative rulings,
interpretations of policy, implementation of reimbursement procedures,
retroactive payment adjustments and governmental funding restrictions. Our
levels of revenue and profitability, like those of other health care companies,
are affected by the continuing efforts of government payors to contain or
reduce the costs of health care, including competitive bidding initiatives,
measures that impose quality standards as a prerequisite to payment, policies
reducing certain HME payment rates and restricting coverage and payment for
inhalation drugs, and refinements to payments for oxygen and oxygen equipment.

(1) Competitive Bidding Program for HME.
On April 2, 2007, CMS issued its final rule implementing a competitive bidding
program for certain HME products under Medicare Part B. This nationwide
competitive bidding program is designed to replace the existing fee schedule
payment methodology. Under the competitive bidding program, suppliers compete
for the right to provide items to beneficiaries in a defined region. CMS
selects contract suppliers that agree to receive as payment the single payment
amount calculated by CMS after bids are submitted. Round one of the
competitive bidding program began on July 1, 2008 in ten high-population
competitive bidding areas (CBAs). The competitive bidding program was scheduled
to expand to 70 additional CBAs for a total of 80 CBAs in 2009 and additional
areas thereafter.

However,
on July 15, 2008, the United States Congress, following an override of a
Presidential veto, enacted MIPPA. MIPPA retroactively delays the implementation
of competitive bidding for eighteen months, and terminates all existing
contracts previously awarded. MIPPA includes a 9.5% nationwide reduction in
reimbursement effective January 1, 2009 for the product categories included in
competitive bidding, as a budget neutrality offset for the eighteen month
delay. Effective April 18, 2009, CMSs Interim Final Rule incorporates the
MIPPA requirements into regulations. CMS will be issuing further guidance on
the timeline for and bidding requirements related to the Round 1 re-bid.

(2) Certain Clinical Conditions,
Accreditation Requirements and Quality Standards. The MMA required
establishment and implementation of new clinical conditions of coverage for HME
products and quality standards for HME suppliers. Some clinical conditions have
been implemented, such as the requirement for a face-to-face visit by treating
physicians for beneficiaries seeking power mobility devices. CMS published its
quality standards and criteria for accrediting organizations for HME suppliers
in 2006 and revised some of these standards in October 2008. As an entity that
bills Medicare and receives payment from the program, we are subject to these
standards. We have revised our policies and procedures to ensure compliance in
all material respects with the quality standards. These standards, which are
applied by independent accreditation organizations, include business-related
standards, such as financial and human resources management requirements, which
would be applicable to all HME suppliers, and product-specific quality
standards, which focus on product specialization and service standards. The
product specific standards address several of our products, including oxygen
and oxygen equipment, CPAP and power and manual wheelchairs and other mobility
equipment.

Currently,
we are accredited by the Accreditation Commission for Health Care, Inc. (ACHC)
for Medical Supply Provider Services. The ACHC is a CMS recognized accrediting
organization. Round one competitive bid suppliers will now be required to be
accredited by September 30, 2009.

On
January 25, 2008, CMS published a proposed rule to clarify, expand and add to
the existing enrollment requirements that Durable Medical Equipment and
Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers must satisfy to
establish and maintain billing privileges in the Medicare program. Included in
the proposed rule are revised or clarified requirements regarding contracting
with an individual or entity to provide licensed services, record retention,
clarification of the term appropriate site as set forth in the regulation
(which may be expanded to include a minimum square footage requirement), use of
cell phones and beepers/pagers as a method of receiving calls from the public
or beneficiaries, comprehensive liability insurance, patient solicitation,
maintenance of ordering and referring documentation, sharing of a practice
location with another Medicare provider, and minimum operating hours. At this
time, we cannot predict the impact that this proposed rule, if implemented,
would have on our business.

On
January 2, 2009, CMS published its final rule on surety bond requirements for
DMEPOS suppliers, effective March 3, 2009. The amount of the surety bond has
been set at $50,000 and must be obtained for each National Provider Identifier
(NPI) number subject to Medicare billing privileges. We are required to have
our own NPI number. There may be an upward adjustment for suppliers that have
had adverse legal actions imposed on them in the past. DMEPOS suppliers already
enrolled in Medicare must obtain a surety bond by October 2, 2009, and newly
enrolled suppliers or those changing ownership will be subject to the
provisions of the new rule on May 4, 2009. We have obtained a surety bond by
October 2, 2009.

14

(3) Reduction in Payments for HME and
Inhalation Drugs. The MMA changes also included a reduction in
reimbursement rates beginning in January 2005 for oxygen equipment and certain
other items of home medical equipment (including wheelchairs, nebulizers,
hospital beds and air mattresses) based on the percentage difference between
the amount of payment otherwise determined for 2002 and the 2002 median
reimbursement amount under the Federal Employee Health Benefits Program (FEHBP)
as determined by the Office of the Inspector General of the DHHS. The FEHBP
adjusted payments remained frozen through 2008. With limited exceptions,
items that were not included in competitive bidding received a 5% update for
2009. As discussed above, for 2009, MIPPA included a 9.5% nationwide reduction
in reimbursement for the product categories included in competitive bidding, as
a budget neutrality offset for the eighteen month delay.

(4) Reductions in Payments for Oxygen and
Oxygen Equipment.The
DRA which was signed into law on February 8, 2006, has made certain changes to
the way Medicare Part B pays for certain of our HME products, including oxygen
and oxygen equipment. For oxygen equipment, prior to the DRA, Medicare made
monthly rental payments indefinitely, provided medical need continued. The DRA
capped the Medicare rental period for oxygen equipment at 36 months of
continuous use, after which time ownership of the equipment would transfer to
the beneficiary. For purposes of this cap, the DRA provides for a new 36-month
rental period that began January 1, 2006 for all oxygen equipment. In addition
to the changes in the duration of the rental period for capped rental items and
oxygen equipment, the DRA permits payments for servicing and maintenance of the
products after ownership transfers to the beneficiary.

On
November 1, 2006, CMS released a final rule to implement the DRA changes, which
went into effect January 1, 2007. Under the rule, CMS clarified the DRAs
36-month rental cap on oxygen equipment. CMS also revised categories and
payment amounts for the oxygen equipment and contents during the rental period
and for oxygen contents after equipment ownership by the beneficiary as
described below. With the passage of MIPPA on July 15, 2008, transfer of title
to oxygen equipment at the end of the 36-month rental cap was repealed,
although the rental cap remained in place. Effective January 1, 2009, after the
36th continuous month during which payment is made for the oxygen equipment,
the equipment is to continue to be furnished during any period of medical need
for the remainder of the reasonable useful lifetime of the equipment. After the
36-month rental cap, payment is made only for oxygen contents and for certain
reasonable and necessary maintenance and servicing (for parts and labor not
covered by the suppliers or manufacturers warranty) (discussed in more detail
below).


 Payment for Rental Period. For stationary
 oxygen equipment, the 2009 monthly payment amount is $175.79, a decrease of
 $23.49 from the 2008 amount. The 2009 monthly portable oxygen add-on amount
 is $28.77, a decrease of $3.02 from the 2008 amount. These 2009 payment
 amounts include the 9.5% reduction associated with MIPPA. The 2009 monthly
 payment amount for oxygen-generating portable oxygen equipment remains
 unchanged from 2008 at $51.63 and is unaffected by MIPPA.
 Payment for Contents after 36-Month Rental Cap.
 Payment is based on the type of equipment owned and whether it is
 oxygen-generating. Previously, CMS paid a combined average monthly payment
 amount of $154.90 for furnishing oxygen contents for stationary and portable
 systems after the 36 month rental cap. This amount included payment for both
 stationary contents and portable contents. CMS will split this payment into a
 separate monthly payment amount for stationary oxygen content of $77.45 and a
 separate monthly payment amount for portable oxygen content of $77.45. This
 payment amount is for oxygen contents for equipment that is not
 oxygen-generating. If the beneficiary uses both stationary and portable
 equipment that is not oxygen-generating, the monthly payment amount for
 oxygen contents is $154.90. For stationary or portable oxygen equipment that
 is oxygen-generating, there will be no monthly payment for contents.In
its November 1, 2006 final rule, CMS also acknowledged certain other payments
after the 36-month rental cap, including payment for supplies such as tubing
and masks. In addition, CMS detailed several requirements regarding a
suppliers responsibility to maintain and service capped rental items and
provided for a general maintenance and servicing payment for certain
oxygen-generating equipment beginning six months after the 36-month rental cap.
On October 30, 2008, CMS issued new oxygen payment rules and supplier
responsibilities to address changes to the transfer of title under MIPPA. In
the final rule, CMS determined that for liquid or gaseous oxygen (stationary or
portable), after the 36-month rental cap, there will be no additional Medicare
payment for the maintenance and servicing of such equipment for the remainder
of the useful lifetime of the equipment. CMS also determined that for 2009
only, Medicare will pay for in-home, maintenance and servicing visits for
oxygen concentrators and transfilling equipment every six months, beginning six
months after the end of the 36-month rental cap. This payment will be made if
the supplier visits the beneficiarys home, performs any necessary maintenance
and servicing, and inspects the equipment to ensure that it will function
safely for the next six months. CMS also solicited public comments on whether
to continue such maintenance and servicing payments after 2009. Finally, CMS
clarified that though it retains title to the equipment, a supplier is required
to continue to furnish

15

needed oxygen
equipment and contents for liquid or gaseous equipment after the 36-month
rental cap until the end of the equipments reasonable useful lifetime. CMS
determined the reasonable useful lifetime for oxygen equipment to be five years
provided there are no breaks in service due to medical necessity, computed
based on the date the equipment is delivered to the beneficiary. On January 27,
2009, CMS posted further instructions on the implementation of the 36-month
rental cap, including guidance on payment for oxygen contents after month 36
and the replacement of oxygen equipment that has been in continuous use by the
patient for the equipments reasonable useful lifetime (as defined above). In
accordance with these instructions, and consistent with the final rule
published on October 30, 2008, suppliers may bill for oxygen contents on a
monthly basis after the 36-month rental cap, and the supplier can deliver up to
a maximum of three months of oxygen contents at one time. Additionally, in
accordance with these instructions, and consistent with the final rule
published on October 30, 2008, we now provide replacement equipment to our
patients that exceed five years of continuous use.

The
financial impact of the 36-month rental cap will depend upon a number of
variables, including, (i) the number of Medicare oxygen customers reaching 36
months of continuous service, (ii) the number of patients receiving oxygen
contents beyond the 36-month rental period and the coverage and billing
requirements established by CMS for suppliers to receive payment for such
oxygen contents, (iii) the mortality rates of patients on service beyond 36
months, (iv) the incidence of patients with equipment deemed to be beyond its
reasonable useful life that may be eligible for new equipment and therefore a
new rental episode and the coverage and billing requirements established by CMS
for suppliers to receive payment for a new rental period, (v) any breaks in
continuous use due to medical necessity, and (vi) payment amounts established
by CMS to reimburse suppliers for maintenance of oxygen equipment. We cannot
predict the impact that any future rulemaking by CMS will have on our business.
If payment amounts for oxygen equipment and contents are further reduced in the
future, this could have an adverse effect on our revenues, profit margins,
profitability, operating cash flows and results of operations.

Results of Operations

The following
table sets forth information from our statements of operations for the years
ended December 31, 2009 and 2008:

The following
table provides an overview of certain key factors of our results of operations
for the year ended December 31, 2009 as compared to the year ended December 31,
2008:

Years endedDecember 31,2009
 
 2008Net Revenues
 
 $
 3,390,840
 
 $
 4,575,680Cost of sales
 
 
 910,540
 
 
 1,269,620Operating Expenses:Marketing and selling
 
 
 20,644
 
 
 1,950Depreciation and amortization
 
 
 29,001
 
 
 40,908General and administrative
 
 
 2,857,606
 
 
 2,722,888Total operating expenses
 
 
 2,907,251
 
 
 2,765,746Income (loss) from operations
 
 
 (426,951
 )
 
 540,314Total other income (expense)
 
 
 (9,065
 )
 
 (2,612,649
 )Income tax benefit (expense)
 
 
 104,727
 
 
 (111,000
 )Net income (loss)
 
 $
 (331,289
 )
 $
 (2,183,335
 )Other Key Indicators:

Years ended
 December 31,2009
 
 2008Cost of sales as a percentage of revenues
 
 26.9
 %
 
 27.7
 %Gross profit margin
 
 73.1
 %
 
 72.3
 %General and administrative expenses as a
 percentage of revenues
 
 84.3
 %
 
 59.5
 %Total operating expenses as a percentage of
 revenues
 
 85.7
 %
 
 60.44
 %16

Years ended December 31, 2009 and 2008

Net Revenues

For
the year ended December 31, 2009, we reported revenues of $3,390,840 as
compared to revenues of $4,575,680 for the year ended December 31, 2008, a
decrease of $1,184,840 or approximately 26%. The decrease is primarily due to
the impact of the 9.5% MIPAA reduction, lower reimbursement rates from third
party payors and lower hospital census levels.

