HASCO Medical, Inc. - FORM 10-K

Attached files

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EX-31 - CERTIFICATION OF THE CEO - HASCO Medical, Inc.	ex_31-1.htm
EX-32 - CERTIFICATION OF THE CEO - HASCO Medical, Inc.	ex_32-1.htm
EX-21 - LIST OF SUBSIDIARIES - HASCO Medical, Inc.	ex_21-1.htm
EX-32 - CERTIFICATION OF THE CFO - HASCO Medical, Inc.	ex_32-2.htm
EX-31 - CERTIFICATION OF THE CFO - HASCO Medical, Inc.	ex_31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - HASCO Medical, Inc.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


[√]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011


[ ]	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 of incorporation 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 registered
None	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.

[ ] Yes [√] 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.

[ ] Yes [√] 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 [ ] No

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 [ ] No

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.

[ ]

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	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ] (Do not check if smaller reporting company)	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 [√] No

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 $3,027,820 on June 30, 2011.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 972,675,204 shares of common stock are issued and outstanding as of March 29, 2012.

HASCO MEDICAL, INC.

FORM 10-K

TABLE OF CONTENTS


		Page No.
Part I
Item 1.	Business.	1
Item 1A.	Risk Factors.	6
Item 1B.	Unresolved Staff Comments.	16
Item 2.	Properties.	16
Item 3.	Legal Proceedings.	16
Item 4.	Mine Safety Disclosures.	16

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	16
Item 6.	Selected Financial Data.	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	30
Item 8.	Financial Statements and Supplementary Data.	30
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.	30
Item 9A.	Controls and Procedures.	30
Item 9B.	Other Information.	32

Part III

Item 10.	Directors, Executive Officers and Corporate Governance.	32
Item 11.	Executive Compensation.	35
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	37
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	38
Item 14.	Principal Accountant Fees and Services.	39

Part IV

Item 15.	Exhibits, Financial Statement Schedules.	40

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FORWARD–LOOKING STATEMENTS

This Annual Report on Form 10-K (including the section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations) and any documents incorporated by reference herein or therein may contain “forward-looking statements.”. Forward-looking statements reflect our current view about future beliefs, plans, objectives, goals or expectations. When used in such documents, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements relating to our business goals, business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, a continued decline in general economic conditions nationally and internationally; decreased demand for our products and services; market acceptance of our products and services; our ability to protect our intellectual property rights; the impact of any infringement actions or other litigation brought against us; competition from other providers and products; our ability to develop and commercialize new and improved products and services; our ability to raise capital to fund continuing operations; changes in government regulation; our ability to complete customer transactions and capital raising transactions; and other factors (including the risks contained in the sections of this annual report entitled “Risk Factors”) relating to our industry, our operations and results of operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. We file reports with the Securities and Exchange Commission (“SEC”). Our electronic filings with the United States Securities and Exchange Commission (including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports) are available free of charge on the Securities and Exchange Commission’s website at http://www.sec.gov. 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, DC20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this annual report and other reports we have filed or will file with the SEC and which are incorporated by reference herein, including statements under the caption “Risk Factors” and “Forward-Looking Statements” in such reports. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these.

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 subsidiaries.

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PART I


ITEM 1.	DESCRIPTION OF BUSINESS

General development of business

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. In May 2009, we changed our fiscal year end from September 30 to December 31.

On January 12, 2009 HASCO Holdings, LLC acquired 75% of the outstanding shares of common stock of the Company from two of its shareholders for total consideration of $150,000. 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 former shareholder of Southern Medical & Mobility, Inc. was issued a total of 554,676,000 shares of our common stock in exchange for its Southern Medical & Mobility, Inc. shares.

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, the company was a shell company with no business operations.

On May 13, 2011, the Company completed the acquisition of Mobility Freedom Inc. and Wheelchair Vans of America. Mobility Freedom is a Florida Corporation founded in 1999. A few years after the business started Mobility Freedom, Inc. purchased a van rental company, which now does business under the name “Wheelchair Vans of America.” Pursuant to the terms of the transaction, HASCO paid the selling shareholders of Mobility Freedom Inc. and Wheelchair Vans of America $1,850,000 in cash and a $2,000,000 Promissory Note with a 15 year term for a total consideration of $3,850,000 along with 250,000 shares of HASCO Medical, Inc. common stock.

On November 16, 2011, the Company acquired Certified Medical Systems II (“Certified Medical”) and Certified Auto (“Certified Auto”) (together “Certified”). Pursuant to the terms of the transaction, HASCO paid the selling shareholders $50,000 in cash and a $50,000 Promissory Note with a 4 year term for a total consideration of $100,000 along with 2,857,143 shares of HASCO Medical, Inc. common stock. The equity of Certified as well as the amount the Company paid for its assets was less than 10% of the total assets of HASCO and its consolidated subsidiaries.

Financial information about industry segments

The Company’s operations involve servicing patients and customers through (i) its Home Healthcare Products and Services segment and (ii) Wheelchair Conversion Vans and related products and services segment.

Narrative description of business

Historically, our operations were focused on the provision of a diversified range of home health care services and products. Following our May 2011 acquisition of Mobility Freedom, our operations are conducted within two business units:


	·	Mobility Freedom, including its rental operations conducted under the trade name Wheelchair Vans of America, and Certified Auto located in Central Florida, and

	·	Southern Medical & Mobility located in Mobile Alabama, and Certified Medical located in Ocala Florida

Our objective is to continue to grow both intrinsically and through acquisitions in areas that we currently offer products and services in, as well in areas that are complementary. As Mobility Freedom is significantly larger than Southern Mobility, we anticipate that Mobility Freedom will drive our near term financial results.

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Mobility Freedom responds to the need, in the fast growing Central Florida area, for a quality full service dealership of conversion vans and other mobility products, that help the disabled become mobile. Wheelchair Vans of America specializes in renting conversion vans to disabled individuals visiting the State of Florida. This business unit has proven to be an effective complement to Mobility Freedom and is anticipated to be expanded to other areas of the country.

Mobility Freedom caters to individuals with physical limitations that need specialty equipment to drive as well as families with members who are disabled that need transportation. In certain circumstances, both the van itself as well as its specialty equipment is paid for, directly to Mobility Freedom, by a federal or state agency. Approximately 30% of Mobility Freedom’s revenue was derived from veterans receiving benefits from the United States Department of Veterans Affairs (the “VA”). As part of the VA’s mission “to provided veterans the world-class benefits and services they have earned”, the VA pays for a van for disabled veterans. As a result, Mobility Freedom is both a VA and Vocational Rehabilitation (VR) state certified vendor. In addition, Mobility Freedom is an exclusive vendor for certain Florida state funded agencies, including the Florida Birth-Related Neurological Injury Compensation Association (NICA).

Mobility Freedom offers their clients a complete inventory of new and used wheelchair accessible vans to their customers in the Clermont, Orlando, Tampa, and Palm Coast area in Florida. Certified Auto offers the same inventory to their customers in Ocala, Florida. They both offer additional services on most mobility vans with items such as extended warranty, adaptive equipment like automobile hand controls or EZ lock tie downs. They are a licensed automobile dealer, home lift system provider, VA and VR state certified vendors and they are also exclusive vendors for certain Florida state funded agencies.

Wheelchair Vans of America specializes in renting conversion vans to the disabled individuals visiting the State of Florida. The vans have a lowered floor conversion with a fully automatic fold out ramp and kneeling system for ease of use.

The sales operations for Mobility Freedom and Certified Auto are conducted as an authorized dealer for a number of Original Equipment Manufacturer (“OEM”) handicap van manufacturers including:


	·	The Braun Corporation, which offers a variety of wheelchair accessible van conversions of popular minivan models including the Dodge Grand Caravan, the Chrysler Town & Country, the Toyota Sienna and the Honda Odyssey;

	·	Vantage Mobility International; and

	·	ElDorado National Company, a THOR company.

These OEM manufacturers provide chassis conversions to traditional minivans and full size vans in order to make them handicap accessible. These conversions traditionally include lowering the floors in order to increase head room, the addition of side entry or rear entry ramps and the installation of a wheelchair lift. Upon the selection by a customer of its base van, Mobility Freedom provides custom conversion services.

Mobility Freedom’s mobility services revolve around an analysis of each individual’s use of the van as well as individual physical limitations. In those instances where it is the passenger and not the driver who requires a wheelchair, Mobility Freedom provides full installation of EZ Lock Tie Down Systems to secure the wheelchair during movement. In connection with meeting the needs of a handicapped driver, the Company utilizes an independent evaluator who evaluates the needs of the driver and recommends the appropriate Driver Adaptive Equipment (“DAE”).

DAE installed by Mobility Freedom covers a broad array of products designed to allow a motorist with disabilities to drive despite his or her physical limitations. The equipment, the cost of which in certain circumstances can exceed $100,000, includes:


	·	hand controls;

	·	spinner knob to aid in turning the steering wheel;

	·	a transfer seat;

	·	electronic driving controls such as a touch screen which controls various electronic equipment in an auto such as the ignition; and

	·	reduced effort steering and braking.

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Mobility Freedom has four corporate owned stores which are located in Orlando, Largo, Clermont and Palm Coast/Bunell, and one affiliate located in Edgewater. Certified Auto has one store in Ocala. This makes a total of six operation centers in Florida. We believe that many of the demographic factors in North Central Florida make it an ideal location for Mobility Freedom’s operations including:


	·	an older and aging population;

	·	the numerous tourist destinations that define the greater Orlando area; and

	·	a significant population of military veterans attracted by the Orlando VA Medical Center. Currently the new Orlando VA Medical Center is under construction and will be located on a 65-acre campus in southeast Orange County. The 1.2 million square foot facility, scheduled to open in fall of 2012, will have a large multispecialty outpatient clinic, 134-inpatient beds, 120-community living center beds, a 60-bed domiciliary and administrative and support services. The VA will be co-located with the University of Central Florida College of Medicine, the Burnham Institute, the University of Florida Academic and Research Center and Nemours Children’s Hospital in the Lake Nona area known as the “Medical City.”

Mobility Freedom and Certified Auto’s agreements with the vehicle manufacturers permit it to sell the vehicles within certain specific territories and it is not authorized to sell all brands in all of these areas. The agreements with the affiliates provide that Mobility Freedom holds the territory rights to sell vehicles and the affiliate provides the location. The affiliate is entitled to receive 50% of the profit on each van sold as consideration for providing the location.

Southern Mobility and Certified Medical are low cost, quality providers of a broad range of home healthcare services that serve patients in Alabama, Florida, and Mississippi. We have two major service lines at Southern Mobility: home respiratory equipment and durable/ home medical equipment. Certified Medical carries 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 Products
Home 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 Strategy

Organization

Management is focused on revenue development and cost control, and decision-making to improve responsiveness and ensure quality.

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, sales and marketing support, regulatory affairs and licensure, and information system design.

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 appropriate training and orientation to its employees.

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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 trended financial data, and financial comparisons to prior periods. These systems 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

A portion of the Company’s revenues is derived from third-party payors including the United States Department of Veterans Affairs, Medicare, private insurers, and Medicaid. VA is a government-run military veteran benefit system with Cabinet-level status. VA provides patient care and federal benefits to US military veterans and their dependents. The agency is the second largest of the 15 cabinet departments and offers health-care and financial assistance programs to US military veterans and their dependents. We provide equipment and services to persons eligible for VA benefits in the regions covered. Through Mobility Freedom, we are a VA and Vocational Rehabilitation (VR) state certified vendor. 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. Our billing system contains payor-specific price tables that reflect the fee schedule amounts, as available, in effect or contractually agreed upon by various government and commercial payors for each item of equipment or supply provided to a customer. Net revenues are recorded based upon the applicable fee schedule. 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.

Sales revenues and related services include all product sales to customers and are derived from the sale and rental of wheelchair vans, 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.

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Because the Company derives a significant portion of its revenues from the United States Department of Veterans Affairs and from Medicare and Medicaid reimbursement, material changes in reimbursement policies 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 any future reimbursement reductions through a variety of initiatives designed to grow revenues, improve productivity, and cost efficiencies and reduction. 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 accounts receivable at December 31, 2011 was $1,042,953, compared to net accounts receivable of $254,362 at December 31, 2010.

We derive a portion of our revenue from reimbursement by third-party payors. We generally do not require collateral or other security in extending credit to patients however we routinely obtain and accept assignment of insurance benefits from customers and, in most instances, invoice and collect payments directly from Medicare, Medicaid, other federally funded programs (including the Veterans Administration) 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 total revenues derived from different types of payors for both segments.


	Year Ended December 31,
Payors	2011			2010
Veterans Affairs		24	%		—	%
Medicare and Medicaid programs		6			26
Private insurance		19			60
Direct payment		51			14

		100	%		100	%

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 for each segment:


	2011	2010
Home healthcare	49 days	89 days
Wheelchair conversion vans	20 days	—

The 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 growth through acquisition as well as sales and marketing efforts and strategic partnerships 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.

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The Company’s sales and marketing focus for 2012 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

Wheelchair Vans

Most of the wheelchair van markets are granted by the major manufacturers to dealers and the territory is protected. Contractually there are criteria that must be maintained to retain the territory. Criteria generally involve minimum unit sales per annum. The Company was in compliance with all agreements at December 31, 2011. Management believes that the competitive factors most important in wheelchair van sales are obtaining territories from the major manufacturers.

