Annual Report Amendment No. 1

10-K/A 1 hasc_10ka.htm ANNUAL REPORT AMENDMENT NO. 1 Annual Report Amendment No. 1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)


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

For the fiscal year ended December 31, 2012


¨	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

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 þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

¨ Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ 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).

þ 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	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes þ 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: $9,805,699 on June 30, 2012.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 988,190,882 shares of common stock are issued and outstanding as of March 18, 2013.

EXPLANATORY NOTE

This First Amended Annual Report on Form 10-K/A discloses and discusses the impact and effect of a restatement of our previously filed financial statements for the fiscal years ended December 31, 2012 and 2011; and amends Item 1 of Part I; Items 7, 8, and 9A of Part II and Item 15 of Part IV of our Annual Report on Form 10-K previously filed on March 29, 2013 (the “Original Filing”). This restatement is necessary due to (1) required corrections to 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, (2) a correction to the classification of certain direct labor and overhead expenses originally reported as administrative expenses and now reported as cost of sales for the years ended December 31, 2012 and 2011, (3) a correction to the method used to depreciate leasehold improvements from useful life to the shorter of useful life or lease term, (4) a correction to the accounting for sold vehicles that previously had not been fully relieved from inventory, (5) an adjustment for the impairment of all of the goodwill associated with the Home Healthcare reporting unit in the quarter ended December 31, 2012, (6) correction to the method used to account for certain Home Healthcare revenues using the gross revenue method to the net revenue method and (7) the tax effects of the above corrections. The Company has also concluded that there was a material weakness in internal control over financial reporting as of December 31, 2012.

This First Amended Annual Report on Form 10-K/A for the fiscal years ended December 31, 2012 and 2011 (the “Amended Report”) amends and restates only those items of the previously filed Annual Report on Form 10-K which have been affected by the restatement. In order to preserve the nature and character of the disclosures set forth in such items as originally filed, no attempt has been made in this amendment (i) to modify or update such disclosures except as required to reflect the effects of the restatement or (ii) to make revisions to the Notes to the Consolidated Financial Statements, except for those which are required by or result from the effects of the restatement. For additional information regarding the restatement, see Note 15 to our Consolidated Financial Statements included in Part II - Item 8. No other information contained in our previously filed Form 10-K for the year ended December 31, 2012 has been updated or amended.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively, as exhibits to the Original Filing have been re-executed and re-filed as of the date of this Amended Report and are included as exhibits hereto.

HASCO MEDICAL, INC.

FORM 10-K

TABLE OF CONTENTS


		Page No.
Part I
Item 1.	Business.	1

Part II

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 8.	Financial Statements and Supplementary Data.	18
Item 9A.	Controls and Procedures.	18


Part IV

Item 15.	Exhibits, Financial Statement Schedules.	22

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 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 this annual report 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” 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,” “the Company,” ” we,” “our,” and “us” refers 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.

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, bearing interest at 6%, for a total consideration of $3,850,000 along with 250,000 shares of HASCO Medical, Inc. common stock. In connection with the cash payment, a related party loaned Hasco $2,000,000 payable over ten years and bearing 5% interest.

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.

On March 1, 2012, Hasco Medical, Inc. completed the acquisition 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 Medical paid Mark Lore, the sole selling shareholder of Ride-Away, $500,000 in cash and a $3,000,000 Promissory Note bearing 5% simple interest, principal and interest payable monthly over 10 years, along with 176,944,450 shares of HASCO Medical, Inc. common stock, valued at $2,500,000, for a total consideration of $6,000,000. Mark Lore is now a Vice-President of Hasco Medical.

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 Vans and related products and services segment.

Narrative description of business

Our objective is to continue to grow both intrinsically and through acquisitions in areas in which we currently offer products and services, as well in areas that we feel are complementary. As Ride-Away is our most significant subsidiary, we anticipate the results of operations of Ride-Away will drive our near term financial results.

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 our March 2012 acquisition of Ride-Away, our operations are conducted within two business units:


	·	Wheelchair Vans – 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 eleven locations from Maine to Florida, and Mobility Freedom Inc. which has five locations in Florida and includes "Wheelchair Vans of America" operating our van rental operations. "Certified Medical Auto" is an inactive entity.

	·	Home Health Care - conducts operations in the home health care market. Southern Medical & Mobility, Inc. is located in Mobile, Alabama, and Certified Medical Systems II is located in Ocala, Florida.

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.

Wheelchair Vans Segment

Ride-Away and Mobility Freedom 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 years ended December 31, 2012 and 2011, approximately 16% of the Wheelchair Vans 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 eleven 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. Mobility Freedom has five corporate owned stores located in Orlando, Largo, Clermont, Bunnell and Ocala, 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 and Ride-Away subsidiaries.

The vehicle sales operations for Ride-Away and Mobility Freedom are conducted as licensed and bonded independent automobile dealers for a number of Original Equipment Manufacturers (“OEMs”) including Dodge, Chrysler, Toyota and Honda. These OEM vans are converted by various after-market companies specializing in modifying vehicles for disabled access (“Alterers”). Among them:

The Braun Corporation, which offers a variety of wheelchair accessible van conversions of popular minivan models;

Vantage Mobility International; and

ElDorado National Company, a THOR company.

Our agreements with Alterers permit us to sell vehicles within certain specific territories, some of which require us to exclusively sell their brand in a specific territory. We have subsidiary agreements with various affiliates whereby we hold the territory rights to sell vehicles and affiliates provide the location. Our agreements with affiliates typically hold that we receive 50% of the profit on each van sold at the affiliate site.

Alterers provide chassis conversions to traditional minivans and full size vans. These conversions traditionally include lowering the floor in order to increase head room, adding side entry or rear entry ramps and/or installing wheelchair lifts. We also modify certain types of vans in such a manner when Alterers’ conversions do not provide for our customers’ needs. Upon the selection by a customer of an altered OEM van, we provide custom conversion services.

As a part of our custom conversion services, we provide a comprehensive analysis of each individual’s prospective vehicle use as well as an evaluation of individual physical limitations. In instances where handicap use is by passenger only, we provide a full installation of EZ Lock Tie Down Systems to secure a customer’s mobility chair. Where the intended driver of the vehicle is physically limited, we utilize independent evaluators to determine specific driver needs and to make recommendations as to the appropriate Driver Adaptive Equipment (“DAE”).

Our DAE installations cover a broad array of products, nearly all of which require a custom-designed adaptation. The sales price of such equipment, which in certain circumstances can exceed $100,000, includes:

hand controls to allow complete vehicle operation using only hand and arm movements;

spinner knobs to aid in steering wheel turning;

transfer seats to ease vehicle entry and exit;

electronic driving controls, such as a touch screen modules, to control vehicle electronic equipment and vehicle functions; and

reduced effort steering and braking devices.

Home Health Care Segment

We operate two entities in the home health care market, Southern Medical and Certified Medical. 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. Our companies are both low-cost, high-quality providers of durable medical equipment and serve patients in Alabama, Florida, and Mississippi.

Southern Medical also serves patients with severe and chronic pulmonary disabilities. 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 and confirming insurance coverage information, our service technicians visit the patients’ home to deliver and to prepare the prescribed equipment. Company representatives coordinate the prescribed regimen with the patient physician and train patients and caregivers in the correct use of the equipment. For patients renting equipment, Company representatives also make periodic follow-up home visits to provide additional instructions, to perform required equipment maintenance, and to deliver oxygen and respiratory supplies.

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

Through its corporate office, the Company provides support, compliance oversight and training, marketing and managed care expertise, sales training and support, and financial and information systems to our subsidiaries. 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. Management is focused on revenue development and cost control, and decision-making to improve responsiveness and to ensure quality.

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.

In addition, as described below, we continually train our employees on the operation of our management and information systems.

Management Information Systems

Our information and customer relations management systems are unique to the industry and enable us to continually track our sales and service operations, as well as to monitor key statistical data such as accounts receivables, payer mix, cash collections, revenue mix and expense trends. Management believes that periodic refinement and upgrading of these systems is essential. 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 payers including the United States Department of Veterans Affairs (“VA”), Medicare, private insurers, and Medicaid. The VA is a government-run military veteran benefit system with cabinet-level status, and is the second-largest of the 15 cabinet-level departments. The VA provides patient care and federal benefits as well as 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 Ride-Away and Mobility Freedom, we are a federal 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 on fixed rates.

Both our Wheelchair Vans Segment and our Home Health Care Segment receive revenues from third-party payers. Revenues are recorded at the expected reimbursement rates when 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 payers. Our billing system contains payer-specific price tables that reflect fee-schedule amounts as available, in effect or contractually agreed upon by various government and commercial payers 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 payers, 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, the sale or 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 payer 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 medical 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 payer when the Company has obtained the properly completed CMN from the health care provider, when applicable. Certain pieces of equipment are subject to capped rental arrangements, whereby title to the equipment transfers to the patient at the end of the capped rental payment period.

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

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

Because the Company derives a significant portion of its revenues from 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 the Company’s business operations and financial results. Reimbursement levels typically are subject to downward pressure as the federal and state governments and managed care payers 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 and improve productivity by cost efficiencies and reductions. 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, 2012 was $7,116,008, compared to net accounts receivable of $1,042,953 at December 31, 2011.

We derive a portion of our revenue from reimbursement by third-party payers. 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 payers for both segments.


	Year Ended December 31,
Payers	2012			2011
Veterans Affairs		16	%		24	%
Medicare and Medicaid programs		*			6
Private insurance		*			19
Direct and other third party payment		84	%		51

		100	%		100	%

* Less than 1%. As of December 31, 2012, revenue from our Home Health Care Segment comprised an insignificant percentage of our business and categorization of these revenues is no longer financially relevant.

