HASCO Medical, Inc. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - HASCO Medical, Inc.	Financial_Report.xls
EX-32 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - HASCO Medical, Inc.	ex_32-2.htm
EX-31 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - HASCO Medical, Inc.	ex_31-1.htm
EX-31 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - HASCO Medical, Inc.	ex_31-2.htm
EX-32 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - HASCO Medical, Inc.	ex_32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended: March 31, 2014


[ ]	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.)


15928 Midway Road, Addison, TX	75001
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (214) 302-0930

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 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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

999,757,689 shares of common stock were issued and outstanding as of August 7, 2014.

Hasco Medical, Inc.

FORM 10-Q

TABLE OF CONTENTS

Index


PART I – FINANCIAL INFORMATION		4

ITEM 1.	FINANCIAL STATEMENTS.	4

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FIANCIAL CONDITION AND RESULTS OF OPERATIONS.	15

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	19

ITEM 4.	CONTROLS AND PROCEDURES.	20

PART II – OTHER INFORMATION		21

ITEM 1.	LEGAL PROCEEDINGS	21

ITEM 1A.	RISK FACTORS	21

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	21

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	21

ITEM 4.	MINE SAFETY DSICLOSURES.	21

ITEM 5.	OTHER INFORMATION.	21

ITEM 6.	EXHIBITS	22

SIGNATURES		22

- 2 -

FORWARD–LOOKING STATEMENTS

This Report on Form 10-Q (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 management’s 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 these forward-looking statements. They are neither statements of historical fact nor guarantees or 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 decline in general economic conditions nationally and internationally; decreased demand for our products and services; a change in the 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 our annual report on Form 10-K entitled “Risk Factors”) relating to our industry, our operations and results of operations or 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, DC 20549. 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”. 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 quarterly report, the terms “Hasco,” “the Company,” “we,” “our,” and “us” refer to Hasco Medical, Inc., a Florida corporation, and our subsidiaries. “Management” refers to the executive officers of Hasco Medical, Inc. and any of its subsidiaries.

- 3 -

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Hasco Medical, Inc. & Subsidiaries

Consolidated Balance Sheets


	March 31,			December 31,
	2014			2013
	(unaudited)
Assets
Current assets
Cash	$	909,004		$	150,313
Accounts receivable, net of allowance for doubtful accounts of $675,509 and $686,345, respectively		5,817,869			6,182,680
Inventory, net		10,981,334			11,572,060
Deferred tax asset, short term		413,193			413,193
Prepaid expenses and other current assets		654,411			504,819
Total current assets		18,775,811			18,823,065

Property & equipment, net of accumulated depreciation of $1,387,930 and $1,164,634, respectively		2,164,217			2,141,212

Intangible assets, net of accumulated depreciation of $21,223 and $10,192, respectively		6,203,003			6,214,034
Deferred tax asset, long term		149,204			149,204
Other non-current assets		586,930			604,965
Total Assets	$	27,879,165		$	27,932,480

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	2,361,956		$	1,849,702
Cash overdraft		—			175,572
Customer deposits and deferred revenue		389,305			388,433
Line of credit		928,810			2,303,143
Note payable - floor plan		12,655,167			12,174,639
Obligation under capital leases		321,712			366,658
Current portion of notes payable		382,966			376,685
Current portion note payable, related party		335,312			353,008
Other current liabilities		875,085			493,923
Total current liabilities		18,250,313			18,481,763

Obligation under capital leases, net of current portion		960,816			817,828
Notes payable, net of current portion		3,947,856			4,075,802
Notes payable to related party, net of current portion		1,838,927			1,947,214
Total liabilities		24,997,912			25,322,607

Stockholders’ Equity
Preferred stock, $0.001 par value, 3,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value, 2,000,000,000 shares authorized; and 996,938,389 and 993,134,076 shares issued and outstanding, respectively		996,938			993,134
Additional paid-in capital		6,742,285			6,669,056
Accumulated deficit		(4,857,970	)		(5,052,317	)
Total stockholders’ equity		2,881,253			2,609,873

Total Liabilities and Stockholders’ Equity	$	27,879,165		$	27,932,480

See accompanying notes to unaudited consolidated financial statements

- 4 -

Hasco Medical, Inc. & Subsidiaries

Consolidated Statements of Operations

(unaudited)


	For the Three Months Ended March 31,
	2014			2013

Product sales	$	16,588,280		$	11,855,547
Rental revenue		245,005			273,395
Service and other		3,852,318			2,826,546
Total net revenues		20,685,603			14,955,488

Cost of sales		15,425,817			11,415,351

Gross profit		5,259,786			3,540,137

Operating expenses:
Selling and marketing		953,798			917,500
General and administrative		3,415,207			2,486,904
Amortization and depreciation		234,327			319,974
Total operating expenses		4,603,332			3,724,378

Income (loss) from operations		656,454			(184,241	)

Other income (expense)
Other income		20,989			49,192
Interest expense		(302,838	)		(193,577	)
Total other income (expense)		(281,849	)		(144,385	)

Income (loss) from continuing operations before income taxes		374,605			(328,626	)

Provision for (benefit from) income taxes		170,218			(261,000	)

Income (loss) from continuing operations		204,387			(67,626	)
(Loss) from discontinued operations, net of income tax		(10,040	)		(131,086	)
Net income (loss)	$	194,347		$	(198,712	)

Earnings per share:
Basic and dilutive-Continuing Operations	$	0.00			0.00
Basic and dilutive-Discontinued Operations	$	0.00		$	0.00