Wheelchair van rental competition varies from national franchise companies that just do wheelchair van rental to smaller companies. There are still relatively few barriers to entry in the local markets served by the Company, with the biggest hurdle being the capital outlay required. Therefore, the Company could encounter competition from new market entrants. We believe the Orlando market has a heavier concentration of wheelchair van rental companies due to the many tourist attractions in the area.

Home Health Care

The home medical equipment market is highly competitive and divided among a large number of providers, some of which are national providers, but most of which are either regional or local providers. 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

At December 31, 2011, the company had 73 employees. None of our employees are covered by collective bargaining agreements. We believe that the relations between our management and employees are good.


ITEM 1A.	RISK FACTORS

You should carefully consider each of the following risks and all of the other information set forth in this Annual Report on Form 10-K. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our company in each of these categories of risk. However, the risks and uncertainties our company faces are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

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RISKS RELATED TO OUR RELIANCE ON MEDICARE, MEDICAID AND OTHER THIRD-PARTY REIMBURSEMENT

THE COST OF SUBSTANTIAL PORTION OF BOTH WHEELCHAIR VEHICLES AND OF HEALTHCARE IS FUNDED 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 Veterans Administration, 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.

A SIGNIFICANT PERCENTAGE OF OUR BUSINESS IS DERIVED FROM PATIENTS WITH PRIMARY HEALTH COVERAGE UNDER MEDICARE PART B, AND AS SUCH, ANY DECREASES IN MEDICARE PART B REIMBURSEMENT RATES ARE LIKELY TO HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION, REVENUES, PROFIT MARGINS, PROFITABILITY, OPERATING CASH FLOWS AND RESULTS OF OPERATIONS.

As a home medical equipment (HME) provider, we are heavily dependent on Medicare reimbursement with approximately 2% of our revenue reimbursed under Medicare Part B. There are increasing pressures on Medicare to control health care costs and to reduce or limit reimbursement rates for home medical equipment and services. Medicare reimbursement is subject to statutory and regulatory changes, retroactive rate adjustments, administrative and executive orders and governmental funding restrictions, all of which could materially decrease payments to us for the services and equipment we provide.

Legislation containing provisions that directly impact reimbursement for the primary HME products that we provide have had a material adverse affect on our financial condition, revenues, profitability, profit margins, operating cash flows and results of operations. The most recent health care reform enacted in March 2010 is discussed in more detail below. Prior legislation with continued impact on our business includes, but is not limited to:


	·	Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). MIPPA delayed the implementation of a Medicare competitive bidding program for oxygen equipment and certain other HME items that was scheduled to begin on July 1, 2008 and instituted a 9.5% price reduction nationwide for these items as of January 1, 2009.

	·	Medicare, Medicaid and SCHIP Extension Act of 2007 (“SCHIP Extension Act”). The SCHIP Extension Act reduced Medicare reimbursement amounts for certain covered Part B drugs, including inhalation drugs that we provide, beginning April 1, 2008.

	·	Deficit Reduction Act of 2005 (DRA). DRA provisions negatively impacted reimbursement for oxygen equipment beginning in 2009 and negatively impacted reimbursement for HME items subject to capped rental payments beginning in 2007.

	·	Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). MMA significantly reduced reimbursement for inhalation drug therapies beginning in 2005, reduced payment amounts for certain categories of durable medical equipment (DME), 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.

These legislative provisions, as currently in effect and when fully implemented, have had and will have a material adverse effect on our financial condition, revenues, profit margins, profitability, operating cash flows and results of operations.

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

The sources and amounts of our home health care 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.

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FUTURE REDUCTIONS IN REIMBURSEMENT RATES UNDER MEDICAID COULD NEGATIVELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION.

Due to budgetary shortfalls, many states are considering, or have enacted, cuts to their Medicaid programs. These cuts have included, or may include, elimination or reduction of coverage for some or all of our equipment and services, amounts eligible for payment under co-insurance arrangements, or payment rates for covered items. Continued state budgetary pressures could lead to further reductions in funding for the reimbursement for our equipment and services which, in turn, could have a material adverse effect on our financial condition, revenues, profit margins, profitability, operating cash flows and results of operations. Further, President Obama’s budget for fiscal year 2012 includes provisions that may limit Medicaid reimbursement of HME based on Medicare’s competitive bidding payment rates. We cannot predict at this time whether the President’s proposal or other measures may be adopted in the future and the impact of such legislation on our financial condition, revenues, profit margin, profitability, operating cash flows and results of operations.

HEALTH CARE REFORM, INCLUDING RECENTLY ENACTED LEGISLATION, MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR INDUSTRY AND OUR RESULTS OF OPERATIONS.

In March 2010, the President signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the PPACA), which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the pharmaceutical and medical device industries. The PPACA includes, amount other things, the following measures:


	·	expansion of Round 2 of competitive bidding to 21 additional metropolitan areas (to a total of 91), and by 2016, the competitive bidding process must be nationalized or prices in non-competitive bidding areas must be adjusted to match competitive bidding prices;

	·	annual, non-deductible fees on any entity that manufacturers or imports certain prescription drugs and biologics, beginning in 2011;

	·	a deductible excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions, beginning in 2013;

	·	a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research;

	·	elimination of the option to purchase power mobility devices, beginning January 1, 2011; and

	·	new face-to-face encounter requirements for DME and home health services.

There are also current proposals at the federal level to impose additional measures involving our industry. President Obama’s budget for fiscal year 2012 includes measures to control expenditures that may require Medicare claims processors to review all power wheelchair claims before payment is made. Further, in January 2011 the U.S. Government Accountability Office released a report that found that Medicare payment rates for home oxygen generally exceeded other payors’ rates and recommended that the Centers for Medicare & Medicaid Services (CMS) unbundle payment for portable oxygen refills from the rental payment for stationary equipment. CMS disagreed with the recommendations on the grounds that such policy changes would not yield immediate savings to the program, but it remains uncertain whether CMS or Congress will take action to further reduce payments for home oxygen. We cannot predict at this time the impact of the PPACA and/or other healthcare reform measures that may be adopted in the future on our financial condition, revenues, profit margins, profitability, operating cash flows and 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 HOME HEALTH CARE REVENUES AND OPERATING MARGINS.

In fiscal 2011, 6% 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.

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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.

FUTURE REDUCTIONS IN REIMBURSEMENT RATES FROM THIRD-PARTY PAYORS COULD NEGATIVELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION.

Private payors continually seek to control the cost of providing health care services through direct contracts with health care providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations. These private payors are increasingly demanding discounted fee structures and the assumption by the health care provider of all or a portion of the financial risk. Reimbursement payments under private payor programs may not remain at current levels and may not be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs, and we may suffer deterioration in pricing flexibility, changes in payor mix and growth in operating expenses in excess of increases in payments by private third-party payors. We may be compelled to lower our prices due to increased pricing pressures, which could have a material adverse effect on our financial condition, revenues, profit margins, profitability, operating cash flows and results of operations.

REFORMS TO THE UNITED STATES HEALTHCARE SYSTEM MAY ADVERSELY AFFECT OUR BUSINESS.

From time to time, Congress has proposed and passed a number of legislative initiatives, impacting HME suppliers. Currently pending are initiatives that include possible repeal of PPACA. In addition, a number of states have challenged the constitutionality of certain provisions of PPACA and many of these challenges are still pending final adjudication in several jurisdictions. At this time, it remains unclear whether there will be any changes made to PPACA, whether to certain provisions or its entirety. We cannot assure you that PPACA, as currently enacted or as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.

In addition, other legislative changes have been proposed and adopted since PPACA was enacted. Most recently, on August 2, 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reductions to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. The full impact on our business of PPACA and the new law is uncertain. Any reductions in Medicare or Medicaid reimbursement could materially adversely affect our profitability.

RISKS RELATED TO OUR COMPLIANCE WITH FEDERAL AND STATE REGULATORY AGENCIES, AS WELL AS ACCREDITATION STANDARDS

HOME HEALTH CARE IS A HEAVILY REGULATED INDUSTRY, AND CHANGES IN REGULATIONS AND VIOLATIONS OF REGULATIONS MAY RESULT IN INCREASED COSTS OR SANCTIONS.

Our home health care 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 REVIEWS, COMPLIANCE AUDITS AND INVESTIGATIONS THAT COULD RESULT IN ADVERSE FINDINGS THAT NEGATIVELY AFFECT OUR NET SERVICE REVENUES AND PROFITABILITY.

As a result of our participation in Medicaid, Medicare programs, VA programs and other state and local governmental programs, we are subject to various reviews, audits and investigations by governmental authorities and other third parties to verify our compliance with these programs and agreements as well as applicable laws, regulations and conditions of participation. If we fail to meet any of the conditions of participation or coverage, we may receive a notice of deficiency from the applicable surveyor or

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authority. Failure to institute a plan of action to correct the deficiency within the period provided by the surveyor or authority could result in civil or criminal penalties, the imposition of fines or other sanctions, damage to our reputation, cancellation of our agreements, suspension or revocation of our licenses or disqualification from federal and state reimbursement programs. These actions may adversely affect our ability to provide certain services, to receive payments from other payors and to continue to operate. Additionally, actions taken against one of our locations may subject our other locations to adverse consequences. We may also fail to discover all instances of noncompliance by our acquisition targets, which could subject us to adverse remedies once those acquisitions are complete. Any termination of one or more of our locations from the Medicare program or another state or local program for failure to satisfy such program’s conditions of participation could adversely affect our net service revenues and profitability.

Payments we receive in respect of Medicaid and Medicare can be retroactively adjusted after a new examination during the claims settlement process or as a result of pre- or post-payment audits. Federal, state and local government payors may disallow our requests for reimbursement based on determinations that certain costs are not reimbursable because proper documentation was not provided or because certain services were not covered or deemed necessary. In addition, other third-party payors may reserve rights to conduct audits and make reimbursement adjustments in connection with or exclusive of audit activities. Significant adjustments as a result of these audits could adversely affect our revenues and profitability.

In 2006, the federal government launched a national pilot program utilizing independent contractors known as recovery audit contractors (“RAC”), to identify and recoup Medicare overpayments. RACs are paid a contingent fee based on amounts recouped. An initial demonstration project implemented in several states resulted in the return of over $900 million in overpayments to Medicare between 2005 and 2008 from various provider types. The RAC program is now permanently implemented in all 50 states. This expansion may lead to an increase in the number of overpayment reviews, more aggressive audits and more claims for recoupment. If future Medicare RAC reviews result in significant refund payments, it would have an adverse effect on our financial results.

Under the RAC program, third party firms engaged by CMS conduct extensive reviews of claims data and non-medical and other records to identify potential improper payments under Medicare. In recent years, federal and state civil and criminal enforcement agencies have heightened and coordinated their oversight efforts related to the healthcare industry, including with respect to referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers.

Although we have invested substantial time and effort in implementing policies and procedures to comply with laws and regulations, we could be subject to liabilities arising from violations. A violation of the laws governing our operations, or changes in the interpretation of those laws, could result in the imposition of fines, civil or criminal penalties, the termination of our rights to participate in federal and state-sponsored programs or the suspension or revocation of our licenses to operate. If we become subject to material fines or if other sanctions or other corrective actions are imposed upon us, we may suffer a substantial reduction in revenues.

LACK OF ACCREDITATION OF OUR OPERATING LOCATIONS OR FAILURE TO MEET GOVERNMENT STANDARDS FOR COVERAGE AND PAYMENT COULD RESULT IN A DECLINE IN OUR REVENUES.

Currently, all of our operating locations are accredited by the Joint Commission (formerly referred to as the Joint Commission on the Accreditation of Healthcare Organizations). If future reviews by the Joint Commission do not result in continued accreditation of our operating locations, we would likely experience a decline in our revenues. Further, as required by the MMA, any entity or individual that bills Medicare for home medical equipment and certain supplies and has a Medicare supplier number for submission of claims must be accredited as meeting quality standards issued by CMS as a condition of receiving payment from the Medicare program. The standards for HME suppliers consist of business-related standards, such as financial and human resources management requirements, which are applicable to all HME suppliers, and product-specific quality standards, and 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. We have revised our policies and procedures to ensure compliance in all material respects with the quality standards though there can be no assurance that we will be able to comply with the quality standards in all instances.

The MMA also authorized CMS to establish clinical conditions for payment for home medical equipment. These clinical conditions for payment could limit or reduce the number of individuals who can sell or provide our products and could restrict coverage for our products. 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. In addition, the PPACA requires a face-to-face encounter by certain providers prior to certification for home health services or DME. Because we have Medicare supplier numbers and are subject to clinical conditions for payment, our failure to meet such conditions could affect our ability to bill and, therefore, could have a material adverse effect on our financial condition, revenues, profit margins, profitability, operating cash flows and results of operations. At this time, we cannot predict the full impact that the clinical conditions will have on our business.

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WE ARE ALSO SUBJECT TO FEDERAL AND STATE LAWS THAT GOVERN FINANCIAL AND OTHER ARRANGEMENTS AMONG HEALTHCARE PROVIDERS.

Federal law prohibits the knowing and willful offer, payment, solicitation or receipt, directly or indirectly, of remuneration to induce, arrange for, or in return for, the referral of federal health care program beneficiaries for items or services paid for by a federal health care program. State laws also prohibit such payments for Medicaid beneficiaries and some states have expanded anti-kickback statutes. The federal law known as the “Stark Law” prohibits certain financial arrangements with physicians. State laws often prohibit certain direct and indirect payments or fee-splitting arrangements between healthcare providers that are designed to encourage the referral of patients to a particular provider for medical products and services. Furthermore, some states have enacted laws similar to the Stark Law, which restrict certain business relationships between physicians and other providers of healthcare services. Many states prohibit business corporations from providing, or holding themselves out as a provider of, medical care. These laws vary from state to state, are often vague and have seldom been interpreted by the courts or regulatory agencies. Possible sanctions for violation of any of these restrictions or prohibitions include loss of licensure or eligibility to participate in reimbursement programs, civil and criminal penalties, and exclusion from participation in Medicare, Medicaid and other federal and state health care programs.