Cost of Sales

Our
cost of sales consists of the depreciation of rental assets and products
purchased for resale. For the year ended December 31, 2009, cost of sales was
$910,540, or approximately 26.9% of revenues, compared to $1,269,620, or
approximately 27.7% of revenues, for the year ended December 31, 2008. There
was no material change in the costs of sales as a percentage of revenue and the
corresponding gross profit margin for the year ended December 31, 2009 as
compared to the year ended December 31, 2008.

Total Operating
Expenses

Our
total operating expenses increased approximately 5% to $2,907,251 for the year
ended December 31, 2009 as compared to $2,765,746 for the year ended December
31, 2008. These changes include:

          Marketing
and Selling. For the year ended December 31, 2009, marketing and selling
costs were $20,644 as compared to $1,950 for the year ended December 31, 2008,
an increase of $18,694. The increase was due to marketing, advertising and
print advertising programs initiated during the year ended December 31, 2009.

          Depreciation expense. For the year ended December 31, 2009, depreciation
expense amounted to $29,001 as compared to $40,908 for the year ended December
31, 2008, a decrease of $11,907 or 29.1%. The decrease in depreciation was
primarily attributable to older assets which were fully depreciated in fiscal
2008.

          General and administrative expense. For the year ended December 31,
2009, general and administrative expenses were $2,857,606 as compared to
$2,722,888 for the year ended December 31, 2008, an increase of $134,718 or
approximately 5%. For the year ended December 31, 2009 and 2008 general and
administrative expenses consisted of the following:

Years endedDecember 312009
 
 2008Rent
 
 $
 82,274
 
 $
 43,365Employee compensation
 
 
 1,609,201
 
 
 1,392,324Professional fees
 
 
 136,002
 
 
 52,022Internet/Phone
 
 
 29,350
 
 
 55,394Travel/Entertainment
 
 
 78,144
 
 
 124,822Bad debt expense
 
 
 463,727
 
 
 648,788Insurance
 
 
 57,277
 
 
 64,227Other general and administrative
 
 
 199,976
 
 
 173,946Management fees
 
 
 201,655
 
 
 168,000$
 2,857,606
 
 $
 2,722,888
 For the year
 ended December 31, 2009, rent expense increased to $82,274 as compared to
 $43,365. Rent expense is higher due to the Companys relocation to its retail
 location in Mobile, Alabama.
 For the year
 ended December 31, 2009, employee compensation increased by $216,877, or
 15.6% as compared to $1,392,324. The increase was primarily attributable to
 the addition of a management team, as well as additional headcount in staff.17


 For the year
 ended December 31, 2009, Professional fees expense increased to $136,002 as
 compared to $52,022. Professional fees expense increased as a result of
 non-recurring legal and audit fees incurred in connection with the reverse
 merger which was executed in May 2009. Non-recurring legal fees in connection
 with the filing of our stock option plan and reverse merger was approximately
 $13,000 and $25,000, respectively.
 For the year
 ended December 31, 2009, internet and telephone expense decreased to $29,350
 as compared to $55,394. Internet and telephone expense decreased as a result
 of the change in service provider resulting in lower costs and the Companys
 move to its retail location in August 2008.
 For the year
 ended December 31, 2009, travel and entertainment expense decreased to
 $78,144 as compared to $124,822. Travel and entertainment expense decreased
 as a result of cost cutting measures.
 For the year
 ended December 31, 2009 Bad debt expense amounted to $463,727 as compared to
 $648,788 for the year ended December 31, 2008, a decrease of $185,061, or
 29%. The decrease was due to the implementation of improved collections
 procedures, and the overall decrease in revenues for the year ended December
 31, 2009 as compared to the prior year. For the year ended December 31, 2009,
 we wrote off approximately $141,000 of acquired accounts receivable which
 management deemed uncollectible.
 For the year
 ended December 31, 2009 Insurance expense decreased to $57,277 as compared to
 $64,227 for the year ended December 31, 2008. Insurance expense decreased due
 to change in insurance providers during the period.
 For the year
 ended December 31, 2009 Other general and administrative expense increased to
 $199,976 as compared to $173,946 for the year ended December 31, 2008. The
 increase is primarily attributable to increase in software system expense of
 approximately $16,000 by the Company.
 For the year
 ended December 31, 2009 Management fee expense increased to $201,655 as
 compared to $168,000 for the year ended December 31, 2008. The increase is
 primarily attributable to management fees paid to HASCO Holdings, LLC
 beginning in August 2008.INCOME (LOSS) FROM
OPERATIONS

We
reported loss from operations of $(426,951) for the year ended December 31,
2009 as compared to income from operations of $540,314 for the year ended
December 31, 2008, a decrease of $967,265 or approximately 179%.

OTHER INCOME (EXPENSES)

Losses
on disposal of assets. Losses on disposal of assets were $0 and $53,825 for
the year ended December 31, 2009 and 2008, respectively. In 2008, the losses
are attributable to the disposal of vehicles and office equipment which were no
longer used by the Company upon moving to their new location and change of
ownership.

Interest
Income. Interest income for the year ended December 31, 2009 amounted to
$0. This compares to $5,130 in interest income in the comparable period in
fiscal 2008.

Impairment of intangible assets. Impairment of intangible assets for the year ended December 31, 2009 and 2008 amounted to $0 and $2,553,417.
During fiscal 2008, management determined that the acquired intangible was impaired due to the the departure of former CEO. In
addition, we recognized an impairment loss due to the sum of expected undiscounted future cash flows is less than the carrying
amount of the assets during that period.

Interest
Expense. For the year ended December 31, 2009, interest expense amounted to
$17,815 as compared to $10,537 for the year ended December 31, 2008. The
increase in interest expense is primarily attributable to higher notes payable
and interest bearing liabilities in fiscal 2009.

NET INCOME (LOSS)

Our net loss was $331,289 for the year ended December 31, 2009 as compared to net loss of $2,183,335 for the
year ended December 31, 2008.

18

LIQUIDITY AND
CAPITAL RESOURCES

Liquidity
is the ability of a company to generate funds to support its current and future
operations, satisfy its obligations and otherwise operate on an ongoing basis.
The following table provides an overview of certain selected balance sheet
comparisons between December 31, 2009 and December 31, 2008:

December 31,
 
 December 31,
 
 $
 
 %2009
 
 2008
 
 Change
 
 ChangeWorking capital
 
 
 67,940
 
 
 479,435
 
 
 (411,495
 )
 (85.8
 %)Cash
 
 
 200
 
 
 141,163
 
 
 (140,963
 )
 (100.0
 %)Accounts receivable, net
 
 
 241,190
 
 
 356,801
 
 
 (115,611
 )
 (32.4
 %)Inventory
 
 
 104,106
 
 
 223,022
 
 
 (118,916
 )
 (53.3
 %)Total current assets
 
 
 358,986
 
 
 729,984
 
 
 (370,998
 )
 (50.8
 %)Property and equipment, net
 
 
 255,130
 
 
 186,056
 
 
 69,074
 
 37.1
 %Total assets
 
 
 614,536
 
 
 916,460
 
 
 (301,924
 )
 (32.9
 %)Accounts payable and accrued liabilities
 
 
 258,388
 
 
 142,339
 
 
 116,049
 
 81.5
 %Notes payable-current
 
 
 17,658
 
 
 10,205
 
 
 7,453
 
 73.0
 %Total current liabilities
 
 
 291,046
 
 
 250,549
 
 
 40,497
 
 16.2
 %Notes payable-long term
 
 
 168,939
 
 
 171,015
 
 
 (2,076
 )
 (1.2
 %)Total liabilities
 
 
 459,985
 
 
 421,564
 
 
 38,421
 
 9.1
 %Accumulated deficit
 
 
 (3,254,535
 )
 
 (2,385,336
 )
 
 (869,199
 )
 36.4
 %Stockholders equity
 
 
 154,551
 
 
 494,896
 
 
 (340,345
 )
 (68.8
 %)Net cash provided by operating activities was $124,265 for the year ended December 31, 2009 as compared to
net cash provided by operating activities of $893,601 for the year ended December 31, 2008, a decrease of $769,336. For the year
ended December 31, 2009, we had net loss of $331,289 and non-cash items such as depreciation expense of $201,531, bad debt of $463,727,
stock based compensation of $2,173 offset by decreases from changes in assets and liabilities of $211,877. During the year ended
December 31, 2009 we experienced an increase in accounts receivable of $348,116, an increase in prepaid expenses of $4,492, and
an increase in accounts payable and accrued expenses of $21,815, which was offset by a decrease in inventory of $118,916. For the
year ended December 31, 2008, we used cash to fund our net loss of $2,183,335 incremented by non-cash items such as depreciation
expense of $390,022, bad debts of $648,788, impairment of intangible assets of $2,553,417, offset by changes in assets and liabilities
of $569,116.

Net
cash used in investing activities for the year ended December 31, 2009 was
$248,846 as compared to net cash used in investing activities of $306,958 for
the year ended December 31, 2008. During the year ended December 31, 2009 and
2008, we used cash for property and equipment purchases.

Net
cash used in financing activities for the year ended December 31, 2009 was
$16,382 as compared to net cash used in financing activities of $759,849 for
the year ended December 31, 2008. For the year ended December 31, 2009, net
cash provided by financing activities related to payments on notes payable of
$16,382. For the year ended December 31, 2008, net cash used in financing
activities included dividends paid of $898,729, payments on notes payable of
$18,125, offset by proceeds from related party borrowings of $157,005.

At
December 31, 2009 we had a working capital surplus of $67,940 and accumulated
deficit of $(3,254,535).

In
connection with our annual report for our fiscal year ending December 31, 2009
our management will be required to provide an assessment of the effectiveness
of our internal control over financial reporting, including a statement as to
whether or not internal control over financial reporting is effective. In order
to comply with this requirement we will need to engage a consulting firm to
undertake an analysis of our internal controls. We have yet to engage such a
consulting firm and are unable at this time to predict the costs associated
with our compliance with Section 404 of Sarbanes-Oxley Act of 2002.

19

Contractual Obligations and Off-Balance Sheet
Arrangements

Contractual Obligations

The following
tables summarize our contractual obligations as of December 31, 2009.

Payments Due by PeriodLess than 1
 
 
 1-3 Years
 
 
 3-5
 
 
 5 YearsTotal
 
 
 year
 
 
 
 
 
 Years
 
 
 +Contractual
 Obligations :Operating Lease
 
 $
 231,000
 
 $
 66,000
 
 $
 165,000
 
 $
 
 
 $
 Notes payable
 
 
 36,597
 
 
 17,658
 
 
 18,939
 
 
 
 
 
 Note payable  related party
 
 
 150,000
 
 
 
 
 
 
 
 
 150,000
 
 
 Total Contractual Obligations:
 
 $
 417,597
 
 $
 83,658
 
 $
 183,939
 
 $
 150,000
 
 $
 Off-balance Sheet Arrangements

We have not
entered into any other financial guarantees or other commitments to guarantee
the payment obligations of any third parties. We have not entered into any
derivative contracts that are indexed to our shares and classified as
shareholders equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.

Recently Issued Accounting Pronouncements

In June 2009,
the FASB issued Accounting Standards Update No. 2009-01, Generally Accepted
Accounting Principles (ASC Topic 105) which establishes the FASB Accounting
Standards Codification (the Codification or ASC) as the official single
source of authoritative U.S. generally accepted accounting principles (GAAP).
All existing accounting standards are superseded. All other accounting guidance
not included in the Codification will be considered non-authoritative. The
Codification also includes all relevant Securities and Exchange Commission
(SEC) guidance organized using the same topical structure in separate
sections within the Codification.

Following the
Codification, the Board will not issue new standards in the form of Statements,
FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will
issue Accounting Standards Updates (ASU) which will serve to update the
Codification, provide background information about the guidance and provide the
basis for conclusions on the changes to the Codification.

The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 financial statements and the principal impact on our financial statements
is limited to disclosures as all future references to authoritative accounting
literature will be referenced in accordance with the Codification.

In April 2009,
the FASB issued ASC Topic 320-10-65, Recognition and Presentation of
Other-Than-Temporary Impairments. This update provides guidance for allocation
of charges for other-than-temporary impairments between earnings and other
comprehensive income. It also revises subsequent accounting for
other-than-temporary impairments and expands required disclosure. The update
was effective for interim and annual periods ending after June 15, 2009. The
adoption of ASC Topic 320-10-65 did not have a material impact on the results
of operations and financial condition.

In April 2009,
the FASB issued ASC Topic 320-10-65, Interim Disclosures About Fair Value of
Financial Instruments. This update requires fair value disclosures for
financial instruments that are not currently reflected on the balance sheet at
fair value on a quarterly basis and is effective for interim periods ending
after June 15, 2009. The Companys financial instruments include cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and notes
payable. At December 31, 2009 and 2008 the carrying value of the Companies
financial instruments approximated fair value, due to their short term nature.

