HASCO Medical, Inc. - FORM 10-Q/A

Attached files

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EX-31 - CERTIFICATION OF THE CFO - HASCO Medical, Inc.	ex312.htm
EX-32 - CERTIFICATION OF THE CFO - HASCO Medical, Inc.	ex322.htm
EX-31 - CERTIFICATION OF THE CEO - HASCO Medical, Inc.	ex311.htm
EX-32 - CERTIFICATION OF THE CEO - HASCO Medical, Inc.	ex321.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A
Amendment No. 1


x	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Period ended March 31, 2010


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File No. 000-52422

HASCO Medical, Inc.

(Name of Small Business Issuer)


Florida		65-0924471
(State or other jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)


1416 West I-65 Service Road S., Mobile, AL		36693
(Address of principal executive offices)		(Zip Code)

(251) 633-4133

(Registrant’s Telephone Number, including Area Code)

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 x 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 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: At May 14, 2010, there were 733,553,142 outstanding shares of common stock, $.001 par value per share.

Transitional Small Business Disclosure Format (Check one): Yes o No x

EXPLANATORY NOTE

Hasco Medical, Inc. (which may be referred to as the "Company," "we," "us," or "our") filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed with the U.S. Securities and Exchange Commission (the "SEC") on May 14, 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 12 to the unaudited consolidated financial statements for details.

HASCO MEDICAL, INC.

Form 10-Q/A

Quarterly period ended March 31, 2010

Index


Part I.	Financial Information

	Item 1.	Financial Statements	3

		Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and as of December 31, 2009 (Audited)	3

		Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (Unaudited)	4

		Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (Unaudited)	5

		Notes to Unaudited Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

	Item 4.	Controls and Procedures	24

Part II.	Other Information

	Item 1.	Legal Proceedings	25

	Item 1A.	Risk Factors	25

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Submission of Matters to a Vote of Security Holders	25

	Item 5.	Other Information	25

	Item 6.	Exhibits	25

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

HASCO Medical, Inc. and Subsidiary

Consolidated Balance Sheets


	March 31, 2010 (Restated - See note 12)		December 31, 2009
	(Unaudited)		(1)
ASSETS

CURRENT ASSETS:
Cash	$	13,445	$	200
Accounts receivable, net		277,388		241,190
Inventory		99,184		104,106
Prepaid expenses		24,593		13,490

Total Current Assets		414,610		358,986

OTHER ASSETS:
Property and equipment, net		239,342		255,130
Deposits		420		420

Total Assets	$	654,372	$	614,536

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	405,610	$	258,388
Notes payable, current portion		17,744		17,658
Accrued interest payable		18,750		15,000

Total Current Liabilities		442,104		291,046

LONG-TERM LIABILITIES:
Notes Payable		14,463		18,939
Note Payable - related party		150,000		150,000

Total Long-Term Liabilities		164,463		168,939

Total Liabilities		606,567		459,985

STOCKHOLDERS' 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; 733,553,142 and 713,496,000 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively)		733,553		713,496
Additional paid in capital		2,819,193		2,695,590
Accumulated deficit		(3,504,941)		(3,254,535)

Total Stockholders' Equity		47,805		154,551

Total Liabilities and Stockholders' Equity	$	654,372	$	614,536

(1) Derived from Audited Financial Statements

See accompanying notes to unaudited consolidated financial statements

HASCO Medical, Inc. and Subsidiary

Consolidated Statements of Operations


	Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)

Net revenues	$	645,568		$	902,175

Cost of sales		191,315			295,388

Gross profit		454,253			606,787

Operating expenses:
Marketing and selling		3,348			7,248
Depreciation		7,302			6,135
General and administrative		673,305			707,087

Total operating expenses		683,955			720,470

Loss from operations		(229,702	)		(113,683	)

Other income (expenses):
Forgiveness of debt		—			8,750
Interest expense		(4,858	)		(4,064	)

Total other (expenses) income		(4,858	)		4,686

Loss before income taxes		(234,560	)		(108,997	)

Income tax benefit (expense)		(15,846	)		92,500

Net loss	$	(250,406	)	$	(16,497	)

Net loss per common shares:
Basic	$	—		$	—
Diluted	$	—		$	—

Weighted average common shares outstanding:
Basic		721,425,524			554,676,000
Diluted		721,425,524			554,676,000