OUR HOME HEALTH CARE BUSINESS FACES 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 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.

RISKS RELATED TO OPERATIONAL AND FINANCIAL PERFORMANCE

THE COMPANY HAS INCURRED RECURRING LOSSES WHICH COULD IMPACT ITS ABILITY TO CONTINUE AS A GOING CONCERN.

The Company has incurred recurring losses resulting in a accumulated deficit, negative cash flows from operations and negative working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Further information and management’s lans in regard to these uncertainties are described in Note 2 to the financial statements.

THE LOSS OF FINANCING FOR VEHICLE PURCHASES AND/OR THE LOSS OF MAJOR CREDIT LINES WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

The Company has a financing plan for floor planning its wheelchair vehicles and has a line of credit used for financing its accounts receivable. The Company believes that it can meet all financial covenants under these arrangements and that such agreements will be renewed when they come due. However there can be no assurance of this and the loss of this financing would have a material adverse effect on the Company.

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 wheelchair vehicle market is relatively competitive and increased competition could cause downward price pressure. The barrier to entry consists primarily of the ability to modify the vehicle with needed hand and voice controls.

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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.

BOTH THE PROVISION OF MODIFICATIONS TO WHEELCHAIR VANS AND 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 modifications to wheelchair vehicles and also the provision of healthcare services entail an inherent risk of liability. Since the Company installs and modifies wheelchair vans to add various hand and voice controls, there is a risk that there would be a failure of such modifications which could result in an accident and subsequent legal action. Additionally, 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 customers or to expand its business.

A TIGHTENING OF AVAILABILITY OF AUTO LOANS TO CONSUMERS COULD IMPACT THE SALES OF WHEELCHAIR VEHICLES.

If consumers are unable to obtain financing for the portion of the van that they are responsible for, this could have an adverse effect on our profitability.

INABILITY TO MAINTAIN SIGNIFICANT VENDOR RELATIONSHIPS COULD RESULT IN A SIGNIFICANT DISRUPTION IN OUR BUSINESS, MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND RESULT IN AN INABILITY TO SERVE OUR PATIENTS IF WE LOSE THESE RELATIONSHIPS.

We currently have certain critical vendor relationships. Although we have been able to maintain such relationships without material interruption in the past, there can be no assurance that such relationships will continue. Should any of these vendors elect not to provide services, wheelchair vehicles, equipment, inhalation drugs or supplies to us, there would likely be a significant disruption to our business, a material adverse effect on our financial condition, revenues, profit margins, profitability, operating cash flows and results of operations and an inability to serve our patients until such time as a replacement vendor could be identified. This would likely occur if there is a deterioration or perceived deterioration in our financial position, including our standing with respect to our senior subordinated debt. Moreover, there can be no assurance that the pricing structure that we currently enjoy would be matched by a replacement vendor. Additionally, any future issues with liquidity, debt covenant compliance or declines in our results of operations, could adversely impact our ability to leverage our purchasing activities with new or existing vendors.

THE COMPANY’S HOME HEALTH CARE BUSINESS 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 its home health care business, the success of this portion of the Company 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 in its home health care line unless the Company also decreases its cost for providing those 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.

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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, who may have a material adverse effect on our financial position and operating results.

IF WE DO NOT ENHANCE AND MAINTAIN EFFECTIVE AND EFFICIENT INFORMATION SYSTEMS, THEN OUR OPERATIONS MAY BE DISRUPTED AND OUR ANTICIPATED OPERATING EFFICIENCY MAY NOT BE REALIZED.

Our operations are dependent on the enhancement and uninterrupted performance of our information systems. Failure to enhance and maintain reliable information systems or disruptions in our information systems could cause disruptions in our business operations, including billing and collections, loss of existing patients and difficulty in attracting new patients, patient and payor disputes, regulatory problems, increases in administrative expenses or other adverse consequences, any or all of which could disrupt our operations and prevent us from achieving operating efficiency. We rely on information technology systems to process, transmit and store electronic information, including electronically maintained and transmitted patient health information. Hence, telecommunications and information technology system disruptions and failures at any of our facilities could significantly disrupt our operations. Like most companies, our information technology systems may be vulnerable to a variety of failures or disruptions due to events beyond our control, including, but not limited to natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. We have technology security initiatives and disaster recovery plans in place to mitigate its risk to these vulnerabilities, but these measures may not be adequate or implemented properly to ensure that our operations are not disrupted.

INCREASES IN OUR COSTS COULD ERODE OUR PROFIT MARGINS AND SUBSTANTIALLY REDUCE OUR NET INCOME AND CASH FLOWS.

Cost containment in the health care industry, fueled, in part, by federal and state government budgetary shortfalls, is likely to result in constant or decreasing reimbursement amounts for our equipment and services. As a result, we must control our operating cost levels, particularly labor and related costs. We compete with other health care providers to attract and retain qualified or skilled personnel. We also compete with various industries for lower-wage administrative and service employees. Since reimbursement rates are established by fee schedules mandated by Medicare, Medicaid and private payors, we are not able to offset the effects of general inflation in labor and related cost components, if any, through increases in prices for our equipment and services. Consequently, such cost increases could erode our profit margins and reduce our net income.

IF WE FAIL TO CULTIVATE NEW OR MAINTAIN ESTABLISHED RELATIONSHIPS WITH PHYSICIANS AND OTHER REFERRAL SOURCES, THEN OUR REVENUES MAY DECLINE.

Our success, in part, is dependent upon referrals and our ability to maintain good relations with physicians and other referral sources. Physicians and other medical personnel that refer patients to us are not our employees, and are free to refer their patients to our competitors. If we are unable to successfully cultivate new referral sources and maintain strong relationships with our current referral sources, then our revenues may decline.

WE ARE HIGHLY DEPENDENT ON OUR KEY PERSONNEL.

Our performance is substantially dependent on the performance and continued efforts of our senior management team. The loss of the services of any of our executive officers or other key employees could result in a decline in our business, results of operations and financial condition. Our future success is dependent on the ability of our managers and sales personnel to manage and promote our business, operations and growth. Any inability to manage our operations effectively could have a material adverse effect on our financial condition, revenues, profit margins, profitability, operating cash flows and results of operations.

IF WE ARE NOT ABLE TO HIRE QUALIFIED MANAGEMENT AND OTHER PERSONNEL, OR IF COSTS OF COMPENSATION OR EMPLOYEE BENEFITS INCREASE SUBSTANTIALLY, THEN OUR ABILITY TO DELIVER EQUIPMENT AND SERVICES EFFECTIVELY COULD SUFFER AND OUR PROFITABILITY WOULD LIKELY DECLINE.

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The success of our business depends upon our ability to attract and retain highly motivated, well-qualified management and other personnel. Our highest cost is in the payment of salaries to our approximately 73 full time employees. We face significant competition in the recruitment of qualified employees. If we are unable to recruit or retain a sufficient number of qualified employees, or if the costs of compensation or employee benefits increase substantially, our ability to deliver services effectively could suffer and our profitability would likely decline. Further, in the event that our business operations or financial condition further deteriorate, we may not be able to maintain or recruit critical employees.

IF WE FAIL TO ESTABLISH AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL, WE MAY NOT BE ABLE TO REPORT OUR FINANCIAL RESULTS ACCURATELY OR TO PREVENT FRAUD. ANY INABILITY TO REPORT AND FILE OUR FINANCIAL RESULTS ACCURATELY AND TIMELY COULD HARM OUR REPUTATION AND ADVERSELY IMPACT THE TRADING PRICE OF OUR COMMON STOCK.

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. Management has determined that our internal audit function is significantly deficient due to insufficient qualified resources to perform internal audit functions. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2011, management identified significant deficiency related to (i) our internal audit functions, and (ii) a lack of segregation of duties within accounting functions. 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 any policies and procedures may deteriorate. Management has determined that our internal audit function is significantly deficient due to insufficient qualified resources to perform internal audit function. 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. . We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Ineffective internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

PUBLIC COMPANY COMPLIANCE MAY MAKE IT MORE DIFFICULT TO ATTRACT AND RETAIN OFFICERS AND DIRECTORS.

The Sarbanes-Oxley Act and rules implemented by the Securities and Exchange Commission have required changes in corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs in 2012 and beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

COMPLIANCE WITH THE REPORTING REQUIREMENTS OF FEDERAL SECURITIES LAWS CAN BE EXPENSIVE AND MAY DIVERT RESOURCES FROM OTHER PROJECTS, THUS IMPAIRING OUR ABILITY GROW.

We are subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would have been if we were a privately owned company.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant certifications required by such act, which may preclude us from keeping our filings with the Securities and Exchange Commission current and interfere with the ability of investors to trade our securities and for our shares to continue to be quoted on the OTC Bulletin Board or to list on any national securities exchange.

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RISKS RELATING TO OUR COMMON STOCK

OUR STOCK PRICE MAY BE VOLATILE.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:


	·	changes in our industry;

	·	competitive pricing pressures;

	·	our ability to obtain working capital financing;

	·	additions or departures of key personnel;

	·	limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;

	·	our ability to execute our business plan; sales of our common stock;

	·	operating results that fall below expectations;

	·	loss of any strategic relationship;

	·	regulatory developments;

	·	economic and other external factors; and

	·	period-to-period fluctuations in our financial results; and inability to develop or acquire new or needed technology.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

WE HAVE NOT PAID CASH DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

OUR COMMON STOCK IS DEEMED A “PENNY STOCK,” WHICH WOULD MAKE IT MORE DIFFICULT FOR OUR INVESTORS TO SELL THEIR SHARES.

Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $4.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

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OFFERS OR AVAILABILITY FOR SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.

If our stockholders sell substantial amounts of our common stock in the public market or upon the expiration of any statutory holding period, under Rule 144, or upon expiration of lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

Not applicable to a smaller reporting company.


ITEM 2.	PROPERTIES

We currently lease 5 properties as follows:


Location	Usage	Square Footage	Annual Rent	Leased From	Lease Expiration
Mobile, Alabama	Southern Medical home health care store & HASCO Executive Office	12,000	$66,000	Unrelated Third Party	6/30/2013
Clermont, Florida	Mobility Freedom store & offices	5,964	$108,485	Connor Properties	4/30/2014
Orlando, Florida	Mobility Freedom store	3,119	$68,095	Connor Properties	4/30/2014
Palm Coast, Florida	Mobility Freedom store	1,000	$14,406	Connor Properties	4/30/2014
Tampa, Florida	Mobility Freedom store	3,000	$34,133	Unrelated Third Party	9/30/2012

The Company believes that the facilities outlined above are adequate to support our current needs.


ITEM 3.	LEGAL PROCEEDINGS

We are not a party to any pending or threatened litigation.


ITEM 4.	MINE SAFETY DISCLOSURES

Not Applicable.

PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price of and Dividends on Common Equity and Related Stockholder Matters

Our common stock is quoted on the OTC Bulletin Board under the symbol “HASC.OB”

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 OTC Bulletin Board. The quotations reflect inter dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.

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Year Ended December 31, 2011	High	Low
First Quarter	$0.0350	$0.0165
Second Quarter	0.0410	0.0110
Third Quarter	0.0440	0.0125
Fourth Quarter	0.0260	0.0120
Year Ended December 31, 2010
First Quarter	$ N/A	$ N/A
Second Quarter	0.20	0.05
Third Quarter	0.10	0.02
Fourth Quarter	0.03	0.02

Holders

As of March 29, 2012, we had 139 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.

Dividend Policy

We have never paid cash dividends on our common stock. 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

Between May 2011 and August 2011, we issued an aggregate of 4,666,674 shares of common stock for net proceeds of approximately $59,500.

Between June 2011 and December 2011, we issued an aggregate of 8,106,981 shares of our common stock to our directors, executive employees and certain employees of the Company as compensation for services.

In May 2011, we issued 250,000 of our common stock as consideration in connection with the acquisition of Mobility Freedom Inc.

In November 2011, we issued 2,857,143 of our common stock as consideration in connection with the acquisition of Certified Medical Systems II and Certified Auto.

In December 2011, we issued 21,111,111, shares in connection with the payment of loans of $365,000 to one of our directors.

All of the foregoing issuances were made to accredited investors and accordingly these issuances were 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 DATA

Not applicable to a smaller reporting company.

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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, 2010 and 2009 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.

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 former shareholder of Southern Medical & Mobility, Inc. was issued a total of 554,676,000 shares of our common stock in exchange its Southern Medical & Mobility, Inc. shares.

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.

On May 13, 2011, we completed the acquisition of Mobility Freedom Inc. and Wheelchair Vans of America. Mobility Freedom is a Florida Corporation founded in 1999. A few years after the business started Mobility Freedom, Inc. purchased a van rental company, which now does business under the name “Wheelchair Vans of America.” Pursuant to the terms of the transaction, we paid the selling shareholders of Mobility Freedom Inc. and Wheelchair Vans of America $1,850,000 in cash and a $2,000,000 Promissory Note with a 15 year term for a total consideration of $3,850,000 along with 250,000 shares of HASCO Medical, Inc. common stock.