20

In May 2009,
the FASB issued (ASC Topic 855), Subsequent Events (ASC Topic 855). This
guidance is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. It is effective for
interim and annual reporting periods ending after June 15, 2009. The adoption
of this guidance did not have a material impact on our consolidated financial
statements.

In June 2009,
the FASB issued ASC Topic 810-10, Amendments to FASB Interpretation No.
46(R). This updated guidance requires a qualitative approach to identifying a
controlling financial interest in a variable interest entity (VIE), and
requires ongoing assessment of whether an entity is a VIE and whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. It is
effective for annual reporting periods beginning after November 15, 2009. The
adoption of ASC Topic 810-10 did not have a material impact on the results of
operations and financial condition.

In October
2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue
Arrangements. This ASU establishes the accounting and reporting guidance for
arrangements including multiple revenue-generating activities. This ASU
provides amendments to the criteria for separating deliverables, measuring and
allocating arrangement consideration to one or more units of accounting. The
amendments in this ASU also establish a selling price hierarchy for determining
the selling price of a deliverable. Significantly enhanced disclosures are also
required to provide information about a vendors multiple-deliverable revenue
arrangements, including information about the nature and terms, significant
deliverables, and its performance within arrangements. The amendments also
require providing information about the significant judgments made and changes
to those judgments and about how the application of the relative selling-price
method affects the timing or amount of revenue recognition. The amendments in
this ASU are effective prospectively for revenue arrangements entered into or
materially modified in the fiscal years beginning on or after June 15, 2010.
Early application is permitted. The Company is currently evaluating this new
ASU.

In October
2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That
Include Software Elements. This ASU changes the accounting model for revenue
arrangements that include both tangible products and software elements that are
essential to the functionality, and scopes these products out of current
software revenue guidance. The new guidance will include factors to help
companies determine what software elements are considered essential to the
functionality. The amendments will now subject software-enabled products to
other revenue guidance and disclosure requirements, such as guidance
surrounding revenue arrangements with multiple-deliverables. The amendments in
this ASU are effective prospectively for revenue arrangements entered into or
materially modified in the fiscal years beginning on or after June 15, 2010.
Early application is permitted. The Company is currently evaluating this new
ASU.

Other
accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact
on the consolidated financial statements upon adoption.

ITEM 7A.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKNot
applicable to smaller reporting companies

ITEM 8.
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATASee
our Financial Statements beginning on page F-1 of this annual report.

ITEM 9.
 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURENone.

21

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls
and Procedures

As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as of
December 31, 2009, the end of the year covered by this report, our management
concluded its evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures.

Disclosure
controls and procedures refer to controls and other procedures designed to
ensure that information required to be disclosed in the reports we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the
SEC and that such information is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating and
implementing possible controls and procedures.

Our
management does not expect that our disclosure controls and procedures will
prevent all error and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the
control systems objectives will be met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. The design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.

With
respect to the fiscal year ending December 31, 2009, under the supervision and
with the participation of our management, we conducted an evaluation of the
effectiveness of the design and operations of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the
Securities Exchange Act of 1934. Based upon our evaluation regarding the fiscal
year ending December 31, 2009, the Companys management, including its Chief
Executive Officer and Chief Financial Officer, has concluded that its
disclosure controls and procedures were not effective due to the Companys
limited internal audit functions. Through the use of external consultants and
the review process, management believes that the financial statements and other
information presented herewith are materially correct.

Managements Report
on Internal Control over Financial Reporting

Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act. Our management is also required to assess
and report on the effectiveness of our internal control over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002
(Section 404). Management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2009. In making this assessment, we
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control - Integrated Framework. During
our assessment of the effectiveness of internal control over financial
reporting as of December 31, 2009, management identified material weaknesses
related to (i) our internal audit functions and (ii) a lack of segregation of
duties within accounting functions. Therefore, our internal controls over
financial reporting were not effective as of December 31, 2009.

Management
has determined that our internal audit function is significantly deficient due
to insufficient qualified resources to perform internal audit functions.

Due
to our size and nature, segregation of all conflicting duties may not always be
possible and may not be economically feasible. However, to the extent possible,
we will implement procedures to assure that the initiation of transactions, the
custody of assets and the recording of transactions will be performed by
separate individuals.

22

We
believe that the foregoing steps will remediate the material weaknesses
identified above, and we will continue to monitor the effectiveness of these
steps and make any changes that our management deems appropriate. Due to the
nature of these material weaknesses in our internal control over financial
reporting, there is more than a remote likelihood that misstatements which
could be material to our annual or interim financial statements could occur
that would not be prevented or detected.

A
material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a
deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet important
enough to merit attention by those responsible for oversight of the companys
financial reporting.

Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies and procedures may deteriorate.

Auditor
Attestation

This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only managements report in this annual
report.

Changes in
Internal Control over Financial Reporting

There
have been no changes in our internal control over financial reporting during
our fiscal year 2009 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 9B.
 Other Information.None.

PART III

ITEM 10.
 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCESet
forth below is information concerning our executive officers and directors:

Name
 
 Age
 
 PositionHal Compton,
 Sr.
 
 62
 
 Chairman of
 the BoardHal Compton,
 Jr.
 
 37
 
 Chief
 Executive Officer and DirectorMark B.
 Lucky
 
 51
 
 Chief
 Financial Officer and DirectorBill
 Marginson*
 
 63
 
 DirectorBarry
 McCook*
 
 62
 
 Director*
Member of the audit and compensation committees.

23

Biographical Information

Harold F.
Compton, Sr. Mr. Compton has been a member of our Board of Directors since
January 2009. Mr. Compton has been a retailer for more than 30 years. Mr.
Compton joined CompUSA Inc. in 1994 as Executive Vice President-Operations,
becoming Executive Vice President and Chief Operating Officer in 1995,
President of CompUSA Stores in 1996 and Chief Executive Officer of CompUSA Inc.
in 2000, a position he held until his retirement in 2004. Prior to joining
CompUSA, Inc., from 1993 until 1994 he served as President and COO of Central
Electric Inc., Executive Vice President Operations and Human Resources, and
Director of Stores for HomeBase (1989 to 1993), Senior Vice President
Operations and Director of Stores for Roses Discount Department Stores (1986 to
1989), and held various management positions including Store Manager, District
Manager, Regional Vice President and Zone Vice President for Zayre Corporation
from 1965 to 1986. Mr. Compton currently serves as lead director on the Board
of Directors of IceWEB, Inc., and is also currently a member of the Board of
Directors of Maidenform Brands, Inc. and is a member of its Compensation
Committee and Audit Committee of the Board of Directors of that company.

Hal Compton,
Jr. Mr. Compton is currently the CEO/President of Southern Medical &
Mobility Inc. Prior to joining Southern Medical & Mobility, he was in the
retail sector for 18 years. He was previously the Vice President of Sales and
Operations in charge of stores for CompUSA. In addition to his professional
experience, he is currently serving on the National Advisory Council for Arnold
Palmer Hospital in Orlando Florida. Mr. Compton is a graduate of Pepperdine
University.

Mark B. Lucky
Mr. Lucky has over 20 years professional experience in high growth/start-up
ventures and established companies with multi-industry experience including
financial services, technology, software, real estate, biotech and
entertainment and media. He is currently the Chief Financial Officer of IceWEB,
Inc., a technology company located in northern Virginia. Prior to joining
IceWEB, he consulted at Bearing Point on their financial restatement project.
From 2004 to 2005 he was Vice President of Finance and Administration at Galt
Associates, Inc., a Sterling, Virginia informatics/ technology and medical
research services company and from 2001 to 2004 he was Vice President of
Finance and Administration of MindShare Design, Inc., a San Francisco,
California based internet technology company. While at both Galt Associates,
Inc. and MindShare Design, Inc. Mr. Lucky was the senior financial officer for
the company, providing strategic and tactical analysis and managing day to day
finance, accounting, cash management, reporting and human resource
responsibilities. During his career Mr. Lucky has also been employed by Axys
Pharmaceuticals, Inc., a NASDAQ-listed San Francisco, California-based early
stage drug discovery biotech company (acting CFO and Senior Director of
Finance), PriceWaterhouseCoopers, LLC, COMPASS Management and Leasing, Inc.
(Vice President - Finance 1997 to 1998), Mindscape, Inc. (Director of Financial
Planning and Analysis 1995 to 1996), The Walt Disney Company (Manager,
Operations Planning & Analysis, Manager of Corporate Planning 1991 to
1995), and KPMG. Mr. Lucky is a CPA and received his B.A., Economics, from the
University of California at Los Angeles.

Bill Marginson
Mr. Marginson is currently the vice president of Retail Services at Solutions
Management, LLC. He was also a founding partner of LSM Mortgage,
Inc./Sandcastle Title, Inc. of Tampa, Florida. Prior to founding LSM Mortgage,
he served in senior management positions in the retail industry for 27 years,
including serving as president of Clearwater Mattress Company and serving as
CEO of The Wiz electronics retailer. In addition, Mr. Marginson was the co-founder
of Yes Appliances and Furniture Co. Inc. and has also held senior positions
with The Garr Consulting Group, Montgomery Ward, and Zayre Discount Department
Stores. Mr. Marginson was an officer in the U.S. Army, and holds an MBA in
Management and Finance, with distinction, from Babson College, and a B.S. in
Business Economics from the University of Rhode Island.

Barry McCook
Mr. McCook is currently the owner and President of QS, LLC, a commercial
construction and real estate firm. He was also previously the founder and
president of Finders Keepers Inc., an Atlanta, Georgia based retailer featuring
deep discount gifts and home accessories. Prior to founding Finders Keepers,
Inc., he served in senior management positions in the retail industry for 27 years,
including serving as Senior Vice President of Store Operations and Real Estate
for Softwarehouse /CompUSA, the Director of Store Operations for Tuesday
Morning Inc., and as a District Manager for Eckerd Drug Inc. In addition, Mr.
McCook holds a BBA in Finance from the University of Texas  Arlington.

Family Relationships

Harold Compton
Sr. and Harold Compton Jr. are father and son.

24

Section 16(a) Beneficial Ownership Reporting
Compliance

Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
executive officers and directors, and persons who beneficially own more than
10% of a registered class of our equity securities to file with the Securities
and Exchange Commission initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of our
common shares and other equity securities, on Forms 3, 4 and 5 respectively.
Executive officers, directors and greater than 10% stockholders are required by
the Securities and Exchange Commission regulations to furnish us with copies of
all Section 16(a) reports they file. Based solely on our review of the copies
of such forms furnished to us during the year ended December 31, 2009, none of
our executive officers, directors and persons holding greater than 10% of our
issued and outstanding stock have failed to file the required reports in a
timely manner.

Code of Ethics Policy

We
have adopted a code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. Our code of ethics will be provided to
any person without charge by written request to 1416 West I-65 Service Road S.,
Mobile, AL.

Committees of our Board of Directors

Our
Board of Directors has created both an Audit Committee and a Compensation
Committee. We do not have a Nominating Committee or any committee performing a
similar function. The functions that such a committee would undertake are being
undertaken by the entire board as a whole. We do not have a policy regarding
the consideration of any director candidates which may be recommended by our
stockholders, including the minimum qualifications for director candidates, nor
has our Board of Directors established a process for identifying and evaluating
director nominees. We have not adopted a policy regarding the handling of any
potential recommendation of director candidates by our stockholders, including
the procedures to be followed. Our Board has not considered or adopted any of
these policies as we have never received a recommendation from any stockholder
for any candidate to serve on our Board of Directors or any inquiry as to what
the procedures may be if a stockholder wished to make such a recommendation.
Since May 2009 the Board has been developing a nominating and approval process
and policy to guide the handling of potential recommendations of board
candidates. While there have been no nominations of additional directors
proposed, in the event such a proposal is made, all members of our Board will
participate in the consideration of director nominees.

