10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

FORM 10-Q

 (Mark One)

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

For the Quarterly Period Ended March 31, 2013

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to 

Commission File Number 0-13117

HealthWarehouse.com, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	22-2413505
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification No.)

7107 Industrial Road, Florence, Kentucky	41042
(Address of Principal Executive Offices)	(Zip Code)

(800) 748-7001

(Registrant’s Telephone Number, Including Area Code)

Indicate  by check mark whether the registrant (1) has filed all reports required to be  filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or  for such  shorter  period  that  the  registrant  was required to file such reports), and  (2) has  been subject to such filing requirements for the past 90 days.   Yes  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x     No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  o                                                                       Accelerated Filer                     o

Non-accelerated Filer     o                                                                       Smaller Reporting Company  x

(Do not check if a smaller reporting company)

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

There were 26,529,091 shares of Common Stock outstanding as of October 18, 2013.

HEALTHWAREHOUSE.COM, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Item 1.      Financial Statements.	3
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations.	20
Item 3.      Quantitative and Qualitative Disclosures About Market Risk.	24
Item 4.      Controls and Procedures.	24
PART II – OTHER INFORMATION
Item 1.      Legal Proceedings.	25
Item 1A.   Risk Factors.	27
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.	27
Item 3.      Defaults upon Senior Securities.	27
Item 4.      Mine Safety Disclosures.	28
Item 5.      Other Information.	28
Item 6.      Exhibits.	28
SIGNATURES	29

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PART I – FINANCIAL INFORMATION

Item 1.      Financial Statements.

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31,			December 31,
	2013			2012
	(unaudited)
Assets
Current assets:
Cash	$	382,353		$	-
Restricted cash		125,000			850,002
Accounts receivable, net		221,211			214,973
Inventories - finished goods, net		310,065			395,584
Prepaid expenses and other current assets		41,841			52,292
Total current assets		1,080,470			1,512,851
Property and equipment, net		757,665			768,021
Total assets	$	1,838,135		$	2,280,872
Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable – trade	$	2,882,558		$	2,973,774
Accounts payable – related parties		211,932			147,933
Accrued expenses and other current liabilities		700,258			1,942,769
Deferred revenue		104,228			73,787
Current portion of equipment lease payable		50,802			49,122
Convertible notes		-			1,000,000
Notes payable and other advances, net of debt discount of $0 and $44,363 as of March 31, 2013
and December 31, 2012, respectively		40,000			1,955,637
Note payable and other advances – related parties		-			765,000
Redeemable preferred stock – Series C; par value $0.001 per share;
10,000 designated Series C: 10,000 issued and outstanding as of
March 31, 2013 and December 31, 2012 (aggregate liquidation preference of $1,000,000)		1,000,000			1,000,000
Total current liabilities		4,989,778			9,908,022
Long term liabilities:
Long term portion of equipment lease payable		152,847			166,286
Note payable, net of debt discount of $315,300 as of March 31, 2013		184,700			-
Total long term liabilities		337,547			166,286
Total liabilities		5,327,325			10,074,308
Commitments and contingencies
Stockholders’ deficiency:
Preferred stock – par value $0.001 per share; authorized 1,000,000 shares; issued and outstanding
as of  March 31, 2013 and December 31, 2012 as above and as follows:
Convertible preferred stock - Series A – 200,000 shares designated Series A; 44,443 shares available
to be issued; no shares issued and outstanding		-			-
Convertible preferred stock - Series B – 625,000 shares designated Series B; 422,315 and 394,685
shares issued and outstanding as of March 31, 2013 and December 31, 2012 , respectively (aggregate
liquidation preference of $4,060,717 and $3,990,877 as of March 31, 2013
and December 31, 2012, respectively)		422			395
Common stock – par value $0.001 per share; authorized 50,000,000 shares; 24,175,156 and 13,030,397
shares issued and 22,995,944 and 11,851,185 shares outstanding as of March 31, 2013
and December 31, 2012, respectively		24,175			13,031
Additional paid-in capital		26,465,916			16,460,385
Employee advances		(50,386	)		(18,858	)
Treasury stock, at cost, 1,179,212 shares as of March 31, 2013 and December 31, 2012		(3,419,715	)		(3,419,715	)
Accumulated deficit		(26,509,602	)		(20,828,674	)
Total stockholders’ deficiency		(3,489,190	)		(7,793,436	)
Total liabilities and stockholders’ deficiency	$	1,838,135		$	2,280,872
The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	For the Three Months Ended
	March 31,
	2013			2012
Net sales	$	2,409,916		$	3,153,607
Cost of sales		1,235,156			1,704,647
Gross profit		1,174,760			1,448,960
Operating expenses:
Selling, general and administrative expenses		2,389,103			2,684,478
Loss from operations		(1,214,343	)		(1,235,518	)
Other income (expense):
Loss on extinguishment of debt		(2,792,900	)		-
Interest income		-			2,548
Interest expense		(71,123	)		(317,342	)
Total other expense		(2,864,023	)		(314,794	)
Net loss		(4,078,366	)		(1,550,312	)
Preferred stock:
Series B convertible contractual dividends		(69,840	)		(65,271	)
Series B convertible deemed dividends		(1,532,722	)		-
Series C redeemable deemed dividends		-			(92,916	)
Loss attributable to common stockholders	$	(5,680,928	)	$	(1,708,499	)
Per share data:
Net loss – basic and diluted	$	(0.26	)	$	(0.15	)
Series B convertible contractual dividends		-			(0.01	)
Series B convertible deemed dividends		(0.10	)		-
Series C redeemable deemed dividends		-			(0.01	)
Net loss attributable to common stockholders - basic and diluted	$	(0.36	)	$	(0.17	)
Weighted average number of common shares outstanding - basic and diluted		15,609,892			10,191,353
The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(Unaudited)
	Convertible
	Series B																						Total
	Preferred Stock				Common Stock				Additional			Employee			Treasury Stock					Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid-In Capital			Advances			Shares		Amount			Deficit			Deficiency
Balances, December 31, 2012		394,685	$	395		13,030,397	$	13,031	$	16,460,385		$	(18,858	)		1,179,212	$	(3,419,715	)	$	(20,828,674	)	$	(7,793,436	)
Stock-based compensation		-		-		-		-		330,021			-			-		-			-			330,021
Warrants issued to 2012 private
placement investors		-		-		-		-		487,200			-			-		-			-			487,200
Issuance of Series B preferred stock as
payment-in-kind for dividend		27,630		27		-		-		261,057			-			-		-			-			261,084
Cashless exercise of warrants into
common stock		-		-		6,934,784		6,934		(6,934	)		-			-		-			-			-
Contractual dividends on Series B convertible
preferred stock		-		-		-		-		-			-			-		-			(69,840	)		(69,840	)
Beneficial conversion feature and deemed
dividend on Series B convertible preferred
stock		-		-		-		-		1,532,722			-			-		-			(1,532,722	)		-
Warrants issued as debt discount in
connection with notes payable		-		-		-		-		315,300			-			-		-			-			315,300
Conversion of notes and accounts payable
into common stock and warrants		-		-		833,000		833		3,625,067			-			-		-			-			3,625,900
Issuance of common stock and warrants
for cash		-		-		3,376,975		3,377		3,373,598			-			-		-			-			3,376,975
Imputed value of services contributed		-		-		-		-		87,500			-			-		-			-			87,500
Reduction in value of employee
advance reserve		-		-		-		-		-			(31,528	)		-		-			-			(31,528	)
Net loss		-		-		-		-		-			-			-		-			(4,078,366	)		(4,078,366	)
Balances, March 31, 2013		422,315	$	422		24,175,156	$	24,175	$	26,465,916		$	(50,386	)		1,179,212	$	(3,419,715	)	$	(26,509,602	)	$	(3,489,190	)
The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Three Months Ended
	March 31,
	2013			2012
Cash flows from operating activities
Net loss	$	(4,078,366	)	$	(1,550,312	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts		(31,528	)		10,521
Depreciation and amortization		35,846			111,851
Stock-based compensation		330,021			259,409
Warrants issued to 2012 private placement investors		487,200			-
Loss on extinguishment of notes and accounts payable		2,792,900			-
Imputed value of services contributed		87,500			-
Amortization of debt discount		44,363			215,711
Changes in operating assets and liabilities:
Accounts receivable		(6,238	)		21,542
Inventories - finished goods		85,519			106,206
Prepaid expenses and other current assets		10,451			17,386
Accounts payable – trade		(91,216	)		550,400
Accounts payable – related parties		185,999			(4,902	)
Accrued expenses and other current liabilities		(340,265	)		84,793
Deferred revenue		30,441			-
Net cash used in operating activities		(457,373	)		(177,395	)
Cash flows from investing activities
Change in restricted cash		725,002			-
Changes in employee advances		-			(81,043	)
Website development costs		(25,490	)		-
Net cash provided by (used in) investing activities		699,512			(81,043	)
Cash flows from financing activities
Principal payments on equipment leases payable		(11,759	)		(22,131	)
Proceeds from issuance of notes payable		500,000			-
Repayment of notes payable		(2,000,000	)		-
Repayment of convertible notes payable		(1,000,000	)		-
Proceeds from the sale of common stock [1]		2,526,973			125,000
Proceeds from offering in advance of equity offering closing		125,000			-
Cash overdraft		-			(155,656	)
Proceeds from notes payable and other advances – related parties		-			375,000
Repayment of notes payable and other advances – related parties		-			(63,812	)
Net cash provided by financing activities		140,214			258,401
Net increase (decrease) in cash		382,353			(37	)
Cash - beginning of period		-			40
Cash - end of period	$	382,353		$	3
[1] - Excludes $850,002 of cash received during 2012 but closed on during the three months ended March 31, 2013
Cash paid for:
Interest	$	367,978		$	21,491
Taxes	$	-		$	-
The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Continued)
	For the Three Months Ended
	March 31,
	2013		2012
Non-cash investing and financing activities:
Issuance of Series B preferred stock for settlement of accrued dividends	$	261,084	$	244,001
Cashless exercise of warrants into common stock	$	6,934	$	-
Cashless exercise of options into common stock	$	-	$	93
Warrants issued as debt discount in connection with notes payable	$	315,300	$	-
Accrual of contractual dividends on Series B convertible preferred stock	$	69,840	$	65,271
Deemed dividends on Series B convertible preferred stock	$	1,532,722	$	-
Reclassification of accounts payable - trade to equipment lease payable	$	-	$	257,583
Deemed dividend – redeemable Series C preferred stock	$	-	$	92,916
Common stock and warrants issued in exchange of notes and accounts payable	$	3,625,900	$	-
The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.  Organization and Basis of Presentation

HealthWarehouse.com, Inc., a Delaware company incorporated in 1998, (the “Company”) is a U.S. licensed virtual retail pharmacy (“VRP”) and healthcare e-commerce company that sells brand name and generic prescription drugs as well as over-the-counter (“OTC”) medical products. The Company’s objective is to be viewed by individual healthcare product consumers as a low-cost, reliable and hassle-free provider of prescription drugs and OTC medical products. The Company is presently licensed as a mail-order pharmacy for sales to 50 states and the District of Columbia.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2013 and for the three months ended March 31, 2013 and 2012. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the operating results for the full year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2012 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on July 23, 2013.

2. Going Concern and Management’s Liquidity Plans

Since inception, the Company has financed its operations primarily through debt and equity financings and advances from related parties. As of March 31, 2013, the Company had a working capital deficiency of $3,909,308 and an accumulated deficit of $26,509,602.  During the three months ended March 31, 2013 and year ended December 31, 2012, the Company incurred net losses of $4,078,366 and $5,574,775 and used cash in operating activities of $457,373 and $947,911, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Subsequent to March 31, 2013, the Company (a) had a closing of its private placement offering in the amount of $125,000 which funds had been received by the Company during the three months ended March 31, 2013; (b) raised an aggregate of $149,000 in debt financings; and (c) continues to incur net losses, use cash in operating activities and experience cash and working capital constraints. See Note 11.

On February 13, 2013, the Company received a Notice of Redemption related to its Series C Redeemable Preferred Stock aggregating $1,000,000 (see Note 7). As a result of receiving the Notice of Redemption, the Company must now apply all of its assets to redemption of the Series C Preferred Stock and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders (the Company is not permitted to utilize toward the redemption those assets required to pay its debts as they come due and those assets required to continue as a going concern).

The Company recognizes it will need to raise additional capital in order to fund operations, meet its payment obligations and execute its business plan. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, attempt to extend note repayments, attempt to negotiate the preferred stock redemption and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.  If the Company is unable to obtain financing on a timely basis, the Company could be forced to sell its assets, discontinue its operation and /or seek reorganization under the U.S. bankruptcy code.

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, and ION Belgium NV, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets, the valuation of equity instruments and debt discounts.

Reclassifications

Certain accounts in the prior period condensed consolidated financial statements have been reclassified for comparison purposes to conform to the presentation of the current period condensed consolidated financial statements.  These reclassifications had no effect on the previously reported net loss.

Revenue Recognition

Revenues for the sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is reasonably assured. The Company defers revenue when cash has been received from the customer but delivery has not yet occurred.  Such amounts are reflected as deferred revenues in the accompanying condensed consolidated financial statements.

Net Loss Per Share of Common Stock

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted net loss per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock.  Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following:

	March 31,
	2013		2012
Options		2,451,483		2,033,807
Warrants		6,047,119		2,916,590
Series B Convertible Preferred Stock		3,407,313		1,973,425
Convertible Promissory Notes		-		529,100
Total potentially dilutive shares		11,905,915		7,452,922

Stock-Based Compensation

Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award. For employees and directors, the award is measured on the grant date.  For non-employees, the award is measured on the grant date and is then remeasured at each vesting date and financial reporting date.  The Company recognizes the estimated fair value of the award as compensation cost over the requisite service period of the award, which is generally the option vesting term.  The Company generally issues new shares of common stock to satisfy option and warrant exercises.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Summary of Significant Accounting Policies – Continued

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." This ASU addresses the requirements regarding the financial statement presentation of an unrecognized tax benefit within Accounting Standards Codification ("ASC") Topic 740 for the purpose of providing consistency between the financial reporting of U.S. GAAP entities. Generally, this ASU provides guidance for the preparation of financial statements and disclosures when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  This ASU is effective for periods beginning after December 15, 2013 and is not expected to have any impact on the Company’s condensed consolidated financial statements or disclosures.