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	·	Mobility Freedom, including its rental operations conducted under the trade name Wheelchair Vans of America, and Certified Auto located in Central Florida, and

	·	Southern Medical & Mobility located in Mobile Alabama, and Certified Medical located in Ocala Florida

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, 2011 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 consolidated financial statements.

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 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.

	·	Revenues are recognized on an accrual basis at the time services and related products are provided to patients and collections are reasonably assured, and are recorded at amounts estimated to be received under healthcare contracts with third-party payers, including private insurers, Medicaid, and Medicare.

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	·	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.

	·	We recognize revenue when the earnings process is complete, generally either at the time of sale to a customer or upon delivery to a customer. We recognize used vehicle revenue when a sales contract has been executed and the vehicle has been delivered. A reserve for vehicle returns is recorded based on historical experience and trends, and results could be affected if future vehicle returns differ from historical averages.

	·	Vehicles are rented to individuals and are invoice at the date of service. A reserve for receivables is recorded based on historical experience and trends, and results could be affected if future vehicle returns differ from historical averages.

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.

Goodwill and Other Intangible Assets - In accordance with ASC 350- 30-65 “Goodwill and Other Intangible Assets”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:


	1.	Significant underperformance relative to expected historical or projected future operating results;


	2.	Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and


	3.	Significant negative industry or economic trends.

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When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

Reimbursement by Third Party Payors

We derive substantially all of our revenues from reimbursement by third party payors, including Medicare, Medicaid, United States Department of Veterans Affairs (the “VA”) and private insurers. Our business has been, and may continue to be, significantly impacted by changes mandated by Medicare and government agencies legislation.

The health care industry is subject to extensive regulation by a number of governmental entities at the federal, state and local levels. The industry also is subject to frequent legislative and regulatory changes. Our business is impacted not only by those laws and regulations that are directly applicable to us, but also by certain laws and regulations that are applicable to our managed care payors and patients. State laws also govern, among other things, pharmacies, nursing services, distribution of medical equipment and certain types of home health activities and apply to those locations involved in such activities. If we fail to comply with the laws and regulations applicable to our business, we could suffer civil and/or criminal penalties and we could be excluded from participating in Medicare, Medicaid and other federal and state health care programs.

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 Patient Protection and Affordable Care Act (“PPACA”), 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.

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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. PPACA was signed into law on March 23, 2010. Together with the Health Care and Education Reconciliation Act of 2010 (signed into law on March 30, 2010) which amended the statute, PPACA is a comprehensive health care law that is intended to expand access to health insurance, reform the health insurance market to provide additional consumer protections, and improve the health care delivery system to reduce costs and produce better outcomes through a combination of cost controls, subsidies and mandates. These legislative provisions, as currently in effect and when fully implemented, have had and will have a material adverse effect on our business, financial condition, operating results and cash flows. 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.

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). On July 15, 2008, Congress enacted the MIPPA legislation which retroactively delayed the implementation of competitive bidding and reduced Medicare prices nationwide by 9.5% beginning in 2009 for the product categories, including oxygen, that were initially included in competitive bidding. As a result of the delay, CMS cancelled all contract awards retroactively to June 30, 2008. In January 2009, CMS reinstituted the bidding process in the nine largest MSA markets. Reimbursement rates from the re-bidding process were publicly released by CMS on June 30, 2010. CMS announced average savings of approximately 32% off the current payment rates in effect for the product categories included in competitive bidding. These payment rates are now in effect in the nine markets only, as of January 1, 2011. CMS will undertake a second round of competitive bidding in up to 91 additional markets, with contracts expected to be effective as of July 2013. It is not certain at this time whether CMS intends to implement competitive bidding in all 91 markets simultaneously, or whether the program will be phased in over several years. The PPACA legislation requires CMS to expand competitive bidding further to all geographic markets (certain markets may be excluded at the discretion of CMS) or to use competitive bid pricing information to adjust the payment amounts otherwise in effect for areas that are not competitive acquisition areas by January 1, 2016. We will continue to monitor developments regarding the implementation of the competitive bidding program. While we cannot predict the outcome of the competitive bidding program on our business when fully implemented nor the Medicare payment rates that will be in effect in future years for the items subjected to competitive bidding, it is likely that the program will materially adversely affect our financial position and operating results.

On July 15, 2008, Congress enacted the MIPPA legislation which reduced Medicare payment rates nationwide for certain DME items, including oxygen equipment, by 9.5% beginning in 2009. In addition to the 9.5% reduction, CMS subjected the monthly payment amount for stationary oxygen equipment to additional cuts of 2.3% in 2009, thereby reducing the monthly payment rate from $199.28 in 2008 to $175.79 in 2009. The monthly payment amount was reduced by 1.5% in 2010, to $173.17. We estimate that this reduction negatively impacted our revenues in 2010. The stationary oxygen payment rate for 2011 has been established by CMS at $173.31 per month, an increase of 0.1%.

(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.

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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 obtained a surety bond on October 2, 2009 and still currently maintaining such surety bond.

(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)

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

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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 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 provides an overview of certain key factors of our results of operations for the year ended December 31, 2011 as compared to the year ended December 31, 2010:


	Years ended December 31,
	2011			2010
Net Revenues	$	9,514,475		$	2,157,530
Cost of sales		6,146,490			766,821
Operating Expenses:
Marketing and selling		306,564			17,177
Depreciation and amortization		180,796			29,208
General and administrative		3,105,298			2,344,521
Total operating expenses		3,592,658			2,390,906
Loss from operations		(224,673	)		(1,000,197	)
Total other expense		(117,842	)		(69,951	)
Income tax benefit (expense)		—			—
Net loss	$	(342,515	)	$	(1,070,148	)

Other Key Indicators:


	Years ended December 31,
	2011	2010
Cost of sales as a percentage of revenues	64.6%	35.5%
Gross profit margin	35.4%	64.5%
General and administrative expenses as a percentage of revenues	32.6%	108.7%
Total operating expenses as a percentage of revenues	37.8%	110.8%

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The following table provides comparative data regarding the source of our net revenues for our Home Healthcare segment in each of these periods:


	Years ended December 31,
	2011		2010
Product Sales	$	587,617	$	1,425,039
Rental Revenue		1,242,681		732,491
Service Revenue		23,248		—
Total Net Revenues:	$	1,853,546	$	2,157,530


Gross profit as a Percentage of Net Revenues	Years ended December 31,
from Home Healthcare segment	2011	2010
Product sales	8%	37%
Rental Revenue	61%	27%
Service Revenue	1%	—

The following table provides comparative data regarding the source of our net revenues for our Wheelchair Conversion Van segment in each of these periods:


	Years ended December 31,
	2011		2010
Product Sales	$	7,289,564	$	—
Rental Revenue		272,762		—
Service Revenue		98,603		—
Total Net Revenues:	$	7,660,929	$	—


Gross profit as a Percentage of Net Revenues	Years ended December 31,
from Wheelchair Conversion Van segment	2011	2010
Product sales	22%	—
Rental Revenue	4%	—
Service Revenue	1%	—

Year ended December 31, 2011 and 2010

Net Revenues

For the year ended December 31, 2011, we reported revenues of $9,514,475 as compared to revenues of $2,157,530 for the year ended December 31, 2010, an increase of $7,356,945 or approximately 341%. Product sales for our Home Healthcare segment for the year ended December 31, 2011 decreased by $837,422, or approximately 59% as compared to the year ended December 31, 2010. Rental revenue for our Home Healthcare segment for the year ended December 31, 2011 increased by $509,740 or 70% approximately as compared to the year ended December 31, 2010. The overall decrease of product sales for our Home Healthcare segment is 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, hospice and nursing home census levels. The increase in rental revenue for our Home Healthcare segment is primarily attributable the revision by Medicare on the power wheelchair payment rule whereby instead of a purchase option, Medicare requires that the power chair is rented over a period of 13 months and after the 13th month ownership of the chair will transfer to the patient.

Product sales and Rental revenue for our Wheelchair Conversion Van segment for the year ended December 31, 2011 amounted to $7,289,564 and 272,762, respectively. Additionally, Service revenue for our Wheelchair Conversion Van segment for the year ended December 31, 2011 amounted to $98,603. The overall increase of revenue for our Wheelchair Conversion Van segment is due to the acquisition of Mobility Freedom Inc. on May 13, 2011. Approximately 30% of Mobility Freedom’s revenue was derived from veterans receiving benefits from VA. We do not have comparable revenue during the year ended December 31, 2010.

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Cost of Sales

The following table provides comparative data regarding Cost of Sales for our two segments in each of these periods:


	Years ended December 31,
Cost of sales as a Percentage of Net Revenues	2011	2010
Home Healthcare Segment	5.9%	35.5%
Wheelchair Conversion Van Segment	58.7%	—%

Our cost of sales consists of the depreciation of rental assets and products purchased for resale. For the year ended December 31, 2011, cost of sales was $6,146,490, or approximately 64.6% of revenues, compared to $766,821, or approximately 35.5% of revenues, for the year ended December 31, 2010. During the year ended December 31, 2011, cost of sales increased due to increased revenues related to our Wheelchair Conversion Van Segment. We do not have a comparable cost of sales for our Wheelchair Conversion Van Segment during the prior year. The overall increase of cost of sales for our Wheelchair Conversion Van segment is due to the acquisition of Mobility Freedom Inc. on May 13, 2011. During the year ended December 31, 2011, cost of sales as a percentage of net revenues for our Home Healthcare Segment decreased due to increased rental revenues as compared to the year ended December 31, 2010.

Gross Profit

During the year ended December 31, 2011, our gross profit for our product sales for our home healthcare segment as a percentage of net revenues from our home healthcare segment decreased by approximately 29% as compared to the year ended December 31, 2010 as a result of the decrease in product sales. During the year ended December 31, 2011, our gross profit for our rental revenue for our home healthcare segment as a percentage of net revenues from our home healthcare segment increased by approximately 34% as compared to the year ended December 31, 2010. The increase in gross profit of rental revenue is primarily attributable to the increase in rental revenues during 2011.

During the year ended December 31, 2011, our gross profit for our product sales, rental revenue and service revenue for our Wheelchair Conversion Van Segment as a percentage of net revenues from our Wheelchair Conversion Van Segment increased by approximately 27% as compared to the year ended December 31, 2010. The overall increase of gross profit for our Wheelchair Conversion Van segment is due to the acquisition of Mobility Freedom Inc. on May 13, 2011. We do not have comparable revenue during the year ended December 31, 2010.

Total Operating Expenses

Our total operating expenses increased approximately 50.3% to $3,592,658 for the year ended December 31, 2011 as compared to $2,390,906 for the year ended December 31, 2010. These changes include:

· Marketing and Selling. For the year ended December 31, 2011, marketing and selling costs were $246,319 as compared to $17,177 for the year ended December 31, 2010, an increase of $229,142. This increase in marketing and selling costs was a result of the acquisition of Mobility Freedom Inc. in May 2011.

· Depreciation and amortization expense. For the year ended December 31, 2011, depreciation expense amounted to $180,796 as compared to $29,208 for the year ended December 31, 2010, an increase of $151,588. This increase is primarily attributable to the amortization of intangible assets as a result of the acquisition of Mobility Freedom Inc. in May 2011.

· General and administrative expense. For the year ended December 31, 2011, general and administrative expenses were $3,165,543 as compared to $2,344,521 for the year ended December 31, 2010, an increase of $821,022. For the year ended December 31, 2011 and 2010 general and administrative expenses consisted of the following:

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	Year Ended December 31, Fiscal Q1
		2011			2010
Rent	$	203,182		$	68,233
Employee compensation		2,214,763			1,404,626
Professional fees		217,650			162,813
Internet/Phone		77,248			36,154
Travel/Entertainment		77,518			45,921
Bad debt (recovery) expense		(17,273	)		57,328
Insurance		142,381			51,695
Management fee		—			360,000
Other general and administrative		250,074			157,751
	$	3,165,543		$	2,344,521


	·	For the year ended December 31, 2011, Rent expense increased by $134,949or 198%. The increase is primarily attributable to our new offices located in Florida as a result of the acquisition of Mobility Freedom Inc. in May 2011.

	·	For the year ended December 31, 2011, employee compensation, related taxes and stock-based compensation expenses decreased to $2,214,763 as compared to $1,404,626, an increase of $810,137 or 58%. The increase was due to an increase in number of employees and commission expense as compared to the 2010 period as a result of the acquisition of Mobility Freedom Inc. in May 2011.

	·	For the year ended December 31, 2011, professional fees increased to $217,650 as compared to $162,813, an increase of $54,837 or 33.7%. The increase is primarily related to increase in accounting fees and legal fees related to the acquisition of Mobility Freedom Inc. in May 2011.

	·	For the year ended December 31, 2010, internet/telephone expense increased to $77,248 as compared to $36,154, an increase of $41,094 or 114%. Such increase is primarily attributable to an increase in operations as a result of the acquisition of Mobility Freedom Inc. in May 2011.

	·	For the year ended December 31, 2011, travel and entertainment expense increased to $77,518 as compared to $45,921. Travel and entertainment expense increased due to increase sales-related travel related to our subsidiary, Mobility Freedom Inc.

	·	For the year ended December 31, 2011 bad debt expense decreased by $74,601 as compared to the year ended December 31, 2010. The decrease was due to decreased write offs as a result of the detailed review of Accounts Receivable aging by senior management and improvement in collections.

	·	For the year ended December 31, 2011 insurance expense increased to $142,381 as compared to $51,695 for the year ended December 31, 2010, an increase of $90,686, or 175%. The increase is primarily related to an increase in general liability insurance expense related to our subsidiary, Mobility Freedom Inc. in May 2011.