Audit
Committee. The Audit Committee of our Board of
Directors was formed to assist the Board of Directors in fulfilling its
oversight responsibilities for the integrity of our consolidated financial
statements, compliance with legal and regulatory requirements, the independent
registered public accounting firms qualifications and independence, and the
performance of our internal audit function and independent auditors. The Audit
Committee will also prepare the report that SEC rules require be included in
our annual proxy statement. The Audit Committee has adopted a charter which
sets forth the parameters of its authority The Audit Committee Charter provides
that the Audit Committee is empowered to:


 Appoint,
 compensate, and oversee the work of the independent registered public
 accounting firm employed by our company to conduct the annual audit. This
 firm will report directly to the audit committee;
 Resolve any
 disagreements between management and the auditor regarding financial
 reporting;
 Pre-approve
 all auditing and permitted non-audit services performed by our external audit
 firm;
 Retain
 independent counsel, accountants, or others to advise the committee or assist
 in the conduct of an investigation;
 Seek any
 information it requires from employees - all of whom are directed to
 cooperate with the committees requests - or external parties;
 Meet with
 our officers, external auditors, or outside counsel, as necessary; and
 The
 committee may delegate authority to subcommittees, including the authority to
 pre-approve all auditing and permitted non- audit services, provided that
 such decisions are presented to the full committee at its next scheduled
 meeting.25

Each Audit
Committee member is required to:


 satisfy the
 independence requirements of Section 10A(m)(3) of the Securities Exchange Act
 of 1934, and all rules and regulations promulgated by the SEC as well as the
 rules imposed by the stock exchange or other marketplace on which our
 securities may be listed from time to time, and
 meet the
 definitions of non-employee director for purposes of SEC Rule 16b-3 and
 outside director for purposes of Section 162(m) of the Internal Revenue
 Code.Each committee
member is required to be financially literate and at least one member is to be
designated as the financial expert, as defined by applicable legislation and
regulation. No committee member is permitted to simultaneously serve on the
audit committees of more than two other public companies. Our board of
directors has determined that the member of the audit committee is an
independent director. Mr. Marginson is considered an audit committee financial
expert under the definition under Item 407 of Regulation S-K. As we expand our
Board of Directors with additional independent directors the number of
directors serving on the Audit Committee will also increase.

Compensation Committee.
The Compensation Committee was appointed by the Board to discharge the Boards
responsibilities relating to:


 compensation
 of our executives,
 equity-based
 compensation plans, including, without limitation, stock option and
 restricted stock plans, in which officers or employees may participate, and
 arrangements
 with executive officers relating to their employment relationships with our
 company, including employment agreements, severance agreements, supplemental
 pension or savings arrangements, change in control agreements and restrictive
 covenants.The
Compensation Committee has adopted a charter. The Compensation Committee
charter provides that the Compensation Committee has overall responsibility for
approving and evaluating executive officer compensation plans, policies and
programs of our company, as well as all equity-based compensation plans and
policies. In addition, the Compensation Committee oversees, reviews and
approves all of our ERISA and other employee benefit plans which we may
establish from time to time. The Compensation Committee is also responsible for
producing an annual report on executive compensation for inclusion in our proxy
statement and assisting in the preparation of certain information to be
included in other periodic reports filed with the SEC.

Each
Compensation Committee member is required to:


 satisfy the
 independence requirements of Section 10A(m)(3) of the Securities Exchange Act
 of 1934, and all rules and regulations promulgated by the SEC as well as the
 rules imposed by the stock exchange or other marketplace on which our
 securities may be listed from time to time, and
 meet the
 definitions of non-employee director for purposes of SEC Rule 16b-3 and
 outside director for purposes of Section 162(m) of the Internal Revenue
 Code.Pursuant
to our Compensation Committee Charter, the Compensation Committee is charged
with evaluating and recommending for approval by the Board of Directors the
compensation of our executive officers. In addition, the Compensation Committee
also evaluates and makes recommendations to the entire Board of Directors
regarding grants of options which may be made as director compensation. The
Compensation Committee does not delegate these authorities to any other persons
nor does it use the services of any compensation consultants.

Mr.
McCook is the only member of our Compensation Committee. As we expand our Board
of Directors with additional independent directors the number of directors
serving on the Compensation Committee will also increase.

26

ITEM 11.
 EXECUTIVE COMPENSATIONSummary Compensation Table

The following
table summarizes all compensation recorded by us in each of the last two
completed fiscal years for our principal executive officer, each other
executive officer serving as such whose annual compensation exceeded $100,000
and up to two additional individuals for whom disclosure would have been made
in this table but for the fact that the individual was not serving as an
executive officer of our company at December 31, 2009. The value attributable
to any option awards is computed in accordance with ASC Topic 718.

SUMMARY COMPENSATION TABLEName and
 principal
 position(a)
 
 Year(b)
 
 Salary($)(c)
 
 Bonus($)(d)
 
 StockAwards($)(e)
 
 OptionAwards($)(f)
 
 Non-
 Equity
 Incentive
 Plan
 Compen-
 sation
 ($)(g)
 
 Non-
 qualified
 Deferred
 Compen-
 sation
 Earnings
 ($)(h)
 
 AllOther
 Compen-
 sation($)(i)
 
 Total($)(j)HalCompton Jr.(1)
 
 
 2009
 
 
 185,000
 
 
 
 
 
 
 
 
 6,400
 
 
 
 
 
 
 
 
 11,700
 
 $
 203,1002008
 
 
 149,423
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 5,730
 
 $
 155,153Mark Lucky(2)
 
 
 2009
 
 
 63,400
 
 
 
 
 
 
 
 
 6,400
 
 
 
 
 
 
 
 
 
 
 $
 69,8002008
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 $
 AlfredoOllivierre(3)
 
 
 2009
 
 
 126,615
 
 
 
 
 
 
 
 
 6,400
 
 
 
 
 
 
 
 
 4,500
 
 $
 137,5152008
 
 
 46,538
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1,500
 
 $
 48,038(1)
 Hal Compton Jr. has served
 as our CEO since May 2009. During 2009, in addition to his salary, his
 compensation included options awards to purchase a total of 1,000,000 shares
 of our common stock at an exercise price of $.007 per share which were valued
 at $6,400. Other compensation for fiscal 2009 included $11,700 for payment of
 health, dental and life insurance.(2)
 Mark Lucky has served as
 our CFO since May 2009. During 2009, in addition to his salary, his
 compensation included options awards to purchase a total of 1,000,000 shares
 of our common stock at an exercise price of $.007 per share which were valued
 at $6,400.(3)
 Alfredo Ollivierre. has
 served as our COO since May 2009. During 2009, in addition to his salary, his
 compensation included options awards to purchase a total of 1,000,000 shares
 of our common stock at an exercise price of $.007 per share which were valued
 at $6,400. Other compensation for fiscal 2009 included $4,500 for payment of
 health, dental and life insurance.Prior to the
Share Exchange on May 6, 2009, we were a blank check shell company that was
formed to investigate and acquire a target company or business seeking the
perceived advantages of being a publicly held corporation. The officer and
director of our company prior to the Share Exchange are no longer employed by
or affiliated with our company.

Compensation
for our current named executive officers is determined with the goal of
attracting and retaining high quality executive officers and encouraging them
to work as effectively as possible on our behalf. Compensation is designed to
reward executive officers for successfully meeting their individual functional
objectives and for their contributions to our overall development. For these
reasons, the elements of compensation of our executive officers are salary and
bonus. Salary is paid to cover an appropriate level of living expenses for the executive
officers and the bonus is paid to reward the executive officer for individual
and company achievement. The compensation is determined by the Compensation
Committee of our Board of Directors.

27

We believe
that the salaries paid to our executive officers during 2009 are indicative of
the objectives of our compensation program and reflect the fair value of the
services provided to our company. Salary is designed to attract, as needed,
individuals with the skills necessary for us to achieve our business plan, to
motivate those individuals, to reward those individuals fairly over time, and
to retain those individuals who continue to perform at or above the levels that
we expect. When setting and adjusting individual executive salary levels, we
consider the relevant established salary range, the named executive officers
responsibilities, experience, potential, individual performance and
contribution. We also consider other factors such as our overall corporate
budget for annual merit increases, unique skills, demand in the labor market
and succession planning.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR ENDOPTION AWARDS
 
 STOCK AWARDSName
 (a)
 
 Number of
 Securities
 Underlying
 Unexercised
 Options(#)
 Exercisable(b)
 
 Number of
 Securities
 Underlying
 Unexercised
 Options(#)
 Unexercisable
 (c)
 
 Equity
 Incentive Plan
 Awards:
 Number of
 Securities
 Underlying
 Unexercised
 Unearned
 Options(#)(d)
 
 Option 
 Exercise 
 Price($)(e)
 
 Option 
 Expiration
 Date(f)
 
 Number
 of Shares
 or Units
 of Stock
 That
 Have Not
 Vested (#)
 (g)
 
 Market
 Value of
 Shares or
 Units of
 Stock
 That
 Have Not
 Vested
 ($)(h)
 
 Equity
 Incentive
 Plan
 Awards:
 Number of
 Unearned
 Shares, Units
 or Other
 Rights that
 Have Not
 Vested (#)(i)
 
 Equity
 Incentive Plan
 Awards:
 Market or
 Payout Value
 of Unearned
 Shares, Units
 or Other
 Rights That
 Have Not
 Vested (#)(j)Hal Compton
 Jr.
 
 
 
 
 
 1,000,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Mark Lucky
 
 
 
 
 
 1,000,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Alfredo
 Ollivierre
 
 
 
 
 
 1,000,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2009 Stock Option Plan

Under the
Companys stock option plan, adopted on July 9, 2009, 20,000,000 shares of
common stock were reserved for issuance upon exercise of options granted to our
directors, officers and employees. We are authorized to issue Incentive Stock
Options (ISOs), which meet the requirements of Section 42 of the Internal
Revenue Code of 1986. At its discretion, we can also issue Non Statutory
Options (NSOs). When an ISO is granted, the exercise price shall be equal to
the fair market value per share of the common stock on the date of the grant.
The exercise price of an NSO shall not be less than fair market value of one
share of the common stock on the date the option is granted. The vesting period
will be determined on the date of grant.

Pension Benefits

There were no
pension benefit plans in effect in 2009

Nonqualified defined contribution and other
nonqualified deferred compensation plans

There were no
non-qualified defined contribution or other nonqualified deferred compensation
plans in effect in 2009.

Employment Agreements

At this time
there are no agreements in place.

28

Director Compensation

Our Board of
Directors is comprised of Hal Compton, Sr., Hal Compton, Jr. Bill Marginson and
Barry McCook. Hal Compton, Jr. does not receive any compensation specifically
for his Board services. The following table provides information concerning the
compensation of Hal Compton, Sr., Bill Marginson and Barry McCook for services
as members of our Board of Directors for fiscal 2009. The value attributable to
any option awards is computed in accordance with ASC Topic 718.

DIRECTOR COMPENSATIONName
 (a)
 
 Fees
 earned or
 paid in
 cash ($)
 (b)
 
 Stock
 awards
 ($)
 (c)
 
 Warrant
 and
 Option
 awards
 ($)
 (d)
 
 Non-equity
 incentive
 plan
 compensation
 ($)
 (e)
 
 Nonqualified
 deferred
 compensation
 earnings ($)
 (f)
 
 All other
 compensation
 ($)
 (g)
 
 Total
 ($)
 (h)Hal
 Compton, Sr. (1)
 
 
 0
 
 
 0
 
 
 160
 
 
 0
 
 
 0
 
 
 0
 
 
 160Bill
 Marginson (2)
 
 
 0
 
 
 0
 
 
 160
 
 
 0
 
 
 0
 
 
 0
 
 
 160Barry
 McCook (3)
 
 
 0
 
 
 0
 
 
 160
 
 
 0
 
 
 0
 
 
 0
 
 
 160(1)
 Represents the value of
 options to purchase 25,000 shares of our common stock with an exercise price
 of $0.007 per share.(2)
 Represents the value of
 options to purchase 25,000 shares of our common stock with an exercise price
 of $0.007 per share(3)
 Represents the value of
 options to purchase 25,000 shares of our common stock with an exercise price
 of $0.007 per shareWe
have not established standard compensation arrangements for our directors and
the compensation payable to each individual for their service on our Board and
determined from time to time by our Board of Directors based upon the amount of
time expended by each of the directors on our behalf.

ITEM 12.
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERSAt
March 31, 2010 we had 733,553,142 shares of our common stock issued and
outstanding. The following table sets forth information regarding the
beneficial ownership of our common stock as of March 31, 2010 by:


 each person
 known by us to be the beneficial owner of more than 5% of our common stock;
 each of our
 directors;
 each of our
 named executive officers; and
 our named
 executive officers, directors and director nominees as a group.Unless
otherwise indicated, the persons and entities named in the table have sole
voting and sole investment power with respect to the shares set forth opposite
the stockholders name, subject to community property laws, where applicable.
Unless otherwise indicated, the address of each stockholder listed in the table
is c/o Southern Medical & Mobility, Inc. 1416 West I-65 Service Road, S.,
Mobile, AL 36693.