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	March 31,		December 31,
	2013		2012
Deferred rent	$	40,889	$	39,100
Advertising		75,000		75,000
Salaries and benefits		220,075		166,118
Professional fees		50,000		81,872
Dividends payable		69,840		261,084
Accrued interest		44,250		410,101
Due to investors (1)		125,000		850,002
Customer payables		59,018		51,333
Other		16,186		8,159
Total	$	700,258	$	1,942,769

(1) - Proceeds received from investors in advance of equity offering closing.

5. Convertible Notes Payable

On February 1, 2013, the Company repaid convertible notes with an outstanding principal balance of $1,000,000 plus outstanding accrued interest of $163,861. The convertible notes bore interest at a rate of 7% per annum compounded annually and were due on December 31, 2012. The Company recorded amortization of debt discount associated with convertible notes payable of $82,616 for the three months ended March 31, 2012 using the effective interest method. As of December 31, 2012, the debt discount had been fully amortized.

6. Notes Payable

On February 1, 2013, the Company repaid notes with an outstanding principal balance of $2,000,000 plus outstanding accrued interest of $199,260. The notes bore interest at a rate of 7% per annum and were due on January 15, 2013. The Company recorded amortization of debt discount associated with notes payable of $44,363 and $133,095 for the three months ended March 31, 2013 and 2012, respectively, using the effective interest method.

On March 28, 2013, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed $500,000 from the Lender (the “Loan”). The Loan is evidenced by a promissory note (the “March Note”) and bears interest on the unpaid principal balance of the March Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (as of March 31, 2013, the Prime Rate was 3.25% per annum). Under the terms of the Loan Agreement, the Company has agreed to make monthly payments of accrued interest on the first day of every month, beginning on May 1, 2013. The principal amount and all unpaid accrued interest on the March Note is payable on March 1, 2015, or earlier in the event of default or a sale or liquidation of the Company. The Loan may be prepaid in whole or in part at any time by the Company without penalty.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

6. Notes Payable – Continued

The Company granted the Lender a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to repay the Loan. The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Lender’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. Upon the occurrence of an event of default, the Lender has the right to impose interest at a rate equal to five percent (5.0%) per annum above the otherwise applicable interest rate (the “Default Rate”). The repayment of the Loan may be accelerated prior to the maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties.

In consideration of the Loan, the Company granted the Lender a five-year warrant to purchase 750,000 shares of common stock at an exercise price of $0.35 per share. The warrants contain customary anti-dilution provisions. The warrant had a relative fair value of $315,300 which was set up as debt discount and will be amortized using the effective interest method over the term of the Loan.  Including the value of the warrant, the March Note had an effective interest rate of 40% per annum.

See Note 7 – Stockholders’ Deficiency – Common Stock for details regarding the conversion of outstanding notes payable – related parties into common stock and warrants.

See Note 11 – Subsequent Events for additional details.

7. Stockholders’ Deficiency

Common Stock

During the three months ended March 31, 2013, pursuant to a private placement offering of units that commenced on October 4, 2012 (the “Private Placement”), the Company received an aggregate of $3,376,975 of proceeds related to the sale of 3,376,975 units at a price of $1.00 per unit. The aggregate amount includes $500,000, which was received from an officer, and $850,002, which was received during the fourth quarter of 2012 and classified as restricted cash as of December 31, 2012. Each unit consists of (i) one share of the Company’s common stock and (ii) a five-year warrant to purchase three shares of the Company’s common stock at an exercise price of $0.25 per share, such that warrants to purchase an aggregate of 10,130,925 shares of common stock were issued.Substantially all of the proceeds from the sale of the units were used by the Company to satisfy all of its obligations under the convertible notes and notes (see Notes 5 and 6). In connection with the Private Placement, an officer has entered into repurchase agreements with certain purchasers of units, pursuant to which he has agreed to repurchase, subject to certain conditions, one-half of these holder’s units at a purchase price of $1.00 per unit if the closing price of the Common Stock is less than $0.25 on five consecutive trading days at any time within one year of February 1, 2013. Cape Bear, which holds a substantial equity position in the Company, also entered into repurchase agreements with certain purchasers, other than the officer, that are substantially similar to the officer’s agreements, except that Cape Bear’s obligations are secured by a lien over certain real estate.

On March 13, 2013, the Company exchanged $761,000 of notes payable and other advances – related parties and $72,000 of accounts payable to a related party into an aggregate of 833,000 units at a price of $1.00 per unit. Each unit consists of (i) one share of the Company’s common stock, and (ii) a five-year warrant to purchase two and three-quarters shares of the Company’s common stock at an exercise price of $0.25 per share (such that warrants to purchase an aggregate of 2,290,750 shares of common stock were issued). The $3,625,900 aggregate fair value of the securities issued ($2,639,700 related to the warrants and $986,200 related to the common stock) was credited to equity at conversion. The Company recorded a $2,792,900 extinguishment loss which represents the incremental fair value of the securities issued as compared to the carrying value of the liabilities.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. Stockholders’ Deficiency – Continued

Series B Preferred Stock

On January 1, 2013, the Company issued 27,630 shares of Series B Convertible Preferred Stock valued at $261,084, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding to the Series B Convertible Preferred Stockholders as payment in kind for dividends (the “2013 Series B Dividend”). In connection with the 2013 Series B Dividend, the Company recognized a $202,305 beneficial conversion feature during the three months ended March 31, 2013, which represents the difference between the commitment date value of the shares and the effective conversion price. In connection with the outstanding preferred stock, during the three months ended March 31, 2013 and 2012, the Company recorded $69,840 and $65,271 as contractual 7% dividends, respectively. As of December 31, 2012, February 1, 2013, March 13, 2013 and April 11, 2013, Series B holders are entitled to convert into 5.00, 7.61, 8.07 and 8.14 shares, respectively, of the Company’s common stock for each share of Series B Preferred Stock due to the anti-dilution provision. The anti-dilution provision represents a contingent beneficial conversion feature.  As of March 31, 2013, an incremental 1,295,738 shares of common stock are issuable at conversion of the Series B Convertible Preferred Stock as compared to the original terms.   Using the commitment date common stock price in effect, the commitment date value of the incremental shares is $3,332,792. However, recognition of beneficial conversion features is limited to the aggregate gross proceeds allocated to the preferred stock of $3,199,689 (422,315 shares of Series B Convertible Preferred Stock times $9.45 per share less the relative fair value of the warrants of $791,188) less the $1,666,967 beneficial conversion feature already recognized on the original issuance of 365,265 shares of Series B Preferred Stock (prior to the issuance of additional shares as payment-in-kind in lieu of cash dividends) and the $202,305 recognized related to the 2013 Series B Dividend. Due to these limitations, a beneficial conversion feature of $1,330,417 related to the incremental shares was recognized during the three months ended March 31, 2013.

Series C Preferred Stock

On February 13, 2013, the Company received a Notice of Redemption of Series C Preferred Stock. As a result of the Convertible Notes coming due and not being paid on December 31, 2012, the Company accelerated the accretion rate of the deemed dividend on the Redeemable Preferred Stock – Series C and reclassified the Redeemable Preferred Stock – Series C from temporary equity to current liabilities. The Company recorded Series C deemed dividends of $92,916 during the three months ended March 31, 2012.  As of December 31, 2012, the discount associated with the Series C Preferred Stock was fully amortized.

Stock Options

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2013			2012
Risk free interest rate		1.13	%		1.04	%
Dividend yield		0.00	%		0.00	%
Expected volatility		166.0	%		172.2	%
Expectd life in years		6.00			6.00

The weighted average fair value of the stock options granted during the three months ended March 31, 2013 and 2012 was $1.20 and $5.27 per share, respectively.

On February 15, 2013, the Company granted options to employees to purchase an aggregate of 330,500 shares of common stock under the 2009 Plan at an exercise price of $1.60 per share for an aggregate grant date value of $395,041. The options vest over a three year period and have a term of ten years.

Stock-based compensation expense related to stock options for the three months ended March 31, 2013 and 2012 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $312,444 and $259,409, respectively.  As of March 31, 2013, stock-based compensation expense related to stock options of $2,916,160 remains unamortized, including $2,024,591 which is being amortized over the weighted average remaining period of 2.3 years.  The remaining $891,569 is related to a performance based option where vesting is currently deemed to be improbable and no amount is being amortized.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. Stockholders’ Deficiency – Continued

Stock Options – Continued

A summary of the stock option activity during the three months ended March 31, 2013 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, January 1, 2013		2,183,899		$	3.42
Granted		330,500			1.60
Exercised		-			-
Forfeited		(62,916	)		3.11
Outstanding, March 31, 2013		2,451,483		$	3.18		6.2	$	77,331
Exercisable, March 31, 2013		1,192,649		$	2.66		4.7	$	77,331

The following table presents information related to stock options at March 31, 2013:

	Options Outstanding		Options Exercisable
	Weighted		Weighted	Weighted
Range of	Average	Outstanding	Average	Average	Exercisable
Exercise	Exercise	Number of	Exercise	Remaining Life	Number of
Price	Price	Options	Price	In Years	Options
$0.80 - $2.20	$         1.59	806,400	$         1.58	2.5	485,900
$2.21 - $3.80	3.19	924,083	2.91	5.6	510,083
$3.81 - $6.99	4.94	721,000	4.65	8.1	196,666
	$         3.18	2,451,483	$         2.66	4.7	1,192,649

Warrants

In applying the Black-Scholes option pricing model to stock warrants granted, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2013			2012
Risk free interest rate		0.88	%		n/a
Dividend yield		0.00	%		n/a
Expected volatility		164.3	%		n/a
Expectd life in years		5.00			n/a

The weighted average fair value of the stock warrants granted during the three months ended March 31, 2013 was $1.38 per share.  There were no warrants granted during the three months ended March 31, 2012.

On February 15, 2013, the Company granted vested five-year warrants to purchase an aggregate of 408,348 shares of common stock at an exercise price of $1.00 per share to investors who purchased shares in private placements at $4.50 per share during 2012. The warrants had an aggregate issuance date fair value of $487,200 which was expensed immediately.

See Note 7 – Stockholders’ Deficiency – Common Stock for details regarding warrants granted in connection with the Private Placement and the conversion of related party notes and accounts payable into equity.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. Stockholders’ Deficiency – Continued

Warrants – Continued

During the three months ended March 31, 2013, the Company issued an aggregate of 6,934,784 shares of common stock to several holders of warrants who elected to exercise warrants to purchase an aggregate of 8,125,750 shares of common stock on a "cashless" basis under the terms of the warrants. The warrants had an exercise price of $0.25 per share. The aggregate intrinsic value of the warrants exercised was $11,840,859 for the three months ended March 31, 2013.

Stock-based compensation expense related to warrants for the three months ended March 31, 2013 and 2012 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $504,777 and $0, respectively. As of March 31, 2013, stock-based compensation expense related to warrants of $674,312 remains unamortized, including $97,472 which is being amortized over the weighted average remaining period of 2.5 years.  The remaining $576,840 is related to a performance based warrant where vesting is currently deemed to be improbable and no amount is being amortized.

A summary of the stock warrant activity during the three months ended March 31, 2013 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Outstanding, January 1, 2013		592,846		$	3.01
Granted		13,580,023			0.28
Exercised		(8,125,750	)		0.25
Forfeited		-			-
Outstanding, March 31, 2013		6,047,119		$	0.58		4.7	$	4,618,507
Exercisable, March 31, 2013		5,767,119		$	0.46		4.8	$	4,618,507

The following table presents information related to stock warrants at March 31, 2013:

	Warrants Outstanding		Warrants Exercisable
	Weighted		Weighted	Weighted
Range of	Average	Outstanding	Average	Average	Exercisable
Exercise	Exercise	Number of	Exercise	Remaining Life	Number of
Price	Price	Warrants	Price	In Years	Warrants
$0.25 - $0.35	$        0.26	5,045,925	$        0.26	4.9	5,045,925
$0.36 - $1.60	1.00	408,348	1.00	4.9	408,348
$1.61 - $3.00	2.91	562,846	2.91	3.4	312,846
$3.01 - $4.95	4.95	30,000	-	-	-
	$        0.58	6,047,119	$        0.46	4.8	5,767,119

Services Contributed

Effective January 1, 2013, an executive officer of the Company waived payment for services contributed during 2013. As a result, the Company imputed the value of the services contributed and recorded salary expense of $87,500 for the three months ended March 31, 2013 with a corresponding credit to stockholders’ deficiency.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Commitments and Contingent Liabilities

Operating Leases

On March 13, 2013, the Company gave notice of early termination for a lease agreement for a corporate apartment dated May 31, 2011.  Accordingly, the lease expired on March 31, 2013. The Company did not incur any penalties related to the early termination of the lease agreement.

During the three months ended March 31, 2013 and 2012, the Company recorded aggregate rent expense of $45,719 and $52,457, respectively.

Litigation

On February 9, 2012, two of our former stockholders, Rock Castle and Jason Smith (“Plaintiffs”), filed suit against the Company in the Hamilton County, Ohio Court of Common Pleas, alleging that the Company had breached the terms of certain stock options the Company granted to the Plaintiffs in connection with the Company’s now-terminated oral consulting arrangements with the Plaintiffs, by among other things, refusing Plaintiffs’ purported exercise of options to purchase 233,332 shares of the Company’s common stock at an exercise price of $2.00 per share in December 2011.  Plaintiffs have requested that, among other things, the court require the Company to permit the exercise of the 233,332 options.  Plaintiffs have also provided an expert report indicating damages of $2.086 million. Also named as defendants were two individuals, Michael Peppel and Gary Singer, whom Plaintiffs claim acted as agents for the Company in connection with its purchase of shares of its common stock from Plaintiffs in September 2011. On April 26, 2013, Plaintiffs dismissed Mr. Singer from the lawsuit.  Trial of the case is currently scheduled for April of 2014.  The Company denies all of the Plaintiffs’ claims and intends to contest this matter vigorously.

On October 9, 2012, American Express Travel Related Services Company, Inc. brought legal action against the Company in the Boone County, Kentucky Circuit Court. The action seeks to recover the unpaid balance on a credit card account in the amount of $87,029, plus interest and costs. The Company filed an answer in November 2012.  This litigation was resolved on July 10, 2013 by a negotiated settlement. Such amount has been accrued in the accompanying consolidated balance sheet as of March 31, 2013.

On November 5, 2012, HD Smith, Inc., one of the Company’s vendors, (“Plaintiff”) filed a complaint against the Company alleging that it breached its vendor credit agreement. The Plaintiff is seeking damages of $170,316 plus pre-judgment interest and attorneys’ fees. This litigation was resolved on January 25, 2013, as amended on June 20, 2013, by a negotiated settlement. Such amount has been accrued in the accompanying consolidated balance sheet as of March 31, 2013.