See accompanying notes to unaudited consolidated financial statements

HASCO Medical, Inc. and Subsidiary

Consolidated Statements of Cash Flows


	Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)

Cash flows from operating activities:
Net loss	$	(250,406	)	$	(16,497	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		46,913			46,700
Bad debt expense		67,842			112,713
Fair value of options issued to employees		3,260			—
Common stock issued for services		112,400			—
Changes in operating assets and liabilities
Accounts receivable		(104,040	)		(175,011	)
Inventory		4,922			91,762
Prepaid expenses		(11,103	)		(7,514	)
Income tax payable		—			(92,500	)
Accounts payable and accrued liabilities		150,972			19,951
Due to related party		—			(7,005	)

Net cash provided by (used in) operating activities		20,760			(27,401	)

Cash flows from investing activities:
Purchase of property and equipment		(31,125	)		(37,623	)

Net cash used in investing activities		(31,125	)		(37,623	)

Cash flows from financing activities:
Proceeds from sale of common stock		28,000			—
Repayments of notes payable		(4,390	)		(4,890	)

Net cash provided by (used in) financing activities		23,610			(4,890	)

Net increase (decrease) in cash		13,245			(69,914	)

Cash, Beginning of period		200			141,163

Cash, End of period	$	13,445		$	71,249


Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	—		$	—

Cash paid during the year for taxes	$	—		$	—

Supplemental schedule of non-cash financing and investing activities:

See accompanying notes to unaudited consolidated financial statements

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Therefore, the Company’s historical financial statements reflect those of Southern Medical & Mobility, Inc. 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.

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.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2009 and notes thereto and other pertinent information contained in Form 10-K of HASCO Medical, Inc. (the “Company”, “we”, “us”. Or “our”) as filed with the Securities and Exchange Commission (the “Commission”). All significant intercompany transactions and balances have been eliminated in consolidation.

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 2010 and 2009 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 liabilities
	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

Cash and cash equivalents include money market securities that are considered to be highly liquid and easily tradable as of March 31, 2010 and December 31, 2009, 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.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

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

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 March 31, 2010, 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.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 unaudited 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 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 March 31, 2010 and December 31, 2009, 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 $303,759 and $307,495 as of March 31, 2010 and December 31, 2009, 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.

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.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

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

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 three months ended March 31, 2010 and 2009 totaled $3,348 and $7,248, respectively.

Shipping and Handling Costs

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

Property and Equipment

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. 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

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 three months ended March 31, 2010 and 2009.

Income Taxes

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.

Income Taxes (continued)

Pursuant to accounting standards 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.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

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

Subsequent Events

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 period ending March 31, 2010, subsequent events were evaluated by the Company as of May 14, 2010, the date on which the unaudited consolidated financial statements at and for the period ended March 31, 2010, 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.

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.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

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

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.

Recently Issued Accounting Pronouncements (continued)

In October 2009, the FASB issued ASU No. 2010-14, “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.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements” an amendment to ASC Topic 820, “Fair Value Measurements and Disclosures.” This amendment requires an entity to: (i) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers and (ii) present separate information for Level 3 activity pertaining to gross purchases, sales, issuances, and settlements. ASU No. 2010-06 is effective for the Company for interim and annual reporting beginning after December 15, 2009, with one new disclosure effective after December 15, 2010. The adoption of ASU No. 2010-06 did not have a material impact on the results of operations and financial condition.

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 Per Share

Earnings per common share are calculated under the provisions of a FASB issued new guidance,” which established new accounting standards for computing and presenting earnings per share. The accounting standard requires the Company to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potential dilutive common shares outstanding.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

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

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


	Three months ended March 31, 2010			Three months ended March 31, 2009
Numerator:
Net loss	$	(250,406	)	$	(16,497	)

Denominator:
Denominator for basic loss per share
(weighted-average shares)		721,425,524			554,676,000

Denominator for dilutive loss per share
(adjusted weighted-average)		721,425,524			554,676,000

Basic and diluted loss per share from continuing operations	$	0.00		$	0.00

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:


	Estimated Life	March 31, 2010			December 31, 2009
Office equipment	5 years	$	38,979		$	38,979
Rental equipment	13 - 36 months		433,480			402,355
Vehicles	5 years		71,656			71,656
Computer equipment	5 years		31,483			31,483
			575,598			544,473
Less: accumulated depreciation			(336,256	)		(289,343	)
		$	239,342		$	255,130

For the three months ended March 31, 2010 and 2009, depreciation expense amounted to $46,913 and $46,700, of which $39,611 and $40,565 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 through December 2011. As of March 31, 2010, the current and long term portion of these notes amounted to $17,744 and $14,463, respectively. As of December 31, 2009, the current and long term portion of these notes amounted to $17,658 and $18,939, respectively.