	·	For the year ended December 31, 2011 Management fee expense decreased to $0 as compared to $360,000 for the year ended December 31, 2010. The decrease in management fee was primarily attributable to the termination of the management agreement in January 2011.

	·	For the year ended December 31, 2011 other general and administrative expense increased to $250,074 as compared to $157,751 for the year ended December 31, 2010. The increase is primarily attributable to increase in office expense, office supplies and automobile expense by the Company. Additionally, the increase is due to an increase in operations as a result of the acquisition of Mobility Freedom Inc. in May 2011.

LOSS FROM OPERATIONS

We reported loss from operations of $224,673 for the year ended December 31, 2011 as compared to $1,000,197 for the year ended December 31, 2010.

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OTHER EXPENSES

Interest Expense. For the year ended December 31, 2011, interest expense amounted to $197,842 as compared to $69,951 for the year ended December 31, 2010, an increase of $127,891. The increase is primarily attributable due to increase interest expense in connection with notes payable issued during the fiscal year 2011 related to the acquisition of Mobility Freedom Inc. and Certified.

NET LOSS

Our net loss was $342,515 for the year ended December 31, 2011 compared to a net loss $1,070,148 for the year ended December 31, 2010.

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, 2011 and December 31, 2010:


	December 31, 2011			December 31, 2010			$ Change			% Change
Working capital surplus (deficit)	$	(356,347	)	$	(356,324	)	$	(23	)	(0.01	%)

Cash		212,460			423			212,037		50,127	%
Accounts receivable, net		1,042,953			254,362			788,591		310	%
Inventory		2,444,563			76,356			2,368,207		3,101.5	%
Total current assets		3,789,183			349,986			3,439,197		982.7	%
Property and equipment, net		526,571			147,769			378,802		256.4	%
Intangible property, net		3,695,755			—			3,695,755		100	%
Total assets		8,011,929			498,175			7,513,754		1,508.3	%


Accounts payable and accrued liabilities		2,627,326			612,282			2,015,044		329	%
Customer deposits and deferred revenue		175,464			—			175,464		100	%
Line of credit		898,713			—			898,713		100	%
Notes payable-current		108,091			18,005			90,896		504.8	%
Notes payable, related party-current		154,346			—			154,346		100	%
Total current liabilities		4,145,530			706,310			3,439,220		486.9	%
Notes payable-long term		1,947,994			152,509			1,945,485		77,540	%
Notes payable, related party-long term		1,784,020			—			1,784,020		100	%
Total liabilities		7,877,544			858,819			7,018,725		817.3	%
Accumulated deficit		(4,667,198	)		(4,324,683	)		(342,515	)	7.9	%
Stockholders’ equity (deficit)	$	134,385		$	(360,644	)	$	495,029		(137.3	%)

Net cash used in operating activities was $489,576 for the year ended December 31, 2011. For the year ended December 31, 2011, we had net loss of $342,515 offset by non-cash items such as depreciation and amortization expense of $295,666 and stock-based compensation of $156,794, add back decreases from changes in assets and liabilities of $582,248 and bad debt recovery of $17,273. During the year ended December 31, 2011 we experienced an increase in accounts receivable of $771,318, an increase in inventory of $2,580,833, an increase in prepaid expenses of $70,362 and an increase in accounts payable and accrued liabilities of $2,664,801.

Net cash used in operating activities was $222,939 for the year ended December 31, 2010. For the year ended December 31, 2010, we had net loss of $1,070,148 offset by non-cash items such as depreciation expense of $173,652, bad debt of $57,328, stock-based compensation of $237,440, amortization of debt discount of $25,000, amortization of debt issuance cost of $3,000 and increases from changes in assets and liabilities of $350,789. During the year ended December 31, 2010 we experienced an increase in accounts receivable of $70,500, a decrease in inventory of $27,750, an increase in prepaid expenses of $5,355, and an increase in accounts payable and accrued liabilities of $398,894.

Net cash used in investing activities for the year ended December 31, 2011 was $154,223 as compared to net cash used in investing activities of $66,291 for the year ended December 31, 2010. During the year ended December 31, 2011 and 2010, we used cash for property and equipment purchases.

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Net cash provided by financing activities for the year ended December 31, 2011 was $855,836. For the year ended December 31, 2011, net cash provided by financing activities consist of proceeds from sale of common stock of $79,500 and proceeds from advances from line of credit of $898,713 offset by payments on notes payable of $122,377.

Net cash provided by financing activities for the year ended December 31, 2010 was $289,453. For the year ended December 31, 2010, net cash provided by financing activities consist of proceeds from sale of common stock of $142,000 and proceeds from issuance of debts of $170,513 offset by payment of debt issuance cost $3,000 and payments on notes payable of $66,083.

At December 31, 2011 we had a working capital deficit of $356,347 and accumulated deficit of $(4,667,198).

As we attempt to expand and develop our operations, we expect to continue to experience net negative cash flows from operations in amounts not now determinable, and will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings to the extent necessary to provide working capital. We have and expect to continue to have substantial capital expenditures and working capital needs. We do not now have funds sufficient to fund our operations at their current level for the next twelve months. We need to raise additional cash to fund our operations and implement our business plan. We expect that the additional financing will (if available) take the form of a private placement of equity, although we may be constrained to obtain additional debt financing in lieu thereof. We are maintaining an on-going effort to locate sources of additional funding, without which we will not be able to remain a viable entity. No financing arrangements are currently under contract, and there are no assurances that we will be able to obtain adequate financing. If we are able to obtain the financing required to remain in business, eventually achieving operating profits will require an expansion of operations to generate revenues or drastically reducing expenses from their current levels or both. If we are able to obtain the required financing to remain in business, future operating results depend upon a number of factors that are outside of our control.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following tables summarize our contractual obligations as of December 31, 2011.


	Payments Due by Period
	Total		Less than 1 year		1-3 Years		4-5 Years		5 Years +
Contractual Obligations:
Operating Lease	$	659,094	$	306,041	$	353,053	$	—	$	—
Line of credit		898,713		898,713		—		—		—
Notes payable		2,056,895		108,901		234,225		240,434		1,473,335
Notes payable – related party		1,938,366		154,346		337,838		380,798		1,065,384
Total Contractual Obligations:	$	5,553,068	$	1,468,001	$	925,116	$	621,232	$	2,538,719

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

In May 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS” (“ASU No. 2011-04”). ASU No. 2011-04 provides guidance which is expected to result in common fair value measurement and disclosure requirements between U.S. GAAP and IFRS. It changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. It is not intended for this update to result in a change in the application of the requirements in Topic 820. The amendments in ASU No. 2011-04 are to be applied prospectively. ASU No. 2011-04 is effective for public companies for interim and annual periods beginning after December 15, 2011. Early application is not permitted. This update does not have a material impact on the Company’s consolidated financial statements.

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In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU No. 2011-05”). In ASU No. 2011-05, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments in ASU No. 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. They also do not change the presentation of related tax effects, before related tax effects, or the portrayal or calculation of earnings per share. The amendments in ASU No. 2011-05 should be applied retrospectively. The amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. This update does not have a material impact on the Company’s consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08 – Intangibles – Goodwill and Other (ASC Topic 350) – Testing of Goodwill for Impairment. This ASU simplifies how entities test goodwill for impairment. The amendments under this ASU permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If an entity concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it would not be required to perform the two-step impairment test for that reporting unit. This ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements or results of operations.

On December 31, 2011, the FASB issued ASU No. 2011-11, “Disclosures about Offsetting Assets and Liabilities”, which requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the ASU requires disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. The ASU is effective for annual reporting periods beginning on or after January 1, 2013. The Company is currently evaluating the impact, if any, that these updates will have on its financial condition, results of operations and cash flows. This update is not expected to have a material impact on the Company’s consolidated financial statements.

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 RISK

Not applicable to smaller reporting companies


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See our Financial Statements beginning on page F-1 of this annual report.


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

None.


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, 2011, 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.

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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, 2011, 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, 2011, 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.

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, 2011. 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, 2011, management identified significant deficiency 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, 2011.

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.

We believe that the foregoing steps identified above will remediate the significant deficiency, 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 significant deficiencies 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.

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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 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 the fourth quarter of the year ended December 31, 2011 that have 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 GOVERNANCE

Set forth below is information concerning our executive officers and directors:


Name	Age	Position
Hal Compton, Sr.	64	Chairman of the Board
Hal Compton, Jr.	39	Chief Executive Officer and Director
Robyn Priest	61	Chief Financial Officer
Bill Marginson*	65	Director
Barry McCook*	64	Director

* Member of the audit and compensation committees.

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.

Robyn Priest is currently the Chief Financial Officer of Hasco Medical Inc. She served as Senior Vice President-Finance and Chief Financial Officer of eTelcharge, Inc. She also served as Vice President, Controller and Chief Accounting Officer of CompUSA. She provided executive financial consultation in the retail sector and was a Principle with Arthur Young & Company. Ms. Priest holds a BA in Accounting from the University of South Florida. She is a Certified Public Accountant.

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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.

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, 2011, 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, 36693.

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:

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	·	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.

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

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	·	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.

Director or Officer Involvement in Certain Legal Proceedings

Mr. Compton was Co-Chairman and a 25.5% owner of the Country Sampler Stores, LLC, which filed for bankruptcy under Chapter 7 of the Federal Bankruptcy Code in 2006. No other director or executive officer was involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

Director Independence

Of the four directors, the Company has determined that Mr. Marginson and Mr. McCook would be considered “independent” within the meaning of Rule 5605 of the NASDAQ Marketplace Rules.


ITEM 11.	EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes the overall compensation earned over each of the past two fiscal years ending December 31, 2011 by (1) each person who served as our principal executive officer during fiscal 2011; and (2) our two most highly compensated executive officers as of December 31, 2011 with compensation during fiscal 2011 of $100,000 or more (the “Named Executive Officers”). The value attributable to any option awards is computed in accordance with ASC Topic 718.

SUMMARY COMPENSATION TABLE


Name and principal position (a)	Year (b)	Salary ($) (c)		Bonus ($) (d)		Stock Awards ($) (e)		Option Awards ($) (f)		Non-Equity Incentive Plan Compen-sation ($) (g)		Non-qualified Deferred Compen-sation Earnings ($) (h)		All Other Compen-sation ($) (i)		Total ($) (j)
Hal Compton Jr. (1)	2011		169,616		—		25,800		—		—		—		13,212	$	208,628
	2010		185,000		—		7,000		—		—		—		12,588	$	204,588
Mark Lucky (2)	2011		9,056		—		—		—		—		—		—	$	9,056
	2010		10,650		—		—		—		—		—		—	$	10,650
James Thomas (3)	2011		37,744		—		18,693		—		—		—		1,479	$	57,916
	2010		—		—		—		—		—		—		—	$	—
Robyn Priest (4)	2011		—		—		—		—		—		—		—	$	—
	2010		—		—		—		—		—		—		—	$	—
Alfredo Ollivierre (5)	2011		120,000		—		25,800		—		—		—		5,100	$	150,900
	2010		120,000		—		7,000		—		—		—		4,860	$	131,860

(1)

Hal Compton Jr. has served as our CEO since May 2009. During 2011, in addition to his salary, his compensation included stock awards to purchase a total of 1,500,000 shares of our common valued at $25,800. During 2010, in addition to his salary, his compensation included stock awards to purchase a total of 1,000,000 shares of our common valued at $7,000. Other compensation for fiscal 2011 and 2010 included $13,212 and $12,588, respectively for payment of health, dental and life insurance.

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(2)	Mark Lucky had served as our CFO since May 2009 until April 1, 2011.

(3)	James Thomas had served as our CFO since April 2011 until February 1, 2012. During 2011, in addition to his salary, his compensation included stock awards to purchase a total of 933,333 shares of our common valued at $18,693. Other compensation for fiscal 2011 and 2010 included $1,479 and $0, respectively for payment of health, dental and life insurance.

(4)	Robyn Priest has served as our CFO since February 1, 2012.

(5)	Alfredo Ollivierre has served as our COO since May 2009. During 2011, in addition to his salary, his compensation included stock awards to purchase a total of 1,500,000 shares of our common valued at $25,800. During 2010, in addition to his salary, his compensation included stock awards to purchase a total of 1,000,000 shares of our common valued at $7,000. Other compensation for fiscal 2011 and 2010 included $5,100 and $4,860, respectively 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.

We believe that the salaries paid to our executive officers during 2011 and 2010 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 END DECEMBER 31, 2011
OPTION AWARDS						STOCK AWARDS
Name (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 (1)	—	—	—	—	—	—	—	—
Alfredo Ollivierre	1,000,000 (1)	—	—	—	—	—	—	—	—

(1) options vested on November 1, 2011.

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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 2011.

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 2011.

Employment Agreements

At this time there are no agreements in place.

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. Except for the options granted in fiscal year 2009 and stock awards granted in fiscal year 2011 and 2010 we have not had compensation arrangements in place for members of our Board of Directors and have not finalized any plan to compensate directors in the future for their services as directors. We 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 AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

At March 29, 2012 we had 972,675,204 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 29, 2012 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.

