Liquidity and Capital Resources

The Company had cash of $7,961,000 at March 31, 2010, compared to cash of $3,798,000 at September 30, 2009, an increase of $4,163,000. The increase in cash for the six months ended March 31, 2010, is primarily attributed to the sale of common stock to a single institutional investor in March 2010 for gross proceeds of $7 million   borrowings from our credit line facility, and proceeds from the exercise of warrants, partially offset by our direct response advertising costs, the build out of our new 24,000 square foot facility during the quarter, and an increase in the level of outstanding accounts receivable.

As of March 31, 2010, our current assets of $20,796,000 exceeded our current liabilities of $12,697,000 by $8,099,000. The current liabilities as of March 31, 2010, consist of outstanding convertible notes payable totaling $6,037,000. These convertible notes are convertible into shares of our common stock at conversion prices that are less than the current market price of our common stock.

Conversion of May 22, 2008, Convertible Notes

On May 22, 2008, the Company closed a private placement consisting of convertible notes and common stock warrants for gross proceeds of $3,500,000 to a single institutional investor.  The notes were convertible into shares of the Company's common stock at a conversion price of $0.80 per share.  On May 11, 2010, the investor converted the entire $3,500,000 principal amount of the notes into 4,375,000 shares of common stock.

SOURCE Liberator Medical Holdings, Inc.