Weighted average shares outstanding:
Basic and dilutive		994,619,535			988,069,704

See accompanying notes to unaudited consolidated financial statements

- 5 -

Hasco Medical, Inc. & Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)


	For the Three Months Ended March 31,
	2014			2013

Cash Flows from Operating Activities:
Net income (loss)	$	194,347		$	(198,712	)
Adjustment to reconcile net income (loss) to net cash provided by (used in) operations:
Depreciation and amortization		234,327			321,062
Stock based compensation		34,607			2,000
Changes in assets and liabilities:
Accounts receivable		364,811			1,796,155
Inventory		590,726			(1,263,088	)
Deferred tax asset		—			(261,000	)
Prepaid expenses		(149,592	)		(182,989	)
Other assets		18,035			5,871
Accounts payable and accrued expenses		512,254			(325,594	)
Customer deposits and deferred revenue		872			(431,381	)
Other liabilities		381,162			231,609
Net Cash provided by (used in) Operating Activities		2,181,549			(306,067	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(44,875	)		(121,999	)
Decrease in other assets		—			144,087
Net Cash provided by (used in) Investing Activities		(44,875	)		22,088

Cash Flows from Financing Activities:
Proceeds from floor plan financing		10,751,664			7,964,524
Repayments of floor plan financing		(10,271,136	)		(6,598,718	)
Proceeds from line of credit		—			40,000
Repayments of line of credit		(1,374,333	)		(214,000	)
Repayments of note and loan payables		(121,665	)		(109,782	)
Repayments of loans payables – related party		(83,557	)		(41,642	)
Principal payments under capital lease obligations		(103,384	)		(261,641	)
Cash overdraft		(175,572	)		—
Proceeds from issuance of stock		—			2,000
Net Cash provided by (used in) Financing Activities		(1,377,983	)		780,741

Net increase in cash		758,691			496,762
Cash at beginning of period		150,313			850,391
Cash at end of period	$	909,004		$	1,347,153

Supplemental disclosures of cash flow information
Cash paid for:
Interest	$	281,914		$	184,098
Income taxes	$	170,218		$	—

Non-Cash transactions:
Loan payments made through issuance of common stock	$	42,426		$	—
Vehicles purchased through capital lease	$	201,426		$	—

See accompanying notes to unaudited consolidated financial statements

- 6 -

Hasco Medical, Inc. & Subsidiaries

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Hasco Medical, Inc., formerly BBC Graphics of Palm Beach Inc. was incorporated in May 1999 under the laws of the State of Florida. Through a series of transactions, BBC Graphics of Palm Beach, Inc. (at the time an inactive corporation) became Hasco Medical, Inc. (Hasco). Concurrently, Hasco Medical, Inc. acquired Southern Medical & Mobility. In May, 2011, Hasco acquired Mobility Freedom, Inc. and Wheelchair Vans of America. In November, 2011, Hasco acquired Certified Medical Systems II (Certified Medical). A more detailed description of these transactions is contained in our 10-K filing with the Securities and Exchange Commission for the period ended December 31, 2013. On March 1, 2012, Hasco Medical, Inc. completed the acquisition of Ride-Away Handicap Equipment Corp., a closely-held New Hampshire corporation (Ride-Away). On September 4, 2013, Hasco Medical, Inc. completed the acquisition of Auto Mobility Sales, Inc. (Auto Mobility).

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, our March 2012 acquisition of Ride-Away and our September 2013 acquisition of Auto Mobility Sales, our operations are conducted within one major business unit:

Modified Mobility Vehicles – conducts sales of handicap accessible vans, parts and services as well as the rental of such vehicles. This segment consists of Ride-Away Handicap Equipment Corp. which has twelve locations from Maine to Florida, Mobility Freedom Inc. which has five locations in Florida and includes “Wheelchair Vans of America” operating our van rental operations, and Auto Mobility Sales, Inc., which has two (2) locations in Florida.

With our acquisitions of Mobility Freedom, Ride-Away, and Auto Mobility Sales, our Modified Mobility Vehicles segment comprises more than 97% of our consolidated revenues. As a consequence and for purposes of consolidated financial statement presentation, our Home Health Care segment is no longer materially relevant when considering the consolidated financial statements as a whole.

Our corporate headquarters and principle corporate operations are conducted in Addison, Texas, a northern suburb of Dallas, Texas. We also house a portion of our corporate operations in Londonderry, New Hampshire. Hasco Medical Inc. is a Florida corporation.

Modified Mobility Vehicles

Ride-Away, Mobility Freedom and Auto Mobility serve individuals with physical limitations that need specialty equipment in order to safely operate their vehicle. We also provide products for families and care-givers with transport requirements for those under care. In certain circumstances both the van itself and its specialty equipment is paid for directly by a federal or state agency. For the periods ended March 31, 2014 and 2013, approximately 24% and 13%, respectively, of the Modified Mobility Vehicles segments revenue was derived from veterans receiving benefits from the United States Department of Veterans Affairs (the “VA”). Mobility Freedom and Ride-Away are both a VA and Vocational Rehabilitation (VR) certified vendors in all the states in which we operate.

Ride-Away has twelve corporate owned stores which are located in Beltsville, MD, East Hartford, CT, Essex Junction, VT, Gray, ME, Londonderry, NH, Norfolk, VA, Norristown, PA, North Attleboro, MA, Norwood, MA, Richmond VA, and Tampa, FL and Astoria, NY. Mobility Freedom has five corporate owned stores located in Orlando, Largo, Clermont, Bunnell and Ocala, Florida. Auto Mobility Sales has locations in Fort Lauderdale and Lake Worth, Florida.