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 payers. A decline in DSO usually results from process improvements or more timely payment processing by payers. 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:


	2012	2011
Home healthcare	53 days	49 days
Wheelchair conversion vans	38 days	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 payer 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 by sales and marketing efforts. The company has also developed 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.

The Company’s sales and marketing focus for 2013 and beyond includes: (i) the continuing development of market share in existing sales territories; (ii) sales process and training programs to continue our development of existing sales consultants and the training and development of new sales; (iii) strengthening its sales and marketing efforts through a variety of programs and initiatives; and (iv) expanding managed care revenue through greater management attention and prioritization of payers 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 wheelchair van markets are granted by the major manufacturers to dealers under a system of protected exclusive territories. Contractually we must maintain certain criteria to retain our territories, most notably we must maintain a minimum unit sales volume. The Company was in compliance with all such agreements as of December 31, 2012. Management believes the primary competitive factor in wheelchair van sales is obtaining these protected territories from major manufacturers.

Wheelchair van rental competition varies. Our competition can range from national franchise companies, to companies that perform van rentals as a side-business of their van sales, all the way down to small single-market companies. We believe there are relatively few barriers to entry in the local markets served by the Company, with the most notable hurdle being the size of the initial capital outlay required. Therefore, the Company could encounter competition from new market entrants. Of the markets we serve in wheelchair van rental, we believe the Orlando market has a heavier concentration of competition which serves the tourist draw to area attractions.

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, the ability to develop and 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 and not pricing. As reimbursement levels are established by fee schedules promulgated by Medicare and Medicaid or by the individual determinations of private insurance companies, we do not compete on price. 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 patients to alter the relationship, so long as the home respiratory company is providing responsive, professional and high-quality service.

Third-party payers and their case managers actively monitor and direct the care delivered to their beneficiaries. Accordingly, relationships with such payers and case managers and the inclusion within preferred provider networks has become a prerequisite in many cases to the Company’s ability to establish patient relationships. 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 those providers offering a broad range of services, substantially discounted prices, and geographic coverage.

Employees

At December 31, 2012, the Company had 243 employees. None of our employees are covered by collective bargaining agreements. We believe the relations between management and employees are good.

PART II


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, 2012 and 2011 should be read in conjunction with 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 15928 Midway Road, Addison, TX 75001, and our telephone number is (214) 302-0930.

On January 12, 2009 HASCO Holdings, LLC acquired 65,324,000 shares of HASCO Medical, Inc. common stock for total consideration of $150,000 thereby acquiring beneficial ownership of 75% of the outstanding shares of common stock of the Company from its 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, pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”) among HASCO, SOUTHERN MEDICAL & MOBILITY 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. HASCO HOLDINGS LLC was issued a total of 554,676,000 shares of common stock in exchange 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, or approximately 96.5%, were held by HASCO HOLDINGS, LLC.

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, became a low cost, quality provider of a broad range of home healthcare services that serve patients in Alabama, Florida, and Mississippi. We had 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. In connection with the cash payment, a related party loaned Hasco $2,000,000 payable over ten years and bearing 5% interest.

On March 1, 2012, Hasco Medical, Inc. completed the acquisition of Ride-Away Handicap Equipment Corp., a closely-held New Hampshire corporation (Ride-Away). Pursuant to the terms of the Stock Purchase Agreement, Hasco Medical paid the sole selling shareholder of Ride-Away $500,000 in cash and a $3,000,000 Promissory Note bearing 5% simple interest, principal and interest payable monthly over 10 years, along with 176,944,450 shares of HASCO Medical, Inc. common stock, valued at $2,500,000, for a total consideration of $6,000,000.

Our operations are conducted within two business units:


	·	Wheelchair Vans – our primary business conducts sales of handicap accessible vans, parts and services and conducts rental operations of related equipment. This segment consists of Ride-Away which has eleven locations from Maine to Florida, Mobility Freedom including its rental operations conducted under the trade name “Wheelchair Vans of America” and Certified Medical Auto, now inactive, all three of which are located in Florida;

	·	Home Health Care - conducts sales of medical equipment and supplies. This segment consists of Southern Medical & Mobility located in Mobile, Alabama and Certified Medical located in Ocala, Florida. We now consider this segment of the Company not material when considering the financial statements as a whole.

Restatement

We have become aware that we:

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.

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.

had failed to properly depreciate leasehold improvements from useful life to the shorter of useful life or lease term.

had failed to properly relieve inventory for sold vehicles that previously had not been fully relieved from inventory.

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

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 have restated our financial statements for the years ended December 31, 2012 and 2011, included with this Amended Report.

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 Generally Accepted Accounting Principles for companies 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 disclosures 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 if different assumptions were made or different conditions existed.

A summary of significant accounting policies is included in Note 1 to the audited consolidated financial statements included for the year ended December 31, 2012 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 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 from these estimates under different assumptions or conditions.

Revenue Recognition - The Company follows the provisions of SAB 104, “Revenue Recognition in Financial Statements”, for 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. We recognize 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 and medical equipment and fees for home health care services 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.

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

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. The Company issued no and cancelled all previous compensation related to stock options. The Company issued stock for an immaterial amount for services provided, issued stock to a related party in lieu of interest on an unsecured note, issued stock to a related party in connection with the acquisition of Ride-Away and issued stock to management and employees for compensation and bonuses.

Accounts Receivable - Management performs ongoing evaluations of its accounts receivable. Due to the nature of the industry and the reimbursement environment in which the Healthcare Segment of the Company operates, certain estimates are required to record net revenues and accounts receivable at their estimated 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 payers may result in adjustments to amounts originally recorded in previous accounting periods. Such adjustments are typically identified and recorded at the point of cash application, claim denial or account review. For our Wheelchair Van Segment, our review of the collectability of accounts receivable does not require this significant oversight and adjustment. 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 payer 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 - Vehicle inventory is valued at an actual cost basis and is adjusted to reflect the lower of cost or market. Parts and inventoried equipment is valued at cost basis and includes primarily finished goods. Work in process vehicle inventory is valued at a cost basis related to actual vehicle costs increased by a cost-based accumulation of work according to the judgment of management. In addition to this actual value determination according to the judgment of management and outside auditors, the Company makes a reserve to the value of our inventory to account for the potential decline in value of aging model years of our new and used vehicle inventory, the seasonal fluctuation of our used vehicle inventory, and to account for other undeterminable factors which may affect the on-going valuation of our inventory.

Long-Lived Assets - The Company accounts for fixed assets at cost basis adjusted for depreciation based on management’s judgment of the life of each individual asset or, in some cases, for a term required by various regulatory agencies. Management reviews these values 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.

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 Payers

We derive approximately 16% of our Wheelchair Van Segment revenue from the United States Department of Veterans Affairs (the “VA”).

We derive substantially all of our Home Health care Segment revenues from reimbursement by third party payers, including Medicare, Medicaid 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 payers and patients. State laws also govern, among other things, pharmacies, nursing services, the distribution of medical equipment and certain types of home health 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. It is the judgment of management that we are in compliance with all such laws and regulations to the extent they may materially affect our financial condition.

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 entities from 2011 to 2012. 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 year-to-year results. The following table provides an overview of certain key factors of our results of operations for the years ended December 31, 2012 as compared to December 31, 2011:


	Year ended Dec. 31,
	(Restated) 2012			(Restated) 2011
Net Revenues	$	63,852,766		$	9,044,090
Cost of sales		49,784,301			7,068,907
Operating Expenses:
Selling and Marketing		3,711,159			246,319
General and administrative		9,489,843			3,165,543
Amortization and Depreciation		323,088			56,992
Total operating expenses		13,524,090			3,468,854
Income (loss) from operations		544,375			(1,493,671	)
Total other income (expense)		(455,402	)		(117,842	)
Provision for income taxes		6,673			-
Net income (loss)	$	82,300		$	(1,611,513	)

Other Key Indicators:


	Year ended Dec. 31,
	(Restated) 2012			(Restated) 2011
Cost of sales as a percentage of revenues		78.0	%		78.2	%
Gross profit margin		22.0	%		21.8	%
General and administrative expenses as a percentage of revenues		14.9	%		35.0	%
Total operating expenses as a percentage of revenues		21.2	%		38.4	%

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


	Year Ended December 31,
	2012		(Restated) 2011
Product Sales	$	51,871,362	$	7,406,796
Rental Revenue		1,094,574		1,515,443
Service and other		10,886,830		121,851
Total Net Revenues	$	63,852,766	$	9,044,090

Year ended December 31, 2012 and 2011

Net Revenues

For the year ended December 31, 2012, we reported revenues of $63,852,766 as compared to revenues of $9,044,090 for the year ended December 31, 2011, an increase of $54,808,676 or approximately 606.0 %. The increase is due to the business acquisitions in 2012 and 2011.

Product sales for the year ended December 31, 2012 and 2011 amounted to $51,871,362 and $7,406,796 respectively, an increase of $44,464,566 or 600.3%. Rental revenue for the year ended December 31, 2012 amounted to $1,094,574 compared to $1,515,443 in the same period of 2011, a decrease of $420,869 or 27.8%. Service and other revenue were $10,886,830 for the year ended December 31, 2012 compared to $121,851 in the same period in 2011. This represents an increase of $10,764,979 or 8,834.5%.

The increase in product sales and service and other revenue was primarily due to the acquisition of Mobility Freedom on May 13, 2011 and Ride-Away on March 1, 2012. We do not anticipate any significant price increases in 2013. The decrease in rental revenue is due to declines in our Southern Medical and Mobility subsidiary as a result of overall lower rentals of durable medical equipment in the year ended December 31, 2012 compared to the year ended December 31, 2011. Product sales comprise approximately 81.2% of the Company’s sales for the year ended December 31, 2012 compared to 81.9% in the same period of 2011.