On March 13, 2013, a former vendor filed suit against the Company in the Hamilton County, Ohio Court of Common Pleas, alleging that the Company had breached its contract. The plaintiff is seeking damages of $17,800 plus pre-judgment interest and other costs and expenses. The Company answered the complaint and trial was set for June 2014.  This matter was resolved by a negotiated settlement. Such amount has been accrued in the accompanying consolidated balance sheet as of March 31, 2013.

On March 20, 2013, a complaint was filed in the Delaware Court of Chancery by two shareholders of the Company, HWH Lending, LLC and Milfam I L.P., seeking to compel the holding of an annual meeting of stockholders for the election of directors under Delaware law.  The Company filed an answer to the complaint on April 12, 2013.  On May 13, 2013, the Company publicly announced that the Board of Directors had set the date for the Company’s next annual meeting of stockholders as August 15, 2013 at 11:00 a.m. Eastern time.  In lieu of further litigation, on July 18, 2013, the parties submitted to the court a proposed order confirming August 15, 2013 as the annual meeting date and establishing certain procedures related to the annual meeting.  On July 18, 2013, the court entered the proposed order providing that (i) the Company shall notice and hold its annual meeting on August 15, 2013 for the election of directors and for the transaction of any other business properly brought before the meeting, and the date of the  meeting shall not be adjourned, continued or postponed prior to the election of directors absent an order of the court; (ii) the shares of the Company’s stock represented at the annual meeting, either in person or by proxy, and entitled to vote thereat shall constitute a quorum for purposes of the meeting, notwithstanding any contrary provision in the Company’s certificate of incorporation or bylaws, and (iii) the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting is July 1, 2013, and if the annual meeting noticed for August 15, 2013 is adjourned, continued or postponed prior to the election of directors pursuant to an order of the court, the Company may set a new record date in accordance with the Company’s bylaws. In accordance with the Court order, the Company’s annual meeting of stockholders was held on August 15, 2013 at which time Lalit Dhadphale, Youssef Bennani, Joseph Savarino, and Ambassador Ned Siegel each received a plurality of the total votes cast at the annual meeting and each was elected as a director by the stockholders of the Company. On September 24, 2013, this action was dismissed without prejudice by a joint stipulation of dismissal.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Commitments and Contingent Liabilities – Continued

Litigation – Continued

 On April 23, 2013, the Company’s Board of Directors formed a Special Committee, chaired by Youssef Bennani, a director and Chairman of the Company’s Audit Committee, to investigate certain stockholder demands.  Since March 1, 2013, the Company has received three letters from stockholders alleging certain breaches of fiduciary duties by directors of the Company and demanding that the Company commence investigations of the alleged conduct.  On March 1, 2013, the Company received a letter on behalf of the holders of the Company’s Series B Preferred Stock (“Preferred Holders”) alleging that a convicted felon appears to be a consultant to the Company, owes the Company money, and exercises control over the Company.  On March 8, 2013, the Company received a letter on behalf of stockholder Wayne Corona alleging that two directors, Matthew Stecker and John Backus, breached their fiduciary duties and demanding that the Company investigate legal claims against those directors.  The letter alleges that the director designee of the holders of the Company’s Series B Preferred Stock and the director designee of New Atlantic Ventures Fund III, L.P. (“NAV”) acted in concert to attempt to scuttle the Company’s recent financing plan.  The letter also alleged that the director designee of the Preferred Holders and the director designee of NAV sought to prevent the Company from paying back its lenders in 2010 and 2011.  On March 18, 2013, the Company received a letter on behalf of the two directors denying the allegations and stating there was no proper basis for launching an investigation.  On March 27, 2013, a letter on behalf of Messrs. Backus and Stecker, in their capacities as directors and stockholders, demanded that the Company (i) investigate alleged breaches of confidentiality and fiduciary duties by the Company’s President and CEO and two other directors in connection with the purported stockholder demand letter of Mr. Corona dated March 8, 2013, and (ii) assert related claims against those individuals.  The letter also asserted that the director constituting the special committee, Youssef Bennani, is subject to alleged conflicts of interest that disqualify him from serving on any proposed special committee to evaluate the pending stockholder demands.  The Special Committee has retained an independent law firm to conduct the investigation and advise the Special Committee.

On April 30, 2013, a purported class-action complaint was filed against the Company in the United States District Court for the Northern District of Illinois.  The complaint alleges that the Company sent an unsolicited advertising fax to Glen Ellyn Pharmacy, the named plaintiff, and other recipients.  The complaint alleges that such a fax violates the federal Telephone Consumer Protection Act (the “TCPA”), the Illinois Consumer Fraud Act and Illinois common law.  Under the TCPA, recipients of unsolicited fax advertisements are entitled to damages of up to $500 per fax for inadvertent violations and up to $1,500 for knowing or willful violations.  At the time of filing the complaint, the plaintiff also filed a motion asking the Court to certify a class of persons and entities who were sent advertising faxes by the Company which did not contain an opt out notice.  On June 19, 2013, the plaintiff filed an amended class-action complaint which withdrew the two counts for alleged violations of the Illinois Consumer Fraud Act and the common law tort of conversion.  The amended complaint eliminates claims for damages under Illinois law and leaves only a single count for an alleged violation of the TCPA.  The Company filed an answer to the amended complaint on July 8, 2013 contesting class certification and liability. The District Court has not established or recognized any class.  This litigation was resolved on September 24, 2013. The settlement amount is deemed to be de minimis.

On May 7, 2013, a putative stockholder derivative action was filed in the Court of Chancery of the State of Delaware against certain directors and the chief executive officer of the Company and against the Company, as a nominal defendant.  The complaint alleges claims for breach of fiduciary duty, entrenchment and corporate waste arising out of the alleged failure to conduct annual meetings, SEC filing obligations, advances to a former employee and a $500,000 secured loan to the Company which the entire board of directors approved.  The derivative complaint seeks unspecified compensatory damages and other relief.  The Company and the individual defendants believe that the allegations stated in the complaint are without merit and they intend to defend themselves vigorously against the allegations. The individual director defendants filed a motion to dismiss the complaint on July 22, 2013 and filed an opening brief in support of the motion to dismiss on August 2, 2013.  The Company joined in the motion to dismiss.  Plaintiff’s brief in opposition to the motion to dismiss was due on September 16, 2013.  Instead of filing a brief in opposition to the motion to dismiss, on September 16, 2013, plaintiff filed an amended complaint against the same defendants alleging two claims for breach of fiduciary duty and corporate waste and deleting the claim for entrenchment.  The claims in the amended complaint arise out of allegations regarding a failure to conduct stockholder annual meetings, a failure to comply with SEC filing obligations, a lack of internal controls and unauthorized advances to a former employee and a $500,000 secured loan approved by the Company’s entire board.  The Company and the individual defendants continue to believe the allegations are without merit and intend to vigorously defend themselves against the allegations. On October 3, 2013, the individual director defendants moved to dismiss the amended complaint, and the Company joined in the motion to dismiss.  Under a briefing schedule approved by the court, defendants’ brief on the motion to dismiss is due by November 4, 2013, plaintiff’s answering brief is due by December 13, 2013, and defendants’ reply brief is due by January 10, 2014.

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HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

8. Commitments and Contingent Liabilities – Continued

Litigation – Continued

On May 15, 2013, a former consultant filed suit in Boone County, Kentucky Circuit Court alleging breach of contract and unjust enrichment for unpaid consulting fees and expenses of approximately $27,000.  The Company filed an answer to the complaint on July 22, 2013 and intends to vigorously defend itself against the allegations.

On August 9, 2013, two shareholders of the Company, HWH Lending, LLC and Milfam I L.P., filed in the Delaware Court of Chancery a verified complaint for injunctive and declaratory relief, seeking to prevent the Company from including a 10.5% block of shares held by a stockholder in the vote count at the Company’s upcoming annual meeting of stockholders scheduled for August 15, 2013.  The complaint alleged that the Company and its Chief Executive Officer did not follow proper procedures in issuing the shares to the stockholder and caused those shares to be issued in violation of Delaware law.  Following an expedited briefing schedule, the court held a hearing on August 14, 2013 and denied plaintiffs’ request for a temporary restraining order.  On August 21, 2013, the plaintiffs filed a notice of voluntary dismissal, dismissing the action without prejudice.

On October 11, 2013, two former directors of the Company sent a letter demanding payment of $80,766 in legal fees and expenses pursuant to certain Company indemnification and advancement provisions.  The Company is evaluating the demand and has requested additional information.

In the normal course of business the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable. Currently, other than discussed above, the Company is not involved in any such material matters.

Settlement Agreement

On February 22, 2013, the Company entered into a settlement agreement with a counterparty for amounts owed related to the return of expired goods and inventory and the Company wrote down the accounts receivable to the settlement amount as of December 31, 2012. On February 28, 2013, the Company received $50,000 in connection with the agreement in complete satisfaction of all outstanding and past due accounts receivable from the counterparty, such that there was no balance due to the Company as of March 31, 2013.

9. Concentrations

The Company maintains deposits in financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in these financial institutions in excess of the amount insured by the FDIC.

As of March 31, 2013, three companies represented approximately 16%, 15% and 14% of accounts receivable.  As of December 31, 2012, two companies represented approximately 18% and 14% of accounts receivable.

During the three months ended March 31, 2013, two vendors represented 30% and 11% of total inventory purchases. During the three months ended March 31, 2012, one vendor represented 41% of total inventory purchases.

- 17 -

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

10. Related Party Transactions

During the three months ended March 31, 2013 and 2012, a director was paid $0 and $13,800 for general financial and business consulting. Beginning July 1, 2013, the director is to be paid $3,000 per month and is entitled to expense reimbursements as compensation for serving on the Company’s Board committees.

From March 2011 to April 2013, a wife of a director served as the agent for the Company's D&O insurance. During the three months ended March 31, 2013 and 2012, the Company recorded insurance premium expense of $14,100 and $11,750, respectively.

See Note 7 – Stockholders’ Deficiency – Common Stock for details regarding the exchange of common stock and warrants in satisfaction of related party notes payable, advances and accounts payable.

11. Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed below.

Private Placement Offerings

On April 11, 2013, the Company completed private placements for an aggregate of $125,000 for the purchase 125,000 units at a price of $1.00 per unit. Each unit consists of (i) one share of the Company’s common stock, and (ii) a five-year warrant to purchase three shares of the Company’s common stock at an exercise price of $0.25 per share. Substantially all of the proceeds from the sale of the units were used by the Company to satisfy all of its obligations under the Notes and Convertible Notes (see Note 7).

Warrant Exercises

Subsequent to March 31, 2013, the Company issued an aggregate of 3,408,147 shares of common stock to holders of warrants who elected to exercise warrants to purchase an aggregate of 4,404,273 shares of common stock on a "cashless" basis under the terms of the warrants. The warrants had exercise prices of $0.25 per share (3,245,925 gross shares), $0.35 per share (750,000 gross shares), and $1.00 per share (408,348 gross shares).

Option Grants

On June 19, 2013, the Company granted an option to a director to purchase 100,000 shares of common stock under the 2009 Plan at an exercise price of $1.45 per share for a grant date value of $109,600.  The option vests over a three year period and has a term of ten years.

Pagosa Health LLC

On June 4, 2013, the Company formed a wholly owned subsidiary called Pagosa Health LLC (“Pagosa”). On June 7, 2013, Pagosa signed a three year lease for $1,000 per month to house an office, pharmacy as well as inventory and is located in Lawrenceburg, Indiana. A redundant facility is required by Verified Internet Pharmacy Practice Sites (“VIPPS”) and a newly acquired contract.  Pagosa will serve as a backup facility and will function as a closed door pharmacy. On July 8, 2013, the parties agreed to extend the lease for two additional years, such that the new termination date is now June 7, 2018.

Related Party Advances

Subsequent to March 31, 2013, an officer advanced approximately $2,000 to the Company and he was repaid approximately $60,000. As of March 31, 2013, the outstanding payable to the officer was approximately $154,000.

Notes Payable

On August 15, 2013, the Company issued a note payable to a related party with a principal balance of $49,000, bearing interest at a rate of 10% per annum.  The note has a maturity date of November 7, 2013 and will be repaid in weekly payments of principal and interest beginning in September 2013.

- 18 -

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

11. Subsequent Events – Continued

Notes Payable – Continued

Effective September 30, 2013, the Company entered into an Amended and Restated Promissory Note (the “September Note”) which supersedes the March Note (see Note 6 – Notes Payable) with the same Lender.  The Company borrowed an additional $100,000 from the Lender, which brought the face value of the September Note to $600,000.  The September Note contains financial covenants which require the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation (“EBITDAS”) for the calendar quarters and years ended between December 31, 2013 and 2014, inclusive. In addition, the September Note extended the deadline for providing the March 31, 2013 and June 30, 2013 quarterly financial statements and financial covenant certifications from 45 days after quarter end to October 31, 2013. The remainder of the material September Note terms are unchanged from the March Note.  In consideration of the Lender providing additional funds and entering into the September Note, the Company granted the Lender a five-year warrant to purchase 150,000 shares of common stock at an exercise price of $0.35 per share. The warrant contains customary anti-dilution provisions. The warrant had a relative fair value of $51,200 which was set up as debt discount and will be amortized using the effective interest method over the term of the September Note.  Including the value of the warrants issued in connection with the March Note and September Note, the September Note had an effective interest rate of 41% per annum.

Sublease Agreement

On October 10, 2013, the Company entered into a sublease agreement for 15,000 square feet of warehouse space at the Company’s corporate headquarters in Florence, Kentucky. The initial term of the sublease expires on January 31, 2014 with rent of $4,688 per month. After the expiration of the initial term, the tenant may extend the term of the sublease agreement on a month to month basis.

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

The following discussion and analysis of the results of operations and financial condition of HealthWarehouse.com, Inc. (and including its subsidiaries,  the “Company”) as of March 31, 2013 and December 31, 2012 and for the three months ended March 31, 2013 and 2012 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to the Company. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors That May Affect Results and Financial Condition”) of our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (the “SEC”) on July 23, 2013.

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Overview

We are a Verified Internet Pharmacy Practice Sites (“VIPPS”) accredited retail mail-order pharmacy and healthcare e-commerce company that sells discounted generic and brand name prescription drugs, as well as, over-the-counter (OTC) medical products and surgical supplies. Our web addresses are http://www.healthwarehouse.com  and http://www.hocks.com. At present, we sell:

●   a range of prescription drugs (we are licensed as a mail-order pharmacy for sales to 50 states and the District of Columbia);

●   diabetic supplies including glucometers, lancets, syringes and test strips;

●   OTC medications covering a range of conditions from allergy and sinus to pain and fever to smoking cessation aids;

●   home medical supplies including incontinence supplies, first aid kits and mobility aids; and

●   diet and nutritional products including supplements, weight loss aids, and vitamins and minerals.