Wheelchair Vans of America specializes in renting conversion vans to disabled individuals, and is located in Orlando, Florida. Our rental operations compliment the retail products we provide through our Mobility Freedom, Auto Mobility Sales and Ride-Away subsidiaries.

Discontinued Operations

During the second quarter of 2013, the Company initiated a plan to liquidate the division of Southern Medical and Mobility. These operations were originally reported in the home health care segment. The Company assessed the fair value of the operations less the disposal costs and concluded there is no impairment of the carrying value of the assets. Management has also determined that the amount of assets continued to be realized is immaterial and therefore not separately disclosed.

- 7 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Accounting Policy

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial position as of March 31, 2014 and the consolidated statements of operations, and cash flows for the periods ended March 31, 2014 and March 31, 2013 of Hasco Medical Inc. (“Hasco” or the “Company”).

The significant accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements in the December 31, 2013, Hasco Medical Inc. Annual Report on Form 10-K , which should be read in conjunction with these financial statements. The results of operations for the period ended March 31, 2014 are not necessarily indicative of the result to be expected for the full year.

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.; (discontinued operations)
·	Mobility Freedom, Inc.;
·	Ride Away Handicapped Equipment, Inc.;
·	Auto Mobility Sales, Inc.;
·	Certified Medical Systems II, Inc.; and
·	Certified Medical Auto Division, Inc. (inactive).

Reclassifications

Prior period financial statement amounts have been reclassified to conform to current period presentation.

Use of Estimates

Management’s Discussion and Analysis or Plan of Operations is based upon our audited consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. Management bases its use of 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 significantly from these estimates under different assumptions or conditions.

Revenue Recognition

The Company recognizes revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605, “Revenue Recognition”, and with the guidelines of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition”. Under SAB 104, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable, and (iv) collection is reasonably assured. Revenues consist of the sales of new and used vehicles, sales of parts and automotive services, commissions from finance and insurance products, vehicle rentals, sales of durable medical equipment and home health care services. The Company recognizes revenue in the period in which products are sold or the services are rendered and only if there is reasonable expectation of collection. For vehicles, a sale is recorded only when title has transferred and the vehicle has been delivered. Rebates received from manufacturers are recorded as a reduction of the costs of each vehicle and recognized upon the sale of the vehicle or when earned under a specific manufacturer program.

Rental fees for vehicles are recognized over the course of the rental or service term, with unbilled amounts accrued at period end in cases where the rental term extends beyond the end of a period.

In certain instances, customers place deposits on vehicles or special order parts for service and conversions. Deposits are not recognized as revenue until the related vehicle or part is sold.

- 8 -

The Company arranges financing for customers through various institutions and receives financing fees based on the difference between the loan rates charged to customers and wholesale financing rates set by the financing institution. The Company also receives fees from the sale of extended service contracts, warranties and vehicle security systems.

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 high credit quality financial institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. From time to time and for the three month periods ended March 31, 2014 and December 31, 2013, the Company 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.

Related Parties

Parties are considered to be related to the Company if the parties, 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.

Earnings Per Share

Earnings per common share are calculated under the provisions of ASC 260. 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 if they would be anti-dilutive. There were no stock options which could potentially dilute earnings per share for the periods ended March 31, 2014 and 2013, respectively.

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


	Three Months ended March 31, 2014		Three Months ended March 31, 2013
Numerator:
Net income (loss)	$	194,347	$	(198,712	)

Denominator:
Denominator for basic income per share
(weighted-average shares)		994,619,535		988,069,704

Denominator for dilutive income per share
(adjusted weighted-average)		994,619,535		988,069,704

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

The number of outstanding shares of our common stock as of March 31, 2014 was 996,938,389.

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.

- 9 -

NOTE 2 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:


	March 31, 2014 (unaudited)			%	December 31, 2013			%

Trade receivables	$	2,566,890		39.5	$	2,993,757		43.6
Government receivables		3,926,488		60.5		3,875,268		56.4
		6,493,378		100.0		6,869,025		100.0
Less: allowances for doubtful accounts		(675,509	)			(686,345	)
Total	$	5,817,869			$	6,182,680

Trade receivables represent amounts due for van sales, van rentals, and medical supplies that have been delivered or sold. Government receivables represent receivables from the VA and other Government bodies related to van sales and rentals listed above. The Company does not bill Medicare or Medicaid for any vehicle-related sales or service.

NOTE 3 – INVENTORY

Inventory consists of the following:


	March 31, 2014 (unaudited)			December 31, 2013
Vehicles	$	9,864,877		$	10,859,361
Equipment and supplies		980,250			1,008,996
Work in Process		574,258			412,829
Inventory reserve		(438,051	)		(709,126	)
	$	10,981,334		$	11,572,060

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:


	Estimated Life	March 31, 2014 (unaudited)			December 31, 2013
Building improvements	varies	$	899,530		$	899,530
Office furniture and equipment	5 years		303,561			303,561
Rental equipment	13-36 months		479,834			434,959
Vehicles	5 years		91,521			91,521
Capitalized leases	Varies		1,777,701			1,576,275
Total			3,552,147			3,305,846
Accumulated depreciation			(1,387,930	)		(1,164,634	)
Net		$	2,164,217		$	2,141,212

For the three months ended March 31, 2014 and 2013 depreciation expense amounted to $223,296 and $313,752, respectively of which $0 and $14,410 is included in discontinued operations, respectively.