Cost of Sales

Our cost of sales consists of products purchased for resale, service parts and labor, and the depreciation of rental assets. For the year ended December 31, 2012, cost of sales was $49,784,301, or approximately 78.0% of revenues, compared to $7,068,907, or approximately 78.2% of revenues, for the year ended December 31, 2011. During the year ended December 31, 2012, cost of sales increased due to the increase in Wheelchair Van sales and the higher cost of sales as a percentage of revenues than the Home Healthcare operations. The overall increase of cost of sales for our Wheelchair Van operations is due to the acquisition of Mobility Freedom Inc. on May 13, 2011 and Ride-Away Handicap Equipment Corp. on March 1, 2012.

We have a single vendor that represents 28% of our Cost of Sales. 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 22.0% for the year ended December 31, 2012 from 21.8% for the year ended December 31, 2011, 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 21.2% for the year ended December 31, 2012 from 38.4% for the year ended December 31, 2011. These changes include:

Selling and Marketing Expense. For the year ended December 31, 2012, selling and marketing costs were $3,711,159 and $246,319 for the year ended December 31, 2011. The increase was due to the business acquisitions made in 2012 and marketing, advertising and print advertising programs initiatives, primarily in the wheelchair van operations.

General and Administrative Expense. For the year ended December 31, 2012, general and administrative expenses were $9,489,843 as compared to $3,165,543 for the year ended December 31, 2011, an increase of $6,324,300. The increase is due to the acquisition of business entities in 2012. For the year ended December 31, 2012 and 2011 general and administrative expenses consisted of the following:


	Year Ended December 31,
	2012 (Restated)		2011
Rent	$	1,062,000	$	203,182
Employee compensation		5,440,063		2,214,763
Professional fees		296,529		217,650
Internet/Phone		237,616		77,248
Travel/Entertainment		320,664		77,518
Insurance		316,781		142,381
Other general and administrative		1,816,190		232,801
	$	9,489,843	$	3,165,543


	·	For the year ended December 31, 2012, Rent expense increased by $858,818 over the same period in 2011. The increase is due to the larger number of facility leases as a result of the Mobility Freedom and Ride Away acquisitions.

	·	For the year ended December 31, 2012, employee compensation, related taxes and stock-based compensation expenses were $5,440,063, an increase of $3,225,300 over the year ended December 31, 2011. The increase relates primarily to the personnel added with the acquisition of Ride-Away and Mobility Freedom and to the addition of several key positions in anticipation of these acquisitions.

	·	For the year ended December 31, 2012, professional fees increased to $296,529 as compared to $217,650 for the year ended December 31, 2011; an increase of $78,879. The increase is due primarily to the additional expense related to the expansion of our business entities.

	·	For the year ended December 31, 2012, internet/telephone expense increased to $237,616 as compared to $77,248 for the year ended December 31, 2011, an increase of $160,368. This increase is due to the addition of the Ride-Away and Mobility Freedom subsidiaries and their operations and locations.

	·	For the year ended December 31, 2012, travel and entertainment expense increased to $320,664 as compared to $77,518 for the year ended December 31, 2011, an increase of $243,146. This increase is due to the increased travel necessitated by the addition of the Ride-Away and Mobility Freedom subsidiaries.

	·	For the year ended December 31, 2012 insurance expense increased to $316,781 as compared to $142,381 for the year ended December 31, 2011, an increase of $174,400. This increase is due to the addition of the Ride-Away and Mobility Freedom locations.

	·	For the year ended December 31, 2012, other general and administrative expense increased to $1,816,190 as compared to $232,801 for the year ended December 31, 2011, an increase of $1,583,389. This increase is due to the addition of the Ride-Away and Mobility Freedom subsidiaries.

Depreciation and Amortization Expense. For the year ended December 31, 2012, depreciation and amortization expense amounted to $323,088 as compared to $56,992 for the year ended December 31, 2011, an increase of $266,096. The increase is due to the fixed assets acquired in the purchase of Mobility Freedom and Ride-Away.

INCOME (LOSS) FROM OPERATIONS

We reported income from operations of $544,375 for the year ended December 31, 2012 as compared to a loss from operations of $(1,493,671) for the year ended December 31, 2011.

OTHER INCOME (EXPENSES)

Other income (expense) for the year ended December 31, 2012 amounted to $(455,402) compared to $(117,842) for the year ended December 31, 2011. Other income and expense consists of Acquisition Fees, Early Pay Discounts and Interest Expense. Impairment expense for the year ended December 31, 2012 resulted from the impairment of goodwill in our Home Healthcare reporting unit of $105,454.

Acquisition fees for the year ended December 31, 2012 and 2011 were $(26,740) and zero, respectively. These are the various legal and professional fees incurred in the acquisition of Ride-Away which occurred on March 1, 2012, in the first quarter.

Early Pay Discounts for the year ended December 31, 2012 and 2011 were $513,501 and $80,000, respectively. This change reflects the differences in the volume of our cash payments from 2011 to 2012.

Interest expense for the year ended December 31, 2012 amounted to $(942,163) as compared to $(197,842) for the year ended December 31, 2011, an increase of $744,321. This increase is due to the additional debt and capital lease obligations the Company has incurred in the acquisition of the Ride-Away and Mobility Freedom subsidiaries.

NET INCOME (LOSS)

Our net income was $82,300 for the year ended December 31, 2012 compared to net loss of $(1,611,513) for the year ended December 31, 2011.

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, 2012 and December 31, 2011:


	(Restated) December 31, 2012			(Restated) December 31, 2011			$ Change			% Change
Working capital surplus (deficit)	$	183,922		$	(356,347	)	$	540,269			151.6

Cash		850,391			212,460			637,931			300.3
Accounts receivable, net		7,116,008			1,042,953			6,073,055			582.3
Inventory		10,489,388			2,444,563			8,044,825			329.1
Total current assets	$	18,633,729		$	3,789,183		$	14,844,546			391.8
Property and equipment, net		2,162,729			526,571			1,636,158			310.7
Intangible property, net		5,670,013			2,426,757			3,243,256			133.6
Total assets	$	27,067,319		$	6,742,931		$	20,324,388			301.5

Accounts payable and accrued liabilities	$	2,528,005		$	2,627,326		$	99,321			3.8
Customer deposits and deferred revenue		909,465			175,464			734,001			418.3
Line of credit		6,081,368			898,713			5,182,655			576.7

Note Payable – Floor Plan		7,421,638			-			7,421,638			NA
Current portion of capital leases		510,555			-			510,555			NA
Notes payable-current		114,265			108,091			6,174			6.6
Notes payable, related party-current		506,787			154,346			352,441			214.5
Total current liabilities	$	18,449,807		$	4,145,530		$	14,304,277			345.1
Capital lease obligations		531,969			-			531,969			NA
Notes payable-long term		1,833,746			1,947,994			(114,248	)		(5.9	)
Notes payable, related party-long term		4,556,861			1,784,020			2,772,841			155.4
Total liabilities	$	25,372,383		$	7,877,544		$	17,494,839			222.1
Accumulated deficit		(5,853,896	)		(5,936,196	)		82,300			1.4
Stockholders’ equity (deficit)	$	1,694,936		$	(1,134,613	)	$	2,829,549			249.8

The increase in net cash provided by operating activities was $1,500,098 for the year ended December 31, 2012 was primarily due to net income of $82,300 and non-cash items such as depreciation and amortization expense of $1,285,202; impairment of intangible assets of $105,454; stock-based compensation of $114,227; and issuance of stock in settlement of services of $93,132; and changes in operating assets and liabilities of $16,641; offset partially bad debt expense of $72,835, and the gain on disposal of property and equipment of $124,023. The changes in operating assets and liabilities were primarily due to increases in accounts receivable of $1,932,642; other assets of $341,773; and other current liabilities of $196,944 partially offset by decreases in inventory of $3,702,675; prepaid expenses of $126,213; accounts payable and accrued expenses of $1,617,403 and customer deposits and deferred revenue of $117,373.

The decrease in net cash used in operating activities was $(98,112) for the year ended December 31, 2011 primarily due to a net loss of $(1,611,513), and bad debt expense of $17,273, offset partially by depreciation expense of $171,862, stock based compensation of $152,714, fair value of options issued to employees of $4,080, and changes in operating assets and liabilities of $1,202,018. The changes in operating assets and liabilities were primarily due to increases in accounts payable and accrued liabilities of $2,531,941, customer deposits and deferred revenue of $175,464, other current liabilities of $104,757, offset partially by the increases in accounts receivable of $771,318, inventory of $768,464, and in prepaid expenses of $70,362.

Net cash used in investing activities for the year ended December 31, 2012 was $770,002 as compared to net cash used in investing activities of $2,442,811 for the year ended December 31, 2011. During the year ended December 31, 2012 and 2011, we used cash for property and equipment purchases and the acquisition of Mobility Freedom, Certified Medical Systems II, Certified Auto, and Ride-Away.

Net cash used in financing activities for the year ended December 31, 2012 was $(92,165). This consisted of net draws and repayments on our floor plan of $437,762, net draws and repayments on our lines of credit of $87,001, net draws and repayments on our notes payable of $181,173, proceeds from sale of common stock of $79,500, and offset partially by repayments of related party notes payable of $164,775, and principal payments under capital lease obligations of $673,216. For the year ended December 31, 2011, net cash provided by financing activities was $2,752,960. This consisted of draws on our floor plan of $631,915, net draws and repayments on our lines of credit of $96,284, net draws and repayments on our notes payable of $6,895, net draws and repayments of related party notes payable of $1,938,366, and proceeds from sale of common stock of $79,500.