29

Name and Address
 of Beneficial Owner
 
 Title
 
 
 Beneficially
 Owned
 Post-Share
 Exchange
 (1)
 
 Percent
 of ClassHASCO Holdings, LLC
 
 
 
 
 632,857,142
 
 86.3
 %Hal Compton, Sr. (2)
 
 Chairman of
 the Board
 
 
 215,002,381
 
 29.3
 %Scott Compton (2)
 
 
 
 
 211,952,380
 
 28.9
 %Hal Compton, Jr. (2)
 
 Chief
 Executive Officer
 
 
 211,952,381
 
 28.9
 %Barry McCook
 
 Board member
 
 
 50,000
 
 *Bill Marginson
 
 Board member
 
 
 50,000
 
 *Mark Lucky
 
 Chief
 Financial Officer, Board member
 
 
 2,050,000
 
 *All
 directors and executive officers as a group (7 people)
 
 
 
 
 635,007,142
 
 86.6
 %*
 represents
 less than 1%(1)
 Beneficial
 ownership has been determined in accordance with Rule 13d-3 under the
 Securities Exchange Act of 1934. Unless otherwise noted, we believe that all
 persons named in the table have sole voting and investment power with respect
 to all shares of common stock beneficially owned by them.(2)
 Includes
 210,952,381 shares of common stock owned by HASCO Holdings, LLC, our largest
 stockholder. HASCO Holdings, LLC is a Texas limited liability company of
 which Hal Compton Sr., Hal Compton, Jr. and Scott Compton are each managers
 and each own 33.3% of the outstanding membership interests.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

We entered
into a note payable agreement with its largest shareholder, HASCO Holdings, LLC
in June 2008, at the time of the Companys acquisition by HASCO. The loan was
in the amount of $150,000, was for working capital, and bears interest at 10%
per annum. The loan has a term of five years. As of December 31, 2009, accrued
interest from such notes payable amounted to $15,000.

We paid
management fee of approximately $202,000 and $168,000 to HASCO Holdings, LLC
during the year ended December 31, 2009 and 2008, respectively.

Our major
shareholder, HASCO Holdings, LLC has made advances to us from time-to-time for
operating expenses. These advances are short-term in nature and are
non-interest bearing. At December 31, 2009 and 2008, amounts due to this
related party amounted to $0 and $7,005, respectively.

In January,
2010 we sold 4,000,000 shares of common stock to a Director at a price of
$0.007 per share, the fair value at the time of the transaction. The proceeds
of the transaction was $28,000.

In March,
2010, we issued 12,857,142 shares of our common stock valued at $90,000 in
satisfaction of debt in the amount of $90,000, which is related to services
rendered to the Company by a related party.

30


Director Independence

Of
the five directors, management believes that Mr. Marginson and Mr. McCook would
be considered independent within the meaning of Rule 5605 of the NASDAQ
Marketplace Rules.

ITEM 14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES.The
following table sets forth the fees billed by our principal independent
accountants for each of our last two fiscal years for the categories of
services indicated.

Year Ended December 31,Category
 
 2009
 
 2008Audit Fees (1)
 
 $
 26,472
 
 $
 1,572Audit Related Fees (2)
 
 
 14,750
 
 
 Tax Fees (3)
 
 
 
 
 
 2,500All Other Fees (4)
 
 
 
 
 
 (1)
 Consists of
 fees billed for the audit of our annual financial statements, review of our
 Form 10-K/10-KSB and services that are normally provided by the accountant in
 connection with year end statutory and regulatory filings or engagements.(2)
 Consists of
 fees billed for the review of our quarterly financial statements, review of
 our forms 10-Q/10-QSB and 8-K and services that are normally provided by the
 accountant in connection with non year end statutory and regulatory filings
 on engagements.(3)
 Consists of
 professional services rendered by a company aligned with our principal
 accountant for tax compliance, tax advice and tax planning.(4)
 The services
 provided by our accountants within this category consisted of advice and
 other services relating to SEC matters, registration statement review,
 accounting issues and client conferences.Our
Board of Directors has adopted a procedure for pre-approval of all fees charged
by our independent auditors. Under the procedure, the Board approves the
engagement letter with respect to audit, tax and review services. Other fees
are subject to pre-approval by the Board, or, in the period between meetings,
by a designated member of Board. Any such approval by the designated member is
disclosed to the entire Board at the next meeting. The audit and tax fees paid
to the auditors with respect to fiscal year 2009 were pre-approved by the
entire Board of Directors.

31

ITEM 15.
 EXHIBITS, FINANCIAL STATEMENT SCHEDULES.Exhibit No.
 
 Exhibit
 Description2.1
 
 Agreement
 and Plan of Merger between BBC Graphics of Palm Beach, Inc. HASCO Holdings,
 LLC and Southern Medical & Mobility, Inc. *2.2
 
 Amendment to
 Articles of Incorporation of BBC Graphics, Inc. *2.3
 
 Bylaws of
 Southern Medical & Mobility, Inc. *2.4
 
 Schedule of
 Directors and Officers of Surviving Corporation *2.5
 
 Articles of
 Incorporation of Southern Medical & Mobility, Inc. *2.6
 
 Amendments
 to the Articles of Incorporation of Southern Medical & Mobility, Inc. *2.7
 
 Amendment to
 Stock Sale and Purchase Agreement *2.8
 
 Delaware
 Certificate of Merger between Southern Medical Acquisition, Inc. and Southern
 Medical & Mobility, Inc. *23.1
 
 Consent of Sherb & Co. LLP **31.1
 
 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **31.2
 
 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **32.1
 
 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **32.2
 
 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *** Previously filed** Filed herein

32


SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

HASCO MEDICAL, INC.By:/s/
 Hal Compton, Jr.February 11, 2011
 Hal Compton,
 Jr.,Chief
 Executive Officer, principal executive officerPursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.

Signature
 
 Title
 
 DateChief
 Executive Officer,/s/ Hal
 Compton, Jr.
 
 principal
 executive officer
 
 February 11, 2011Hal Compton,
 Jr.Chief
 Financial Officer,/s/ Mark B.
 Lucky
 
 principal
 financial and
 
 February 11, 2011Mark B.
 Lucky
 
 accounting
 officer/s/ Hal
 Compton, Sr.
 
 Director
 
 February 11, 2011Hal Compton,
 Sr./s/ Bill
 Marginson
 
 Director
 
 February 11, 2011Bill
 Marginson/s/ Barry
 McCook
 
 Director
 
 February 11, 2011Barry McCook33

HASCO MEDICAL, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

Report of
 Independent Registered Public Accounting Firm
 F-2Consolidated
 Financial Statements:Consolidated Balance Sheets as of December
 31, 2009 and 2008
 F-3Consolidated Statements of Operations for
 the years endedDecember 31, 2009 and 2008
 F-4Consolidated Statements of Changes in
 Stockholders Equity for the years endedDecember 31, 2009 and 2008
 F-5Consolidated Statements of Cash Flows for
 the years endedDecember 31, 2009 and 2008
 F-6Notes to
 Audited Consolidated Financial Statements
 F-7 to F-18F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board
of Directors 
HASCO Medical, Inc. and Subsidiary

We have audited
the accompanying consolidated balance sheets of HASCO Medical, Inc. and
Subsidiary as of December 31, 2009 and 2008 and the related consolidated
statements of operations, changes in stockholders equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted
our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. The Company is not required
at this time, to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HASCO Medical, Inc.
and Subsidiary as of December 31, 2009 and 2008 and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

/s/ Sherb
 & Co., LLPCertified
 Public AccountantsBoca Raton,
 FloridaMarch 24,
 2010 (except to Note 13 which is as of January 20, 2011)F-2

HASCO Medical, Inc. and Subsidiary
Consolidated Balance Sheets

December 31, 2009
(Restated -
See note 13)
 
 December 31, 2008ASSETSCURRENT ASSETS:Cash
 
 $
 200
 
 $
 141,163Accounts receivable, net
 
 
 241,190
 
 
 356,801Inventory
 
 
 104,106
 
 
 223,022Prepaid expenses
 
 
 13,490
 
 
 8,998Total Current Assets
 
 
 358,986
 
 
 729,984OTHER ASSETS:Property and equipment, net
 
 
 255,130
 
 
 186,056Deposits
 
 
 420
 
 
 420Total Assets
 
 $
 614,536
 
 $
 916,460LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES:Accounts payable and accrued liabilities
 
 $
 258,388
 
 $
 142,339Notes payable, current portion
 
 
 17,658
 
 
 10,205Income tax payable
 
 
 
 
 
 82,250Due to related party
 
 
 
 
 
 7,005Accrued interest payable
 
 
 15,000
 
 
 8,750Total Current Liabilities
 
 
 291,046
 
 
 250,549LONG-TERM LIABILITIES:Notes Payable
 
 
 18,939
 
 
 21,015Notes Payable - related party
 
 
 150,000
 
 
 150,000Total Long-Term Liabilities
 
 
 168,939
 
 
 171,015Total Liabilities
 
 
 459,985
 
 
 421,564STOCKHOLDERS' EQUITY:Preferred stock ($.001 par value; 3,000,000
 shares authorized; none issued and outstanding)
 
 
 
 
 
 Common stock ($.001 par value;
 1,000,000,000 shares authorized; 713,496,000 and 554,676,000 shares issued and
 outstanding at December 31, 2009 and December 31, 2008, respectively)
 
 
 713,496
 
 
 554,676Additional paid in capital
 
 
 2,695,590
 
 
 2,325,556Accumulated deficit
 
 
 (3,254,535
 )
 
 (2,385,336
 )Total Stockholders' Equity
 
 
 154,551
 
 
 494,896Total Liabilities and Stockholders' Equity
 
 $
 614,536
 
 $
 916,460See accompanying notes to audited consolidated financial statements
F-3

HASCO Medical, Inc. and Subsidiary
Consolidated Statements of Operations

For the Year Ended
 December 31,2009
 
 2008Net revenues
 
 $
 3,390,840
 
 $
 4,575,680Cost of sales
 
 
 910,540
 
 
 1,269,620Gross profit
 
 
 2,480,300
 
 
 3,306,060Operating expenses:Marketing and selling
 
 
 20,644
 
 
 1,950Depreciation
 
 
 29,001
 
 
 40,908General and administrative
 
 
 2,857,606
 

 
 2,722,888Total operating expenses
 
 
 2,907,251
 
 
 2,765,746Income (loss) from operations
 
 
 (426,951
 )
 
 540,314Other income (expenses):Loss on disposal of assets
 
 
 
 
 
 (53,825
 )Impairment of intangible assets
 
 
 
 
 
 (2,553,417
 )Forgiveness of debt
 
 
 8,750
 
 
 Interest income
 
 
 
 
 
 5,130Interest expense
 
 
 (17,815
 )
 
 (10,537
 )Total other expenses:
 
 
 (9,065
 )
 
 (2,612,649
 )Loss before taxes
 
 
 (436,016
 )
 
 (2,072,335
 )Income tax benefit (expense)
 
 
 104,727
 
 
 (111,000
 )Net loss
 
 $
 (331,289
 )
 $
 (2,183,335
 )Net loss per common shares:Basic
 
 $
 
 
 $
 Diluted
 
 $
 
 
 $
 Weighted average common shares outstanding:Basic
 
 
 656,059,726
 
 
 554,676,000Diluted
 
 
 656,059,726
 
 
 554,676,000See accompanying notes to audited consolidated financial statements
F-4

HASCO Medical, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2009 and 2008

Preferred Stock
 
 Common Stock
 
 Additional
 Paid-in
 Capital
 
 Retained
 Earnings
 (Accumulated
 Deficit)
 
 TotalShares
 
 Amount
 
 Shares
 
 AmountBalance, December 31, 2007
 
 
 
 
 $
 
 
 
 554,676,000
 
 $
 554,676
 
 $
 (553,676
 )
 $
 1,022,542
 
 $
 1,023,542Reclass of S-Corporation retained earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 325,814
 
 
 (325,814
 )
 
 Dividends paid
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (898,729
 )
 
 (898,729
 )Push down accounting pursuant to acquisition of the Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2,553,417
 
 
 
 
 
 2,553,417Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (2,183,335
 )
 
 (2,183,335
 )Balance, December 31, 2008
 
 
 
 
 
 
 
 
 554,676,000
 
 
 554,676
 
 
 2,325,555
 
 
 (2,385,336
 )
 
 494,895Common stock issued in connection with reverse merger
 
 
 
 
 
 
 
 
 87,500,000
 
 
 87,500
 
 
 367,862
 
 
 (639,066
 )
 
 (183,704
 )Issuance of common stock for due to shareholder
 
 
 
 
 
 
 
 
 71,320,000
 
 
 71,320
 
 
 
 
 
 101,156
 
 
 172,476Fair value of options issued to employees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2,173
 
 
 
 
 
 2,173Net loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 (331,289
 )
 
 (331,289
 )Balance, December 31, 2009
 
 
 
 
 $
 
 
 
 713,496,000
 
 $
 713,496
 
 $
 2,695,590
 
 $
 (3,254,535
 )
 $
 154,551See accompanying notes to audited consolidated financial statements
F-5

HASCO Medical, Inc. and Subsidiary
Consolidated Statements of Cash Flows

For the Year Ended
 December 31,2009
 
 2008Cash flows from operating activities:Net income (loss)
 
 $
 (331,289
 )
 $
 (2,183,335
 )Adjustments to reconcile net income (loss) to net cash provided by operating
 activities:Depreciation
 
 
 201,531
 
 
 390,022Loss on disposal of fixed assets
 
 
 
 
 
 53,825Impairment of intangible assets
 
 
 
 
 
 2,553,417Bad debt expense
 
 
 463,727
 
 
 648,788Fair value of options issued to employees
 
 
 2,173
 
 
 Changes in operating assets and liabilitiesAccounts receivable
 
 
 (348,116
 )
 