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

- 10 -

NOTE 5 – INTANGIBLE ASSETS

Intangible assets consist of the following:


	Estimated Life		March 31, 2014 (unaudited)			December 31, 2013
Goodwill related to acquisition of Mobility Freedom	Indefinite		1,641,303			1,641,303
Goodwill related to acquisition of Ride-Away	Indefinite		1,888,710			1,888,710
Trade name related to acquisition of Mobility Freedom	Indefinite		400,000			400,000
Trade name related to acquisition of Ride-Away	Indefinite		990,000			990,000
Primary market area related to acquisition of Mobility Freedom	Indefinite		280,000			280,000
Primary market area related to acquisition of Ride-Away	Indefinite		470,000			470,000
Goodwill related to acquisition of Auto Mobility Sales	Indefinite		284,213			284,213
Trade name related to acquisition of Auto Mobility Sales	2.32 years		40,000			40,000
Primary market area related to acquisition of Auto Mobility Sales	Indefinite		150,000			150,000
Non-compete agreements area related to acquisition of Auto Mobility Sales	3 years		80,000			80,000
Subtotal			6,224,226			6,224,226
Accumulated amortization			(21,223	)		(10,192	)
Total		$	6,203,003		$	6,214,034

For the three months ended March 31, 2014 and 2013 amortization expense was $11,031 and $0, respectively.

NOTE 6 – NOTES PAYABLE AND DEBT

Revolving Line of Credit

On November 1, 2012, the Company renewed its Commercial Note agreement with a bank for advances of funds for working capital purposes under a line of credit arrangement for $8,000,000 with an interest calculation of the prime rate plus 0.25% which reflected an interest rate of 3.50% as of March 31, 2014. The agreement is secured against all property of the borrowers assets, on demand with an annual review as of December 31, 2013. Payments due are interest only and the interest rate varies based on the Company’s leverage ratio. The balance of the line of credit was $928,810 at March 31, 2014 and $2,303,143 at December 31, 2013.

The Company was in compliance with its line of credit covenants at March 31, 2014 and December 31, 2013.

Note Payable – Floor Plan

The Company has a floor plan line of credit with General Electric Credit Corporation with a maximum borrowing capacity of $11,250,000 for Ride-Away, $3,850,000 for Mobility Freedom, and $1,750,000 for Auto Mobility Sales at March 31, 2014. The borrowing capacity was increased by $5 million on May 20, 2013. Amounts borrowed for vehicles under this line bear no interest for 60 days and then bear interest at the 90 day LIBOR plus 6.0% for Ride-Away and at the 90 day LIBOR plus 5.5% for Mobility Freedom and Auto Mobility Sales. The loan balance on the vehicle is due when the vehicle is fully funded or paid by the customer. If the vehicle is not fully funded or paid within nine months of being purchased by the Company and funded by the floor plan, a graduated percentage of the balance is due with the entire balance due at twelve months. The note is secured by the vehicles financed. At March 31, 2014 and December 31, 2013, the Company had $12,655,167 and $12,174,639 respectively, outstanding under these lines. With the discretionary nature of this loan agreement, the Lender or the Company can terminate this agreement with a thirty (30) day written notice at any time.

Subsequent to March 31, 2014, the Company was notified of a default under this floor plan agreement for lack of timeliness of financial statements. This default has been remedied by a “Notice of Covenant Waiver” of such default from the lender.

- 11 -

Installment Debt

Installment debts consist of the following:


	March 31, 2014 (unaudited)		December 31, 2013

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		23,562		25,918

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 secured by grantee from the majority shareholder of Mobility Freedom		1,753,924		1,785,953

Note Payable to related party, dated May 13, 2011, associated with the acquisition of Mobility Freedom, original amount of $2 million, ten years (120 months), 5% interest rate, commenced August 1, 2011, matures on July 1, 2021, monthly installment payments of $22,204		1,545,373		1,618,387

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		18,660		21,785

Note Payable, dated March 1, 2012, issued for the acquisition of Ride-Away, original amount of $3,000,000, ten years (120 months), 5% interest rate, commences June 1, 2012, matures on May 2, 2022, monthly installment payments of $31,820. Note is with the former owner of Ride-Away		2,534,675		2,618,831

Note payable to related party, dated March 1, 2012, issued for the acquisition or Ride-Away, original amount of $500,000 , five years (60 months), 6% interest rate, commenced April 1, 2012, matures March 1, 2017, monthly installment payments of $9,685		310,091		342,143

Promissory Note payable to a related party, dated September 4, 2013, issued for the acquisition of Auto Mobility Sales, original amount of $210,000 , five years (60 months), 5% interest rate, commenced November 1, 2013, matures October 1, 2018, monthly installment payments of $3,963		191,265		205,877

Promissory Note payable to a related party, dated September 4, 2013, issued for the acquisition of Auto Mobility Sales, original amount of $140,000 , five years (60 months), 5% interest rate, commenced November 1, 2013, matures October 1, 2018, monthly installment payments of $2,642		127,511		133,815

Total debt		6,505,061		6,752,709

Current portion of long-term debt, notes payable		718,278		729,692
Long-term portion	$	5,786,783	$	6,023,017

- 12 -

NOTE 7 – STOCKHOLDERS’ EQUITY

During quarter ended March 31, 2014, 750,000 shares of common stock valued at $15,000 were issued to key employees as employee compensation and 1,020,414 shares of common stock valued at $19,607 were issued to directors as board compensation.