At December 31, 2012 we had a working capital of $183,922 and accumulated deficit of $(5,853,896).

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.

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 years ended December 31, 2012 and 2011:

For the year-ended December 31, 2012:


Facility	Additions		Payments		Net Usage Increase
Floor plan	$	23,200,055	$	22,762,293	$	437,762
Line of credit		772,561		685,560		87,001
Total	$	23,972,616	$	23,447,853	$	524,763

For the year-ended December 31, 2011:


Facility	Additions		Payments		Net Usage Increase
Floor plan	$	631,915	$	-	$	631,915
Line of credit		465,284		369,000		96,284
Total	$	1,097,199	$	369,000	$	728,199

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following tables summarize our contractual obligations as of December 31, 2012.


	Payments Due by Period
	Total		Less than 1 year		1-3 Years		4-5 Years		5 Years +
Contractual Obligations:
Operating Lease	$	5,237,006	$	1,674,600	$	1,539,231	$	1,310,865	$	712,310
Capital lease		1,077,059		534,771		542,288		-		-
Line of credit		6,081,368		6,081,368		-		-		-
Notes payable		1,948,011		114,265		239,839		231,504		1,362,403
Notes payable – related party		5,063,648		506,787		1,100,661		1,130,715		2,325,485
Total Contractual Obligations:	$	19,407,092	$	8,911,791	$	3,422,019	$	2,673,084	$	4,400,198

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

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.


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


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, 2012, the end of the year covered by this report, our management concluded its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures.

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

Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. As previously discussed, management is aware of the limitations of current system of control and procedures. A control system, no matter how well designed and operated, can provide only reasonable and not absolute assurance that the control system’s objectives will be met. Further, the design of a control system must reflect 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.

Identification of Material Weaknesses in Controls and Procedures

As a result of the misstatements in the financial statements for the years ended December 31, 2012 and 2011, as described under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations - Restatements, and in connection with the evaluation of our controls and procedures for the year ended December 31, 2012 we have determined that we have a material weakness 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:

had failed to properly depreciate leasehold improvements from useful life to the shorter of useful life or lease term.

had failed to properly relieve inventory for sold vehicles that previously had not been fully relieved from inventory.

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

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 that periods should no longer be relied upon. Accordingly, we have restated our financial statements for the year ended December 31, 2012 included with this Amended Report.

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 year ended December 31, 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.

Management has discussed this material weakness 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. However, our management believes that these remediation efforts will be complete by the end of 2014.

With respect to the fiscal year ending December 31, 2012, 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, 2012, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has concluded that its disclosure controls and procedures were not effective.

Management’s Report On Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

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 or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

Based on its assessment, we concluded that, as of December 31, 2012, our internal control over financial reporting is not effective based on those criteria.

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, 2012 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART IV


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. *

10.1		Inventory Financing Agreement

10.2		Amendment to Inventory Financing Agreement

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

101		Interactive Data Files of Financial Statements and Notes contained in this Annual Report on Form 10-K.**

* Previously filed

** In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Annual Report on Form 10-K 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.
February 14, 2014	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	February 14, 2014
Hal Compton, Jr.

/s/ Jens Mielke	Chief Financial Officer, principal financial and accounting officer	February 14, 2014
Jens Mielke

/s/ Hal Compton, Sr.	Director	February 14, 2014
Hal Compton, Sr.

/s/ Bill Marginson	Director	February 14, 2014
Bill Marginson

/s/ Barry McCook	Director	February 14, 2014
Barry McCook

HASCO MEDICAL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS


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

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2012 and 2011 – As Restated	F-4

Consolidated Statements of Operations for the years ended December 31, 2012 and 2011 – As Restated	F-5

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2012 and 2011 – As Restated	F-6

Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011 – As Restated	F-7

Notes to Audited Consolidated Financial Statements	F-8 to F-30

F-1

[hasc_10ka002.gif]

DKM Certified Public Accountants

2451 N. McMullen Booth Road, Suite 308

Clearwater Florida 33759-1362

855.334.0934

www.dkmcpas.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of HASCO Medical, Inc. and Subsidiaries

We have audited the consolidated balance sheet of HASCO Medical, Inc. and its subsidiaries as of December 31, 2012 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. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of HASCO Medical, Inc. and its subsidiary as of December 31, 2011 were audited by other auditors whose report dated March 28, 2012 on those financial statements included an explanatory paragraph describing going concern issues as discussed in Note 2 to those financial statements.

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 audits to obtain reasonable assurance about whether the financial statements were free of material misstatement. The Company was not required 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 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, we 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 consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our 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, 2012, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

These financial statements have been restated to make corrections as described in Note 15.

[hasc_10ka004.gif]

DKM Certified Public Accountants

Clearwater, Florida

March 29, 2013, except for Note 15 which is dated February 14, 2014.

F-2

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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.

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 of the December 31, 2011 notes to the financial statements, the Company 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 the above referenced Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

These financial statements have been restated to make corrections as described in Note 15.

/s/ Peter Messineo, CPA

Peter Messineo, CPA

Palm Harbor, Florida

March 28, 2012, except for Note 15 which is dated February 14, 2014.

F-3

Hasco Medical, Inc. and Subsidiaries

Consolidated Balance Sheets


	December 31,
	(Restated) 2012			(Restated) 2011

Assets
Current assets
Cash	$	850,391		$	212,460
Accounts receivable, net of allowance for doubtful accounts of $414,718 and $328,177, respectively		7,116,008			1,042,953
Inventory		10,489,388			2,444,563
Prepaid expenses and other current assets		177,942			89,207
Total current assets		18,633,729			3,789,183

Property & equipment, net of accumulated depreciation of $1,604,689 and $634,857, respectively		2,162,729			526,571

Intangible property		5,670,013			2,426,757
Other non-current assets		600,848			420
Total Assets	$	27,067,319		$	6,742,931

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	2,528,005		$	2,627,326
Customer deposits and deferred revenue		909,465			175,464
Line of credit		6,081,368			898,713
Notes payable – Floor Plan		7,421,638			—
Current portion of capital leases		510,555			—
Current portion of note payable		114,265			108,901
Current portion of note payable to related party		506,787			154,346
Other current liabilities		377,724			180,780
Total current liabilities		18,449,807			4,145,530

Obligation under capital leases, net of current portion		531,969			-
Notes payable, net of current portion		1,833,746			1,947,994
Notes payable to related party, net of current portion		4,556,861			1,784,020
Total liabilities		25,372,383			7,877,544

Stockholders’ Equity
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; 987,852,772 and 794,578,818 shares issued and outstanding, respectively		987,853			794,579
Additional paid-in capital		6,560,979			4,007,004
Accumulated deficit		(5,853,896	)		(5,936,196	)
Total stockholders’ equity		1,694,936			(1,134,613	)

Total Liabilities and Stockholders’ Equity	$	27,067,319		$	6,742,931

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,


	(Restated) 2012			(Restated) 2011

Product sales	$	51,871,362		$	7,406,796
Rental revenue		1,094,574			1,515,443
Service and other		10,886,830			121,851
Total net revenues		63,852,766			9,044,090

Cost of sales		49,784,301			7,068,907

Gross profit		14,068,465			1,975,183

Operating expenses:
Selling and marketing		3,711,159			246,319
General and administrative		9,489,843			3,165,543
Depreciation and amortization		323,088			56,992
Total operating expenses		13,524,090			3,468,854

Income (loss) from operations		544,375			(1,493,671	)

Other income (expense):
Other income		618,955			80,000
Impairment of intangible assets		(105,454	)		—
Acquisition fees		(26,740	)		—
Interest expense		(942,163	)		(197,842	)
Total other income (expense)		(455,402	)		(117,842	)

Income (Loss) from operations before income taxes		88,973			(1,611,513	)

Provision for income taxes		6,673			—

Net income (loss)	$	82,300		$	(1,611,513	)

Earnings per share:
Basic and dilutive	$	0.00		$	0.00

Weighted average shares outstanding
Basic and dilutive		948,357,991			759,962,640

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					Holders’
	Preferred				Common				Paid in		Retained			Equity
	shares		$.001 par		shares		$.001 par		Capital		Earnings			(Deficit)

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

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												(1,611,513	)		(1,611,513	)

Balance at December 31, 2011		—	$	—		794,578,818	$	794,579	$	4,007,004	$	(5,936,196	)	$	(1,134,613	)

Issuance of common stock for:
Cash		—		—		2,813,238		2,813		37,077		—			39,890
Employee compensation		—		—		6,713,288		6,713		107,514		—			114,227
Settlement of services		—		—		6,802,978		6,803		86,329		—			93,132
Acquisition of Ride Away		—		—		176,944,450		176,945		2,323,055		—			2,500,000

Net income												82,300			82,300

Balance at December 31, 2012		—	$	—		987,852,772	$	987,853	$	6,560,979	$	(5,853,896	)	$	1,694,936
											(Restated)			(Restated)

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 Years Ended December 31,


	(Restated) 2012			(Restated) 2011
Cash Flows from Operating Activities:
Net income (loss)	$	82,300		$	(1,611,513	)
Adjustment to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization		1,285,202			171,862
Impairment of intangible assets		105,454			—
Gain on disposal of property and equipment		(124,023	)		—
Fair value of options issued to employees		—			4,080
Issuance of common stock in settlement of services		93,132			152,714
Stock based compensation		114,227			—
Bad debt expense		(72,835	)		(17,273	)
Changes in assets and liabilities:
Accounts receivable		(1,932,642	)		(771,318	)
Inventory		3,702,675			(768,464	)
Prepaid expenses		126,213			(70,362	)
Other assets		(341,773	)		—
Accounts payable and accrued expenses		(1,617,403	)		2,531,941
Other current liabilities		196,944			104,757
Customer deposits and deferred revenue		(117,373	)		175,464
Net Cash Provided by (Used in) Operating Activities		1,500,098			(98,112	)