 (612,024
 )Inventory
 
 
 118,916
 
 
 (165,529
 )Prepaid expenses
 
 
 (4,492
 )
 
 (8,997
 )Other assets
 
 
 
 
 
 (130
 )Income tax payable
 
 
 
 
 
 82,250Accounts payable and accrued liabilities
 
 
 28,820
 
 
 126,564Due to related party
 
 
 (7,005
 )
 
 8,750Net cash provided by operating activities
 
 
 124,265
 
 
 893,601Cash flows from investing activities:Purchase of property and equipment
 
 
 (248,846
 )
 
 (306,958
 )Net cash used in investing activities
 
 
 (248,846
 )
 
 (306,958
 )Cash flows from financing activities:Proceeds from notes payable - related party
 
 
 
 
 
 150,000Advance from related party
 
 
 
 
 
 7,005Payment of dividends
 
 
 
 
 
 (898,729
 )Repayments of notes payable
 
 
 (16,382
 )
 
 (18,125
 )Net cash used in financing activities
 
 
 (16,382
 )
 
 (759,849
 )Net decrease in cash
 
 
 (140,963
 )
 
 (173,206
 )Cash, Beginning of year
 
 
 141,163
 
 
 314,369Cash, End of year
 
 $
 200
 
 $
 141,163Supplemental disclosures of cash flow information:Cash paid during the year for interest
 
 $
 3,519
 
 $
 1,787Cash paid during the year for taxes
 
 $
 
 
 $
 28,750Supplemental schedule of non-cash financing and investing activities:Fair value of shares of common stock issued for due to shareholder
 
 $
 172,476
 
 $
 Vehicles acquired through financing
 
 $
 21,759
 
 
 31,221See accompanying notes to audited consolidated financial statements
F-6

NOTE 1 - NATURE OF OPERATIONS

Organization

HASCO Medical,
Inc. (HASCO or the Company), formerly BBC Graphics of Palm Beach Inc, was
incorporated in May 2009 under the laws of the State of Florida. The Company
operated as a provider of advertising and graphic design services. In June
2009, the Company changed its name to HASCO Medical, Inc.

On May 12,
2009, HASCO completed the acquisition of Southern Medical & Mobility, Inc.
(SMM) pursuant to the terms of the Agreement and Plan of Merger (the Merger
Agreement) among HASCO, SMM and Southern Medical Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company. Under the terms of
the Merger Agreement Southern Medical Acquisition, Inc. was merged into
Southern Medical & Mobility, Inc., and Southern Medical & Mobility,
Inc. became a wholly-owned subsidiary of HASCO. The shareholder of Southern
Medical & Mobility, Inc. was issued a total of 554,676,000 shares of the
Companys common stock in exchange for their Southern Medical & Mobility,
Inc. share.

After the
merger and transactions that occurred at the same time as the merger, there
were 642,176,000 shares of the Companys common stock outstanding, of which
620,000,000, approximately 96.5%, were held by HASCO Holdings, LLC, the former
sole shareholder of Southern Medical & Mobility, Inc.

Prior to the
merger, the Company was a shell company with no business operations.

Southern
Medical & Mobility, Inc. provides home health care services and products
consisting primarily of the rental and sale of home medical equipment and home
health care supplies. These services and products are paid for primarily by
Medicare, Medicaid, and other third-party payors.

For accounting
purposes, HASCO Medical, Inc. has accounted for the transaction as a reverse
acquisition and HASCO will be the surviving entity as a publicly-traded company
under the name HASCO Medical Inc. or together with its subsidiaries. The
Company did not recognize goodwill or any intangible assets in connection with
this transaction.

The Merger was
accounted for as a reverse acquisition, with Southern Medical & Mobility,
Inc, as the accounting acquirer. Accordingly, the reverse acquisition is being
accounted for as a capital transaction in substance, rather than a business
combination. For accounting purposes, the net liabilities of HASCO Medical, Inc.
were recorded at fair value as of the Closing Date, with an adjustment to
additional paid-in capital. The deficit accumulated by HASCO was carried
forward after the Merger. The results of operations of HASCO Medical, Inc. are
included in the accompanying Consolidated Statements of Operations from the
date of the Merger through December 31, 2009.

Effective with
the reverse merger, all previously outstanding common stock owned by HASCO
Medical, Inc.s shareholders were exchanged for the Companys common stock. The
value of the Companys common stock that was issued to HASCO Medical, Inc.s
shareholders was the historical cost of the Companys net tangible assets,
which did not differ materially from its fair value.

All references
to common stock, share and per share amounts have been retroactively restated
to reflect the reverse acquisition as if the transaction had taken place as of
the beginning of the earliest period presented.

Services and Products

The Company
provides a diversified range of home health care services and products.

Home Medical Equipment and Medical Supplies.
The Company provides a variety of equipment and supplies to serve the needs of
home care patients. Revenues from home medical equipment and supplies are
derived principally from the rental and sale of wheelchairs, power chairs,
hospital beds, ambulatory aids, bathroom aids and safety equipment, and
rehabilitation equipment.

F-7

NOTE 1 - NATURE OF OPERATIONS (continued)

Services and Products (continued)

Home Respiratory Equipment.
The Company provides a wide variety of home respiratory equipment primarily to
patients with severe and chronic pulmonary diseases. Patients are referred to
the Company most often by primary care and pulmonary physicians as well as by
hospital discharge planners and case managers. After reviewing pertinent
medical records on the patient and confirming insurance coverage information, a
Company service technician visits the patients home to deliver and to prepare
the prescribed equipment. Company representatives coordinate the prescribed
regimen with the patients physician and train the patient and caregiver in the
correct use of the equipment. For patients renting equipment, Company
representatives also make periodic follow-up visits to the home to provide additional
instructions, perform required equipment maintenance, and deliver oxygen and
other supplies.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Companys
consolidated financial statements include the financial statements of its
wholly-owned subsidiary, Southern Medical & Mobility, Inc. All significant
intercompany accounts and transactions have been eliminated in consolidation.

ASB Accounting Standards Codification

The issuance
by the FASB of the Accounting Standards CodificationTM (the
Codification) on July 1, 2009 (effective for interim or annual reporting
periods ending after September 15, 2009), changes the way that GAAP is
referenced. Beginning on that date, the Codification officially became the
single source of authoritative nongovernmental GAAP; however, SEC registrants
must also consider rules, regulations, and interpretive guidance issued by the
SEC or its staff. The change affects the way the Company refers to GAAP in
financial statements and in its accounting policies. All existing standards
that were used to create the Codification became superseded. Instead,
references to standards consist solely of the number used in the Codifications
structural organization.

Use of Estimates

The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the balance sheets and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Significant estimates in 2009 and 2008 include the allowance for doubtful
accounts, the valuation of inventory, the useful life of property and equipment
and the assumptions used to calculate stock-based compensation.

Fair Value of Financial Instruments

Effective January 1, 2008, the Company
adopted FASB ASC 820, Fair Value Measurements and Disclosures (ASC 820),
for assets and liabilities measured at fair value on a recurring basis. ASC 820
establishes a common definition for fair value to be applied to existing
generally accepted accounting principles that require the use of fair value
measurements, establishes a framework for measuring fair value and expands
disclosure about such fair value measurements. The adoption of ASC 820 did not
have an impact on the Companys financial position or operating results, but
did expand certain disclosures.

ASC 820
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants
at the measurement date. Additionally, ASC 820 requires the use of valuation
techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:

Level 1:
 Observable
 inputs such as quoted market prices in active markets for identical assets or
 liabilitiesLevel 2:
 Observable
 market-based inputs or unobservable inputs that are corroborated by market
 dataLevel 3:
 Unobservable
 inputs for which there is little or no market data, which require the use of
 the reporting entitys own assumptions.F-8

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments
(continued)

Cash and cash
equivalents include money market securities that are considered to be highly
liquid and easily tradable as of December 31, 2009 and 2008, respectively.
These securities are valued using inputs observable in active markets for
identical securities and are therefore classified as Level 1 within our fair
value hierarchy.

In addition,
FASB ASC 825-10-25 Fair Value Option was effective for January 1, 2008. ASC
825-10-25 expands opportunities to use fair value measurements in financial
reporting and permits entities to choose to measure many financial instruments
and certain other items at fair value. The Company did not elect the fair value
options for any of its qualifying financial instruments.

The carrying
amounts of financial instruments, including cash, accounts receivable, accounts
payable and accrued liabilities approximated fair value as of December 31,
2009, because of the relatively short-term maturity of these instruments and
their market interest rates.

Revenue Recognition and Concentration of
Credit Risk

Revenues are
recognized under fee for service arrangements through equipment that the
Company rents to patients, sales of equipment, supplies, and other items the
Company sells to patients. Revenue generated from equipment that the Company
rents to patients is recognized over the rental period and commences on
delivery of the equipment to the patients. Revenue related to sales of
equipment, and supplies is recognized on the date of delivery to the patients.
All revenues are recorded at amounts estimated to be received under
reimbursement arrangements with third-party payors, including private insurers,
prepaid health plans, Medicare and Medicaid.

Our revenues
are recognized on an accrual basis in the period in which services and related
products are provided to customers and are recorded at net realizable amounts
estimated to be paid by customers and third-party payors. Insurance benefits
are assigned to the Company and, accordingly, the Company bills on behalf of
its customers. The Companys billing system contains payor-specific price
tables that reflect the fee schedule amounts in effect or contractually agreed
upon by various government and commercial payors for each item of equipment or
supply provided to a customer. The Company has established an allowance to
account for sales adjustments that result from differences between the payment
amount received and the expected realizable amount. Actual adjustments that
result from differences between the payment amount received and the expected
realizable amount are recorded against the allowance for sales adjustments and
are typically identified and ultimately recorded at the point of cash
application or when otherwise determined pursuant to the Companys collection
procedures. The Company reports revenues in our financial statements net of
such adjustments.

Certain items
provided by the Company are reimbursed under rental arrangements that generally
provide for fixed monthly payments established by fee schedules for as long as
the patient is using the equipment and medical necessity continues (subject to
capped rental arrangements which limit the rental payment periods in some
instances and which may result in a transfer of title to the patient at the end
of the rental payment period). Once initial delivery of rental equipment is
made to the patient, a monthly billing cycle is established based on the
initial date of delivery. The Company recognizes rental arrangement revenues
ratably over the monthly service period and defers revenue for the portion of
the monthly bill that is unearned. No separate payment is earned from the initial
equipment delivery and setup process. During the rental period, the Company is
responsible for servicing the equipment and providing routine maintenance, if
necessary.

The Company
follows the guidance of the FASB ASC 605-10-S99 Revenue Recognition Overall 
SEC Materials. The Company records revenue when persuasive evidence of an
arrangement exists, services have been rendered or product delivery has
occurred, the sales price to the customer is fixed or determinable, and
collectability is reasonably assured.

Due to the
nature of the industry and the reimbursement environment in which the Company
operates, certain estimates are required to record net revenues and accounts
receivable at their net realizable values at the time products and/or services
are provided. Inherent in these estimates is the risk that they will have to be
revised or updated as additional information becomes available. Specifically,
the complexity of many third-party billing arrangements and the uncertainty of
reimbursement amounts for certain services from certain payors may result in
adjustments to amounts originally recorded. Such adjustments are typically
identified and recorded at the point of cash application, claim denial or
account review.

F-9

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition and Concentration of
Credit Risk (continued)

Included in
accounts receivable are earned but unbilled receivables. Unbilled accounts
receivable represent charges for equipment and supplies delivered to customers
for which invoices have not yet been generated by the billing system. Prior to
the delivery of equipment and supplies to customers, the Company performs
certain certification and approval procedures to ensure collection is
reasonably assured and that unbilled accounts receivable are recorded at net
amounts expected to be paid by customers and third-party payors. Billing
delays, generally ranging from several days to several weeks, can occur due to
delays in obtaining certain required payor-specific documentation from internal
and external sources, interim transactions occurring between cycle billing
dates established for each customer within the billing system and business
acquisitions awaiting assignment of new provider enrollment identification
numbers. In the event that a third-party payor does not accept the claim for
payment, the customer is ultimately responsible.

The Company
performs analyses to evaluate the net realizable value of accounts receivable.
Specifically, the Company considers historical realization data, accounts
receivable aging trends, other operating trends and relevant business
conditions. Because of continuing changes in the health care industry and
third-party reimbursement, it is possible that our estimates could change,
which could have a material impact on our operations and cash flows.

Cash and Cash Equivalents

For purposes
of the consolidated statements of cash flows, the Company considers all highly
liquid instruments purchased with a maturity of three months or less and money
market accounts to be cash equivalents.