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 March 31, 2010 and December 31, 2009, accrued interest from such note payable amounted to $18,750 and $15,000, respectively.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

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.

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

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.

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.

NOTE 7 - 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 directors, officers and employees of the Company. The Company is authorized to issue Incentive Stock Options (“ISOs”), which meet the requirements of Section 422 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 which vests at the end of two years, 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 three months ended March 31, 2010, the Company recorded stock based compensation expense of $3,260. At March 31, 2010, there was $20,647 of total unrecognized compensation expense related to non-vested option-based compensation arrangements under the Plan.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE 8 – 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:


Period ending March 31:
2010		49,500
2011		66,000
2012		66,000
2013 and thereafter		33,000
	$	214,500

Rent expense was $16,366 and $20,226 for the three months ended March 31, 2010 and 2009, respectively.

NOTE 9 – SEGMENT REPORTING

Pursuant to accounting standards related to the Disclosure about Segments of an Enterprise and Related Information which establishes standards for the reporting by business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based on the way that management organizes the operations of the Company for making operational decisions and assessments of financial 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 March 31, 2010 and 2009 all material assets and revenues of the Company were in the United States.

NOTE 10 – RELATED PARTY TRANSACTIONS

Note payable to related party

The Company entered into a note payable with its largest shareholder, HASCO Holdings, LLC in June 2009, 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 March 31, 2010 and December 31, 2009, accrued interest from such note payable amounted to $18,750 and $15,000, respectively.

Management Fee

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

Sale of common stock

NOTE 11 – SUBSEQUENT EVENTS

In April 2010, one of the Company’s directors loaned $50,000 to the Company. This loan is non interest bearing and is due on demand.

HASCO MEDICAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

NOTE 12 – RESTATEMENT

The Company has restated its consolidated financial statements as at and for the quarterly period ended March 31, 2010 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 data		As at March 31, 2010
		As Filed		Adjustments to Restate		Restated
Total Assets		654,372		—		654,372

Total Liabilities		606,567		—		606,567

Stockholders’ Equity
Additional paid in capital		265,776		2,553,417	(a)	2,819,193
Accumulated deficit		(951,524)		(2,553,417)	(b)	(3,504,941)
Total Stockholders’ Equity		47,805		—		47,805
Total Liabilities and Stockholders’ Equity	$	654,372	$	—	$	654,372


(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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to the risks discussed in this report.

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.

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.

We provide 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. Our objective is to be a leading provider of home health care products and services in the markets in which it operates.

We provide a diversified range of home health care services and products.

Home Medical Equipment and Medical Supplies. We provide 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.

Home Respiratory Equipment. We provide 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.

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.

Use of Estimates - Management’s Discussion and Analysis or Plan of Operations is based upon our 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.

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.

THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2009

The following table provides an overview of certain key factors of our results of operations for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009:


	Three months ended March 31,
	2010		2009
Net Revenues	$	645,568	$	902,175
Cost of sales		191,315		295,388
Operating Expenses:
Marketing and selling		3,348		7,248
Depreciation and amortization		7,302		6,135
General and administrative		673,305		707,087
Total operating expenses		683,955		720,470
Loss from operations		(229,702)		(113,683)
Total other income (expense)		(4,858)		4,686
Income tax (benefit) expense		(15,846)		92,500
Net loss	$	(250,406)	$	(16,497)

Other Key Indicators:


	Three months ended March 31,
	2010	2009
Cost of sales as a percentage of revenues	29.6%	32.7%
Gross profit margin	70.4%	67.3%
General and administrative expenses as a percentage of revenues	104.3%	78.4%
Total operating expenses as a percentage of revenues	105.9%	79.9%