Cash Flows from Investing Activities:
Proceeds from the sale of property and equipment		241,089			—
Purchase of property and equipment		(511,091	)		(542,811	)
Acquisition of investment in subsidiary		(500,000	)		(1,900,000	)
Net Cash (Used in) Investing Activities		(770,002	)		(2,442,811	)

Cash Flows from Financing Activities:
Proceeds from floor plan financing		23,200,055			631,915
Repayments of floor plan financing		(22,762,293	)		—
Proceeds from line of credit		772,561			465,284
Repayments of line of credit		(685,560	)		(369,000	)
Proceeds from note and loan payables		524,449			47,124
Repayments of note and loan payables		(343,276	)		(40,229	)
Proceeds from loan payables – related party		—			2,000,000
Repayments of loan payables – related party		(164,775	)		(61,634	)
Principal payments under capital lease obligations		(673,216	)		—
Proceeds from issuance of stock		39,890			79,500
Net Cash Provided by (used in) Financing Activities		(92,165	)		2,752,960

Net increase in Cash		637,931			212,037
Cash at beginning of period		212,460			423
Cash at end of period	$	850,391		$	212,460

Supplemental cash flow information:
Interest paid	$	934,212		$	159,092
Taxes paid	$	107,534		$	—

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
Settlement of loans payable in exchange for common stock	$	—		$	365,000
Intangible and net assets acquired in Mobility Freedom acquisition	$	—		$	3,856,250
Intangible and net assets acquired in Certified acquisition	$	—		$	100,000
Intangible and net assets acquired in Ride Away acquisition	$	6,000,000			—
Promissory notes issued for the acquisition of assets	$	3,000,000		$	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, 2012 and 2011

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

Organization

HASCO Medical, Inc., formerly BBC Graphics of Palm Beach Inc., was incorporated in May 1999 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. In May 2009, the Company changed its fiscal year end from September 30 to December 31.

On May 12, 2009, the Company 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 the Company’s wholly-owned subsidiary. The former shareholder of Southern Medical & Mobility, Inc. was issued a total of 554,676,000 shares of 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 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 March 1, 2012, Hasco Medical, Inc. completed the acquisition 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 Medical paid the sole selling shareholder of Ride-Away $500,000 in cash, a vehicle valued at $20,250, and a $3,000,000 Promissory Note bearing 5% simple interest, principal and interest payable monthly over 10 years, along with 176,944,450 shares of HASCO Medical, Inc. common stock, valued at $2,500,000, for a total consideration of $6,000,000.

F-8

Services and Products

The Company’s objective is to continue to grow both intrinsically and through acquisitions in areas in which the company currently offers products and services, as well in complimentary areas. As Ride-Away is the most significant subsidiary, the company anticipates the results of operations of Ride-Away will drive near term financial results.

Historically, Company 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 our March 2012 acquisition of Ride-Away, our operations are conducted within two business units:


	·	Wheelchair Vans – 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 eleven locations from Maine to Florida, Mobility Freedom Inc. which has five locations in Florida and includes "Wheelchair Vans of America" operating van rental operations. "Certified Medical Auto" is an inactive entity.

	·	Home Health Care - conducts operations in the home health care market. Southern Medical & Mobility, Inc. is located in Mobile, Alabama, and Certified Medical Systems II is located in Ocala, Florida.

Corporate headquarters and principle corporate operations are conducted in Addison, Texas, a northern suburb of Dallas, Texas. The Company also houses a portion of corporate operations in Londonderry, New Hampshire. Hasco Medical Inc. is a Florida corporation.

Wheelchair Vans

Ride-Away and Mobility Freedom serve individuals with physical limitations that need specialty equipment in order to safely operate their vehicle. The Company also provides 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 years ended December 31, 2012 and 2011, approximately 16% of the Wheelchair Vans 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 the Company operates.

Home Health Care

The Company operates two entities in the home health care market, Southern Medical and Certified Medical. 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. These companies are both low-cost, high-quality providers of durable medical equipment and serve patients in Alabama, Florida, and Mississippi.

Southern Medical also serves patients with severe and chronic pulmonary disabilities. 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 and confirming insurance coverage information, service technicians visit the patients’ home to deliver and to prepare the prescribed equipment. Company representatives coordinate the prescribed regimen with the patient physician and train patients and caregivers in the correct use of the equipment. For patients renting equipment, Company representatives also make periodic follow-up home visits to provide additional instructions, to perform required equipment maintenance, and to deliver oxygen and respiratory supplies.

F-9

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.;
	·	Ride Away Handicapped Equipment, Inc.; and
	·	Certified Medical Systems II, Inc.
	·	Certified Medical Auto Division, 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 2012 and 2011 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.

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, 2012 and 2011. 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.

F-10

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, 2012 and 2011, because of the relatively short-term maturity of these instruments and their market interest rates.

Revenue Recognition

The Company follows the provisions of SAB 104, “Revenue Recognition in Financial Statements”, for 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.

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.

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 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. From time to time and for the year ended December 31, 2012, 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.

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, 2012 and December 31, 2011, 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.

Accounts Receivable

Accounts receivable includes of receivables due from Medicare, Medicaid, and third party payers. The Company recorded a bad debt allowance of $414,718 and $328,177 as of December 31, 2012 and 2011, respectively. Management performs ongoing evaluations of its accounts receivable.

F-11

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 payers 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 payer 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 a first-in first-out 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 five 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, 2012 and 2011.

Impairment of Indefinite-Lived Intangible Assets

The Company reviews indefinite-lived intangible assets for impairment annually at October 1. 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 recorded an impairment charge of $105,454 at October 1, 2012 related to its Home Healthcare reporting unit. The Company did not record any impairment charge for the year ended December 31, 2011.

F-12

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.

Advertising

Advertising, marketing and selling is expensed as incurred. Such expenses for the year ended December 31, 2012 and 2011 totaled $3,711,159 and $246,319, 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.

F-13

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 none and 3,075,000 stock options which could potentially dilute future earnings per share as of December 31, 2012 and 2011, respectively.

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


	(Restated) Year ended December 31, 2012		(Restated) Year ended December 31, 2011
Numerator:
Net income (loss)	$	82,300	$	(1,611,513	)

Denominator:
Denominator for basic loss per share (weighted-average shares)		948,357,991		759,962,640

Denominator for dilutive loss per share (adjusted weighted-average)		948,357,991		759,962,640

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

Subsequent Events

On January 7, 2013 Timothy Spence assumed the role of Chief Financial Officer.

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, 2012, subsequent events were evaluated by the Company as of the date on which the consolidated financial statements for the year ended December 31, 2012 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.

F-14

Recently Issued Accounting Pronouncements

NOTE 2 – ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:


	December 31,
	2012			%		2011			%

Trade receivables	$	3,579,308			47.5	$	697,847			50.9
Government receivables		3,951,418			52.5		673,283			49.1
		7,530,726			100.0		1,371,130			100.0
Less: allowances for doubtful accounts		(414,718	)				(328,177	)
Total	$	7,116,008				$	1,042,953

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.

During the normal course of business, the Company extends unsecured credit to its customers. Management reviews its accounts receivable on a regular basis to determine if an allowance for doubtful accounts is necessary and adequate. An estimate for doubtful accounts is made when collection of the full amount is no longer probable.

The Company recorded a bad debt allowance of $414,718 and $328,177 as of December 31, 2012 and 2011, respectively.

NOTE 3 – INVENTORY

Inventory consists of the following, as of December 31:


	(Restated) 2012		2011
Vehicles	$	9,269,018	$	2,299,691
Equipment and supplies		1,220,370		144,872
	$	10,489,388	$	2,444,563

NOTE 4 – PROPERTY AND EQUIPMENT

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


	Estimated	(Restated)			(Restated)
	Life	2012			2011
Building improvements	varies	$	883,589		$	5,182
Office furniture and equipment	5 years		313,048			104,595
Rental equipment	13-36 months		1,165,186			929,829
Vehicles	5 years		162,273			121,822
Capitalized leases	varies		1,243,322			—
			3,767,418			1,161,428
Accumulated depreciation			(1,604,689	)		(634,857	)
		$	2,162,729		$	526,571

F-15

For the year ended December 31, 2012 and 2011, depreciation expense amounted to $1,285,202 and $171,862, of which $922,689 and $114,870 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 7 below).

NOTE 5 – INTANGIBLE PROPERTY

Intangible assets consist of the following:


		(Restated)		(Restated)
	Estimated	December 31,		December 31,
	Life	2012		2011
Goodwill related to acquisition of Certified Medical and Certified Auto	Indefinite	$	—	$	105,454
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		—
Trade name related to acquisition of Mobility Freedom	Indefinite		400,000		400,000
Trade name related to acquisition of Ride-Away	Indefinite		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		—
Total		$	5,670,013	$	2,426,757

The Company recorded an impairment charge of $105,454 at October 1, 2012 related to its Home Healthcare reporting unit.

No amortization expense was recorded in 2012 and 2011 due to intangible assets having an indefinite life.

NOTE 6 – OBLIGATIONS UNDER CAPITAL LEASE

The Company is a lessee of certain property and equipment under capital lease obligations that expire on various dates through February 2015. The terms of the capital lease obligations provide for monthly lease payments ranging from approximately $200 to $1,307. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair market value of the related asset. The assets are depreciated over the shorter period of the lease term or the estimate useful life.