Concentrations of Credit Risk

Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash and cash equivalents, accounts
receivable, and notes payable. The Companys cash and cash equivalents accounts
are held at financial institutions and are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000 between January 2007 and October
2008 and $250,000 for interest-bearing accounts and an unlimited amount for
noninterest-bearing accounts after October 2008. During the year ended December
31, 2009, the Company has not reached bank balances exceeding the FDIC
insurance limit. While the Company periodically evaluates the credit quality of
the financial institutions in which it holds deposits, it cannot reasonably
alleviate the risk associated with the sudden failure of such financial
institutions. The Companys investment policy is to invest in low risk, highly
liquid investments. The Company does not believe it is exposed to any
significant credit risk in its cash investment.

The Company
performs on-going credit evaluations of its customer base including those
included in accounts receivable at December 31, 2009 and 2008, and, generally,
does not require collateral. The Company maintains reserves for potential
credit losses and such losses have been within managements expectations.

Accounts Receivable

Accounts
receivable consists primarily of receivables due from Medicare Medicaid, and
third party payors. The Company recorded a bad debt allowance of $307,495 and
$305,539 as of December 31, 2009 and 2008, respectively. Management performs
ongoing evaluations of its accounts receivable.

Due to the
nature of the industry and the reimbursement environment in which the Company
operates, certain estimates are required to record net revenues and accounts
receivable at their net realizable values. Inherent in these estimates is the
risk that they will have to be revised or updated as additional information
becomes available. Specifically, the complexity and uncertainty of
reimbursement amounts for certain services from certain payors may result in
adjustments to amounts originally recorded. Such adjustments are typically
identified and recorded at the point of cash application, claim denial or
account review.

F-10

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable (continued)

Management performs
periodic analyses to evaluate accounts receivable balances to ensure that
recorded amounts reflect estimated net realizable value. Specifically,
management considers historical realization data, accounts receivable aging
trends, and other operating trends. Also considered are relevant business
conditions such as governmental and managed care payor claims processing
procedures and system changes.

Accounts
receivable are reduced by an allowance for doubtful accounts which provides for
those accounts from which payment is not expected to be received, although
services were provided and revenue was earned. Upon determination that an
account is uncollectible, it is written-off and charged to the allowance.

Inventory

Inventory is
valued at the lower of cost or market, on an average cost basis and includes
primarily finished goods.



Advertising

Advertising, marketing and selling is expensed as incurred.  Such expenses for the year ended December
31, 2009 and 2008 totaled approximately $20,604 and $1,950, respectively.




Shipping and Handling Costs

The Company
classifies costs related to freight as costs of sales.

Property and Equipment

Property and equipmentincluding rental equipment are carried at cost and
are depreciated on a straight-line basis over the estimated useful lives of the assets, generally one to three years. The cost
of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired
or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included
in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events
or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Impairment of Long-Lived Assets

Long-Lived
Assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
The Company reviews, long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an
impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as
the difference between the assets estimated fair value and its book value. The
Company did not record any impairment charges for the years ended December 31,
2009 and 2008.

Income Taxes

During the
year ended December 31, 2009, the Company recorded an income tax benefit of
$104,729 from the reversal of the accrual of income tax expense during fiscal
2008 and the receipt of income tax refund in July 2009.

Income taxes
are accounted for under the asset and liability method as prescribed by ASC
Topic 740: Income Taxes (ASC 740). Deferred income tax assets and liabilities
are computed for differences between the carrying amounts of assets and
liabilities for financial statement and tax purposes. Deferred income tax
assets are required to be reduced by a valuation allowance when it is
determined that it is more likely than not that all or a portion of a deferred
tax asset will not be realized. In determining the necessity and amount of a
valuation allowance, management considers current and past performance, the
operating market environment, tax planning strategies and the length of tax
benefit carryforward periods.

F-11

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)

Pursuant to
ASC Topic 740-10: Income Taxes related to the accounting for uncertainty in
income taxes, the evaluation of a tax position is a two-step process. The first
step is to determine whether it is more likely than not that a tax position
will be sustained upon examination, including the resolution of any related
appeals or litigation based on the technical merits of that position. The
second step is to measure a tax position that meets the more-likely-than-not
threshold to determine the amount of benefit to be recognized in the financial
statements. A tax position is measured at the largest amount of benefit that is
greater than 50% likelihood of being realized upon ultimate settlement. Tax
positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first subsequent period in which the
threshold is met. Previously recognized tax positions that no longer meet the
more-likely-than-not criteria should be de-recognized in the first subsequent
financial reporting period in which the threshold is no longer met. The
accounting standard also provides guidance on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosures, and
transition. The adoption had no effect on the Companys consolidated financial
statements.

Subsequent Events

In May 2009,
the FASB issued ASC Topic 855: Subsequent Events (ASC855), which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued. For purposes
of determining whether a post-balance sheet event should be evaluated to
determine whether it has an effect on the financial statements for the year
ended December 31, 2009, subsequent events were evaluated by the Company as of
March 31, 2010, the date on which the consolidated financial statements at and
for the year ended December 31, 2009, were available to be issued.

Stock Based Compensation

In December
2004, the Financial Accounting Standards Board, or FASB, issued FASB ASC Topic
718: Compensation  Stock Compensation (ASC 718). Under ASC 718, companies
are required to measure the compensation costs of share-based compensation
arrangements based on the grant-date fair value and recognize the costs in the
financial statements over the period during which employees are required to
provide services. Share-based compensation arrangements include stock options,
restricted share plans, performance-based awards, share appreciation rights and
employee share purchase plans. Companies may elect to apply this statement
either prospectively, or on a modified version of retrospective application
under which financial statements for prior periods are adjusted on a basis
consistent with the pro forma disclosures required for those periods under ASC 718.
Upon adoption of ASC 718, the Company elected to value employee stock options
using the Black-Scholes option valuation method that uses assumptions that
relate to the expected volatility of the Companys common stock, the expected
dividend yield of our stock, the expected life of the options and the risk free
interest rate. Such compensation amounts, if any, are amortized over the
respective vesting periods or period of service of the option grant.

Related Parties

Parties are
considered to be related to the Company if the parties that, directly or
indirectly, through one or more intermediaries, control, are controlled by, or
are under common control with the Company. Related parties also include
principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other
parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests. The Company discloses all related party
transactions. All transactions shall be recorded at fair value of the goods or
services exchanged. Property purchased from a related party is recorded at the
cost to the related party and any payment to or on behalf of the related party
in excess of the cost is reflected as a distribution to related party.

F-12

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)


Acquisition of Southern Medical Mobility Inc.

In June 2008, the Company consummated a Stock Sale and Purchase Agreement (the "Purchase Agreement"), wherein an individual, Harold Compton, SR., acquired 100% of the outstanding share of stock in Southern Medical & Mobility, Inc. in exchange for cash in the amount of $3,200,000. Harold Compton, SR. acquired 100% of the outstanding stock from the former shareholder of Southern Medical & Mobility, Inc. and subsequently, Mr. Compton, Sr. transferred the title of the acquired stock to Hasco Holdings, LLC, a holding company owned by Mr. Compton Sr. and his family members.

The Company accounted for the acquisition utilizing the purchase method of accounting in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations". Accordingly, the Company applied push-down accounting and adjusted to fair value all of the assets and liabilities directly on the financial statements of the Company. The net purchase price, including acquisition costs paid by Mr. Compton, was allocated to assets acquired and liabilities assumed on the records of the Company as follows:

Current assets (including cash of $341,030)$894,269Property and equipment at net book value268,144Other assets420Intangible assets2,553,417Liabilities assumed(516,250)Net purchase price$3,200,000In December 2008, the former owner and CEO of the Company discontinued his employment with the Company. It was determined that when the former CEO left the Company that there was no future benefit to the acquired customer relationships/intangible assets as a result of his departure. The Company deemed the acquired intangible assets to be impaired and wrote-off the intangible assets in December 2008. In addition, the Company recognized an impairment loss due to the sum of expected undiscounted future cash flows is less than the carrying amount of the assets. Accordingly, for the year ended December 31, 2008, the Company recorded an impairment of intangible assets of $2,553,417 on the accompanying statement of operations.

Recently Issued Accounting Pronouncements

In June 2009,
the FASB issued Accounting Standards Update No. 2009-01, Generally Accepted
Accounting Principles (ASC Topic 105) which establishes the FASB Accounting
Standards Codification (the Codification or ASC) as the official single
source of authoritative U.S. generally accepted accounting principles (GAAP).
All existing accounting standards are superseded. All other accounting guidance
not included in the Codification will be considered non-authoritative. The
Codification also includes all relevant Securities and Exchange Commission
(SEC) guidance organized using the same topical structure in separate
sections within the Codification.

F-13

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements
(continued)

Following the
Codification, the Board will not issue new standards in the form of Statements,
FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will
issue Accounting Standards Updates (ASU) which will serve to update the
Codification, provide background information about the guidance and provide the
basis for conclusions on the changes to the Codification.

The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The Codification is effective for our third-quarter
2009 financial statements and the principal impact on our financial statements
is limited to disclosures as all future references to authoritative accounting
literature will be referenced in accordance with the Codification.

In April 2009,
the FASB issued ASC Topic 320-10-65, Recognition and Presentation of
Other-Than-Temporary Impairments. This update provides guidance for allocation
of charges for other-than-temporary impairments between earnings and other
comprehensive income. It also revises subsequent accounting for
other-than-temporary impairments and expands required disclosure. The update
was effective for interim and annual periods ending after June 15, 2009. The
adoption of ASC Topic 320-10-65 did not have a material impact on the results
of operations and financial condition.

In April 2009,
the FASB issued ASC Topic 320-10-65, Interim Disclosures About Fair Value of
Financial Instruments. This update requires fair value disclosures for financial
instruments that are not currently reflected on the balance sheet at fair value
on a quarterly basis and is effective for interim periods ending after June 15,
2009. The Companys financial instruments include cash and cash equivalents,
accounts receivable, accounts payable, accrued expenses and notes payable. At
December 31, 2009 and 2008 the carrying value of the Companies financial
instruments approximated fair value, due to their short term nature.

In May 2009,
the FASB issued (ASC Topic 855), Subsequent Events (ASC Topic 855). This
guidance is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. It is effective for
interim and annual reporting periods ending after June 15, 2009. The adoption
of this guidance did not have a material impact on our consolidated financial
statements.

In June 2009,
the FASB issued ASC Topic 810-10, Amendments to FASB Interpretation No.
46(R). This updated guidance requires a qualitative approach to identifying a
controlling financial interest in a variable interest entity (VIE), and
requires ongoing assessment of whether an entity is a VIE and whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. It is
effective for annual reporting periods beginning after November 15, 2009. The
adoption of ASC Topic 810-10 did not have a material impact on the results of
operations and financial condition.

In October
2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue
Arrangements. This ASU establishes the accounting and reporting guidance for
arrangements including multiple revenue-generating activities. This ASU
provides amendments to the criteria for separating deliverables, measuring and
allocating arrangement consideration to one or more units of accounting. The
amendments in this ASU also establish a selling price hierarchy for determining
the selling price of a deliverable. Significantly enhanced disclosures are also
required to provide information about a vendors multiple-deliverable revenue
arrangements, including information about the nature and terms, significant
deliverables, and its performance within arrangements. The amendments also require
providing information about the significant judgments made and changes to those
judgments and about how the application of the relative selling-price method
affects the timing or amount of revenue recognition. The amendments in this ASU
are effective prospectively for revenue arrangements entered into or materially
modified in the fiscal years beginning on or after June 15, 2010. Early
application is permitted. The Company is currently evaluating this new ASU.

In October
2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That
Include Software Elements. This ASU changes the accounting model for revenue
arrangements that include both tangible products and software elements that are
essential to the functionality, and scopes these products out of current
software revenue guidance. The new guidance will include factors to help
companies determine what software elements are considered essential to the
functionality. The amendments will now subject software-enabled products to
other revenue guidance and disclosure requirements, such as guidance
surrounding revenue arrangements with multiple-deliverables. The amendments in
this ASU are effective prospectively for revenue arrangements entered into or
materially modified in the fiscal years beginning on or after June 15, 2010.
Early application is permitted. The Company is currently evaluating this new
ASU.

F-14

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements
(continued)

Other
accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact
on the consolidated financial statements upon adoption.

Earnings (Loss) Per Share

Earnings
(loss) per common share are calculated in accordance with ASC Topic 260:
Earnings Per Share (ASC 260). The accounting standard requires the Company to
report both basic earnings (loss) per share, which is based on the
weighted-average number of common shares outstanding, and diluted earnings
(loss) per share, which is based on the weighted-average number of common
shares outstanding plus all potential dilutive common shares outstanding. The
outstanding options of 4,075,000 at December 31, 2009 are excluded from the
income per share computation for that period due to their antidilutive effect.