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Name and Address of Beneficial Owner	Title	Beneficially Owned Post-Share Exchange (1)		Percent of Class

5% Owners
Mark Lore			176,944,450		18.2%
HASCO Holdings, LLC			646,557,142		66.5%

Officers and Directors

Hal Compton, Sr. (2)	Chairman of the Board		248,597,258		25.6%
Scott Compton (2)	Chief Marketing Officer		216,519,047		22.3%
Hal Compton, Jr. (2)	Chief Executive Officer		218,019,047		22.4%
Barry McCook	Board member		1,200,000		*
Bill Marginson	Board member		200,000		*
Alfredo Ollivierre	Chief Operating Officer		2,500,000		*
Robyn Priest	Chief Financial Officer		187,500		*

All directors and executive officers as a group (7 people)			687,222,852		70.6%

* 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 215,519,047 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 our 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, 2011, accrued interest from such notes payable amounted to $36,250. As part of the acquisition of Mobility Freedom, an additional $1,850,000 note was issued to this shareholder. At that time the prior and current note was combined for an aggregated installment note with a face value of $2,000,000 at an interest bearing rate of 6% per annum.

We incurred management fees of approximately $360,000 to HASCO Holdings, LLC during the year ended December 31, 2010.

In April 2010, one of the Company’s directors loaned $50,000 to us. Additionally, in August 2010, the same director loaned an additional $70,513 which was use to fund the prepayment of the convertible promissory note dated June 21, 2010. These loans are non interest bearing and are due on demand. In August 2010, we issued 4,017,100 shares in connection with the payment of these loans for a total amount of $120,513.

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.

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In August 2010, we issued 4,000,000 shares in connection with the payment of accrued management fees of $120,000 to HASCO Holdings, LLC.

In September 2010, in connection with the sale our common stock, we issued 2,500,000 shares of common stock to a director for net proceeds of approximately $75,000.

In December 2010, in connection with the sale of our common stock, we granted 1,250,000 shares of common stock to a director for net proceeds of approximately $25,000.

In December 2010, in connection with the sale of our common stock, we granted 700,000 shares of common stock to HASCO Holdings, LLC for net proceeds of approximately $14,000.

In January 2011, an affiliated company for which our CEO, Hal Compton Jr., is an officer and director, loaned $15,000 to the Company. This loan was non-interest bearing and was due on demand. In March 2011, the Company paid back $15,000 of this loan.

In February 2011, HASCO Holdings, LLC, the largest shareholder of the Company, loaned $50,000 to the Company. These loans are non interest bearing and are due on demand.

In February 2011, one of the Company’s directors loaned $135,000 to the Company. These loans are non interest bearing and are due on demand.

In March 2011, the Company issued 9,000,000 shares in connection with the payment of accrued management fees of $180,000 to HASCO Holdings, LLC. The Company and HASCO Holdings, LLC agreed to terminate the management agreement in January 2011.

In December 2011, the Company issued 21,111,111, shares in connection with the payment of loans of $365,000 to the Company’s director.


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	2011		2010
Audit Fees (1)	$	46,000	$	39,000
Audit Related Fees (2)		8,000		18,000
Tax Fees (3)		—		—
All Other Fees (4)		—		—


(1)	Consists of fees billed for the audit of our annual financial statements, review of our Form 10-K 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 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 the 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 2010 were pre-approved by the entire Board of Directors.

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ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES.


Exhibit No.		Exhibit Description

2.1		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. *

21.1		List of Subsidiaries**

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

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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.
March 29, 2012	Hal Compton, Jr.,
	Chief Executive Officer, principal executive officer

Pursuant 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	Date

/s/ Hal Compton, Jr.	Chief Executive Officer, principal executive officer	March 29, 2012
Hal Compton, Jr.

/s/ Robyn Priest	Chief Financial Officer, principal financial and accounting officer	March 29, 2012
Robyn Priest

/s/ Hal Compton, Sr.	Director	March 29, 2012
Hal Compton, Sr.

/s/ Bill Marginson	Director	March 29, 2012
Bill Marginson

/s/ Barry McCook	Director	March 29, 2012
Barry McCook

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HASCO MEDICAL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS


Reports of Independent Registered Public Accounting Firm	F-2 to F -3

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2011 and 2010	F-4

Consolidated Statements of Operations for the years ended December 31, 2011 and 2010	F-5

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2011 and 2010	F-6

Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010	F-7

Notes to Audited Consolidated Financial Statements	F-8 to F-23

F-1

Peter Messineo

Certified Public Accountant

1982 Otter Way Palm Harbor FL 34685

peter@pm-cpa.com

T 727.421.6268 F 727.674.0511

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of HASCO Medical, Inc. and Subsidiaries

I have audited the consolidated balance sheet of HASCO Medical, Inc. and its subsidiaries as of December 31, 2011 and the related consolidated statement of operations, changes in stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audit. The financial statements of HASCO Medical, Inc. and its subsidiary as of December 31, 2010 were audited by other auditors whose report dated March 25, 2011 on those financial statements included an explanatory paragraph describing going concern issues as discussed in Note 2 to the financial statements.

I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements were free of material misstatement. The Company was not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for designing audit procedures that were 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, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provide a reasonable basis for my opinion.

In my opinion, the financial statements, referred to above, present fairly, in all material respects, the financial position of HASCO Medical, Inc. and Subsidiaries as of December 31, 2011, and the results of its operations and its cash flows for the years then ended,

in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred recurring losses resulting in accumulated deficit, negative cash flows from operations and negative working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Further information and management’s plans in regard to these uncertainties are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Peter Messineo, CPA

Palm Harbor, Florida

March 28, 2012

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

HASCO Medical, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of HASCO Medical, Inc. and Subsidiary as of December 31, 2010 and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the year 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 audit.

We conducted our audit 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 audit provides 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, 2010 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered losses from operations, has a stockholder’s deficit and has a negative working capital all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sherb & Co., LLP

Certified Public Accountants

Boca Raton, Florida

March 25, 2011

F-3

Hasco Medical, Inc. and Subsidiaries

Consolidated Balance Sheets


	December 31,
	2011			2010

Assets
Current assets
Cash	$	212,460		$	423
Accounts receivable, net of allowance for doubtful accounts of $328,177 and $327,697, respectively		1,042,953			254,362
Inventory		2,444,563			76,356
Prepaid expenses and other current assets		89,207			18,845
Total current assets		3,789,183			349,986

Property & equipment, net of accumulated depreciation of $634,857 and $462,995, respectively		526,571			147,769

Intangible property, net of accumulated amortization of $123,804 and $0, respectively		3,695,755			—
Other non-current assets		420			420
Total Assets	$	8,011,929		$	498,175

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	2,627,326		$	612,282
Other current liabilities		180,780			76,023
Customer deposits and deferred revenue		175,464			—
Line of credit		898,713			—
Notes payable		108,901			18,005
Notes payable to related party		154,346			—
Total current liabilities		4,145,530			706,310

Notes payable, net of current portion		1,947,994			2,509
Notes payable to related party, net of current portion		1,784,020			150,000
Total liabilities		7,877,544			858,819

Stockholders’ Equity (Deficit)
Preferred stock, $.001 par value, 3,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $.001 par value, 2,000,000,000 shares authorized; 794,578,818 and 746,436,909 shares issued and outstanding, respectively		794,579			746,437
Additional paid-in capital		4,007,004			3,217,602
Accumulated deficit		(4,667,198	)		(4,324,683	)
Total stockholders’ equity (deficit)		134,385			(360,644	)

Total Liabilities and Stockholders’ Equity	$	8,011,929		$	498,175

The accompanying notes are an integral part of these financial statements.

F-4

Hasco Medical, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31,


	2011			2010

Revenues, net	$	9,514,475		$	2,157,530
Cost of sales		6,146,490			766,821
Gross Profit		3,367,985.			1,390,709

Operating expenses:
Selling and marketing		246,319			17,177
General and administrative		3,165,543			2,344,521
Depreciation and amortization		180,796			29,208
Total operating expenses		3,592,658			2,390,906

Income (loss) from operations		(224,673	)		(1,000,197	)

Other income (expense):
Other income, settlement		80,000			—
Interest expenses		(197,842	)		(69,951	)
Total other income (expense)		(117,842	)		(69,951	)

Loss from operations before income taxes		(342,515	)		(1,070,148	)

Provision for income taxes		—			—

Net loss	$	(342,515	)	$	(1,070,148	)

Earnings per share:
Basic and dilutive	$	(0.00	)	$	(0.00	)

Weighted average shares outstanding
Basic and dilutive		759,962,640			734,737,005

The accompanying notes are an integral part of these financial statements.

F-5

Hasco Medical, Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity (Deficit)


													Stock-
							Additional			Deficit			Holders’
	Preferred			Common			Paid in			Development			Equity
	shares	$.001 par		shares	$.001 par		Capital			Stage			(Deficit)

Balance at December 31, 2009	—	$	—	713,496,000	$	713,496	$	2,695,590		$	(3,254,535	)	$	154,551

Issuance of common stock for:
Cash	—		—	8,450,000		8,450		133,550			—			142,000
Services	—		—	3,216,667		3,217		21,183			—			24,400
Exercise of options	—		—	400,000		400		(400	)		—			—
Management fees	—		—	16,857,142		16,857		193,143			—			210,000
Exchange for loans payable	—		—	4,017,100		4,017		116,496			—			120,513

Fair value of options issued to:
Employees	—		—	—		—		13,040			—			13,040
Consultants	—		—	—		—		20,000			—			20,000

Beneficial conversion of convertible notes	—		—	—		—		25,000			—			25,000

Net loss											(1,070,148	)		(1,070,148	)

Balance at December 31, 2010	—		—	746,436,909		746,437		3,217,602			(4,324,683	)		(360,644	)

Issuance of common stock for:
Cash	—		—	6,666,674		6,667		72,833			—			79,500
Services	—		—	8,256,981		8,257		144,457			—			152,714
Management fees, accrued	—		—	9,000,000		9,000		171,000			—			180,000
Exchange of debt and payables	—		—	21,111,111		21,111		343,889			—			365,000
Acquisition of Mobility Freedom	—		—	250,000		250		6,000			—			6,250
Acquisition of Certified	—		—	2,857,143		2,857		47,143			—			50,000

Fair value of options issued to:
Employees	—		—	—		—		4,080			—			4,080

Net loss											(342,515	)		(342,515	)

Balance at December 31, 2011	—	$	—	794,578,818	$	794,579	$	4,007,004		$	(4,667,198	)	$	134,385

The accompanying notes are an integral part of these financial statements.

F-6

Hasco Medical, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Year Ended December 31,


		2011			2010
Cash Flows from Operating Activities:
Net loss	$	(342,515	)	$	(1,070,148	)
Adjustment to reconcile net loss to net cash provided by operations:
Depreciation and amortization		295,666			173,652
Bad debt (recovery) expense		(17,273	)		57,328
Amortization of debt discounts		—			25,000
Amortization of debt issuance costs		—			3,000
Fair value of options issued to employees		4,080			13,040
Fair value of options issued to consultants		—			20,000
Issuance of common stock in settlement of services		152,714			24,400
Issuance of common stock for management fees		—			180,000
Changes in assets and liabilities:
Accounts receivable		(771,318	)		(70,500	)
Inventory		(2,580,833	)		27,750
Prepaid expenses		(70,362	)		(5,355	)
Accounts payable		2,560,044			398,894
Accrued expenses		104,757			—
Customer deposits and deferred revenue		175,464			—
Net Cash (Used in) Operating Activities		(489,576	)		(222,939	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(154,223	)		(66,291	)
Net Cash (Used in) Investing Activities		(154,223	)		(66,291	)

Cash Flows from Financing Activities:
Overdraft liability		—			46,023
Net advances from lines of credit		898,713			—
Proceeds from issuance of stock		79,500			142,000
debt issuance costs		—			(3,000	)
Proceeds from issuance of note payable		—			170,513
Repayments of notes payable		(60,743	)		(66,083	)
Repayments of related party notes payable		(61,634	)		—
Net Cash Provided by Financing Activities		855,836			289,453


Net increase in Cash		212,037			223
Cash at beginning of period		423			200
Cash at end of period	$	212,460		$	423


Supplemental cash flow information:
Interest paid	$	159,092		$	29,950
Taxes paid	$	—		$	—

Supplemental Schedule of Noncash Investing and Financing Activities
Vehicles acquired through financing	$	47,124		$	—
Settlement of management fees in exchange for common stock	$	180,000		$	30,000
Settlement of loans payable in exchange for common stock	$	365,000		$	120,513
Intangible and net assets acquired in Mobility Freedom transaction	$	3,856,250		$	—
Intangible and net assets acquired in Certified transaction	$	100,000		$	—
Promissory notes issued for the acquisition of assets	$	4,000,000		$	—

The accompanying notes are an integral part of these financial statements.

F-7

HASCO MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011 and 2010

NOTE 1 – BASIS OF PRESENTATION 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 all issued and outstanding shares of Southern Medical & Mobility, Inc.

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 as the surviving entity as a publicly-traded company under the name HASCO Medical Inc. together with its subsidiaries. The Company did not recognize goodwill or any intangible assets in connection with this transaction.

Southern Medical & Mobility, Inc was deemed the accounting acquirer for the reverse acquisition. 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.

On May 13, 2011 Hasco Medical, Inc. completed the acquisition of Mobility Freedom, Inc and Wheel Chair Vans of America (a DBA of Mobility freedom, Inc.). Mobility Freedom was founded in 1999 in Clermont, Florida. Mobility Freedom is a quality full service dealership of conversion vans and other mobility products that would help the disabled become mobile. Wheelchair Vans of America specializes in renting conversion vans to disabled individuals.

On November 17, 2011 Hasco Medical, Inc completed the acquisition of Certified Medical Systems II, Inc. (Certified Medical) and Certified Medical Auto Division, Inc.(Certified Auto). Certified Medical is in the same business segment as Southern Medical & Mobility, Inc. and Certified Auto is in the same business segment as Mobility Freedom, Inc.