During quarter ended March 31, 2014, the Company issued 2,032,899 shares of common stock valued at $42,426, in lieu of payments for notes payable-related party.

NOTE 8 – CONTINGENCIES

Company operations involve the handling and disposal of waste and hazardous material within a highly regulated oversight structure. The Company is subjected to inspections by OSHA and other regulatory bodies. Management believes that there are no current regulatory claims that would have a material effect on the Company’s financial position or results of operations.

NOTE 9 – 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 which require 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 March 31, 2014 and 2013, the Company had net loss carry forwards available to reduce its future federal taxable income of approximately $0 and $1,263,000, 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 income for continuing operations for the periods ended March 31, 2014 and 2013:


	For The Three Months Ended March 31,
	2014		2013
Expected federal income tax expense (34%)	$	127,184	$	(34,000	)
State tax expense, net of federal tax effect		23,427		(4,000	)
Other		19,607		—
		170,218		(38,000	)
Change in valuation allowance		—		(223,000	)
Net income tax expense(benefit)		170,218		(261,000	)

NOTE 10 – SEGMENT REPORTING

Accounting standards for the Disclosure about Segments of an Enterprise and Related Information 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.

According to such standards, management determined that, as a consequence of our Home Healthcare Segment now comprising less than 5% of our Gross Revenue, the reporting of segment operating results is no longer relevant when considering the financial statement as a whole.

NOTE 11 – SUBSEQUENT EVENTS

In April 2014, 666,667 shares of common stock valued at $10,000 were issued to a key employee as employee compensation.

- 13 -

NOTE 12 – ACQUISITIONS AND PROFORMA FINANCIAL INFORMATION

Auto Mobility Sales Acquisition

The following table summarized the impact of the acquisition as if the acquisition date were January 1, 2013.

Hasco Medical, Inc. and Subsidiaries

Consolidated Pro Forma Statements of Operations

For the three months ended March 31, 2013

(unaudited)


	March 31, 2013
Revenues, net	$	16,971,050
Cost of sales		12,910,141
Gross Profit		4,060,909

Operating expenses:
Selling and marketing		917,500
General and administrative		2,977,496
Depreciation and amortization		319,974
Total operating expenses		4,214,970

(Loss) from operations		(154,061	)

Other income (expense)		(144,385	)

(Loss) from operations before income taxes		(298,446	)

Benefit for income taxes		(261,000	)

(Loss) from continued operations		(37,446	)

(Loss) from discontinued operations, net of tax		(131,086	)

Net (loss)	$	(168,532	)

Earnings per share:
Basic and dilutive	$	0.00

Weighted average shares outstanding
Basic and dilutive		988,069,704

- 14 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

The results of operations presented on a historical comparative basis require consideration in the nature of the change in business activity and the acquisition of business entity in 2013. Any such comparison requires a careful examination of the change in the nature of the Company’s business activity in conjunction with numerical comparisons of quarter-to-quarter results.

The following table provides an overview of certain key factors of our results of continuing operations for the quarter ended March 31, 2014 as compared to March 31, 2013:


	Quarter Ended March 31,
	2014			2013
Net revenues	$	20,685,603		$	14,955,488
Cost of sales		15,425,817			11,415,351
Operating expenses:
Selling and marketing		953,798			917,500
General and administrative		3,415,207			2,486,904
Amortization and depreciation		234,327			319,974
Total operating expenses		4,603,332			3,724,378
Income (loss) from operations		656,454			(184,241	)
Total other income (expense)		(281,849	)		(144,385	)
Provision for (benefit from) income taxes		170,218			(261,000	)
Income (loss) from continuing operations		204,387			(67,626	)
(Loss) from discontinued operations		(10,040	)		(131,086	)
Net Income	$	194,347		$	(198,712	)

Other Key Indicators:


	Quarter Ended March 31,
	2014	2013
Cost of sales as a percentage of revenues	74.6%	76.3%
Gross profit margin	25.4%	23.7%
General and administrative expenses as a percentage of revenues	16.5%	16.6%
Total operating expenses as a percentage of revenues	22.3%	24.9%

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


	Quarter ended March 31,
	2014		2013
Product Sales	$	16,588,280	$	11,855,547
Rental Revenue		245,005		273,395
Service and other		3,852,318		2,826,546
Total Net Revenues	$	20,685,603	$	14,955,488

Three Months ended March 31, 2014 and 2013

Net Revenues

For the quarter ended March 31, 2014, we reported revenues of $20,685,603 as compared to revenues of $14,955,488 for the quarter ended March 31, 2013, an increase of $5,730,115 or approximately 38.3%. The increase is due to the increase in private pay business for van sales and the acquisition of Auto Mobility Sales.

- 15 -

Product sales for the quarters ended March 31, 2014 and 2013 amounted to $16,588,280 and $11,855,547, respectively, an increase of $4,732,733 or 39.9%. Rental revenue for the quarters ended March 31, 2014 and 2013 amounted to $245,005 and $273,395, respectively, a decrease of $28,390 or 10.4%. Service and other revenue for the quarters ended March 31, 2014 and 2013 amounted to $3,852,318 and $2,826,546, respectively, an increase of $1,025,772 or 36.3%. These increases were due to the increase in private pay business for van sales and the acquisition of Auto Mobility Sales. We do not anticipate any significant price increases in 2014. Product sales comprise approximately 80.2% of the Company’s sales for the quarter ended March 31, 2014 compared to 78.9% in the same period of 2013.