As of December 31, 2012, future minimum annual commitments under capital lease arrangements are as follows:


Years Ending December 31,

2013	$	534,771
2014		492,908
2015		49,380

Total minimum future lease payments		1,077,059

Less: Amounts representing interest		(34,535	)

Present value of net minimum lease payments	$	1,042,524

F-16

The following is an analysis of the leased equipment under capital leases as of December 31, 2012, which is included in property and equipment (see Note 4).


Computer equipment	$	17,438
Telephone equipment		27,180
		44,618
Less: Accumulated depreciation		(39,967	)
	$	4,651

Interest incurred pursuant to the capital lease obligations was $7,951 and $0 for the years 2012 and 2011, respectively.

NOTE 7 – 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. The agreement is secured against all property of the borrowers assets, on demand with an annual review as of June 30, 2013. Payments due are interest only. The interest rate is at Prime plus .25% as of September 30, 2012 and the effective interest rate was 3.75%. The interest rate varies based on the Company’s leverage ratio. The balance of the line of credit was $6,081,368 at December 31, 2012.

The Commercial Note discussed above replaced the Company’s November 1, 2011 Commercial Note agreement with the same bank for $2,750,000 and the Commercial Note agreement Ride-Away had with Citizens Bank for $6,000,000. This agreement was also secured against all property of the borrowers assets, on demand with one year maturity. Payments due were interest only. The interest rate was 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 at December 31, 2011.

Subsequent to be restatement, the Company was not in compliance with one of its bank covenants relating to its debt to equity ratio at December 31, 2012. The Company has requested a waiver from the lender.

Note Payable – Floor Plan

The Company has a floor plan line of credit with GECC with a maximum borrowing capacity of $8,500,000 for the Ride-Away subsidiary and $2,600,000 for the Mobility Freedom subsidiary. Amounts borrowed for vehicles under this line bear no interest for 60 days and then bear interest at the 90 day LIBOR plus 7% for Ride-Away and at the 90 day LIBOR plus 6.25% for Mobility Freedom. The balance is due when the vehicle is sold. If the vehicle is not sold within six months, 10% of the balance is due with the rest of the balance due at twelve months. The note is secured by the vehicles financed. At December 31, 2012 the Company had $7,421,638 outstanding under these lines.

The Company was in compliance with its floor plan covenants at December 31, 2012.

F-17

Installment Debt

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


	2012		2011

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		35,343		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 secured by grantee from the majority shareholder of Mobility Freedom.		1,878,293		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		34,375		50,000

Note Payable to a related party, 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		2,863,060		—

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		426,997		—

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		1,773,591		1,938,366

Total debt		7,011,659		3,995,261

Current portion of long-term debt, notes payable		621,052		263,247
Long-term portion	$	6,390,607	$	3,732,014

Future debt amortization:


2012	$	621,052
2013		654,570
2014		685,930
2015		710,559
2016		651,661
thereafter		3,687,887
	$	7,011,659

F-18

NOTE 8 – RELATED PARTY TRANSACTIONS

Loans payable to related party

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.

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, 2012 and 2011, accrued interest from such note payable amounted to $0 and $36,250, 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 were combined for an aggregated ten year installment note with a face value of $2,000,000 at a more favorable interest bearing rate of 5%. No compensation was demanded or paid for the reduced interest rate.

On March 1, 2012, Hasco Medical, Inc. completed the acquisition of Ride-Away. Pursuant to the terms and conditions of the Stock Purchase Agreement, Hasco Medical paid Mark Lore a $3,000,000 Promissory Note bearing 5% simple interest, principal and interest payable monthly over 10 years.

In connection with the acquisition of Ride-Away, on March 1, 2012 the Company issued a note to a Related Party in the original amount of $500,000 over 60 months at an interest rate of 6%, with payments commencing on April 1, 2012. The note matures on March 1, 2017. Monthly installment payments are $9,685.

In December 2012, a commercial Note Payable from Hancock Bank was converted to a Note Payable from a related party.

Management Fee

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.

Issuance of common stock

On March 1, 2012, Hasco Medical, Inc. completed the acquisition of Ride-Away. Pursuant to the terms and conditions of the Stock Purchase Agreement, Hasco Medical paid a (now) related party 176,944,450 shares of HASCO Medical, Inc. common stock, valued at $2,500,000.

Sale of common stock

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.

In December 2012, a commercial Note Payable from Hancock Bank was converted to a Note Payable from a Related Party.

F-19

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

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.

On March 1, 2012, Hasco Medical, Inc. completed the acquisition of Ride-Away Handicap Equipment Corp., a closely-held New Hampshire corporation (Ride-Away). Hasco Medical paid the sole selling shareholder of Ride-Away $500,000 in cash and a $3,000,000 Promissory Note bearing 5% simple interest, principal and interest payable monthly over 10 years, along with 176,944,450 shares of HASCO Medical, Inc. common stock, valued at $2,500,000, for a total consideration of $6,000,000.

During 2012, the Company sold 2,813,238 shares of common stock for proceeds of $39,890.

During 2012, outside parties were issued 6,802,978 shares of common stock, valued at fair market at the time of the grant, in the amount of $93,132 for services rendered. Additionally, 6,713,288 shares of common stock were issued to employees as compensation, valued at fair market at the time of the grant, in the amount of $114,228.

NOTE 10 – STOCK OPTION PLAN

Under the Company’s stock option plan, 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 options to purchase an aggregate of 4,075,000 shares of common stock at $0.007 per share which vest at the end of two years, to four officers and three directors of the Company. The options, which expire on the fifth anniversary of the date of grant, 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%. During 2011, 1,000,000 options were forfeited. On June 30, 2012, the Company issued stock grants to four employees valued at a total of $90,000 which vest over a three year period and are contingent upon continued employment.

On August 31, 2012, all outstanding grants under the plan were cancelled.

F-20

Stock option activity for the year ended December 31, 2012 and 2011 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	—
Granted
Exercised
Forfeited	(1,000,000	)	—
Options, December 31, 2010	3,075,000		—	0.007		—
Granted	—		—
Exercised	—		—
Cancelled	(3,075,000	)
Options, December 31, 2011	—		—	0.007		—

Stock options outstanding at December 31, 2010 as disclosed in the above table have no intrinsic value.

NOTE 11 – 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, 2012 and 2011, the Company had net loss carry forwards available to reduce its future federal taxable income of approximately $1,263,000 and $797,000, 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, 2012 and 2011:


	2012			2011
Expected federal income tax expense (34%)	$	365,000		$	(116,000	)
State tax benefit, net of federal tax effect		50,000			(14,000	)
Permanent differences		—			—
		415,000			(130,000	)
Increase in allowance		(415,000	)		130,000
Net income tax benefit		—			—

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


	2012			2011
Net operating loss carryforward	$	125,000		$	433,000
Allowance for doubtful accounts		98,000			125,000
Accrued expenses, related party		—			68,000
		223,000			626,000
Less: valuation allowance		(223,000	)		(626,000	)
		—			—

At December 31, 2012 and 2011, the Company fully reserved against its deferred tax assets due to the uncertainty of the future utilization of such assets. The valuation allowance was decreased by $403,000 and increased by $130,000 in 2012 and 2011, respectively.

F-21

NOTE 12 – 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 Vans and related products and services segment. For the periods ended December 31, 2012 and 2011 all material assets and revenues of the Company were in the United States.


							(Restated)
2012		(Restated) Total		Home Healthcare			Wheelchair Vans
Revenue
Product sales	$	51,871,362	$	708,762		$	51,162,600
Rentals		1,094,574		499,700			594,874
Service and other		10,886,830		148,420			10,738,410
		63,852,766		1,356,882			62,495,884

Cost of Sales
Direct costs		48,774,714		318,839			48,455,875
Depreciation		1,009,587		86,898			922,689
		49,784,301		405,737			49,378,564

Gross profit		14,068,465		951,145			13,117,320

Operating Expenses
Selling and marketing		3,711,159		43,539			3,667,620
General and administrative		9,489,843		1,393,578			8,096,265
Depreciation and amortization		323,088		8,176			314,912
		13,524,090		1,445,293			12,078,797

Operating income (loss)	$	544,375	$	(494,148	)	$	1,038,523

F-22


								(Restated)
2011		(Restated) Total			Home Healthcare			Wheelchair Vans
Revenue
Product sales	$	7,406,796		$	587,617		$	6,819,179
Rentals		1,515,443			1,242,681			272,762
Service and other		121,851			23,248			98,603
		9,044,090			1,853,546			7,190,544

Cost of Sales
Direct costs		6,954,037			447,346			6,506,691
Depreciation		114,870			114,870			—
		7,068,907			562,216			6,506,691

Gross profit		1,975,183			1,291,330			683,853

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		56,992			7,433			49,559
		3,468,854			1,819,252			1,649,602

Operating income (loss)	$	(1,493,671	)	$	(527,922	)	$	(965,749	)

NOTE 13 – 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 claims. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

The Company attempts to mitigate any claim or potential claim through its risk management (insurance) program and through its policies of quality control on all vehicles sold or upon which maintenance is performed. It is the opinion of management, in consultation with our attorneys, that to the extent any claims may have a reasonable possibility of prevailing, potential awards or judgments would be of immaterial financial relevance when considering the financial statements as a whole.

Operating Lease

The Company leases office space Hasco Medical in Addison, Texas under an operating lease which expires on December 15, 2013. Southern Mobility leases office space in Mobile, Alabama under an operating lease that expires on June 30, 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. Ride-Away has offices in Londonderry, New Hampshire; Beltsville, Maryland; East Hartford, Connecticut; Norwalk, Connecticut; Essex Junction, Vermont; Gray, Maine; Norfolk, Virginia; Norristown, Pennsylvania; North Attleboro, Massachusetts; Norwood, Massachusetts; Richmond, Virginia; and Tampa, Florida. These facilities have leases that expire from 2013 to 2027. 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:


2013	$	2,245,371
2014		1,572,407
2015 and thereafter		3,115,867
	$	6,933,645

F-23

The Company incurred rent expense on a consolidated basis for the year in the amounts of $1,062,000 and $203,182 for the years ended December 31, 2012 and 2011, respectively.