Services and Products

Historically, our operations were focused on the provision of a diversified range of home health care services and products. Following our May 2011 acquisition of Mobility Freedom and November 2011 acquisitions of the Certified subsidiaries, our operations are conducted within two business units:

F-8


	·	Mobility Freedom, including its rental operations conducted under the trade name “Wheelchair Vans of America” and Certified Medical Auto are located in Florida. Business unit conducts sales of handicap accessible vans, parts and service and rental operations; and

	·	Southern Medical & Mobility located in Mobile Alabama and Certified Medical located in Ocala, Florida. Business unit conducts sales of medical equipment and supplies.

Mobility Freedom and Certified Auto

Mobility Freedom and Certified Auto serve individuals with physical limitations that need specialty equipment to drive as well as families with members who are disabled that need to be transported. In certain circumstances, both the van itself as well as its specialty equipment is paid for, directly to Mobility Freedom or Certified Auto, by a federal or state agency. Approximately 30% of Mobility Freedom revenue is derived from veterans receiving benefits from the United States Department of Veterans Affairs (the “VA”). As part of the VA’s mission “to provided veterans the world-class benefits and services they have earned”, the VA pays for a van for disabled veterans. As a result, Mobility Freedom is both a VA and Vocational Rehabilitation (VR) state certified vendor. In addition, Mobility Freedom is an exclusive vendor for certain Florida state funded agencies, including the Florida Birth-Related Neurological Injury Compensation Association (NICA).

Mobility Freedom has four corporate owned stores which are located in Orlando, Tampa, Clermont and Palm Coast. Certified Auto is located in Ocala, for a total of five operations centers in Florida.

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

Home Medical Equipment and Medical Supplies. These Companies 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. Southern Medical 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. (Certified Medical does not serve this market.)

Basis of Presentation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and present the financial statements of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The consolidated entities are:


	·	Hasco Holdings, Inc.;
	·	Southern Medical & Mobility, Inc.;
	·	Mobility Freedom, Inc.;
	·	Certified Medical Auto Division, Inc.; and
	·	Certified Medical Systems II, Inc.

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 2011 and 2010 include the allowance for doubtful accounts, the valuation of inventory, the useful life of property and equipment, allocation of acquisition costs and the assumptions used to calculate stock-based compensation.

F-9

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, and 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 December 31, 2011 and 2010. 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, and promissory note, approximated fair value as of December 31, 2011 and 2010, because of the relatively short-term maturity of these instruments and their market interest rates.

Revenue Recognition and Concentration of Credit Risk

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.

Wheelchair Van Sales and Service

We recognize revenue when the earnings process is complete, generally either at the time of sale to a customer or upon delivery to a customer. We recognize used vehicle revenue when a sales contract has been executed and the vehicle has been delivered. A reserve for vehicle returns is recorded based on historical experience and trends, and results could be affected if future vehicle returns differ from historical averages.

Vehicle Rentals

Vehicles are rented to individuals and are invoice at the date of service. A reserve for receivables is recorded based on historical experience and trends, and results could be affected if future vehicle returns differ from historical averages.

Medical Supplies and Equipment

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.

F-10

Revenues are recognized on an accrual basis at the time services and related products are provided to patients and collections are reasonably assured, and are recorded at amounts estimated to be received under healthcare contracts with third-party payers, including private insurers, Medicaid, and Medicare. Insurance benefits are assigned to us by patients receiving medical treatments and related products and, accordingly, we bill on behalf of our patients/customers. Under these contracts, we provide healthcare services, medical equipment and supplies to patients pursuant to a physician’s prescription. The insurance company reimburses us for these services and products at agreed upon rates. The balance remaining for product or service costs becomes the responsibility of the patient. A systematic process is employed to ensure that sales are recorded at net realizable value and that any required adjustments are recorded on a timely basis. We have established an allowance to account for contractual sales adjustments that result from differences between the amount remitted for reimbursement and the expected realizable amount. Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required to record net revenue 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. The Company reports revenues in our financial statements net of such adjustments. The Company recorded contractual adjustments of $638,082 and $568,171 during the year ended December 31, 2011 and 2010, respectively.

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.

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 the Company’s operations and cash flows.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. For the year ended December 31, 2011, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

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 December 31, 2011 and December 31, 2010, and, generally, does not require collateral for revenue generated from equipment sales and supplies. The Company maintains reserves for potential credit losses and such losses have been within management’s expectations.

F-11

Accounts Receivable

Accounts receivable includes of receivables due from Medicare, Medicaid, and third party payors. The Company recorded a bad debt allowance of $328,177 and $327,697 as of December 31, 2011 and 2010, respectively. Management performs ongoing evaluations of its accounts receivable.

Due to the nature of the industry of medical equipment and supplies and the reimbursement environment in which that segment of 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

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

Property and Equipment

Property and equipment, including rental equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. Depreciation of rental equipment is computed using the straight-line method over the estimated useful lives, generally one to three years. Such depreciation of rental equipment is charged to cost of sales. 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 years ended December 31, 2011 and 2010.

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

Advertising

Advertising, marketing and selling is expensed as incurred. Such expenses for the year ended December 31, 2011 and 2010 totaled $50,085 and $17,177, respectively.

Shipping and Handling Costs

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

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.

Certain employees receive a portion of their compensation with the company’s common stock. This compensation is valued at the trading value of the shares at the date of issuance.

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 carry forward periods.

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.

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. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. There were 3,075,000 and 4,075,000 stock options which could potentially dilute future earnings per share as of December 31, 2011 and 2010, respectively.

F-13

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


	Year ended December 31, 2011			Year ended December 31, 2010
Numerator:
Net loss	$	(342,515	)	$	(1,070,148	)

Denominator:
Denominator for basic loss per share
(weighted-average shares)		759,962,640			734,737,005

Denominator for dilutive loss per share
(adjusted weighted-average)		759,962,640			734,737,005

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

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 year ended December 31, 2011, subsequent events were evaluated by the Company as of the date on which the consolidated financial statements for the year ended December 31, 2011 were available to be issued, as of the date filed with the Securities and Exchange Commission. The Company has concluded that all subsequent events have been properly disclosed.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact our consolidated financial position or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (ASU 2011-05). This newly issued accounting standard (1) eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity; (2) requires the consecutive presentation of the statement of net income and other comprehensive income; and (3) requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income nor do the amendments affect how earnings per share is calculated or presented. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers the requirement within ASU 2011-05 to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. During the deferral, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect prior to the issuance of ASU 2011-05. These ASUs are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. As these accounting standards do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, the adoption of this standard is not expected to have an impact on our consolidated financial position or results of operations.

F-14

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04). This newly issued accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (level 3) inputs. This ASU is effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011. The adoption of this standard is not expected to have a material impact on our consolidated financial position or results of operations.

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases, including standards that have been issued or proposed by FASB that do not require adoption until a future date, and believes any effect will not have a material impact on the Company’s present or future consolidated financial statements.

NOTE 2 – GOING CONCERN CONSIDERATIONS

The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern. At December 31, 2011, the Company had an accumulated deficit of approximately $4.7 million (approximately $4.3 million as of December 31, 2010), and a working capital deficiency of approximately $356,000 (as of December 31, 2011 and 2010). Additionally, for the year ended December 31, 2011 and 2010, the Company incurred net losses of $342,515 and $1,070,148 and had negative cash flows from operations in the amount of $489,576 and $222,939, respectively. The ability of the Company to continue as a going concern is dependent upon increasing sales and obtaining additional capital and financing. During the years ended December 31, 2011 and 2010, the Company received net proceeds from sale of stock of $79,500 and $142,000 and net proceeds from issuance of notes and loan payable of $898,713 and $167,513 for working capital purposes, respectively. Management intends to attempt to raise additional funds by way of a public or private offering. While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be no assurances that the Company will be successful in its effort.

NOTE 3 – INVENTORY

Inventory consists of the following, as of December 31,:


	2011		2010
Vehicles	$	2,299,691	$	—
Equipment and supplies		144,872		76,356
	$	2,444,563	$	76,356

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following, as of December 31,:


	Estimated
	Life	2011			2010
Building improvements	15-39 years	$	5,182		$	—
Office furniture and equipment	5 years		73,112			38,979
Rental equipment	13-36 months		929,829			468,646
Vehicles	5 years		121,822			71,656
Computer equipment	5 years		31,483			31,483
			1,161,428			610,764
Accumulated depreciation			(634,857	)		(462,995	)
		$	526,571		$	147,769

For the year ended December 31, 2011 and 2010, depreciation expense amounted to $171,862 and $173,652, of which $114,870 and $144,444 is included in cost of sales, respectively.

The Company has entered into various financing arrangements in connection with the acquisition of delivery vehicles (see Note 6 below).

F-15

NOTE 5 – INTANGIBLE PROPERTY

On May 13, 2011 Hasco Medical, Inc. completed the acquisition of Mobility Freedom, Inc, including its rental operations conducted under the trade name Wheelchair Vans of America. The purchase price consisted of $2,000,000 cash, Promissory Note of $1,850,000 and 250,000 shares of common stock with a fair market value of $6,250 for a total purchase price of $3,856,250. Hasco acquired 100% of the shares outstanding of Mobility Freedom. The purchase price was first assigned to the identifiable assets and liabilities assumed in the transaction. The Company allocated the remaining cost of $3,714,105 to identifiable intangible assets.

On November 17, 2011 Hasco Medical, Inc completed the acquisition of Certified Medical Auto Division, Inc. and Certified Medical Systems II, Inc. in exchange for $70,250 in cash ($50,000 purchase price and $20,250 for a vehicle), a $50,000 promissory note and 2,857,143 shares of common stock at the fair market value of $50,000. The purchase price was first assigned to the identifiable assets and liabilities assumed in the transaction. The Company allocated the remaining cost of $105,454 to goodwill.

The Company’s acquired intellectual property and rights, which it is amortizing on a straight-line basis over the estimated useful life. The Company assesses fair market value for any impairment to the carrying values. As of December 31, 2011 management concluded that there was no impairment to the acquired assts.

The listed intangible assets and future amortization is as follows, as of December 31,:


	Estimated
	Life	2011			2010
Sales and service infrastructure	20 years	$	1,857,053		$	—
Customer list	20 years		1,857,052
Goodwill			105,454			—
			3,819,559			—
Accumulated amortization			(123,804	)		—
		$	3,695,755		$	—

Future amortization of intangible property:
2012		$	185,706
2013			185,706
2014			185,706
2015			185,706
2016			185,706
thereafter			2,767,225
		$	3,695,755

Amortization of the intangible assets was $123,804 and $0 for the years ended December 31, 2011 and 2010, respectively.

Management periodically reviews the valuation of this asset for potential impairments. Consideration of various risks to the valuation and potential impairment includes, but is not limited to: (a) the product’s acceptance in the marketplace and our ability to attain projected forecasts of revenue (discounted cash flow of projections); (b) competition of alternative solutions; and (c) federal and state laws which may prohibit the use of our products as currently designed. Management has not impaired this asset, to date, and does not anticipate any negative impact from known current business developments. Management continuously measures the marketplace, potential revenue developments and competitive developments in the industry.

NOTE 6 – NOTES PAYABLE AND DEBT

Revolving Line of Credit

On November 1, 2011 the Company entered into a Commercial Note agreement with a bank for advances of funds for working capital purposes under a line of credit arrangement for $2,750,000. The agreement is secured against all property of the borrowers financial assets, on demand with one year maturity and is subject to annual review. Payments due are interest only. The interest rate is at Prime plus .5%, as of December 31, 2011 the effective interest rate was 4.37%. The balance of the line of credit was $898,713 and $0 as of December 31, 2011 and 2010, respectively.

F-16

Installment Debt

Installment debts consist of the following, as of December 31,:


	2011		2010

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 are secured by a lien of all three delivery vehicles. These notes shall be payable in thirty-six equal monthly payments of $1,516 beginning in January 2009 through December 2011	$	—	$	20,514

Vehicle Note Payable, dated August 18, 2011, vehicle financing arrangement for tow truck, original amount of $47,124, 5 years (60 months), 0% interest rate, commenced October 1, 2011, matures on October 1, 2016, monthly installment payments of $785		41,626		—

Note Payable, dated May 13, 2011, issued for the acquisition of Mobility Freedom, original amount of $2 million, fifteen years (180 months), 6% interest rate, commenced August 1, 2011, matures on July 1, 2026, monthly installment payments of $16,877		1,965,269		—

Note Payable, dated November 16, 2011, issued for the acquisition of Certified Auto, original amount of $50,000, four years (16 quarters), 0% interest rate, commenced January 16, 2012, matures on November 16, 2015, quarterly installment payments of $3,125		50,000		—

Note Payable to related party, dated May 13, 2011, issued for the acquisition of Mobility Freedom, original amount of $2 million, ten years (120 months), 6% interest rate, commenced August 1, 2011, matures on July 1, 2021, monthly installment payments of $22,204		1,938,366		—

Total debt		3,995,261		20,514
Current portion of long-term debt, notes payable		263,247		18,005
Long-term portion	$	3,732,014	$	2,509

Future debt amortization:


2011	$	263,247
2012		278,131
2013		293,932
2014		310,710
2015		310,522
thereafter		2,538,719
	$	3,995,261

Convertible Promissory Note

On June 21, 2010 the Company issued a convertible promissory note amounting to $50,000. The note bore interest at 8% per annum and matures on March 23, 2011. The Company paid debt issuance cost of $3,000 in connection with this note payable and is being amortized over the term of the note. The note was convertible at the option of the holder into shares of common stock beginning on the date which is 90 days after the date of this note, at a conversion price equal to 55% of the average of three lowest trading prices during the 10 trading day period of the Company’s common stock prior to the date of conversion. In accordance with ASC 470-20-25, the convertible note was considered to have an embedded beneficial conversion feature (BCF) because the effective conversion price was less than the fair value of the Company’s common stock. Therefore the portion of proceeds allocated to the convertible debentures of $25,000 was determined to be the value of the beneficial conversion feature and was recorded as a debt discount and is being amortized over the term of the note. In August 2010, the Company exercised its right to prepay this convertible promissory note. The optional prepayment amount is equal to 140% of the outstanding principal and accrued interest of this note. The Company prepaid a total of $70,513 to satisfy this convertible promissory note. As of December 31, 2010, the Company fully amortized the debt issuance cost of $25,000 on this note due to the prepayment.