Cost of Sales

Our cost of sales consists of products purchased for resale, and service parts and labor. For the quarter ended March 31, 2014, cost of sales was $15,425,817, or approximately 74.6% of revenues, compared to $11,415,351, or approximately 76.3% of revenues, for the quarter ended March 31, 2013. The overall increase of cost of sales for our Modified Mobility Vehicle operations is due to the increase in revenue.

We have a single vendor that represents 56% of our purchases. Our relationship with this vendor is excellent and we do not anticipate any change in the status of that relationship. Should there be any such change management believes that substantially similar products are available from other competitive vendors at terms that will not have a substantial effect on our financial condition.

Gross Profit

Overall gross profit percentage increased to 25.4% for the quarter ended March 31, 2014 from 23.7 % for the quarter ended March 31, 2013 due to the greater buying power and utilization of capacity in service.

Total Operating Expense

Total operating expenses decreased as a percentage of revenues to 22.3% for the quarter ended March 31, 2014 from 24.9% for the quarter ended March 31, 2013. These changes include:

Selling and Marketing Expense. For the quarter ended March 31, 2014, selling and marketing costs were $953,798 and $917,500 for the quarter ended March 31, 2013. The increase was due to the increase in marketing, advertising and print advertising programs initiatives, primarily in the modified mobility vehicle operations.

General and Administrative Expense. For the quarter ended March 31, 2014, general and administrative expenses were $3,415,207 as compared to $2,486,904 for the quarter ended March 31, 2013, an increase of $928,303. The increase is due to the additional rent and professional fees associated with the acquisition of business entities in 2013, additional personnel associated with the acquisition of Auto Mobility Sales, and additions of staff in the accounting and sales departments as well as fully staffing the locations with management personnel.

Depreciation and Amortization Expense. For the quarter ended March 31, 2014, depreciation and amortization expense amounted to $234,327 as compared to $319,974 for the quarter ended March 31, 2013, a decrease of $85,647. This decrease is due to the reduction in leased vehicles and retirement of assets.

Income (Loss) From Operations

We reported income from continuing operations of $374,605 for the quarter ended March 31, 2014 as compared to a net loss from continuing operations of $(328,626) for the quarter ended March 31, 2013.

Other income (Expense)

Other Income (Expense) for the quarter ended March 31, 2014 amounted to $(281,849) compared to $(144,385) for the quarter ended March 31, 2013. Other income and expense consists of Other Income and Interest Expense.

Other Income consists primarily of discounts earned and totaled $20,989 for the quarter ended March 31, 2014 and $49,192 for the quarter ended March 31, 2013. The decrease is due to additional discounts earned in 2013 with the acquisition of the Ride-Away subsidiary.

- 16 -

Interest expense for the quarter ended March 31, 2014 amounted to $302,838 as compared to $193,577 for the quarter ended March 31, 2013, an increase of $109,261. This increase is due to the additional debt and capital lease obligations the Company has incurred in the acquisition of the Auto Mobility subsidiary and the increase in volume on the GE floor plan agreement.

Net Income (Loss)

Our net income was $194,347 for the quarter ended March 31, 2014 compared to net loss of $(198,712) for the quarter ended March 31, 2013.

ASSETS AND LIABILITIES

Assets were $27,879,165 as of March 31, 2014. Assets consisted of cash of $909,004, accounts receivable of $5,817,869, inventory of $10,981,334, prepaid expense of $654,411, short-term deferred tax asset of $413,193, long-term deferred tax asset of $149,204, property and equipment of $2,164,217, intangible assets of $6,203,003, and other non-current assets of $586,930. Liabilities were $24,997,912 as of March 31, 2014. Liabilities consisted primarily of accounts payable and accrued expenses of $2,361,956, customer deposits and deferred revenue of $389,305, line of credit of $928,810, notes payable – floor plan of $12,655,167, obligation under capital leases short term of $321,712, current portion of notes payable of $382,966, related party short-term notes payable of $335,312, other current liabilities of 875,085, obligation under capital leases long term of $960,816, long-term notes payable of $3,947,856, related party long-term notes payable of $1,838,927.

STOCKHOLDERS’ EQUITY

Stockholders’ equity was $2,881,253 as of March 31, 2014. Stockholder’s equity consisted primarily of shares issued for acquisitions, fundraising, employee compensation, and settlement of services totaling $7,739,223, offset primarily by the deficit accumulated of $4,857,970 at March 31, 2014.

Liquidity and Capital Resources

General – 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


	March 31, 2014			December 31, 2013			$ Change			% Change
Working capital surplus	$	525,498		$	341,302		$	184,196		54.0

Cash		909,004			150,313			758,691		504.7
Accounts receivable, net		5,817,869			6,182,680			(364,811	)	(5.9	)
Inventory		10,981,334			11,572,060			(590,726	)	(5.1	)
Total current assets	$	18,775,811		$	18,823,065		$	(47,254	)	(0.3	)
Property and equipment, net		2,164,217			2,141,212			23,005		1.1
Intangible assets, net		6,203,003			6,214,034			(11,031	)	(0.2	)
Total assets	$	27,879,165		$	27,932,480		$	(53,315	)	(0.2	)