Our objectives are to make the pharmaceutical supply chain more efficient and to pass the savings on to the consumer.  We are becoming known by consumers as a convenient, reliable, discount provider of over-the-counter and prescription medications and products. We intend to continue to expand our product line as our business grows.

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Results of Operations

Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012

	For the Three Months						For the Three Months
	Ended March 31, 2013			% of Revenue			Ended March 31, 2012			% of Revenue
	(unaudited)						(unaudited)
Net sales	$	2,409,916			100.0	%	$	3,153,607			100.0	%
Cost of sales		1,235,156			51.3	%		1,704,647			54.1	%
Gross profit		1,174,760			48.7	%		1,448,960			45.9	%
Selling, general & administrative		2,389,103			99.1	%		2,684,478			85.1	%
Loss from operations		(1,214,343	)		(50.4	%)		(1,235,518	)		(39.2	%)
Loss on extinguishment		(2,792,900	)		(115.9	%)		-			0.0	%
Interest income		-			0.0	%		2,548			0.1	%
Interest expense		(71,123	)		(3.0	%)		(317,342	)		(10.1	%)
Net loss	$	(4,078,366	)		(169.2	%)	$	(1,550,312	)		(49.2	%)

Net Sales

Net sales for the three months ended March 31, 2013 fell to $2,409,916 from $3,153,607 for the three months ended March 31, 2012, a decrease of $743,691 or 23.6%, primarily as a result of a reduction in advertising due to cash constraints as well as a shift from over-the-counter inventory toward the higher margin prescription drug inventory which has more loyal customers. As a result, OTC and prescription sales decreased approximately $590,000 and $106,000, respectively.

Costs and Expenses

Cost of Sales and Gross Margin

Cost of sales were $1,235,156 for the three months ended March 31, 2013 as compared to $1,704,647 for the three months ended March 31, 2012, a decrease of $469,491 or 27.5%, primarily as a result of a reduction in order volume. Gross margin percentage increased year-over-year from 45.9% for the three months ended March 31, 2012 to 48.7% for the three months ended March 31, 2013, primarily due to the shift in product mix from over-the-counter drugs to higher margin prescription drugs. We believe that the change in product mix with prescription drugs increasing will continue to improve margins during 2013 and our marketing efforts have focused on this shift.

Selling, General and Administrative Expenses

Selling, general and administrative expenses totaled $2,389,103 for the three months ended March 31, 2013 compared to $2,684,478 for the three months ended March 31, 2012, a decrease of $295,375 or 11.0%. The three months ended March 31, 2013 expense decreases included (a) decreased advertising expense of $354,123 (primarily due to the termination of an advertising campaign); (b) reduced freight expense of $162,630 (primarily due to decreased sales); (c) reduced salaries expense of $87,430 (primarily due to reduction in headcount and salaries); (d) reduced travel expense of $75,129 (primarily due to cost reduction initiatives); and (e) reduced amortization expense of $70,984 (due to the write-off in full of our intangible asset in 2012) .  The decreases were partially offset by (a) an increase in stock-based compensation expense of $557,812 (primarily due to warrants issued to 2012 private placement investors); (b) increased legal expense of $102,044 (primarily due to increased litigation); and (c) increased contract labor expense of $79,444 (primarily due to the increased use of contractors).  We expect that our selling, general and administrative expenses, specifically legal and professional fees, will decrease over time. Certain professional fees will decrease as we improve our internal controls over financial reporting. We expect our legal fees to decrease following the proxy contest that concluded at our Annual Meeting of Shareholders held on August 15, 2013 and further as we resolve our outstanding litigation.

Loss on Extinguishment

During the three months ended March 31, 2013, we recorded a $2,792,900 extinguishment loss which represents the incremental fair value of the equity securities issued as compared to the carrying value of the liabilities that were exchanged.

Interest Expense

Interest expense decreased from $317,342 in the three months ended March 31, 2012 to $71,123 in the three months ended March 31, 2013, a decrease of $246,219 or 77.6%, due to the repayment of notes payable and convertible notes payable during the three months ended March 31, 2013.

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Adjusted EBITDAS

We believe Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation (“Adjusted EBITDAS”), a non-GAAP financial measure, is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for different companies for reasons unrelated to overall operating performance. We believe that:

●   Adjusted EBITDAS provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and

●   Adjusted EBITDAS is useful because it excludes non-cash charges, such as depreciation and amortization, stock-based compensation and one-time charges, which the amount of such expense in any specific period may not directly correlate to the underlying performance of our business operations and these expenses can vary significantly between periods.

We use Adjusted EBITDAS in conjunction with traditional GAAP measures as part of our overall assessment of our performance, to evaluate the effectiveness of our business strategies and to communicate with our lenders, stockholders and board of directors concerning our financial performance.

Adjusted EBITDAS should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do. We compensate for the inherent limitations associated with using Adjusted EBITDAS through disclosure of these limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDAS to the most directly comparable GAAP measure, specifically net loss.

The following provides a reconciliation of net loss to Adjusted EBITDAS:

	For the Three Months Ended
	March 31,
	2013			2012
	(unaudited)
Net loss	$	(4,078,366	)	$	(1,550,312	)
Non-GAAP adjustments:
Loss on extinguishment of debt		2,792,900			-
Interest expense, net		71,123			314,794
Depreciation and amortization		35,846			111,851
Warrants issued to 2012 investors		487,200			-
Imputed value of contributed services		87,500			-
Stock-based compensation		330,021			259,409
Adjusted EBITDAS	$	(273,776	)	$	(864,258	)

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Impact of Inflation

We believe that inflation has not had a material impact on our results of operations for the three months ended March 31, 2013 and 2012. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.

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Liquidity and Capital Resources

Since inception, we have financed operations primarily through debt and equity financings and advances from stockholders.  As of March 31, 2013 we had a working capital deficiency of $3,909,308 and an accumulated deficit of $26,509,602.  During the three months ended March 31, 2013 and year ended December 31, 2012, we incurred net losses of $4,078,366 and $5,574,775 and used cash in operating activities of $457,373 and $947,911, respectively. These conditions raise substantial doubt about our ability to continue as a going concern.

Subsequent to March 31, 2013, we (a) had a closing of our private placement offering in the amount of $125,000 which funds had been received by us during the three months ended March 31, 2013; (b) raised an aggregate of $149,000 in debt financings; and (c) continue to incur net losses, use cash in operating activities and experience cash and working capital constraints.

On February 13, 2013, we received a Notice of Redemption related to our Series C Redeemable Preferred Stock aggregating $1,000,000 As a result of receiving the Notice of Redemption, we must now apply all of our assets to redemption of the Series C Preferred Stock and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders (we are not permitted to utilize toward the redemption those assets required to pay our debts as they come due and those assets required to continue as a going concern).

We recognize that we will need to raise additional capital in order to fund operations, meet our payment obligations, including the redemption of the Series C Redeemable Preferred Stock, and execute our business plan. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to us and whether we will become profitable and generate positive operating cash flow. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to further extend payables, extend note repayments, extend the preferred stock redemption and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.  If we are unable to obtain financing on a timely basis, we could be forced to sell our assets, discontinue our operations and/or seek reorganization under the U.S. bankruptcy code.

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As of March 31, 2013 and December 31, 2012, the Company had cash on hand of $382,353 and $0, respectively.  Our cash flow from operating, investing and financing activities during this period were as follows:

For the three months ended March 31, 2013, cash flows included net cash used in operating activities of $457,373.  This amount included a decrease in operating cash related to a net loss of $4,078,366, partially offset by aggregate non-cash adjustments of $3,746,302, plus aggregate cash used by changes in operating assets and liabilities of $125,309 (primarily a result of paying off accrued expenses and other current liabilities). For the three months ended March 31, 2012, cash flows included net cash used in operating activities of $177,395.  This amount included a decrease in operating cash related to a net loss of $1,550,312, partially offset by aggregate non-cash adjustments of $597,492, plus aggregate cash provided by changes in operating assets and liabilities of $775,425 (primarily a result of extending payables due to cash constraints).

For the three months ended March 31, 2013, net cash provided by investing activities was $699,512 due to releasing cash provided by investors from escrow (restricted cash) partially offset by $25,490 of capitalized web development costs. For the three months ended March 31, 2012, net cash used in investing activities was $81,043 due to the repayment of employee advances.

For the three months ended March 31, 2013, net cash provided by financing activities was $140,214. Cash was provided by $2,526,973 of proceeds from a private placement offering (which excludes $850,002 of cash received during 2012 but closed on during the three months ended March 31, 2013) and $500,000 of proceeds from the issuance of a note payable and $125,000 of private placement deposits, partially offset by repayments of notes payable, convertible notes payable and equipment leases payable of $2,000,000, $1,000,000 and $11,759, respectively.  For the three months ended March 31, 2012, net cash provided by financing activities was $258,401, due primarily to advances from certain stockholders of $375,000, of which $63,812 has been repaid to certain stockholders and proceeds from common  stock issued of $125,000 offset in part by capital lease payments of $22,131 and a cash overdraft of $155,656.

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Critical Accounting Policies and Estimates

There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K filed on July 23, 2013. Please refer to that document for disclosures regarding the critical accounting policies related to our business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d–15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the forms and rules of the SEC and that such information is accumulated and communicated to management, including the CEO, in a manner to allow timely decisions regarding required disclosures.

In connection with the preparation of this Form 10–Q, our management, including the CEO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2013. Management had previously identified material weaknesses in our internal control over financial reporting as of December 31, 2012 (see Form 10-K filed with the SEC on July 23, 2013), which is an integral component of our disclosure controls and procedures. Those material weaknesses were not remediated during the quarter ended March 31, 2013. As a result of those material weaknesses, our management has concluded that, as of March 31, 2013, our disclosure controls and procedures were not effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors during the quarter ended March 31, 2013, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting, except as follows:

On February 21, 2013, Eduardo Altamirano, the Company's Chief Financial Officer, Treasurer and Secretary, stated that he was resigning from all of his positions at the Company effective April 15, 2013. The Chairman of the Audit Committee and each of the other non-management members of the Board of Directors spoke with Mr. Altamirano about the reasons for his departure. Following these discussions, the Board of Directors accepted Mr. Altamirano’s resignation.

On May 15, 2013, the Company engaged a financial consulting firm in order to assist with its financial reporting and to provide the Company with SEC and technical accounting expertise.

Limitations of the Effectiveness of Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

In the ordinary course of business, we may become subject to lawsuits and other claims and proceedings that might arise from litigation matters or regulatory audits. Such matters are subject to uncertainty and outcomes are often not predictable with assurance. Our management does not presently expect that any such matters will have a material adverse effect on the Company’s consolidated financial condition or consolidated results of operations. We are not currently involved in any pending or threatened material litigation or other material legal proceedings nor have we been made aware of any penalties from regulatory audits, except as described below.

On February 9, 2012, two of our former stockholders, Rock Castle and Jason Smith (“Plaintiffs”), filed suit against us in the Hamilton County, Ohio Court of Common Pleas, alleging that we had breached the terms of certain incentive options we granted to the Plaintiffs in connection with our now-terminated oral consulting arrangements with the Plaintiffs, by among other things, refusing Plaintiffs’ purported exercise of options to purchase 233,332 shares of our common stock at an exercise price of $2.00 per share in December 2011.  Plaintiffs have requested that, among other things, the court require us to permit the exercise of the 233,332 options.  Plaintiffs have also provided an expert report indicating damages of $2.086 million. Also named as defendants were two individuals, Michael Peppel and Gary Singer, whom Plaintiffs claim acted as agents for us in connection with our purchase of shares of our common stock from Plaintiffs in September 2011.  On April 26, 2013, Plaintiffs dismissed Mr. Singer from the lawsuit.  Trial of the case is currently scheduled for April of 2014.  We deny all of the Plaintiffs’ claims and intend to contest this matter vigorously.

On October 9, 2012, American Express Travel Related Services Company, Inc. brought legal action against us in the Boone County, Kentucky Circuit Court. The action seeks to recover the unpaid balance on a credit card account in the amount of $87,029, plus interest and costs. We filed an answer in November 2012.  This litigation was resolved on July 10, 2013 by a negotiated settlement.

On November 5, 2012, HD Smith, Inc., one of our vendors, (“Plaintiff”) filed a complaint against us alleging that we breached our vendor credit agreement. The Plaintiff is seeking damages of $170,316 plus pre-judgment interest and attorneys’ fees. This litigation was resolved on January 25, 2013, as amended on June 20, 2013, by a negotiated settlement.

On March 13, 2013, a former vendor filed suit against us in the Hamilton County, Ohio Court of Common Pleas, alleging that we had breached our contract. The plaintiff is seeking damages of $17,800 plus pre-judgment interest and other costs and expenses. We answered the complaint and trial was set for June 2014.  This matter was resolved by a negotiated settlement.

On March 20, 2013, a complaint was filed in the Delaware Court of Chancery by two of our shareholders, HWH Lending, LLC and Milfam I L.P., seeking to compel the holding of an annual meeting of stockholders for the election of directors under Delaware law.  We filed an answer to the complaint on April 12, 2013.  On May 13, 2013, we publicly announced that the Board of Directors had set the date for our next annual meeting of stockholders as August 15, 2013 at 11:00 a.m. Eastern time.  In lieu of further litigation, on July 18, 2013, the parties submitted to the court a proposed order confirming August 15, 2013 as the annual meeting date and establishing certain procedures related to the annual meeting.  On July 18, 2013, the court entered the proposed order providing that (i) we shall notice and hold our annual meeting on August 15, 2013 for the election of directors and for the transaction of any other business properly brought before the meeting, and the date of the  meeting shall not be adjourned, continued or postponed prior to the election of directors absent an order of the court; (ii) the shares of our stock represented at the annual meeting, either in person or by proxy, and entitled to vote thereat shall constitute a quorum for purposes of the meeting, notwithstanding any contrary provision in our certificate of incorporation or bylaws, and (iii) the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting is July 1, 2013, and if the annual meeting noticed for August 15, 2013 is adjourned, continued or postponed prior to the election of directors pursuant to an order of the court, we may set a new record date in accordance with our bylaws. In accordance with the Court order, our annual meeting of stockholders was held on August 15, 2013 at which time Lalit Dhadphale, Youssef Bennani, Joseph Savarino, and Ambassador Ned Siegel each received a plurality of the total votes cast at the annual meeting and each was elected as a director by our stockholders.  On September 24, 2013, this action was dismissed without prejudice by a joint stipulation of dismissal.