Three Month Periods ended March 31, 2010 and 2009

Net Revenues

For the three months ended March 31, 2010, we reported revenues of $645,568 as compared to revenues of $902,175 for the three months ended March 31, 2009, a decrease of $256,607 or approximately 28.4%. The decrease is primarily due to the impact of the 9.5% Medicare Improvement for Patients and Providers Act of 2008 (MIPPA) 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 three months ended March 31, 2010, cost of sales was $191,315, or approximately 29.6% of revenues, compared to $295,388, or approximately 32.7% of revenues, for the three months ended March 31, 2009. During the three months ended March 31, 2010, cost of sales decreased due to decreased revenues as compared to the three months ended March 31, 2009.

Total Operating Expenses

Our total operating expenses decreased approximately 5.1% to $683,955 for the three months ended March 31, 2010 as compared to $720,470 for the three months ended March 31, 2009. These changes include:

• Marketing and Selling. For the three months ended March 31, 2010, marketing and selling costs were $3,348 as compared to $7,248 for the three months ended March 31, 2009, a decrease of $3,900. Marketing and selling expense decreased as a result of cost cutting measures.

• Depreciation and amortization expense. For the three months ended March 31, 2010, depreciation expense amounted to $7,302 as compared to $6,135 for the three months ended March 31, 2009, a slight increase of $1,167 or 19.02%.

• General and administrative expense. For the three months ended March 31, 2010, general and administrative expenses were $673,305 as compared to $707,087 for the three months ended March 31, 2009, a decrease of $33,782 or approximately 4.78%. For the three months ended March 31, 2010 and 2009 general and administrative expenses consisted of the following:


	Three Months Ended March 31, Fiscal Q1
	2010		2009
Rent	$	16,366	$	20,226
Employee compensation		378,093		398,007
Professional fees		51,967		19,247
Internet/Phone		6,586		5,312
Travel/Entertainment		13,584		17,898
Bad debt expense		67,842		112,713
Insurance		14,267		4,516
Management fee		90,000		81,655
Other general and administrative		34,600		47,513
	$	673,305	$	707,087


	•	For the three months ended March 31, 2010, Rent expense slightly decreased to $16,366 as compared to $20,226.

	•	For the three months ended March 31, 2010, employee compensation, related taxes and stock-based compensation expenses decreased to $378,093 as compared to $398,007. The decrease was due to decrease in commission expense as compared to the 2009 period.

	•	For the three months ended March 31, 2010, professional fees increased to $51,967 as compared to $19,247, an increase of $32,720 or 170%. The increase is primarily related to increase in audit and accounting fees.

	•	For the three months ended March 31, 2010, internet/telephone expense slightly increased to $6,586 as compared to $5,312, an increase of $1,274 or 24%.

	•	For the three months ended March 31, 2010, travel and entertainment expense increased to $13,584 as compared to $17,898. Travel and entertainment expense decreased as a result of cost cutting measures.

	•	For the three months ended March 31, 2010 bad debt expense amounted to $67,842 as compared to $112,713 for the three months ended March 31, 2009, a decrease of $44,871 or 40%. The decrease was due to improved collection efforts and the decline in revenues.

	•	For the three months ended March 31, 2010 Insurance expense increased to $14,267 as compared to $4,516 for the three months ended March 31, 2009, an increase of $9,751, or 216%. Insurance expense increased due to change in insurance providers during the 2009 period.

	•	For the three months ended March 31, 2010 Management fee expense slightly increased to $90,000 as compared to $81,655 for the three months ended March 31, 2009.

	•	For the three months ended March 31, 2010 other general and administrative expense decreased to $34,600 as compared to $47,513 for the three months ended March 31, 2009. The decrease is primarily attributable to decrease in office utility expense, office supplies and automobile expense by the Company.

LOSS FROM OPERATIONS

We reported loss from operations of $229,702 for the three months ended March 31, 2010 as compared to loss from operations of $113,683 for the three months ended March 31, 2009, an increase of $116,019.

OTHER INCOME (EXPENSES)

Interest Expense. For the three months ended March 31, 2010, interest expense amounted to $4,858 as compared to $4,064 for the three months ended March 31, 2009, an increase of $794.