Accounts payable and accrued liabilities	$	2,361,956		$	1,849,702		$	512,254		27.7
Cash overdraft		—			175,572			(175,572	)	(100.0	)
Customer deposits and deferred revenue		389,305			388,433			872		.2
Line of credit		928,810			2,303,143			(1,374,333	)	(59.7	)
Note Payable – Floor Plan		12,655,167			12,174,639			480,528		3.9
Current portion of capital leases		321,712			366,658			(44,946	)	(12.3	)
Notes payable-current		382,966			376,685			6,281		1.7
Notes payable, related party-current		335,312			353,008			(17,696	)	(5.0	)
Total current liabilities	$	18,250,313		$	18,481,763		$	(231,450	)	(1.3	)
Capital lease obligations		960,816			817,828			142,988		17.5
Notes payable-long term		3,947,856			4,075,802			(127,946	)	(3.1	)
Notes payable, related party-long term		1,838,927			1,947,214			(108,287	)	(5.6	)
Total liabilities	$	24,997,912		$	25,322,607		$	(324,695	)	(1.3	)
Accumulated deficit		(4,857,970	)		(5,052,317	)		193,347		(3.9	)
Stockholders’ equity	$	2,881,253		$	2,609,873		$	271,380		10.4

- 17 -

Overall, we had an increase in cash of $758,691 in the quarter ending March 31, 2014 resulting from cash provided by operating activities of $2,181,549, offset partially by cash used in investing activities of $44,875, and cash used in financing activities of $1,377,983.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities during the periods indicated:


	Three Months Ended March 31,
	2014			2013
Cash at beginning of period	$	150,313		$	850,391
Net cash provided by (used in) operating activities		2,181,549			(306,067	)
Net cash provided by (used in) investing activities		(44,875	)		22,088
Net cash provided by (used in) financing activities		(1,377,983	)		780,741
Cash at end of period	$	909,004		$	1,347,153

Net cash provided by operating activities was $2,181,549 for the three months ended March 31, 2014. For the three months ended March 31, 2014, we had net income of $194,347, non-cash items such as depreciation and amortization expense of $234,327 and stock-based compensation of $34,607, and the changes in operating assets and liabilities of $1,353,457. The changes in operating assets and liabilities were primarily due to decreases in inventory of $590,726, accounts payable and accrued expenses of $512,254, customer deposits and deferred revenue of $872, other current liabilities of $381,152, other assets of $18,035, and accounts receivable of $364,811, offset partially by the increases in prepaid expenses of $149,592.

The decrease in net cash used in operating activities was $(306,067) for the quarter ended March 31, 2013 was primarily due to a net loss of $198,712, and the changes in operating assets and liabilities of $430,417, offset partially by depreciation and amortization expense of $321,062, and stock based compensation of $2,000. The changes in operating assets and liabilities were primarily due to increases in other current liabilities of $231,609, inventory of $1,263,088, and customer deposits and deferred revenue of $431,381, offset partially by the decreases in, accounts receivable of $1,796,155, and other assets of $5,871, deferred tax asset of $261,000, prepaid expenses of $182,989, accounts payable and accrued expenses of $325,594.

Net cash used in investing activities for the quarter ended March 31, 2014 was $44,875 as compared to net cash provided by investing activities of $22,088 for the quarter ended March 31, 2013. During the quarter ended March 31, 2014, cash was used for the purchase of property and equipment.

Net cash used in financing activities for the three months ended March 31, 2014 was $1,377,983. This consisted of net draws and repayments on our floor plan of $480,528, net draws and repayments on our line of credit of $1,374,333, repayments on our notes payable of $121,665, principal payments under capital lease obligations of $103,384, repayments of related party notes payable of $83,557, and a cash overdraft of $175,572.

Net cash provided by financing activities for the quarter ended March 31, 2013 was $780,741. This consisted of net draws and repayments on our floor plan of $1,365,806, offset partially by net draws and repayments on our lines of credit of $174,000, repayments on our notes payable of $109,782, repayments of related party notes payable of $41,642, and principal payments under capital lease obligations of $261,641 and proceed for issuance of stock of $2,000.

At March 31, 2014 we had a working capital surplus (current assets in excess of current liabilities) of $525,498 and accumulated deficit of $(4,857,970).

Financing – We believe our current working capital position, together with our expected future cash flows from operations will be adequate to fund our operations in the ordinary course of business, anticipated capital expenditures, debt and floor plan payment requirements, and other contractual obligations for at least the next twelve months. However, this belief is based upon many assumptions and is subject to numerous risks (see “Risk Factors”), and there can be no assurance that we will not require additional funding in the future.

- 18 -

As we attempt to expand and develop our operations, there exists a potential for net negative cash flows from future operations in amounts not now determinable, and we may be required to obtain additional financing in support of these plans. We have and expect to continue to have substantial capital expenditures and working capital needs. We expect that the additional financing will (if available) take the form of a private placement of equity, bank borrowings and seller-financed acquisitions, although we may be constrained to obtain additional debt financing in lieu thereof. We are maintaining an on-going effort to consolidate sources of additional funding, without which we may not be able to continue our expansion efforts. There are no assurances that we will be able to obtain or continue adequate financing. If we are able to obtain and continue our required financing, future operating results depend upon a number of factors that are outside such financing considerations.

Vehicle Floorplans and Lines of Credit – Vehicle floorplans and line of credit reflect the amounts borrowed to finance the purchase of specific new and, to a lesser extent, used vehicle inventories with our corresponding manufacturers. Changes in our vehicle floorplan and credit lines are reported in the financing cash flow section. Below is a listing of our gross usage and payments on the company’s floorplan and credit lines for the quarter ended March 31, 2014 and 2013:

For the quarter ended March 31, 2014:


Facility	Additions		Payments		Net Usage Increase (decrease)
Floor plan	$	10,751,664	$	10,271,138	$	480,528
Line of credit		—		1,374,333		(1,374,333	)
Total	$	10,751,664	$	11,645,471	$	(893,807	)

For the quarter ended March 31, 2013:


Facility	Additions		Payments		Net Usage Increase (decrease)
Floor plan	$	7,964,524	$	6,598,718	$	1,365,806
Line of credit		40,000		214,000		(174,000	)
Total	$	8,004,524	$	6,812,718	$	1,191,806

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

With reference to SEC Regulation S-K Item 303(d), tables summarizing our contractual obligations are not required.