NOTE 14 – ACQUISITIONS AND PROFORMA FINANCIAL INFORMATION

On May 13, 2011, the Company completed the acquisition of Mobility Freedom and 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, bearing interest at 6%, for a total consideration of $3,850,000 along with 250,000 shares of HASCO Medical, Inc. common stock. In connection with the cash payment, a related party loaned HASCO $2,000,000 payable over ten years and bearing 5% interest.

On November 16, 2011, the Company acquired Certified Medical and Certified Auto. 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.

On March 1, 2012, the Company completed the acquisition of Ride-Away. Pursuant to the terms and conditions of the Stock Purchase Agreement, HASCO paid the sole selling shareholder $500,000 in cash and a $3,000,000 promissory note bearing 5% simple interest, principal and interest payable monthly over 10 years, along with 176,944,450 shares of HASCO Medical, Inc. common stock, valued at $2,500,000, for a total consideration of $6,000,000.

The following table summarizes the consideration paid and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date for Mobility Freedom and Ride-Away:

Hasco Medical, Inc. and Subsidiaries

Consolidated Pro Forma Statements of Operations

For the Years Ended December 31, 2012 and 2011

(unaudited)


	2012			2011
Revenues, net	$	73,645,509		$	76,432,441
Cost of sales		57,323,631			56,977,294
Gross Profit		16,321,878			19,455,147

Operating expenses:
Selling and marketing		4,470,015			5,328,540
General and administrative		11,371,620			15,896,481
Depreciation and amortization		362,972			392,914
Total operating expenses		16,204,607			21,617,935

Income from operations		117,271			(2,162,788	)

Other income (expense)		(318,056	)		784,630

Income from operations before income taxes		(200,785	)		(1,378,158	)

Provision for income taxes		6,673			57,421

Net loss	$	(194,112	)	$	(1,435,579	)

Earnings per share:
Basic and dilutive		0.0			0.0

Weighted average shares outstanding
Basic and dilutive		948,357,991			936,907,090

F-24

NOTE 15 – RESTATEMENT

Subsequent to the Company’s filing of its Annual Report on Form 10-K for the year ended December 31, 2012, management determined that the Company:

had failed to properly classify direct labor and overhead as cost of goods sold for the years ended December 31, 2012 and 2011. 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.

had failed to properly depreciate leasehold improvements from useful life to the shorter of useful life or lease term.

had failed to properly relieve inventory for sold vehicles that previously had not been fully relieved from inventory.

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

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

F-25

As a result of the above, the Company is restating its previously issued consolidated financial statements for the years ended 2012 and 2011 and the quarters ended September 30, 2011 and June 30, 2011 to correct the errors noted above with the Securities and Exchange Commission within this Annual Report. Accordingly, the accompanying consolidated balance sheet and statements of operations for the period described in the preceding sentence have been retroactively adjusted as summarized below:


Effect of Correction of Purchase Price Allocation, Direct Labor and Overhead, Depreciation of leasehold Improvements, Correction of Inventory, Impairment of Goodwill, and Net revenue method	As Previously Reported			As Restated			Retroactive Adjustment

At December 31, 2012
ASSETS
- Inventory	$	10,746,771		$	10,489,388		$	(257,383	)	(4	)
- Total current assets	$	18,891,112		$	18,633,729		$	(257,383	)
- Property & equipment	$	1,521,267		$	2,162,729		$	641,462		(1	), (3)
- Intangible property	$	7,277,644		$	5,670,013		$	(1,607,631	)	(1	)
- Other non-current assets	$	24,239		$	600,848		$	576,609		(1	)
- Total assets	$	27,714,262		$	27,067,319		$	(646,943	)

LIABILITIES
- Accounts payable and accrued expenses	$	2,628,866		$	2,528,005		$	(100,861)		(11	)
- Current portion of capital lease obligations	$	—		$	510,555		$	510,555		(1	)
- Total current liabilities	$	18,040,113		$	18,449,807		$	409,694		(11	)
- Capital lease obligations, net of current portion	$	—		$	531,969		$	531,969		(1	)
- Total liabilities	$	24,430,720		$	25,372,383		$	941,663

RETAINED EARNINGS/EQUITY
- Accumulated deficit	$	(4,265,290	)	$	(5,853,896	)	$	(1,588,606	)	(1	)
- Total stockholders’ equity	$	3,283,542		$	1,694,936		$	(1,588,606	)
- Total liabilities/stockholders’ equity	$	27,714,262		$	27,067,319		$	(646,943	)

STATEMENT OF INCOME
Year Ended December 31, 2012
- Cost of sales	$	45,619,355		$	49,784,301		$	(4,164,946	)	(1	), (2), (4)

- Gross profit	$	18,233,411		$	14,068,465		$	(4,164,946	)
- General and administrative expenses	$	13,007,551		$	9,489,843		$	(3,517,708	)	(1	), (2)
- Depreciation and amortization	$	628,618		$	323,088		$	(305,530	)	(1	), (3)
- Total operating expenses	$	17,347,328		$	13,524,090		$	(3,823,238	)
- Income from operations	$	886,083		$	544,375		$	(341,708	)
- Other income	$	584,311		$	618,955		$	34,644		(1	)
- Impairment of intangible assets	$	—		$	(105,454	)	$	(105,454	)	(5	)
- Interest expense	$	(934,212	)	$	(942,163	)	$	(7,951	)	(1	)
- Total other income (expenses)	$	(376,641	)	$	(455,402	)	$	(78,761	)
- Income from operations before income taxes	$	509,442		$	88,973		$	(420,469	)
- Provision for income taxes	$	107,534		$	6,673		$	100,861
- Net income	$	401,908		$	82,300		$	(319,608	)

STATEMENT OF STOCKHOLDERS’ EQUITY
At December 31, 2012
- Net income	$	401,908		$	82,300		$	(319,608	)	(7	)
- Accumulated deficit	$	(4,265,290	)	$	(5,853,896	)	$	(1,588,606	)
- Total stockholders’ equity	$	3,283,542		$	1,694,936		$	(1,588,606	)

F-26


STATEMENT OF CASH FLOWS
Year Ended December 31, 2012
Cash Flows from Operating Activities
- Net income	$	401,908		$	82,300		$	(319,608	)	(7	)
- Depreciation and amortization	$	715,446		$	1,285,202		$	(569,756	)	(10	)
- Inventory	$	2,759,476		$	3,702,675		$	943,199		(6	)
- Other assets	$	234,836		$	(341,773	)	$	(576,609	)	(10	)
- Accounts payable and accrued expenses	$	511,776		$	(1,617,403	)	$	(2,129,179	)	(10	)
- Other current liabilities	$	121,944		$	196,944		$	75,000		(10	)
- Cash provided by operating activities	$	2,832,085		$	1,500,098		$	(1,331,987	)

Cash Flows from Investing Activities
- Purchase of property and equipment	$	(372,607	)	$	(511,091	)	$	138,484		(10	)
- Acquisition of investment in subsidiary	$	—		$	(500,000	)	$	(500,000	)	(10	)
- Cash used in investing activities	$	(131,518	)	$	(770,002	)	$	(638,484	)

Cash Flows from Financing Activities
- Proceeds from floor plan financing	$	18,858		$	23,200,055		$	23,181,197		(9	)
- Repayments of floor plan financing	$	—		$	(22,762,293	)	$	(22,762,293	)	(9	)
- Proceeds from line of credit	$	—		$	772,561		$	772,561		(9	)
- Repayments of line of credit	$	—		$	(685,560	)	$	(685,560	)	(9	)
- Proceeds from note and loan payables	$	—		$	524,449		$	524,449		(9	)
- Repayments of note and loan payables	$	(2,121,384	)	$	(343,276	)	$	1,778,108		(9	)
- Repayments of loan payables – related party	$	—		$	(164,775	)	$	(164,775	)	(9	)
- Principal payments under capital lease obligations	$	—		$	(673,216	)	$	(673,216	)	(10	)
- Cash provided by (used in) financing activities	$	(2,062,636	)	$	(92,165	)	$	1,970,471


At December 31, 2011
ASSETS
- Intangible property	$	3,695,755		$	2,426,757		$	(1,268,998	)	(1	)
- Total assets	$	8,011,929		$	6,742,931		$	(1,268,998	)

RETAINED EARNINGS/EQUITY
- Accumulated deficit	$	(4,667,198	)	$	(5,936,196	)	$	(1,268,998	)	(1	)
- Total stockholders’ equity	$	134,385		$	(1,134,613	)	$	(1,268,998	)
- Total liabilities/stockholders’ equity	$	8,011,929		$	6,742,931		$	(1,268,998	)

STATEMENT OF INCOME
Year Ended December 31, 2011
- Product sales	$	7,877,181		$	7,406,796		$	(470,385	)	(6	)
- Total net revenues	$	9,514,475		$	9,044,090		$	(470,385	)

- Cost of sales	$	6,146,490		$	7,068,907		$	(922,417	)	(1	), (6)

- Gross profit	$	3,367,985		$	1,975,183		$	(1,392,802	)
- Depreciation and amortization	$	180,796		$	56,992		$	(123,804	)	(1	)
- Total operating expenses	$	3,592,658		$	3,468,854		$	(123,804	)
- Income (loss) from operations	$	(224,673	)	$	(1,493,671	)	$	(1,268,998	)
- Income from operations before income taxes	$	(342,515	)	$	(1,611,513	)	$	(1,268,998	)
- Net income (loss)	$	(342,515	)	$	(1,611,513	)	$	(1,268,998	)