NET LOSS

Our net loss was $250,406 for the three months ended March 31, 2010 compared to net loss of $16,497 for the three months ended March 31, 2009.

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 March 31, 2010 and December 31, 2009:


	March 31,		December 31,		$		%
	2010		2009		Change		Change
Working capital surplus (deficit)	(27,494)		67,940		(95,434	)	(140.5	%)

Cash	13,445		200		13,245		6,622.5	%
Accounts receivable, net	277,388		241,190		36,198		15	%
Inventory	99,184		104,106		(4,922	)	(4.8	%)
Total current assets	399,606		358,986		40,620		11.3	%
Property and equipment, net	239,342		255,130		(15,788	)	(6.2	%)
Total assets	654,372		614,536		39,836		6.5	%

Accounts payable and accrued liabilities	405,610		258,388		147,222		57.0	%
Notes payable-current	17,744		17,658		86		0.5	%
Total current liabilities	442,104		291,046		151,058		51.9	%
Notes payable-long term	164,463		168,939		(4,476	)	(2.7	%)
Total liabilities	606,567		459,985		146,582		31.9	%
Accumulated deficit	(3,504,941	)	(3,254,535	)	(250,406	)	7.7	%
Stockholders’ equity	47,805		154,551		(106,746	)	(69.1	%)

Net cash provided by operating activities was $20,760 for the three months ended March 31, 2010 as compared to net cash used in operating activities of $27,401 for the three months ended March 31, 2009, an increase of $48,161. For the three months ended March 31, 2010, we had net loss of $250,406 offset by non-cash items such as depreciation expense of $46,913, bad debt of $67,842, stock-based compensation of $115,660 and increases from changes in assets and liabilities of $40,751. During the three months ended March 31, 2010 we experienced an increase in accounts receivable of $104,040, an increase in prepaid expenses of $11,103, and an increase in accounts payable and accrued liabilities of $240,972, which was offset by a decrease in inventory of $4,922. For the nine months ended March 31, 2009, we used cash to fund our net loss of $16,497 incremented by non-cash items such as depreciation expense of $46,700, bad debts of $112,713, offset by changes in assets and liabilities of $(170,317).

Net cash used in investing activities for the three months ended March 31, 2010 was $31,125 as compared to net cash used in investing activities of $37,623 for the three months ended March 31, 2009. During the three months ended March 31, 2010 and 2009, we used cash for property and equipment purchases.

Net cash provided by financing activities for the three months ended March 31, 2010 was $23,610 as compared to net cash used in financing activities of $4,890 for the three months ended March 31, 2009. For the three months ended March 31, 2010, net cash provided by financing activities related to payments on notes payable of $4,390 offset by proceeds from sale of common stock of $28,000. For the three months ended March 31, 2009, net cash used in financing activities included payments on notes payable of $4,890.

At March 31, 2010 we had a working capital deficit of $27,494 and accumulated deficit of $(3,504,941).

In connection with our annual report for our fiscal year ending December 31, 2010 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.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following tables summarize our contractual obligations as of March 31, 2010.


	Payments Due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		5 Years +
Contractual Obligations :
Operating Lease	$	214,500	$	49,500	$	132,000	$	33,000	$	—
Notes payable		32,207		17,744		14,463		—		—
Notes payable – related party		150,000		—		—		150,000		—
Total Contractual Obligations:	$	396,707	$	67,244	$	146,463	$	183,000	$	—

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 stockholder’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


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.


Item 4.	Controls and Procedures

Evaluation of disclosure controls and procedures. We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also 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. Under the supervision and with the participation of our CEO and CFO, or the persons performing similar functions, our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO, has concluded that our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer to allow timely decisions regarding required disclosure.

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

PART II - OTHER INFORMATION


Item 1.	Legal Proceedings

None.


Item 1A.	Risk Factors

Not required for smaller reporting companies.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Submission of Matters to a Vote of Security Holders

None.


Item 5.	Other Information

None.


Item 6.	Exhibits


Exhibit Number	Description

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*

* Filed herein

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has 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 officer

	By:/s/ Mark B. Lucky
February 11, 2011	Mark B. Lucky
	Chief Financial Officer, principal financial and accounting officer

HASCO Medical, Inc. - FORM 10-Q/A - February 14, 2011

Attached files

HASCO Medical, Inc. Reports