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On April 23, 2013, our Board of Directors formed a Special Committee, chaired by Youssef Bennani, a director and Chairman of our Audit Committee, to investigate certain stockholder demands.  Since March 1, 2013, we have received three letters from stockholders alleging certain breaches of fiduciary duties by our directors and demanding that we commence investigations of the alleged conduct.  On March 1, 2013, we received a letter on behalf of the holders of our Series B Preferred Stock (“Preferred Holders”) alleging that a convicted felon appears to be a consultant to us, owes us money, and exercises control over us.  On March 8, 2013, we received a letter on behalf of stockholder Wayne Corona alleging that two directors, Matthew Stecker and John Backus, breached their fiduciary duties and demanding that we investigate legal claims against those directors.  The letter alleges that the director designee of the holders of our Series B Preferred Stock and the director designee of New Atlantic Ventures Fund III, L.P. (“NAV”) acted in concert to attempt to scuttle our recent financing plan.  The letter also alleged that the director designee of the Preferred Holders and the director designee of NAV sought to prevent us from paying back our lenders in 2010 and 2011.  On March 18, 2013, we received a letter on behalf of the two directors denying the allegations and stating there was no proper basis for launching an investigation.  On March 27, 2013, a letter on behalf of Messrs. Backus and Stecker, in their capacities as directors and stockholders, demanded that we (i) investigate alleged breaches of confidentiality and fiduciary duties by our President and CEO and two other directors in connection with the purported stockholder demand letter of Mr. Corona dated March 8, 2013, and (ii) assert related claims against those individuals.  The letter also asserted that the director constituting the special committee, Youssef Bennani, is subject to alleged conflicts of interest that disqualify him from serving on any proposed special committee to evaluate the pending stockholder demands.  The Special Committee has retained an independent law firm to conduct the investigation and advise the Special Committee.

On April 30, 2013, a purported class-action complaint was filed against us in the United States District Court for the Northern District of Illinois.  The complaint alleges that we sent an unsolicited advertising fax to Glen Ellyn Pharmacy, the named plaintiff, and other recipients.  The complaint alleges that such a fax violates the federal Telephone Consumer Protection Act (the “TCPA”), the Illinois Consumer Fraud Act and Illinois common law.  Under the TCPA, recipients of unsolicited fax advertisements are entitled to damages of up to $500 per fax for inadvertent violations and up to $1,500 for knowing or willful violations.  At the time of filing the complaint, the plaintiff also filed a motion asking the Court to certify a class of persons and entities who were sent advertising faxes by us which did not contain an opt out notice.  On June 19, 2013, the plaintiff filed an amended class-action complaint which withdrew the two counts for alleged violations of the Illinois Consumer Fraud Act and the common law tort of conversion.  The amended complaint eliminates claims for damages under Illinois law and leaves only a single count for an alleged violation of the TCPA.  We filed an answer to the amended complaint on July 8, 2013 contesting class certification and liability. The District Court has not established or recognized any class.  This litigation was resolved on September 24, 2013.

On May 7, 2013, a putative stockholder derivative action was filed in the Court of Chancery of the State of Delaware against certain directors and our chief executive officer and against us, as a nominal defendant.  The complaint alleges claims for breach of fiduciary duty, entrenchment and corporate waste arising out of the alleged failure to conduct annual meetings, SEC filing obligations, advances to a former employee and a $500,000 secured loan to us which the entire board of directors approved.  The derivative complaint seeks unspecified compensatory damages and other relief.  We and the individual defendants believe that the allegations stated in the complaint are without merit and we intend to defend ourselves vigorously against the allegations. The individual director defendants filed a motion to dismiss the complaint on July 22, 2013 and filed an opening brief in support of the motion to dismiss on August 2, 2013.  We joined in the motion to dismiss.  Plaintiff’s brief in opposition to the motion to dismiss was due on September 16, 2013.  Instead of filing a brief in opposition to the motion to dismiss, on September 16, 2013, plaintiff filed an amended complaint against the same defendants alleging two claims for breach of fiduciary duty and corporate waste and deleting the claim for entrenchment.  The claims in the amended complaint arise out of allegations regarding a failure to conduct stockholder annual meetings, a failure to comply with SEC filing obligations, a lack of internal controls and unauthorized advances to a former employee and a $500,000 secured loan approved by our entire board.  We and the individual defendants continue to believe the allegations are without merit and intend to vigorously defend ourselves against the allegations. On October 3, 2013, the individual director defendants moved to dismiss the amended complaint, and we joined in the motion to dismiss.  Under a briefing schedule approved by the court, defendants’ brief on the motion to dismiss is due by November 4, 2013, plaintiff’s answering brief is due by December 13, 2013, and defendants’ reply brief is due by January 10, 2014.

On May 15, 2013, a former consultant filed suit in Boone County, Kentucky Circuit Court alleging breach of contract and unjust enrichment for unpaid consulting fees and expenses of approximately $27,000.  We filed an answer to the complaint on July 22, 2013 and intend to vigorously defend ourselves against the allegations.

On August 9, 2013, two of our shareholders, HWH Lending, LLC and Milfam I L.P., filed in the Delaware Court of Chancery a verified complaint for injunctive and declaratory relief, seeking to prevent us from including a 10.5% block of shares held by a stockholder in the vote count at our upcoming annual meeting of stockholders scheduled for August 15, 2013.  The complaint alleged that we and our Chief Executive Officer did not follow proper procedures in issuing the shares to the stockholder and caused those shares to be issued in violation of Delaware law.  Following an expedited briefing schedule, the court held a hearing on August 14, 2013 and denied plaintiffs’ request for a temporary restraining order.  On August 21, 2013, the plaintiffs filed a notice of voluntary dismissal, dismissing the action without prejudice.

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On October 11, 2013, two of our former directors sent a letter demanding payment of $80,766 in legal fees and expenses pursuant to certain Company indemnification and advancement provisions.  We are evaluating the demand and have requested additional information.

Item 1A. Risk Factors.

Not applicable.

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

On February 1, 2013, the Company completed private placements for an aggregate of $3,376,975 for the purchase 3,376,975 units at a price of $1.00 per unit. The aggregate amount includes $500,000, which was received from the Company’s Chief Executive Officer. Each unit consists of (i) one share of the Company’s Common Stock, and (ii) five-year warrants to purchase three shares of the Company’s Common Stock at an exercise price of $0.25 per share. The proceeds were used to repay the principal and accrued interest associated with certain indebtedness. The sale of the Common Stock and warrants was made without registration in reliance on the exemption from registration afforded by §4(2) under the Securities Act of 1933, and corresponding provisions of states securities laws, which exempt transactions by an issuer not involving any public offering.

On February 15, 2013, the Company issued 1,202,350 shares of our Common Stock to the holder of a warrant which elected to exercise warrants to purchase 1,425,000 shares of our Common Stock on a “cashless” basis under the terms of the warrants.  The warrants had an exercise price of $0.25 per share.  The sale of the Common Stock was made without registration in reliance on the exemption from registration afforded by §4(2) under the Securities Act of 1933, and corresponding provisions of states securities laws, which exempt transactions by an issuer not involving any public offering.

On March 15, 2013, the Company converted $761,000 of notes payable and other advances – from related parties and $72,000 of accounts payable to a related party into an aggregate of 833,000 units at a price of $1.00 per unit. Each unit consists of (i) one share of the Company’s Common Stock, and (ii) five-year warrants to purchase two and three-quarters shares of the Company’s Common Stock at an exercise price of $0.25 per share. The issuance of the Common Stock was made without registration in reliance on the exemption from registration afforded by §4(2) under the Securities Act of 1933, and corresponding provisions of states securities laws, which exempt transactions by an issuer not involving any public offering.

On March 18, 2013, the Company issued an aggregate of 5,732,434 shares of Common Stock to several holders of warrants who elected to exercise warrants to purchase 6,700,744 shares of Common Stock on a "cashless" basis under the terms of the warrants. The warrants had exercise prices of $0.25 per share. The issuance of the Common Stock was made without registration in reliance on the exemption from registration afforded by §4(2) under the Securities Act of 1933, and corresponding provisions of states securities laws, which exempt transactions by an issuer not involving any public offering.

Recent Repurchases of Common Stock

There were no repurchases of our common stock during the quarter ended March 31, 2013. The Company does not currently have an announced repurchase program.

Item 3. Defaults upon Senior Securities.

On December 31, 2012, the Company failed to make required payments of $1 million in principal and approximately $180,000 of accrued interest due under its Loan and Security Agreement dated November 9, 2010 (the “Loan Agreement”) with two accredited investors (the “Lenders”) and the 7% Convertible Promissory notes issued thereunder (the “Notes” and, together with the Loan Agreement, the “Loan Documents”). Accordingly, the Company was in breach of its obligations under the Loan Documents and subject to the Lenders’ remedies thereunder. On February 1, 2013, the Company repaid the Notes and outstanding accrued interest.

On January 15, 2013, the Company failed to make required payments of $2 million in principal and approximately $193,000 of accrued interest under its Loan and Security Agreement dated September 2, 2011 (the “Loan Agreement”) with two accredited investors (the “Lenders”) and the 7% Convertible Promissory notes issued thereunder (the “Notes” and, together with the 2011 Loan Agreement, the “2011 Loan Documents”). Accordingly, the Company was in breach of its obligations under the 2011 Loan Documents and subject to the Lenders’ remedies thereunder. On February 1, 2013, the Company repaid the Notes and outstanding accrued interest.

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Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information

On October 16, 2013, HealthWarehouse.com, Inc. and its wholly-owned subsidiaries, Hwareh.com, Inc., Hocks.com, Inc. and Pagosa Health LLC (together, the “Company”) entered into an Amended and Restated Promissory Note (the “Note”) with Melrose Capital Advisors, LLC, an Ohio limited liability company (the “Lender”) and Pagosa Health LLC entered into an additional Security Agreement (the “Security Agreement”) with Lender. Under the terms of the Note, which is effective September 30, 2013 and which supersedes a March 28, 2013 note for $500,000 with the same Lender, the Company borrowed an additional $100,000 from the Lender which brought the face value of the Note to $600,000 (the “Loan”). The proceeds of the Loan will be used by the Company for working capital purposes. The Loan bears interest at a floating rate equal to the prime rate plus 4.25% per annum. Interest is payable monthly and payments began on May 1, 2013. The maturity date of the Loan is March 1, 2015. Under the terms of the additional Security Agreement, Pagosa Health LLC granted the Lender a first priority security interest in all of its assets in order to secure the Company’s obligation to repay the Loan. The Note and Security Agreement contain customary affirmative and negative covenants, including covenants restricting the Company’s ability to take certain actions without the Lender’s consent, such as incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. The payment of the Loan may be accelerated prior to its maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties. The Loan may be prepaid in whole or in part at any time by the Company without penalty.

In consideration of the Lender providing additional funds and entering into the Note, the Company granted the Lender a warrant to purchase 150,000 shares of HealthWarehouse.com, Inc.’s $0.001 par value common stock (the “Common Stock”) at a purchase price of $0.35 per share (the “Warrant”). The Warrant may be exercised in whole or in part and from time to time for a term of five years from its grant date. The Warrant contains a cashless exercise feature and certain customary anti-dilution adjustment provisions. The Warrant is transferable in whole or in part, so long as the transfer complies with applicable securities laws.

The foregoing description of the Note, the Security Agreement and the Warrant is not intended to be complete and is qualified in its entirety by reference to the full text of the Note, the Security Agreement and the Warrant, which are filed as Exhibits 4.1, 4.2 and 10.1 hereto and are incorporated herein by reference.

Item 6. Exhibits.

The following exhibits are filed as part of this quarterly report:

Exhibit No.	Description
4.1	Amended and Restated Promissory Note dated September 30, 2013 in the amount of $600,000 payable by the Company to the order of Melrose Capital Advisors, LLC *
4.2	Common Stock Purchase Warrant for 150,000 common shares *
10.1	Security Agreement dated September 30, 2013 *
31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.*
31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.*
32.1	Certification of CEO Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.**
32.2	Certification of CFO Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.**
101.INS	XBRL Instance Document **
101.SCH	XBRL Schema Document **
101.CAL	XBRL Calculation Linkbase Document **
101.DEF	XBRL Definition Linkbase Document **
101.LAB	XBRL Label Linkbase Document **
101.PRE	XBRL Presentation Linkbase Document **

*           Filed herewith.

**         Furnished herewith.

- 28 -

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.

Dated: October 22, 2013 HEALTHWAREHOUSE.COM, INC.       By: /s/  Lalit Dhadphale                                                                 Lalit Dhadphale    President and Chief Executive Officer    (principal executive officer)

- 29 -

EX-4.1

Exhibit 4.1

AMENDED AND RESTATED PROMISSORY NOTE

$600,000.00	September 30, 2013
	(“Effective Date”)

FOR VALUE RECEIVED, the undersigned, HEALTHWAREHOUSE.COM, INC., a Delaware corporation, HWAREH.COM, INC., a Delaware corporation, HOCKS.COM, INC., an Ohio corporation, and PAGOSA HEALTH LLC, an Indiana corporation, jointly and severally, (collectively, “Borrower”), with an address at 7107 Industrial Road, Florence, Kentucky  41042, hereby promise to pay to the order of MELROSE CAPITAL ADVISORS, LLC, an Ohio limited liability company (together with its successors and assigns, “Lender”), in lawful money of the United States of America in immediately available funds with an address at c/o Statman, Harris & Eyrich, LLC, 441 Vine Street, 37th Floor, Cincinnati, Ohio  45202, or at such other location as the Lender may designate from time to time, the principal sum of SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($600,000.00) together with interest accruing from the date hereof at the rate or rates and in the manner hereinafter provided on the principal balance hereof from time to time outstanding, as provided below.

1.           Interest.  Interest will be charged on the unpaid principal balance of this Note until the full amount of principal has been paid at a floating rate equal to thePrime Rate plus 4.25% per annum.  As used herein, “Prime Rate” meansthe rate publicly announced by PNC Bank, N.A. from time to time as its prime rate.  The Prime Rate is determined from time to time by PNC Bank, N.A. as a means of pricing some loans to its borrowers.  The Prime Rate is not tied to any external rate of interest or index, and does not necessarily reflect the lowest rate of interest actually charged by PNC Bank, N.A. to any particular class or category of customers.  If and when the Prime Rate changes, the rate of interest on this Note will change automatically without notice to the Borrower, effective on the date of any such change.  In no event will the rate of interest hereunder exceed the maximum rate allowed by law.