Off-balance Sheet Arrangements

The Company’s management considers all liabilities stated on the financial statement contained herein disclose all liabilities and potential liabilities in every material respect. 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 in support to such activity. We do not have any determinable or variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Recently Issued Accounting Pronouncements

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in our quantitative and qualitative market risks since the prior reporting period.

- 19 -

ITEM 4. CONTROLS AND PROCEDURES.

The Company is exempt from the reporting requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

As a result of the misstatements in the financial statements for the years ended December 31, 2013 and 2012, and in connection with the evaluation of our controls and procedures for the year ended December 31, 2013 we have determined that we have material weaknesses in our controls and procedures, as more fully described below.

A material weakness in internal control over financial reporting is defined in Section 210.1-02(4) of Regulation S-X as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the 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.

We have become aware that we:


	A)	had failed to properly record the purchase price allocations related to the May 13, 2011 acquisition of Mobility Freedom, Inc. and the March 1, 2012 acquisition of Ride-Away Handicap Equipment Corp. and the effects of these corrections on amortization expense and other income accounts. The error had a significant effect on our previously issued consolidated financial statements for the year ended December 31, 2012, and for each of the quarters for the year ended December 31, 2012.

	B)	had failed to properly classify direct labor and overhead as cost of goods sold for the year ended December 31, 2012. We previously classified the direct labor and overhead as a component of general and administrative expenses, a line item in the consolidated statements of operations of our previously issued consolidated financial statements.

	C)	had failed to properly depreciate leasehold improvements over the shorter of either the useful life of the improvement or the lease term.

	D)	had failed to properly relieve inventory for sold vehicles

	E)	had failed to record impairment of all of the goodwill associated with the Home Healthcare reporting unit in the quarter ended December 31, 2012.

	F)	had failed to properly account for certain Home Healthcare revenues using the Net Revenue method. We previously used the Gross Revenue method.

As a result of identifying these errors, we concluded that accounting adjustments were necessary to correct the previously issued financial statements for the years ended December 31, 2012 and 2011, for each of the quarters for the year ended December 31, 2012, for the quarters ended June 30, 2011, September 30, 2011 and December 31, 2011, and that the reports we filed with the SEC that included the financial statements that reported the erroneous information for those periods should no longer be relied upon. Accordingly, we restated our financial statements for the year ended December 31, 2012. In addition, audit adjustments were necessary in the preparation of the 2013 financial statements.

We determined that these failures and related restatements and reclassification demonstrated the following weakness in our internal control over financial reporting:


·	Accounting and Finance Personnel Weakness — As of the years ended December 31, 2013 and 2012, the Company lacked appropriate resources within the accounting function. The accounting staff is comprised of few people and, as of December 31, 2012, the staff did not have an adequate number of personnel with the expertise and training to meet the Company’s reporting demands.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting

During 2013, we added additional experienced staff to the accounting department. During 2014 we will continue to assess the needs of our accounting department, hire additional staff as needed and monitor the staff’s continuing education. We believe that these factors will substantially decrease the possibility of the occurrence of errors in our financial statements.

- 20 -

Management has discussed these material weaknesses with our Audit Committee and Board of Directors and will continue to review progress on these activities on a consistent and ongoing basis at the senior management level in conjunction with our Board of Directors.

We cannot assure you at this time that the actions and remediation efforts we have taken or ultimately will implement will effectively remediate the material weaknesses described above or prevent the incidence of other significant deficiencies or material weaknesses in our internal control over financial reporting in the future. Our management, including our principal executive officer and principal accounting officer, does not expect that disclosure controls or internal controls over financial reporting will prevent all errors, even as the aforementioned remediation measures are implemented and further improved to address all deficiencies. 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 our stated goals under all potential future conditions.

The implementation of our remediation plan will require substantial expenditures, could take a significant period of time to complete, and could distract our officers and employees from the operation of our business.

With respect to the fiscal period ending March 31, 2014, 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 period ending March 31, 2014, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has concluded that its disclosure controls and procedures were not effective.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company is made to answer various legal disputes arising out of the ordinary course of doing business. It is the opinion of management, in consultation with our attorneys, that to the extent such parties may have a reasonable possibility of prevailing against us, such potential awards or judgments would be of immaterial financial relevance when considering the financial statements as a whole.

ITEM 1A. RISK FACTORS

There has been no material change in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DSICLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

- 21 -

ITEM 6. EXHIBITS

Attached hereto and incorporated by reference are the following exhibits:


Exhibit Number	Description

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.1	Form 8K, dated January 7, 2013**
99.2	Form 8K, dated April 8, 2013**
101	Interactive Data Files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q.***

* Filed herein

** Previously filed and incorporated by reference

*** In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

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.
August 19, 2014	Hal Compton, Jr.,
	Chief Executive Officer, principal executive officer


	By: /s/ Shane Jorgenson
August 19, 2014	Shane Jorgenson
	Chief Financial Officer, principal financial and accounting officer

- 22 -

HASCO Medical, Inc. - FORM 10-Q - August 19, 2014

Attached files

HASCO Medical, Inc. Reports