F-17

Note Payable, Related Party

In June 2008, the Company entered into a note payable with its largest shareholder, HASCO Holdings, LLC, 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, 2011 and 2010, accrued interest from such note payable amounted to $36,250 and $30,000, respectively. As part of the acquisition of Mobility Freedom, an additional $1,850,000 note was issued to this shareholder. At that time the prior and current note was combined for an aggregated installment note with a face value of $2,000,000 at a more favorable interest bearing rate of 6%. No compensation was demanded or paid for the reduced interest rate.

NOTE 7– 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, 2011 and 2010, accrued interest from such note payable amounted to $38750 and $30,000, respectively. This loan was paid through an exchange of common stock and no balance was due as of December 31, 2011.

Loans payable to related party

In April 2010, one of the Company’s directors loaned $50,000 to the Company. Additionally, in August 2010, the same director loaned an additional $70,513 to the Company which was used to fund the prepayment of the convertible promissory note dated June 21, 2010. These loans are non interest bearing and are due on demand. In August 2010, the Company issued 4,017,100 shares in connection with the payment of these loans for a total amount of $120,513.

In December 2011, the Company issued a total of 21,111,111shares of common stock, at the fair market value of $365,000, in exchange of accrued debts due to HASCO Holdings, LLC.

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.

In August 2010, the Company issued 4,000,000 shares in connection with the payment of accrued management fees of $120,000 to HASCO Holdings, LLC.

In March 2011, the Company issued 9,000,000 shares in connection with the payment of accrued management fees of $180,000 to HASCO Holdings, LLC.

Sale of common stock

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 September 2010, in connection with the sale of the Company’s common stock, the Company issued 2,500,000 shares of common stock to the Company’s director for net proceeds of approximately $75,000.

In December 2010, in connection with the sale of the Company’s common stock, the Company issued 1,250,000 shares of common stock to the Company’s director for net proceeds of approximately $25,000.

In December 2010, in connection with the sale of the Company’s common stock, the Company issued 700,000 shares of common stock to HASCO Holdings, LLC for net proceeds of approximately $14,000.

In March 2011, in connection with the sale of the Company’s common stock, the Company issued 100,000 shares of common stock to the Company’s director for net proceeds of approximately $1,400.

F-18

NOTE 8 – STOCKHOLDERS’ EQUITY (DEFICIT)

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. The Company valued these common shares at the fair market value on the date of grant at $0.007 per share or $90,000.

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 May 2010, the Company issued 16,667 shares of common stock for legal services rendered. The Company valued these common shares at the fair market value on the date of grant at $0.12 per share or $2,000. In connection with issuance of these shares, the Company recorded professional fees of $2,000 for professional services performed.

In August 2010, the Company issued 400,000 shares of common stock in connection with the exercise of stock options.

In August 2010, the Company issued 4,017,100 shares in connection with the payment of loans payable to the Company’s director for a total amount of $120,513. The Company valued these common shares at the fair market value on the date of grant at $0.03 per share.

In August 2010, the Company issued 4,000,000 shares in connection with the payment of accrued management fees of $120,000 to HASCO Holdings, LLC. The Company valued these common shares at the fair market value on the date of grant at $0.03 per share.

In December 2010, in connection with the sale of the Company’s common stock, the Company granted 1,250,000 shares of common stock to the Company’s director for net proceeds of approximately $25,000 which is the fair market value on the date of grant.

In December 2010, in connection with the sale of the Company’s common stock, the Company granted 700,000 shares of common stock to HASCO Holdings, LLC for net proceeds of approximately $14,000 which is the fair market value on the date of grant.

During 2011 the company sold 6,666,674 shares of common stock for proceeds of $79,500.

During 2011, consultants were issued 150,000 shares of common stock, valued at fair market at the time of the grant, in the amount of $2,865. Additionally, 8,106,981 shares of common stock were issued to employees as compensation, valued at fair market at the time of the grant, in the amount of $149,849.

Certain debts and accrued expenses were satisfied during 2011 through the exchanges of 30,111,111 shares of common stock, valued at the fair market at the time of the exchanges, in the amount of $545,000.

On May 13, 2011, the Company acquired Mobility Freedom. Per the agreement 250,000 shares were issued to the seller valued at $6,250, the fair market value per share ($.025) at the date of acquisition.

On November 16, 2011, the Company acquired Certified companies. Per the agreement 2,857,143 shares were issued to the seller valued at $50,000, the fair market value per share ($.0175) at the date of acquisition.

F-19

NOTE 9 – 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 year ended December 31, 2011 and 2010, the Company recorded stock based compensation expense of $4,080 and $13,040, respectively. At December 31, 2011, there was $0 of total unrecognized compensation expense related to non-vested option-based compensation arrangements under the Plan.

In July 2010, the Company granted 400,000 90-day options to purchase shares of common stock for accounting services rendered. The Company valued these options at the fair market value on the date of grant at $0.05 per share or $20,000. In connection with the grant of these options, the Company recorded professional fees of $20,000 for professional services performed. In August 2010, the Company issued 400,000 shares of common stock in connection with the exercise of these stock options.

Stock option activity for the year ended December 31, 2011 and 2010 is summarized as follows:


					Weighted Average		Remaining
	Options		Options		Intrinsic	Exercise	Contractual
	Outstanding		Vested		Value	Price	Term
Options, December 31, 2009	4,075,000		—		$0.007	$0.007	3.83 years
Granted	400,000		400,000			0.050
Exercised	(400,000	)	(400,000	)		0.050
Forfeited	—		—
Options, December 31, 2010	4,075,000		—		0.007		2.83 years
Granted	—		—
Exercised	—		—
Forfeited	(1,000,000	)	—
Options, December 31, 2011	3,075,000		—		0.007		1.83 years

Stock options outstanding at December 31, 2011 and 2010 as disclosed in the above table have $0 and $69,275 intrinsic value, respectively.

NOTE 10 – 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, 2011 and 2010, the Company had net loss carry forwards available to reduce its future federal taxable income of approximately $797,000 and $207,000, respectively. These loss carryovers, if unused, expire through 2030. 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, 2011 and 2010:

F-20


	2011			2010
Expected federal income tax expense (34%)	$	(116,000	)	$	(364,000	)
State tax benefit, net of federal tax effect		(14,000	)		(43,000	)
Permanent differences					70,000
		(130,000	)		(337,000	)
Increase in allowance		130,000			337,000
Net income tax benefit		—			—

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


	2011			2010
Net operating loss carryforward	$	433,000		$	303,000
Allowance for doubtful accounts		125,000			125,000
Accrued expenses, related party		68,000			68,000
		626,000			496,000
Less: valuation allowance		(626,000	)		(496,000	)
		—			—

At December 31, 2011 and 2010, 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 $130,000 and $337,000 in 2011 and 2010, respectively.

NOTE 11 – 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 in two operating segments: Home Healthcare Products and Services segment and (ii) Wheelchair Conversion Vans and related products and services segment. For the periods ended December 31, 2011 and 2010 all material assets and revenues of the Company were in the United States.


								Wheelchair
		Total			Home Healthcare			Conversion Vans
Revenue
Product sales	$	7,877,181		$	587,617		$	7,289,564
Rentals		1,515,443			1,242,681			272,762
Service and other		121,851			23,248			98,603
		9,514,475			1,853,546			7,660,929

Cost of Sales
Direct costs		6,031,620			447,346			5,584,274
Depreciation		114,870			114,870			—
		6,146,490			562,216			5,584,274

Gross profit		3,367,985			1,291,330			2,076,655
		35.4%			69.7%			27.1%
Operating Expenses
Selling and marketing		246,319			70,611			175,708
General and administrative		3,165,543			1,741,208			1,424,335
Depreciation and amortization		180,796			7,433			173,363
		3,592,658			1,819,252			1,773,406

Operating loss	$	(224,673	)	$	(527,922	)	$	303,249

F-21

NOTE 12 – COMMITMENTS AND CONTINGENCIES

From time to time the Company may be a party to litigation matters involving claims against the Company. The Company operates with waste, hazardous material and within a highly regulated industry, which may lend itself to legal matters. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

Operating Lease

The Company leases office space for Southern Mobility division in Mobile, Alabama under a five-year operating lease that expires on December 31, 2013. The Mobility Freedom division has offices which are located in Orlando, Tampa, Clermont and Palm Coast and Certified Auto has offices in Ocala, under similar leases. The Mobility and Certified office leases are three year leases expiring on April 30, 2014. The office lease agreements have certain escalation clauses and renewal options. Additionally, the Company has lease agreements for computer equipment, including an office copiers and fax machines. Future minimum rental payments required under these operating leases are as follows:


2012	$	306,041
2013		273,041
2014 and thereafter		80,012
	$	659,094

The Company incurred rent expense on a consolidated basis for the year in the amounts of $203,182 and $68,233 for the years ended December 31, 2011 and 2010, respectively.

NOTE 13 – SUBSEQUENT EVENTS

Revolving Line of Credit

In March 2012 the Company amended its revolving line of credit facility for working capital purposes, in conjunction with the Ride-Away acquisition (disclosed below). The Revolving Line of Credit agreement increased the available advance requests to $8,000,000 from $2,750,000. The agreement states interest rates between Prime + .25% to Prime + 1.5%, based on defined leverage covenants. Payments are interest only, paid monthly. Balance is payable on demand with one year maturity and is subject to annual review. Availability is based on defined percentages of tangible assets owned (asset based lending arrangement), with certain exclusions.

Ride-Away Acquisition

On March 1, 2012 Hasco completed the acquisition of all of the outstanding capital stock of Ride-Away Handicap Equipment Corp., a closely-held New Hampshire corporation (Ride-Away). Pursuant to the terms and conditions of the Stock Purchase Agreement, HASCO paid the sole selling shareholder of Ride-Away a total consideration of $6,000,000 as follows:


	1.	$500,000 in cash (approximately $297,000 at closing and $203,000 to be paid within 12 months in HASCO’s reasonable discretion, without interest)

	2.	176,944,450 of authorized but unissued shares of the company’s common stock, restricted pursuant to Rule 144, valued at $2,500,000 ($0.01413 per share based on the volume-weighted average selling price of the shares for the five business days prior to the transaction); and

	3.	a $3,000,000 Promissory Note bearing 5% simple interest, principle and interest payable monthly over 10 years

Ride-Away is a full-service provider for people with disabilities, supplying wheelchair van lifts and ramps, raised and lowered floor wheelchair van conversions, and full primary and secondary control modifications. Ride-Away is one of the largest providers of wheelchair vans for people with disabilities in the United States with 11 locations from Maine to Florida.


·	Beltsville, MD	·	Norristown, PA
·	East Hartford, CT	·	North Attleboro, MA
·	Essex Junction, VT	·	Norwood, MA
·	Gray, ME	·	Richmond, VA
·	Londonderry, NH	·	Tampa, FL
·	Norfolk, VA

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NOTE 14 – PROFORMA FINANCIAL INFORMATION

On May 13, 2011 Hasco Medical, Inc. completed the acquisition of Mobility Freedom, Inc and Wheel Chair Vans of America (a DBA of Mobility freedom, Inc.) On November 17, 2011 Hasco Medical, Inc completed the acquisition of Certified Medical Systems II, Inc. (Certified Medical) and Certified Medical Auto Division, Inc.(Certified Auto). The Company accounted for the assets, liabilities and ownership interests in accordance with the provisions of ASC 805, Business Combinations for acquisitions occurring in years beginning after December 15, 2008 (formerly SFAS No. 141R, Business Combinations). As such, the recorded assets and liabilities acquired have been recorded at fair value and any difference in the net asset values and the consideration given has been recorded as a gain on acquisition or as goodwill. Pro forma results of operations for the years ended December 31, 2011 as though these acquisitions had taken place at January 1, 2011 are as follows:

Hasco Medical, Inc. and Subsidiaries

Consolidated Pro Forma Statements of Operations

For the Year Ended December 31, 2011

(unaudited)


Revenues, net	$	14,583,429
Cost of sales		9,182,510
Gross Profit		5,400,919

Operating expenses:
Selling and marketing		490,277
General and administrative		4,464,506
Depreciation and amortization		253,713
Total operating expenses		5,208,496

Income from operations		192,423

Other income (expense)		(149,018	)

Income from operations before income taxes		43,405

Provision for income taxes		—

Net income	$	43,405

Earnings per share:
Basic and dilutive		$0.00

Weighted average shares outstanding
Basic and dilutive		759,962,640

F-23

Attached files

HASCO Medical, Inc. Reports

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