2.           Payments.  Borrower will make monthly payments of accrued interest on the first day of every month, beginning on March 1, 2013, and continuing on the first day of each month thereafter.  On March 1, 2015 (“Maturity Date”), the entire unpaid principal balance of this Note and all accrued and unpaid interest shall be due and payable in full. The entire unpaid principal balance of this Note and all accrued and unpaid interest may be prepaid at any time prior to the Maturity Date by the Borrower.

3.           Loan Documents; Restatement.  This Note is executed in connection with and is secured by any and all documents and instruments now or in the future given to the Lender to evidence or secure the loans hereunder (collectively, the “Loan Documents”), including but not limited to the following: Security Agreement from HEALTHWAREHOUSE.COM, INC., HWAREH.COM, INC and HOCKS.COM, INC., dated March 28, 2013, and Security Agreement from PAGOSA HEALTH LLC of even date herewith, covering all business assets, including but not limited to accounts, inventory, equipment and general intangibles (the “Collateral”).

This Note amends and restates, and is in substitution for, that certain Promissory Note dated March 28, 2013 in the original principal amount of $500,000.00 payable to the order of the Lender (the "Existing Note").  However, this Note shall in no way extinguish, cancel or satisfy Borrower’s unconditional obligation to repay all indebtedness evidenced by the Existing Note or constitute a novation of the Existing Note.  Nothing herein is intended to extinguish, cancel  or impair the lien priority or effect of any security agreement with respect to the Borrower’s obligations hereunder and under any other document relating hereto.

Page 1 of 8

4.            Representations.  In order to induce Lender to extend the credit accommodations provided in this Note, Borrower hereby represents and warrants to Lender the following:

(a)           Each Borrower is duly incorporated, validly existing and in good standing under the laws of the State of its incorporation and has the power and authority to own and operate its assets and to conduct its business as now or proposed to be carried on, and is duly qualified, licensed and in good standing to do business in all jurisdictions where its ownership of property or the nature of its business requires such qualification or licensing and failure to be so qualified or licensed could reasonably be expected to materially adversely affect Borrower (on a consolidated basis).  Borrower is duly authorized to execute and deliver the Loan Documents, all necessary action to authorize the execution and delivery of the Loan Documents has been properly taken, and the Loan Documents, when executed and delivered by Borrower, will constitute the legal, valid and binding obligations of Borrower enforceable in accordance with their terms except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

(b)           There are no actions, suits, arbitrations, investigations, claims, inquiries, or proceedings pending or threatened against or affecting Borrower or its property,  and no proceedings before any governmental body are pending or threatened against Borrower or its property, except as set forth on Schedule 4(b).  None of such proceedings listed on Schedule 4(b) (if any) are reasonably expected to have a material adverse effect on Borrower (on a consolidated basis).

(c)           Borrower is in compliance with all material laws, regulations, rulings, orders, injunctions, decrees, conditions or other requirements applicable to or imposed upon Borrower by any law or by any governmental authority, court or agency with jurisdiction over Borrower.  Borrower has filed all required tax returns and reports that are now required to be filed by it in connection with any federal, state and local tax, duty or charge levied, assessed or imposed upon him or his assets, including unemployment, social security, and real estate taxes.  Borrower has paid all taxes which are now due and payable except those which currently are being contested in good faith by appropriate proceedings and for which Borrower has set aside adequate reserves or made other adequate provision with respect thereto.  No taxing authority has asserted or assessed any additional tax liabilities against Borrower which are outstanding on the Effective Date, and Borrower has not filed for any extension of time for the payment of any tax or the filing of any tax return or report.

(d)           All financial information relating to Borrower which has been or may hereafter be delivered by Borrower or on its behalf to Lender is true and correct and Borrower’s financial statements have been prepared in accordance with generally acceptable accounting principles consistently applied (except in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments).  Borrower has no material obligations or liabilities of any kind not disclosed in that financial information, and there has been no material adverse change in the financial condition of Borrower nor has Borrower suffered any damage, destruction or loss which has adversely affected its business or assets since the submission of the most recent financial information to Lender.

(e)           There does not exist any Event of Default under this Note or any default or violation by Borrower of or under any of the terms, conditions or obligations of:  (i) its organizational documents; (ii) any indenture, mortgage, deed of trust, franchise, permit, contract, agreement, or other instrument to which it is a party or by which it is bound that is material to Borrower; or (iii) any law, ordinance, regulation, ruling, order, injunction, decree, condition or other requirement applicable to or imposed upon it by any law, the action of any court or any governmental authority or agency that could reasonably be expected to have a material adverse effect on Borrower (on a consolidated basis); and the consummation of the transactions set forth herein will not result in any such default or violation or Event of Default.

Page 2 of 8

(f)           Borrower has good and marketable title to the assets reflected on the most recent financial statements provided to Lender, free and clear of all liens and encumbrances, except for the following (“Permitted Liens”):  (i) current taxes and assessments not yet due and payable, (ii) liens to Amerisourcebergen Drug Corporation which are subordinated to the liens to Lender pursuant to a lien subordination agreement acceptable to Lender, (iii) liens to Smart Fill Management Group, Inc. which are junior to the liens to Lender, (iv) liens to Wells Fargo Bank, N.A. on specific equipment, and (v) liens to The Mission Bank on specific equipment.

(g)           None of the Loan Documents contains any untrue statement of material fact or omits a material fact necessary in order to make the statements contained in this Note or the Loan Documents not misleading.  There is no fact known to Borrower which materially adversely affects or, so far as Borrower can now reasonably foresee, could reasonably be expected to materially adversely affect the business, assets, operations,  condition (financial or otherwise) or results of operation of Borrower (on a consolidated basis) and which has not otherwise been fully set forth in this Note.

5.           Financial Information.   Borrower shall maintain books and records in accordance with generally accepted accounting principles consistently applied (“GAAP”), except in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments, and shall give representatives of the Lender access thereto at all reasonable times, including permission to examine, copy and make abstracts from any of such books and records and such other information as the Lender may from time to time reasonably request, and Borrower will make available to the Lender for examination copies of any reports, statements and returns which Borrower may make to or file with any federal, state or local governmental department, bureau or agency. Borrower shall deliver the following to Lender during the entire time during which any amount is due under this Note:

(a)           As soon as practicable after the end of each calendar month in each year, beginning in August 31, 2013,, and in any event within thirty  (30) days thereafter, an internally prepared balance sheet of Borrower as of the end of such month, and statements of cash flows, shareholders' equity of Borrower for such month and income statements, certified as complete and correct by the principal financial officer of Borrower, subject to changes resulting from year-end adjustments;

(b)           As soon as practicable after the end of each calendar quarter beginning September 30, 2013, and in any event within forty five  (45) days thereafter, a consolidated balance sheet of Borrower as of the end of such quarter, and consolidated statements of cash flows, shareholders’ equity of Borrower  for such quarter, certified as complete and correct by the principal financial officer of Borrower, subject to changes resulting from year-end adjustments; provided, however, that Borrower may deliver its Form 10-Q filed with the SEC at the time required herein to satisfy this requirement.

Solely for the quarterly financial statements due for the quarters ending March 31, 2013 and June 30, 2013, Lender grants Borrower an extension of time to deliver such financial statements until  October 31, 2013. 

(c)           Within forty five (45) days after the end of each fiscal quarter beginning September 30, 2013, a statement signed by the President or Chief Operating Officer of Borrower setting forth and certifying the calculation of the Financial Covenants (as hereinafter defined);

Solely for the quarterly certification of the calculation of the Financial Covenants due for the quarters ending March 31, 2013 and June 30, 2013, Lender grants Borrower an extension of time to deliver such financial statements until October 31, 2013. 

Page 3 of 8

(d)           As soon as practicable after the end of each fiscal year, and in any event within one hundred twenty (120) days thereafter, audited financial statements of Borrower, including, a balance sheet of Borrower as of the end of such year, and statements of cash flows, owners' equity of Borrower for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by an audit report of independent certified public accountants, selected by Borrower and reasonably satisfactory to Lender, which report and opinion shall be prepared in accordance with generally accepted auditing standards; provided, however, that Borrower may deliver its Form 10-K filed with the SEC at the time required herein to satisfy this requirement.

(e)           With reasonable promptness, such other data and information as from time to time may be reasonably requested by Lender.

5.            Affirmative Covenants.  Borrower agrees that from the date of execution of this Agreement until this Note is repaid in full Borrower will:

(a)           Pay and discharge when due all indebtedness and all taxes, assessments, charges, levies and other liabilities imposed upon Borrower, its income, profits, property or business, except those which currently are being contested in good faith by appropriate proceedings and for which Borrower shall have set aside adequate reserves or made other adequate provision with respect thereto acceptable to the Lender in its reasonable discretion.

(b)           Do all things necessary to (i) maintain, renew and keep in full force and effect its organizational existence and all rights, permits and franchises necessary to enable it to continue its business as currently conducted; (ii) continue in operation in substantially the same manner as at present; (iii) keep its properties in good operating condition and repair (normal wear and tear excepted); and (iv) make all necessary and proper repairs, renewals, replacements, additions and improvements thereto.

(c)           Maintain, with insurers reasonably satisfactory to Lender, insurance with respect to its property and business against such casualties and contingencies, of such types and in such amounts,  as is customary for established companies engaged in the same or similar business and similarly situated.

(d)           Comply in all material respects with all laws applicable to Borrower and to the operation of its business (including without limitation any statute, ordinance, rule or regulation relating to employment practices, pension benefits or environmental, occupational and health standards and controls).

6.            Negative Covenants.  Borrower agrees that from the date of execution of this Agreement until this Note is repaid in full Borrower will not, without the Lender’s prior written consent:

(a)           Create, incur, assume or suffer to exist any indebtedness for borrowed money other than:  (i) this Note; (ii) open account trade debt incurred in the ordinary course of business and not past due; (iii) existing indebtedness secured by the Permitted Liens; and (iv) indebtedness in respect of purchase money financings of equipment in an amount not in excess of $250,000.00 in the aggregate outstanding.

(b)           Create, assume, incur or permit to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kind upon any of its property, now owned or hereafter acquired, or acquire or agree to acquire any kind of property subject to any conditional sales or other title retention agreement, except for Permitted Liens and liens securing purchase money indebtedness permitted pursuant to Section 6(a) above, with the liens limited to the equipment purchased.

Page 4 of 8

(c)           Guarantee, endorse or become contingently liable for the obligations of any person, firm, corporation or other entity, except in connection with the endorsement and deposit of checks in the ordinary course of business for collection.

(d)           Purchase or hold beneficially any stock, other securities or evidences of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity; provided, however, that Borrower may do so with regards to any Borrower.

(e)           Liquidate or dissolve, or merge or consolidate with or into any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or any substantial part of its property, assets, operations or business, whether now owned or hereafter acquired.

(f)           Make or permit any change (i) in its form of corporate organization and (ii) in the nature of its business as carried on as of the date hereof.

(g)           Declare or pay any dividends on or make any distribution with respect to any class of its equity or ownership interest, or purchase, redeem, retire or otherwise acquire any of its equity, provided, however, that if Borrower is a limited liability company with pass through taxation, it may make distributions to its shareholders, partners or members, as the case may be, in an amount equal to the federal and state income tax of such principals of Borrower attributable to the earnings of Borrower as long as no Event of Default exists.

(h)           Make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity.

7.           Financial Covenants.  Borrower agrees that from the date of execution of this Note until this Note is repaid in full, Borrower will comply with the following financial covenants (“Financial Covenants”):

(a)          Borrower will not permit its Adjusted EBITDAS at the end of each fiscal quarter to be less than the following:

Fiscal Quarter Ending	Minimum Adjusted EBITDAS
December 31, 2013	$	0
March 31, 2014	$	50,000
June 30, 2014	$	100,000
September 30, 2014	$	150,000
December 31, 2014	$	200,000

(b)          Borrower will not permit its Adjusted EBITDAS at the end of each fiscal year to be less than the following:

Fiscal Year Ending	Minimum Adjusted EBITDAS
December 31, 2013	$	(830,000	)
December 31, 2014	$	500,000

For the purpose of this Section 7, Adjusted EBITDAS shall be defined as Net Income before interest expense, taxes, and non-cash expenses including depreciation and amortization and all stock based compensation.

Page 5 of 8

8.            Events of Default.  The following events shall constitute events of default under this Note (each, an “Event of Default”):

(i)           Borrower fails to make any payment of principal and/or interest when and as the same shall become due and payable and such amount remains unpaid five (5) days thereafter;

(ii)           any representation or warranty made by Borrower herein or in any of the other Loan Documents is incorrect in any material respect when made or reaffirmed;

(iii)           the filing by or against Borrower of any proceeding in bankruptcy, reorganization, debt adjustment or receivership, or any assignment by Borrower for the benefit of creditors; provided, that any involuntary bankruptcy filed against Borrower shall not be an Event of Default unless such involuntary bankruptcy case is not dismissed within 60 days.

(iv)           Borrower fails to observe or perform any covenant, undertaking or agreement set forth herein or in any of the other Loan Documents and such failure is not remedied within 10 days;

(v)           Borrower defaults under any other debt, liability or obligation to the Lender, or fails to pay or to otherwise observe and perform any obligations imposed upon Borrower under any indebtedness in excess of $100,000.00 (“Material Indebtedness”), if such default shall continue for more than the period of grace, if any, specified therein;

(vi)           if any other Event of Default (said term being defined in this Note as it is defined in the Loan Documents) should occur and shall continue for more than the period of grace, if any specified therein;

(vii)           any event occurs which could reasonably be expected to have a material adverse effect on the Collateral or on Borrower's financial condition, operations, assets or prospects;

(viii)           the entry of any judgment or lien against Borrower by or in favor of any third person in excess of $100,000.00 which judgment or lien is not satisfied, discharged or bonded off within thirty (30) days from the date of entry of said judgment or lien and which is not otherwise stayed or the subject of an appeal filed by Borrower in connection with same; and

(ix)           Borrower shall transfer assets to others (excluding any Borrower) for less than fair value or in other than the ordinary course of business, without Lender’s prior written consent.