F-27


STATEMENT OF STOCKHOLDERS’ EQUITY
At December 31, 2011
- Net income (loss)	$	(342,515	)	$	(1,611,513	)	$	(1,268,998	)	(7	)
- Balance, December 31, 2011	$	(4,667,198	)	$	(5,936,196	)	$	(1,268,998	)

STATEMENT OF CASH FLOWS
Year Ended December 31, 2011
Cash Flows from Operating Activities
- Net income	$	(342,515	)	$	(1,611,513	)	$	(1,268,998	)	(7	)
- Depreciation and amortization	$	295,666		$	171,862		$	(123,804	)	(10	)
- Inventory	$	(2,580,833	)	$	(768,464	)	$	1,812,369		(10	)
- Accounts payable and accrued expenses	$	2,560,044		$	2,531,941		$	(28,103	)	(10	)
- Cash used in operating activities	$	(489,576	)	$	(98,112	)	$	391,464

Cash Flows from Investing Activities
- Purchase of property and equipment	$	(154,223	)	$	(542,811	)	$	(388,588	)	(10	)
- Acquisition of investment in subsidiary	$	—		$	(1,900,000	)	$	(1,900,000	)	(10	)
- Cash used in investing activities	$	(154,223	)	$	(2,442,811	)	$	(2,288,588	)

Cash Flows from Financing Activities
- Proceeds from floor plan financing	$	898,713		$	631,915		$	(266,798	)	(9	)
- Proceeds from line of credit	$	—		$	465,284		$	465,284		(9	)
- Repayments of line of credit	$	—		$	(369,000	)	$	(369,000	)	(9	)
- Proceeds from note and loan payables	$	—		$	47,124		$	47,124		(9	)
- Repayments of note and loan payables	$	(122,377	)	$	(40,229	)	$	82,148		(9	)
- Proceeds from loan payables – related party	$	—		$	2,000,000		$	2,000,000		(9	)
- Repayments of loan payables – related party	$	—		$	(61,634	)	$	(61,634	)	(9	)
- Cash provided by financing activities	$	855,836		$	2,752,960		$	1,897,124


At September 30, 2011
ASSETS
- Intangible property	$	1,597,317		$	2,321,303		$	723,986		(1	)
- Total assets	$	6,760,338		$	7,484,324		$	723,986

RETAINED EARNINGS/EQUITY
- Accumulated deficit	$	(4,426,582	)	$	(3,702,596	)	$	723,986		(1	)
- Total stockholders’ equity	$	(132,307	)	$	591,679		$	723,986
- Total liabilities/stockholders’ equity	$	6,760,338		$	7,484,324		$	723,986

STATEMENT OF INCOME
Nine Months Ended September 30, 2011
- Total net revenues	$	5,459,948		$	5,145,743		$	(314,205	)	(6	)

- Cost of sales	$	3,287,036		$	2,329,675		$	(957,361	)	(1	), (6)

- Gross profit	$	2,172,912		$	2,816,068		$	643,156
- Depreciation and amortization	$	135,947		$	55,117		$	80,830		(1	)
- Total operating expenses	$	2,218,019		$	2,137,189		$	80,830
- Income (loss) from operations	$	(45,107	)	$	678,879		$	723,986
- Income from operations before income taxes	$	(101,899	)	$	622,087		$	723,986
- Net income (loss)	$	(101,899	)	$	622,087		$	723,986

F-28


STATEMENT OF INCOME
Three Months Ended September 30, 2011
- Total net revenues	$	3,113,836		$	2,902,720		$	(211,116	)	(6	)

- Cost of sales	$	1,883,919		$	1,029,647		$	(854,272	)	(1	), (6)

- Gross profit	$	1,229,917		$	1,873,073		$	643,156
- Depreciation and amortization	$	106,736		$	63,762		$	42,974		(1	)
- Total operating expenses	$	1,069,439		$	1,026,465		$	42,974
- Income from operations	$	160,478		$	846,608		$	686,130
- Income from operations before income taxes	$	91,447		$	777,577		$	686,130
- Net income	$	91,447		$	777,577		$	686,130

STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2011
Cash Flows from Operating Activities
- Net income	$	(101,899	)	$	622,087		$	723,986		(7	)
- Depreciation and amortization	$	181,535		$	67,484		$	(114,051	)	(10	)
- Common stock issued for services	$	85,286		$	84,486		$	(800	)	(8	)
- Inventory	$	(1,890,353	)	$	(1,771,706	)	$	(118,647	)	(10	)
- Intangibles	$	640,488		$	—		$	(640,488	)	(10	)
- Cash used in operating activities	$	(458,367	)	$	(608,367	)	$	(150,000	)

Cash Flows from Investing Activities
- Acquisition of investment in subsidiary	$	—		$	(1,850,000	)	$	(1,850,000	)	(10	)
- Cash used in investing activities	$	(262,237	)	$	(2,112,237	)	$	(1,850,000	)

Cash Flows from Financing Activities
- Proceeds from floor plan financing	$	—		$	282,713		$	282,713		(9	)
- Proceeds from line of credit	$	—		$	751,906		$	751,906		(9	)
- Repayments of line of credit	$	—		$	(149,000	)	$	(149,000	)	(9	)
- Proceeds from note and loan payables	$	982,206		$	82,798		$	(899,408	)	(9	)
- Repayments of note and loan payables	$	(133,630	)	$	(94,028	)	$	39,602		(9	)
- Proceeds from loan payables – related party	$	—		$	2,000,000		$	2,000,000		(9	)
- Repayments of loan payables – related party	$	—		$	(25,813	)	$	(25,813	)	(9	)
- Cash provided by financing activities	$	908,076		$	2,908,076		$	2,000,000


At June 30, 2011
ASSETS
- Intangible property	$	2,283,447		$	2,321,303		$	37,856		(1	)
- Total assets	$	6,182,162		$	6,220,018		$	37,856

RETAINED EARNINGS/EQUITY
- Accumulated deficit	$	(4,518,031	)	$	(4,480,175	)	$	37,856		(1	)
- Total stockholders’ equity	$	(223,756	)	$	(185,900	)	$	37,856
- Total liabilities/stockholders’ equity	$	6,182,162		$	6,220,018		$	37,856

F-29


STATEMENT OF INCOME
Six Months Ended June 30, 2011
- Total net revenues	$	2,346,112		$	2,243,023		$	(103,089	)	(6	)

- Cost of sales	$	1,403,118		$	1,300,029		$	(103,089	)	(6	)

- Gross profit	$	942,994		$	942,994		$	-
- Depreciation and amortization	$	29,211		$	(8,645	)	$	(37,856	)	(1	)
- Total operating expenses	$	1,148,581		$	1,110,725		$	(37,856	)
- Income (loss) from operations	$	(205,587	)	$	(167,731	)	$	37,856
- Income from operations before income taxes	$	(193,348	)	$	(155,492	)	$	37,856
- Net income (loss)	$	(193,348	)	$	(155,492	)	$	37,856

STATEMENT OF INCOME
Three Months Ended June 30, 2011
- Total net revenues	$	1,861,783		$	1,758,694		$	(103,089	)	(6	)

- Cost of sales	$	1,247,279		$	1,144,190		$	(103,089	)	(6	)

- Gross profit	$	614,504		$	614,504		$	-
- Depreciation and amortization	$	22,103		$	(15,753	)	$	(37,856	)	(1	)
- Total operating expenses	$	673,017		$	635,161		$	(37,856	)
- Income (loss) from operations	$	(58,513	)	$	(20,657	)	$	37,856
- Income (loss) from operations before income taxes	$	(37,691	)	$	165		$	37,856
- Net income (loss)	$	(37,691	)	$	165		$	37,856

STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2011
Cash Flows from Operating Activities
- Net income (loss)	$	(193,348	)	$	(155,492	)	$	37,856		(7	)
- Fair value of options issued to employees	$	4,880		$	4,080		$	(800	)	(8	)
- Inventory	$	(1,088,006	)	$	(1,275,062	)	$	(187,056	)	(1	)
- Cash used in operating activities	$	132,157		$	(17,843	)	$	(150,000	)

Cash Flows from Investing Activities
- Acquisition of investment in subsidiary	$	—		$	(1,850,000	)	$	(1,850,000	)	(1	)
- Cash used in investing activities	$	(180,368	)	$	(2,030,368	)	$	(1,850,000	)

Cash Flows from Financing Activities
- Proceeds from floor plan financing	$	—		$	48,699		$	48,699		(9	)
- Proceeds from line of credit	$	—		$	326,649		$	326,649		(9	)
- Proceeds from note and loan payables	$	444,506		$	69,158		$	(375,348	)	(9	)
- Proceeds from loan payables – related party	$	—		$	2,000,000		$	2,000,000		(9	)
- Cash provided by financing activities	$	409,978		$	2,409,978		$	2,000,000

(1)

Period effect on results of operations to correct the purchase price allocations related to the Mobility Freedom and Ride-Away acquisitions

(2)

Period effect on results of operations for reclassification of labor and overhead

(3)

Period effect on results of operations for change in method to depreciate leasehold improvements

(4)

Period effect on results of operations for inventory adjustments

(5)

Period effect on results of operations for impairment of goodwill

(6)

Period effect on results of operations to correct method used to account for certain Home Healthcare revenue from Gross method to Net method

(7)

Total period effect on results of operations for adjustments

(8)

Total period effect to correct mechanical error

(9)

Total period effect to display amounts in gross format

(10)

Total effect on results of operations to correct the purchase price allocations related to the Mobility Freedom and Ride-Away acquisitions

(11)

Tax effect of above corrections – year ended December 31, 2012 only

F-30