The following
table sets forth the computation of basic and diluted income (loss) per share:

Year ended
 December 31, 2009
 
 Year ended
 December 31, 2008Numerator:Net income (loss)
 
 $
 (331,289
 )
 $
 370,082Denominator:Denominator for basic income per share
 (weighted-average shares)
 
 
 656,059,726
 
 
 554,676,000Denominator for dilutive income per share
 (adjusted weighted-average)
 
 
 656,059,726
 
 
 554,676,000Basic and diluted income per share from
 continuing operations
 
 $
 0.00
 
 $
 0.00NOTE 3 - PROPERTY AND EQUIPMENT

Property and
equipment consisted of the following:

Estimated Life
 
 December 31, 2009
 
 December 31, 2008Office
 equipment
 
 5 years
 
 $
 38,979
 
 $
 38,325Rental
 equipment
 
 13 - 36 months
 
 
 402,355
 
 
 666,012Vehicles
 
 5 years
 
 
 71,656
 
 
 49,231Computer
 equipment
 
 5 years
 
 
 31,483
 
 
 31,192544,473
 
 
 784,760Less:
 accumulated depreciation
 
 
 
 
 
 (289,343
 )
 
 (598,704
 )$
 255,130
 
 $
 186,056For the years
ended December 31, 2009 and 2008, depreciation expense amounted to $201,531 and
$390,022, of which $172,530 and $349,114 is included in cost of sales,
respectively.

The Company has entered into various financing arrangements in connection with the acquisition of
three delivery vehicles (see Note 4 below).

NOTE 4 - NOTES PAYABLE

Between
December 2008 and January 2009, the Company issued notes payable amounting to
$52,979 in connection with the acquisition of three delivery vehicles. The
notes payable bear approximately 2% interest per annum and shall be payable in
thirty-six equal monthly payments of $1,516 beginning in January 2009 thru
December 2011. As of December 31, 2009, the current and long term portion of
this note amounted to $17,658 and $18,939, respectively. As of December 31,
2008, the current and long term portion of this note amounted to $10,205 and
$21,015, respectively.

F-15

NOTE 5 - NOTE PAYABLE  RELATED PARTY

The Company
entered into a note payable with its largest shareholder, HASCO Holdings, LLC
in June 2008, at the time of the Companys acquisition by HASCO. The loan was
in the amount of $150,000, was for working capital, and bears interest at 10%
per annum. The loan has a term of five years and is included on the
accompanying balance sheet as a long term liability. As of December 31, 2009
and 2008, accrued interest from such notes payable amounted to $15,000 and
$8,750, respectively.

NOTE 6 - STOCKHOLDERS EQUITY

On May 12,
2009 HASCO Medical, Inc. (HASCO) completed the acquisition of Southern
Medical & Mobility, Inc. (SMM) pursuant to the terms of the Agreement and
Plan of Merger (the Merger Agreement) among HASCO, SMM and Southern Medical
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company. Under the terms of the Merger Agreement Southern Medical Acquisition,
Inc. was merged into Southern Medical & Mobility, Inc., and Southern
Medical & Mobility, Inc. became a wholly-owned subsidiary of HASCO. The
shareholder of Southern Medical & Mobility, Inc. was issued a total of
554,676,000 shares of the Companys common stock in exchange for their Southern
Medical & Mobility, Inc. share.

After the
merger and transactions that occurred at the same time as the merger, there
were 642,176,000 shares of the Companys common stock outstanding, of which
620,000,000, approximately 96.5%, were held by HASCO Holdings, LLC, the former
sole shareholder of Southern Medical & Mobility, Inc.

Prior to the
merger, the Company was a shell company with no business operations.

For accounting
purposes, HASCO Medical, Inc. has accounted for the transaction as a reverse
acquisition and HASCO will be the surviving entity as a publicly-traded company
under the name HASCO Medical Inc. or together with its subsidiaries. The
Company did not recognize goodwill or any intangible assets in connection with
this transaction.

Effective with
the reverse merger, all previously outstanding common stock owned by HASCO
Medical, Inc.s shareholders were exchanged for the Companys common stock. The
value of the Companys common stock that was issued to HASCO Medical, Inc.s
shareholders was the historical cost of the Companys net tangible assets,
which did not differ materially from its fair value.

All references
to common stock, share and per share amounts have been retroactively restated
to reflect the reverse acquisition as if the transaction had taken place as of
the beginning of the earliest period presented.

Simultaneous
with the closing of the merger agreement, the Company issued 71,320,000 shares
in connection with the payment of liability to shareholders amounting to
$172,476.

NOTE 7 - STOCK OPTIONS

Under the
Companys stock option plan, adopted on July 9, 2009, 20,000,000 shares of
common stock were reserved for issuance upon exercise of options granted to
directors, officers and employees of the Company. The Company is authorized to
issue Incentive Stock Options (ISOs), which meet the requirements of Section
42 of the Internal Revenue Code of 1986. At its discretion, the Company can
also issue Non Statutory Options (NSOs). When an ISO is granted, the exercise
price shall be equal to the fair market value per share of the common stock on
the date of the grant. The exercise price of an NSO shall not be less than fair
market value of one share of the common stock on the date the option is
granted. The vesting period will be determined on the date of grant.

On November 1,
2009, the Company granted an aggregate of 4,075,000 5-year option to purchase
shares of common stock at $0.007 per share, vesting in 24 equal monthly
installments to four officers and three directors of the Company. The 4,075,000
options were valued on the grant date at $0.0064 per option or a total of
$26,080 using a Black-Scholes option pricing model with the following
assumptions: stock price of $0.007 per share, volatility of 150%, expected term
of five years, and a risk free interest rate of 2.33%. For the year ended
December 31, 2009, the Company recorded stock based compensation expense of
$2,173. At December 31, 2009, there was $23,907 or total unrecognized
compensation expense related to non-vested option-based compensation
arrangements under the Plan.

F-16

NOTE 7 - STOCK OPTIONS (continued)

Stock option
activity for the year ended December 31, 2009 and 2008 is summarized as
follows:

Number of
 shares
 
 Weighted average
 exercise priceOutstanding at December 31, 2007
 
 
 
 
 $
 Granted
 
 
 
 
 
 Exercised
 
 
 
 
 
 Cancelled
 
 
 
 
 
 Outstanding at December 31, 2008
 
 
 
 
 
 Granted
 
 
 4,075,000
 
 
 0.007Exercised
 
 
 
 
 
 Cancelled
 
 
 
 
 
 Outstanding at December 31, 2009
 
 
 4,075,000
 
 $
 0.007The following
table summarizes the Companys stock options outstanding at December 31, 2009:

Options Outstanding
 
 Options ExercisableRange of
 Exercise
 Price
 
 Number
 Outstanding
 
 Weighted
 Average
 Remaining
 Contractual
 Life
 
 Weighted
 Average
 Exercise
 Price
 
 Number
 Exercisable
 
 Weighted
 Average
 Exercise
 Price$
 0.007
 
 
 4,075,000
 
 
 4.83 Years
 
 $
 0.007
 
 
 
 
 $
 4,075,000
 
 
 
 
 $
 0.007
 
 
 
 
 $
 NOTE 8 - INCOME TAXES

Prior to its
acquisition in June, 2008 by HASCO Holdings, LLC, the Company was an S
Corporation. Beginning in June 2008 the Companys tax status changed to a C
Corporation. The Company accounts for income taxes under ASC Topic 740: Income
Taxes requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statements and the tax
basis of assets and liabilities, and for the expected future tax benefit to be
derived from tax losses and tax credit carryforwards. ASC Topic 740
additionally requires the establishment of a valuation allowance to reflect the
likelihood of realization of deferred tax assets.

As of December
31, 2009 and 2008, the Company had net loss carry forwards available to reduce
its future federal taxable income of approximately $417,000 and $0,
respectively. These loss carryovers, if unused, expire through 2029. These
losses may be subject to limitation under Internal Revenue Code Section 382 in
the event of a more than 50% owner shift.

The table
below summarizes the differences between the Companys effective tax rate and
the statutory federal rate as follows for the year ended December 31, 2009 and
2008:

12/31/09
 
 12/31/08Expected Federal income tax expense (at
 34%)
 
 $
 (148,000
 )
 $
 164,000State tax benefit (net of Federal effect)
 
 
 (17,000
 )
 
 19,000Income incurred during S Corp period
 
 
 
 
 
 (77,000
 )Reversal of prior year over accrual
 
 
 (85,727
 )
 
 Permanent differences and Other
 
 
 
 
 
 5,000Increase in valuation allowance
 
 
 146,000
 
 
 Net income tax (benefit) expense
 
 $
 (104,727
 )
 $
 111,000F-17

NOTE 8 - INCOME TAXES

The Company
has deferred tax assets which are summarized as follows:

12/31/09
 
 12/31/08Net
 operating loss
 
 $
 159,000
 
 $
 Allowance
 for doubtful account
 
 
 
 
 
 13,000Valuation
 allowance
 
 
 (159,000
 )
 
 (13,000
 )Net deferred
 tax asset
 
 $
 
 
 $
 At December
31, 2009 and 2008, the Company fully reserved against its deferred tax assets
due to the uncertainty of the future utilization of such assets. The valuation
allowance was increased by $146,000 in 2009.

NOTE 9 - COMMITMENTS

Operating
Lease

The Company
leases office space in Mobile, Alabama under a five-year operating lease that
expires on June 30, 2013. The office lease agreement has certain escalation
clauses and renewal options. Additionally, the Company has lease agreements for
computer equipment, including an office copier and fax machine. Future minimum
rental payments required under these operating leases are as follows:

Years ending
 December 31:2010
 
 
 66,0002011
 
 
 66,0002012
 
 
 66,0002013 and thereafter
 
 
 33,000$
 231,000Rent expense
was $82,274 and $43,365 for the years ended December 31, 2009 and 2008,
respectively.

NOTE 10 - SEGMENT REPORTING

ASC 280, Segment Reporting establishes guidance
for the way that public companies report information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. ASC 280 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.

The Companys
operating decision-maker is considered to be the chief executive officer (CEO).
The CEO reviews financial information for purposes of making operating
decisions and assessing financial performance. The financial information
reviewed by the CEO is identical to the information presented in the
accompanying statements of operations. Therefore, the Company has determined
that it operates in a single operating segment. For the periods ended December
31, 2009 and 2008 all material assets and revenues of the Company were in the
United States.

NOTE 11 - RELATED PARTY TRANSACTIONS

Note payable
to related party

The Company
entered into a note payable with its largest shareholder, HASCO Holdings, LLC
in June 2008, at the time of the Companys acquisition by HASCO. The loan was
in the amount of $150,000, was for working capital, and bears interest at 10%
per annum. The loan has a term of five years and is included on the
accompanying balance sheet as a long term liability. As of December 31, 2009 and
2008, accrued interest from such notes payable amounted to $15,000 and $8,750,
respectively.


F-18

NOTE 11 - RELATED PARTY TRANSACTIONS  (continued)

Management Fee

The Company
paid management fee of approximately $202,000 to HASCO Holdings, LLC during the
year ended December 31, 2009. Based on the amended management agreement in June
2009, HASCO Holdings, LLC has waived the management fees from June 2009 to
October 2009 due to the Companys cash book balance fell below $50,000 as
defined in the amended agreement.

Advances from
related party

The Companys
major shareholder, HASCO Holdings, LLC has made advances to the Company from
time-to-time for operating expenses. These advances are short-term in nature
and are non-interest bearing. At December 31, 2009 and 2008, amounts due to
this related party amounted to $0 and $7,005, respectively.

NOTE 12 - SUBSEQUENT EVENTS

In March 2010,
the Company issued in aggregate 3,200,000 shares of common stock to four
officers and three directors of the Company for services rendered. The Company
valued these common shares at the fair market value on the date of grant at
$.007 per share or $22,400 and has been recorded as stock-based compensation.

In January
2010, in connection with the sale of the Companys common stock, the Company
issued 4,000,000 shares of common stock to the Companys director for net
proceeds of approximately $28,000.

In March 2010,
the Company issued 12,857,142 shares in connection with the payment of
management fee from January 2010 to March 2010 of $90,000 to HASCO Holdings,
LLC.

NOTE 13 - RESTATEMENT

The Company has restated its consolidated financial statements as at and for the year ended December 31, 2009 to reflect the impact of transactions that occurred in fiscal 2008 related to the recording of an intangible asset that was created as a part of the purchase price allocation at the time of the acquisition of  Southern Medical & Mobility, Inc., in June 2008, and the subsequent write off of the intangible asset in December 2008.

The following table presents the adjustments to the consolidated financial statements:

Consolidated Balance Sheet dataAs at December 31, 2009As FiledAdjustments
to RestateRestatedTotal Assets614,536614,536Total Liabilities459,985459,985Stockholders EquityAdditional paid in capital142,1732,553,417(a)2,695,590Accumulated deficit(701,118)(2,553,417)(b)(3,254,535)Total Stockholders Equity154,551154,551Total Liabilities and Stockholders Equity$614,536$$614,536
(a)To reflect push down accounting pursuant to the acquisition of Southern Medical & Mobility, Inc. in June 2008.(b)To reflect impairment of intangible asset  in connection with the acquisition of Southern Medical & Mobility, Inc. in December 2008.F-19