9.            Remedies.  Upon the occurrence of an Event of Default, in addition to any other action permitted to be taken by Lender hereunder or under any other of the Loan Documents:  (a) at the option of Lender for so long as any Event of Default shall continue to exist, the unpaid principal balance of this Note shall, for the period beginning with the date of the occurrence of the Event of Default and continuing for so long as any Event of Default exists, bear interest at a rate (the “Default Rate”) equal to five percent (5.0%) per annum above the otherwise applicable interest rate; and (b) Lender may, at its option, and regardless of whether Lender shall have exercised the option provided for in clause (a) of this paragraph, declare the entire unpaid principal balance of this Note and all accrued but unpaid interest hereon any other sums then payable in accordance with this Note to be immediately due and payable, whereupon all such sums shall be immediately due and payable and shall thereafter bear interest at the Default Rate and Lender shall have the remedies of a secured party under the laws of the State of Ohio with respect to all property mortgaged or pledged as security for this Note and all of the rights and remedies available under the Loan Documents.  No delay or omission on the Lender’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Lender’s action or inaction impair any such right or power.  All remedies provided for herein upon any default by Borrower shall be cumulative and not exclusive.

Page 6 of 8

Borrower hereby agrees that:  (a) in addition to any other right, after any Event of Default, Borrower will pay to Lender upon demand any and all reasonable costs, expenses and fees, including without limitation reasonable attorneys’ fees incurred before or after suit is commenced in enforcing payment hereof; (b) Borrower waives all setoffs and any and all applicable exemption rights; and (c) the acceptance by Lender of any late payment or other performance which does not strictly comply with the terms of this Note or of any Loan Document shall not be deemed to be a waiver of any rights of Lender arising as a result of such failure to comply.

10.           Waivers.  Borrower, and any endorsers and guarantors hereof, and all others who may become liable for all or any part of the indebtedness evidenced by this Note, severally waive diligence, presentment for payment, protests, notice of dishonor and of nonpayment and protest, and do hereby consent to any number of forbearances, renewals or extensions of the time of payment hereof, releases or substitutions of all or any part of the security for the payment hereof or release of any party liable for this obligation and waive all defenses based upon suretyship or impairment of collateral.  Any such extension or release may be made without notice to any of said parties and without discharging their liability. Borrower hereby waives all relief from any and all appraisement or exemption laws now in force or hereafter enacted.

11.           General.

If any provision of this Note is found to be invalid by a court, all the other provisions of this Note will remain in full force and effect.  In no event shall the interest rate charged on this Note exceed the maximum rate of interest permitted under applicable state and/or federal usury laws.  Any payment of interest that would be deemed unlawful under applicable laws for any reason shall be deemed received on account of, and will automatically be applied to reduce, the principal sum outstanding and any other sums (other than interest) due and payable to Lender under this Note, and the provisions hereof shall be deemed amended to provide for the highest rate of interest permitted under applicable law.

Borrower agrees that there are no conditions or understandings which are not expressed in this Note and the documents referred to herein.  No modification, amendment or waiver of, or consent to any departure by Borrower from, any provision of this Note will be effective unless made in a writing signed by the Lender and Borrower and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

Any and all references in this Note to any other document or documents shall be references to such other document or documents as the same may from time to time be modified, amended, renewed, consolidated or extended.

The term “Borrower” as used herein shall include the undersigned and its successors and assigns; provided, however, that Borrower may not assign its obligations hereunder and Lender may assign this Note at any time (i) to a person or entity related to Lender; (ii) with the prior written consent of Borrower, as long as no Event of Default exists and (iii) without the consent of Borrower if any Event of Default exists, but with prior written notice to Borrower (unless Lender is prohibited by law from sending such notice).  If there is more than one Borrower hereunder, their obligations shall be joint and several.

12.           Jurisdiction.  This Note shall be governed by Ohio law.  Borrower hereby submits to personal jurisdiction in the federal and state courts in Hamilton County, Ohio; waives any and all personal rights under the laws of any state or country to object to jurisdiction within the State of Ohio for the purposes of litigation to enforce this Note, or any other Loan Document; and consents to be sued in the federal and state courts in Hamilton County, Ohio. Nothing contained in this Note, however, shall prevent Lender from bringing any action or exercising any rights under this Note within any other state or country.  Borrower agrees that service of process may be made, and personal jurisdiction over Borrower obtained, by serving a copy of the Summons and Complaint upon Borrower at its address set forth in this Note in accordance with the applicable laws of the State of Ohio.

Page 7 of 8

13.           WAIVER OF JURY TRIAL.   BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.

14.           CONFESSION OF JUDGMENT.  Borrower authorizes any attorney to appear in any court of record in or of the State of Ohio, after this Note becomes due and payable, whether by its terms or upon default, to waive service of process and enter judgment by confession against Borrower in favor of the Lender or any holder hereof for the outstanding principal of and accrued but unpaid interest on this Note, plus all costs of collection, including, without limitation, court costs and reasonable attorney’s fees, and thereby to waive and release all errors in the proceedings and judgment, and all rights of appeal from such judgment and stay of execution.  Stay of execution and all exemptions are hereby waived.  Borrower also agrees that the attorney acting for Borrower as set forth in this paragraph may be compensated by Lender for such services, and Borrower waives any conflict of interest caused by such representation and compensation arrangement.  If an obligation is referred to an attorney for collection, and the payment is obtained without the entry of a judgment, the obligors will pay to Lender its attorneys' fees.

WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.  IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.

HEALTHWAREHOUSE.COM, INC.	PAGOSA HEALTH LLC,
a Delaware corporation	an Indiana corporation
By: /s/           Lalit Dhadphale	By: /s/           Lalit Dhadphale
Print Name:  Lalit Dhadphale	Print Name:   Lalit Dhadphale
Title:             President and CEO	Title:              President and CEO
HWAREH.COM, INC.,	HOCKS.COM, INC.,
a Delaware corporation	an Ohio corporation
By: /s/           Lalit Dhadphale	By: /s/           Lalit Dhadphale
Print Name:  Lalit Dhadphale	Print Name:  Lalit Dhadphale
Title:             President and CEO	Title:             President and CEO

Page 8 of 8

EX-4.2

Exhibit 4.2

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

----------------

HealthWarehouse.com, Inc.

FORM OF COMMON STOCK PURCHASE WARRANT

Number of shares:	150,000
Holder:	Melrose Capital Advisors, LLC
Grant Date:	September 30, 2013
Expiration Date:	September 30, 2018
Exercise Price Per Share:	$0.35 (Thirty-five cents per share)

HealthWarehouse.com, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), hereby certifies that, for value received, Melrose Capital Advisors, LLC, or its registered assigns or permitted transferees (the "Warrant Holder"), is entitled, subject to the terms set forth below, to purchase from the Company 150,000 shares, as adjusted from time to time as provided in Section 6 hereof, of common stock, $0.001 par value (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at a price of $0.35 (thirty-five cents) per Warrant Share (the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including 5:00 p.m. New York City time on September 30, 2018 (the "Expiration Date"), and subject to the following terms and conditions.  This Warrant is being issued to the Warrant Holder pursuant to that certain Subscription Agreement, dated as of September 30, 2013, by and between the Company and the Warrant Holder (the “Subscription Agreement”).  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Subscription Agreement.

1.              Registration of Warrant.  The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Warrant Holder hereof from time to time.  The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

2.              Investment Representation.  The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an accredited investor affiliate for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws. Subject to Section 10 hereof, the Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the United States Securities Act of 1933, as amended (the "1933 Act") and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws.

3.         Validity of Warrant and Issue of Shares.  The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof. The Company further warrants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.

4.             Registration of Transfers and Exchange of Warrants.

a.  All or any portion of this Warrant shall be assignable or transferable by Warrant Holder to a subsidiary, parent, general partner, limited partner, retired partner, affiliate, member or retired member, or stockholder of a Holder that is a corporation, partnership or limited liability company,  subject to such terms and conditions with respect to such assignment or transfer as Warrant Holder shall determine.

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b.         Subject to compliance with the legend set forth on the face of this Warrant, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 12.  Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

c.       This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 12 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder.  Any such New Warrant will be dated the date of such exchange.

5.             Exercise of Warrants.

a.       Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 12, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue and deliver or cause to be issued  and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a stock certificate for the number of Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act.  Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise. In connection with such exercise, the Warrant Holder, or such person so designated by the Warrant Holder in accordance with this paragraph, shall be deemed a stockholder of record with respect to the Warrant Shares purchaser pursuant to such exercise, with all rights of a stockholder, including voting rights and rights to receive dividends.

b.        A "Date of Exercise" means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.

c.        This Warrant shall be exercisable at any time and from time to time for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase.  If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.

d.        Cashless Exercise. The Warrant Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate Exercise Price, elect instead to receive upon such exercise the "Net Number" of shares of Common Stock determined according to the following formula (a "Cashless Exercise"):

Net Number =       (A x B) -- (A x C)

  B

For purposes of the foregoing formula:

A = the total number of shares with respect to which this Warrant is then being exercised.

B = the closing sale price of the shares of Common Stock (as reported by Bloomberg) on the date immediately preceding the date of the Form of Election to Purchase (the "Closing Price").

C = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

e.        Deemed Exercise.  If, at the Expiration Date for any Warrant Shares, this Warrant has not theretofore been exercised with respect to such Warrant Shares, and the Closing Price on the business day immediately prior to the Expiration Date is greater than the Exercise Price, then the Warrant Holder shall be deemed to have exercised this Warrant in whole with respect to such Warrant Shares immediately prior to such Expiration Date and shall be deemed to have elected to pay the aggregate Exercise Price pursuant to paragraph d. (Cashless Exercise) of this Section 5, and the Date of Exercise with respect to such deemed exercise shall be the date on which such Expiration Date occurs.

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6.              Adjustment of the Number of Shares.  The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant, are subject to adjustment upon the occurrence of the following events, and all such adjustments shall be cumulative:

a.          Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc.  The Exercise Price and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.

b.          Reserved

c.          Reserved

d.          Distributions of Other Property.  If, at any time while this Warrant remains outstanding and unexpired with respect to any Warrant Shares, the Company shall distribute to all holders of Company Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness or assets (excluding ordinary cash dividends or distributions payable out of consolidated earnings or earned surplus and dividends or distributions referred to in paragraph (a) of this Section 6), then, in lieu of an adjustment to the number of shares Company Common Stock purchasable upon the exercise of this Warrant, the Warrant Holder, upon the exercise hereof at any time after such distribution shall be entitled to receive from the Company the stock or other securities to which the Warrant Holder would have been entitled if the Warrant Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 6.

e.          Certificate as to Adjustments.  In case of any adjustment or readjustment in the number or kind of securities issuable on the exercise of this Warrant, or the Exercise Price, the Company will promptly give written notice thereof (but in no event later than 5 business days thereafter) to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

7.               Fractional Shares.  The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant.  The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented.  If any fraction of a Warrant Share would, except for the provisions of this Section 7, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.

8.               Sale or Merger the Company.  The Company will give Warrant Holder 15-day written notice before the event of a sale of all or substantially all of the assets of the Company or the merger or consolidation of the Company in a transaction in which the Company is not the surviving entity (a "Fundamental Transaction").  The Company shall not enter into or be party to such Fundamental Transaction unless the surviving entity assumes in writing all of the obligations of the Company under this Warrant pursuant to written agreements in form and substance satisfactory to the Warrant Holder and approved by the Warrant Holder prior to such Fundamental Transaction, including agreements to deliver to the Warrant Holder in exchange for this Warrant a security of the surviving entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Warrant Holder.

9.               Issuance of Substitute Warrant.   In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares upon the surrender of this Warrant to the Company.

10.             Listing of Shares.   The Company shall promptly secure the listing of all of the Warrant Shares issuable hereunder upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of Warrant Shares.

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11.            Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Warrant Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the this Warrant, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of this Warrant  (without regard to any limitations on exercise).

12.              Notice.  All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

If to the Company:

HealthWarehouse.com, Inc.

7107 Industrial Road

Florence, KY 42042

Fax: (866) 821-3784

Attn: Chief Executive Officer

with a copy (for informational purposes only) to:

Mark J. Zummo, Esq.

Kohnen & Patton LLP

800 PNC Center

201 E. Fifth Street

Cincinnati, OH 45202

Telephone:  (513) 381-0656

Fax: (513) 381-5823

If to the Warrant Holder:

Melrose Capital

c/o Statman, Harris & Eyrich, LLC

441 Vine Street, 37th Floor

Cincinnati, Ohio  45202

With a copy (for informational purposes only) to:

Statman, Harris & Eyrich, LLC

441 Vine Street, 37th Floor

Cincinnati, Ohio  45202

Attn:  Fern Goldman

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13.             Loss of Warrant.  Upon receipt by the Company of satisfactory evidence of loss, theft, destruction or mutilation of this Warrant and of indemnity satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date and any such lost, stolen or destroyed Warrant shall thereupon become void.

14.             Miscellaneous.

a.            This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Warrant may be amended only in writing and signed by the Company and the Warrant Holder.

b.           Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

c.            This Warrant shall be governed by, construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof.  Each party irrevocably submits and consent to the exclusive jurisdictions of the United States District Courts of the State of Delaware, or, if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in the State of Delaware, and hereby agrees that such courts shall be the exclusive proper forum for the determination of any dispute arising hereunder.

d.            The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

e.            In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

f.            The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a shareholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

g.            The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Warrant Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Warrant Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.  If any action, suit, or other proceedings is instituted concerning or arising out of this Warrant, the prevailing party shall recover all of such party's costs and reasonable attorney's fees incurred in each such action, suit, or other proceeding, including any and all appeals or petitions from any such action, suit or other proceeding.

h.            From and after the date of this Warrant, upon the request of the Warrant Holder or the Company, the Company and the Warrant Holder shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Warrant.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the Grant Date first above stated.

Healthwarehouse.com, Inc.

By: /s/   Lalit Dhadphale                                                              

Name:    Lalit Dhadphale, President

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FORM  OF  ELECTION  TO  PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To:  HealthWarehouse.com, Inc.

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ________________ shares of Common Stock ("Common Stock"), $0.___ par value, of HealthWarehouse.com, Inc. and encloses one warrant and $______________ for each Warrant Share being purchased or an aggregate of $ ______________ in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant. The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

__________________________________

__________________________________

__________________________________

(Please print name and address)

(Please insert Social Security or Tax Identification

Number)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

__________________________________

__________________________________

__________________________________

(Please print name and address)

Dated:  __________________

Name of Warrant Holder:

(Print)       __________________________________

(By:)           __________________________________

(Name:)      __________________________________

(Title:)        __________________________________

Signature must conform in all respects to name of Warrant

Holder as specified on the face of the Warrant

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FORM OF ASSIGNMENT PURSUANT TO SECTION 4(a)

(To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.)

     FOR VALUE RECEIVED hereby sells, assigns and transfers unto

____________________________________________________________

(Please print name and address of transferee)

this Warrant Certificate, together with all right, title and interest therein, and hereby irrevocably constitutes and appoints __________________________ Attorney, to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution.

Dated:  ______________

Signature: ________________________________

(Signature must confirm in all respects to name of holder as specified on the face of the

Warrant Certificate.)

(Insert Social Security or Other Identifying Number of Assignee).

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EX-10.1

Exhibit 10.1

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”), dated as of September 30, 2013, is made by PAGOSA HEALTH LLC, an Indiana corporation, with an address at 62 Doughty Road, Lawrenceburg, IN 47025 (collectively, “Debtor”), in favor of MELROSE CAPITAL ADVISORS, LLC, an Ohio limited liability company with an addressat c/o Statman, Harris & Eyrich, LLC, 441 Vine Street, 37th Floor, Cincinnati, Ohio  45202 (the “Lender”).

WHEREAS, Debtor is indebted to Lender pursuant to the Promissory Note of even date herewith, executed by Debtor in favor of Lender in the original principal amount of $600,000 (“Note”), and all agreements, instruments and documents executed or delivered in connection with the foregoing or otherwise related thereto (together with any amendments, modifications, or restatements thereof, the “Loan Documents”);

WHEREAS, under the terms hereof, the Lender desires to obtain and the Debtor desires to grant the Lender security for all of the Obligations (as hereinafter defined);

NOW, THEREFORE, the Debtor and the Lender, intending to be legally bound, hereby agree as follows:

1.  Definitions.

(a)  “Collateral” shall include all personal property of the Debtor, including the following, all whether now owned or hereafter acquired or arising and wherever located:  (i) accounts (including health-care-insurance receivables and credit card receivables); (ii) securities entitlements, securities accounts, commodity accounts, commodity contracts and investment property; (iii) deposit accounts; (iv) instruments (including promissory notes); (v) documents (including warehouse receipts); (vi) chattel paper (including electronic chattel paper and tangible chattel paper); (vii)inventory, including raw materials, work in process, or materials used or consumed in Debtor’s business, items held for sale or lease or furnished or to be furnished under contracts of service, sale or lease, goods that are returned, reclaimed orrepossessed; (viii) goods of every nature; (ix) equipment, including machinery, vehicles and furniture; (x) fixtures; (xi) commercial tort claims; (xii) letter of credit rights; (xiii) general intangibles, of every kind and description, including payment intangibles, websites, domain names, software, computer information, source codes, object codes, records and data, all existing and future customer lists, choses in action, claims, books, records, patents and patent applications, copyrights, trademarks and  tradenames1 tradestyles, trademark applications, goodwill, blueprints, drawings, designs and plans, trade secrets, contracts, licenses, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies; (xiv) all supporting obligations of all of the foregoing property; (xv) all property of the Debtor now or hereafter in the Lender’s possession or in transit to or from, or under the custody or control of, the Lender or any affiliate thereof; (xvi) all cash and cash equivalents thereof; and (xvii) all cash and noncash proceeds (including insurance proceeds) of all of the foregoing property, all products thereof and all additions and accessions thereto, substitutions therefor and replacements thereof.

(b)  “Obligations” shall include all loans, advances, debts, liabilities and obligations of the Debtor to the Lender of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, or guarantee, or in any other manner,  including but not limited to the Loan Documents, whether direct or indirect, absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, and any amendments, extensions, renewals or increases, and all costs and expenses of the Lender incurred in connection with any of the foregoing, including reasonable attorneys' fees and expenses.

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(c)  “UCC” means the Uniform Commercial Code, as adopted and enacted and as in effect from time to time in the State of Ohio.  Terms used herein which are defined in the UCC and not otherwise defined herein shall have the respective meanings ascribed to such terms in the UCC.

2.  Grant of Security Interest.  To secure the Obligations, the Debtor, as debtor, hereby assigns and grants to the Lender, as secured party, a continuing lien on and security interest in the Collateral.

3.  Change in Name or Locations.  The Debtor hereby agrees that if the location of the Collateral changes from the locations listed on Exhibit “A” hereto and made part hereof, or if the Debtor changes its name, its type of organization, its state of organization, its chief executive office, or establishes a new name in which it may do business, the Debtor will immediately notify the Lender in writing of the additions or changes.

4.  Representations and Warranties.  The Debtor represents, warrants and covenants to the Lender that: (a) all information set forth on Exhibit “A” hereto is true and correct in all material respects on the date hereof;  (b) the Debtor has good, marketable and indefeasible title to the Collateral, has not made any prior sale, pledge, encumbrance, assignment or other disposition of any of the Collateral, and the Collateral is free from all encumbrances and rights of setoff of any kind except the lien in favor of the Lender created by this Agreement and Permitted Liens (as such term is defined in the Note (the “Permitted Liens”);  (c) except as herein provided, the Debtor will not hereafter without the Lender’s prior written consent sell, pledge, encumber, assign or otherwise dispose of any of the Collateral or permit any right of setoff, lien or security interest to exist thereon except to the Lender and the other Permitted Liens; and (d) the Debtor will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein except with regards to Permitted Liens.

5.  Debtor’s Covenants.  The Debtor covenants that it shall:

(a)  from time to time and upon reasonable prior notice and at all reasonable times allow the Lender, by or through any of its officers, agents, attorneys, or accountants, to examine or inspect the Collateral, and obtain valuations and audits of the Collateral, at the Debtor’s expense, wherever located; ; provided, however, that unless an Event of Default exists Debtor shall not be required to pay for more than one valuation or audit of the Collateral in any consecutive twelve month period.  The Debtor shall do, obtain, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as the Lender may reasonably require to vest in and assure to the Lender its rights hereunder and in or to the Collateral, and the proceeds thereof, including waivers from landlords, warehousemen and mortgagees.

(b)  keep the Collateral in good order and repair (normal wear and tear excepted) at all times and immediately notify the Lender of any event causing a material loss or decline in value of the Collateral, whether or not covered by insurance, and the amount of such loss or depreciation;

(c)  only use or permit the Collateral to be used in accordance in all material respects with all applicable federal, state, county and municipal laws and regulations; and

(d)  have and maintain insurance at all times with respect to all Collateral against risks of fire (including so-called extended coverage), theft, sprinkler leakage, and other risks (including risk of flood if any Collateral is maintained at a location in a flood hazard zone) as the Lender may reasonably require, in such form, in such amount, for such period and written by such companies as may be reasonably satisfactory to the Lender.  Each such casualty insurance policy shall contain a standard Lender’s Loss Payable Clause issued in favor of the Lender under which all losses thereunder shall be paid to the Lender as the Lender’s interest may appear.  Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without at least thirty (30) days prior written notice to the Lender and shall insure the Lender notwithstanding the act or neglect of the Debtor.  Promptly upon the Lender’s demand, the Debtor shall furnish the Lender with duplicate original policies of insurance or such other evidence of insurance as the Lender may require.  In the event of failure to provide insurance as herein provided, the Lender may, at its option, obtain such insurance and the Debtor shall pay to the Lender, promptly upon demand, the cost thereof.  Proceeds of insurance may be applied by the Lender to reduce the Obligations or to repair or replace Collateral, all in the Lender’s sole discretion.; provided, however, that if no Event of Default exists, Debtor may apply proceeds of insurance to repair or replace the Collateral.

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6.  Negative Pledge; No Transfer.  The Debtor will not sell or offer to sell or otherwise transfer or grant or allow the imposition of a lien or security interest upon the Collateral (except for sales of inventory and collections of accounts in the Debtor’s ordinary course of business and Permitted Liens), will not allow any third party to gain control of all or any part of the Collateral except for third parties with regards to Permitted Liens, and will not use any portion thereof in any manner inconsistent with this Agreement or with the terms and conditions of any policy of insurance thereon.

7.  Further Assurances.  By its signature hereon, the Debtor hereby irrevocably authorizes the Lender to execute (on behalf of the Debtor) and file against the Debtor one or more financing, continuation or amendment statements pursuant to the UCC in form satisfactory to the Lender, and the Debtor will pay the cost of preparing and filing the same in all jurisdictions in which such filing is reasonably deemed by the Lender to be necessary or desirable in order to perfect, preserve and protect its security interests.  If required by the Lender, the Debtor will execute all documentation necessary for the Lender to obtain and maintain perfection of its security interests in the Collateral.

8.  Events of Default.  The Debtor shall, at the Lender’s option, be in default under this Agreement upon the happening of any of the following events or conditions (each, an “Event of Default”):  (a) any default under any of the Obligations (subject to the expiration of any applicable notice or grace periods); (b) the failure by the Debtor to perform any of its obligations under this Agreement and such failure continues for 10 days; (c) any material falsity, inaccuracy or material breach by the Debtor of any written warranty, representation or statement made or furnished to the Lender by or on behalf of the Debtor; or (d) the failure of the Lender to have a perfected security interest in the Collateral.

9.  Remedies.  Upon the occurrence of any such Event of Default and at any time thereafter, the Lender may declare all Obligations secured hereby immediately due and payable and shall have, in addition to any remedies provided herein or by any applicable law or in equity, all the remedies of a secured party under the UCC. The Lender’s remedies include, but are not limited to, the right to (a) peaceably by its own means or with judicial assistance enter the Debtor’s premises and take possession of the Collateral without prior notice to the Debtor or the opportunity for a hearing, (b) render the Collateral unusable, (c) dispose of the Collateral on the Debtor’s premises, (d) require the Debtor to assemble the Collateral and make it available to the Lender at a place designated by the Lender.  Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Lender will give the Debtor reasonable notice of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made.  The requirements of commercially reasonable notice shall be met if such notice is sent to the Debtor at least ten (10) days before the time of the intended sale or disposition.  Expenses of retaking, holding, preparing for disposition, disposing or the like shall include the Lender’s reasonable attorneys’ fees and legal expenses, incurred or expended by the Lender to enforce any payment due it under this Agreement either as against the Debtor, or in the prosecution or defense of any action, or concerning any matter growing out of or connection with the subject matter of this Agreement and the Collateral pledged hereunder.  The Debtor waives all relief from all appraisement or exemption laws now in force or hereafter enacted.

10.  Power of Attorney.  After and during the existence of an Event of Default, the Debtor does hereby make, constitute and appoint any officer or agent of the Lender as the Debtor’s true and lawful attorney-in-fact, with power to (a) endorse the name of the Debtor or any of the Debtor’s officers or agents upon any notes, checks, drafts, money orders, or other instruments of payment or Collateral that may come into the Lender’s possession in full or part payment of any Obligations; (b) sue for, compromise, settle and release all claims and disputes with respect to, the Collateral; and (c) sign, for the Debtor, such documentation required by the UCC, or supplemental intellectual property security agreements; granting to the Debtor’s said attorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as the Debtor might or could do.  The Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an interest, and is irrevocable.

Page 3 of 4

11.  Payment of Expenses.  Upon Debtor’s failure to do so and at Lender’s option, the Lender may discharge taxes, liens, security interests or such other encumbrances as may attach to the Collateral, may pay for required insurance on the Collateral and may pay for the maintenance, appraisal or reappraisal, and preservation of the Collateral, as determined by the Lender to be necessary.  The Debtor will reimburse the Lender promptly upon demand for any payment so made or any expense incurred by the Lender pursuant to the foregoing authorization, and the Collateral also will secure any advances or payments so made or expenses so incurred by the Lender.

12.  Preservation of Rights.  No delay or omission on the Lender’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Lender’s action or inaction impair any such right or power.  The Lender’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Lender may have under other agreements, at law or in equity.

13.  Changes in Writing.  No modification, amendment or waiver of, or consent to any departure by the Debtor from, any provision of this Agreement will be effective unless made in a writing signed by the Lender and the Debtor, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on the Debtor will entitle the Debtor to any other or further notice or demand in the same, similar or other circumstance.

14.  Entire Agreement.  This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

15.  Successors and Assigns.  This Agreement will be binding upon and inure to the benefit of the Debtor and the Lender and their respective heirs, executors, administrators, successors and assigns.

16.  Governing Law and Jurisdiction.  This Agreement will be governed by Ohio law.  Debtor agrees that service of process may be made, and personal jurisdiction over Debtor obtained, by serving a copy of the Summons and Complaint upon Debtor at its address set forth in this Agreement in accordance with the applicable laws of the State of Ohio.

17.  WAIVER OF JURY TRIAL.  EACH OF THE DEBTOR AND THE LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE DEBTOR AND THE LENDER ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

Executed as of the date first written above.

Debtor:

PAGOSA HEALTH LLC

an Indiana corporation

By: /s/           Lalit Dhadphale                                                        

Print Name:  Lalit Dhadphale

Title:             President & Chief Executive Officer

Lender:

MELROSE CAPITAL ADVISORS, LLC

By: /s/           Timothy E. Reilly                                                      

                       Timothy E. Reilly, Managing Member

Page 4 of 4

EXHIBIT “A”

TO SECURITY AGREEMENT

Locations of Collateral

62 Doughty Road, Lawrenceburg, IN 47025

A - 1

UCC-1 collateral description:

All assets and all personal property now owned and hereafter acquired and the proceeds thereof.  All now owned and hereafter acquired inventory, equipment, fixtures, goods, accounts (including health-care-insurance receivables and credit card receivables), chattel paper (including electronic chattel paper), documents, instruments, general  intangibles, trademarks and tradenames (including but not limited to HEALTHWAREHOUSE and HEALTHWAREHOUSE.COM registered with the U.S. Patent and Trademark Office), websites, domain names, software, investment property, deposit accounts, letter of credit rights, payment intangibles, supporting obligations, software, commercial tort claims, and all rents, issues, profits and products and proceeds thereof, wherever any of the foregoing is located.

UCC - 1

EX-31.1

Exhibit 31.1

CERTIFICATION OF C.E.O. PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, in the capacity and date indicated below, hereby certifies that:

1. I have reviewed this quarterly report on Form 10-Q of HealthWarehouse.com, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 22, 2013
	/s/  Lalit Dhadphale                                                         Lalit Dhadphale
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF P.F.O. PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, in the capacity and date indicated below, hereby certifies that:

1. I have reviewed this quarterly report on Form 10-Q of HealthWarehouse.com, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 22, 2013	/s/ Lalit Dhadphale
	Lalit Dhadphale
	Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of HealthWarehouse.com, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission (the “Report”), I, Lalit Dhadphale, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 22, 2013
	/s/   Lalit Dhadphale                                                               Lalit Dhadphale
	President and Chief Executive Officer

A signed original of this written statement required by section 906 has been provided to HealthWarehouse.com, Inc. and will be retained by HealthWarehouse.com, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of HealthWarehouse.com, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission (the “Report”), I, Lalit Dhadphale, Principal Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 22, 2013
	/s/   Lalit Dhadphale
	Lalit Dhadphale         Principal Financial Officer

A signed original of this written statement required by section 906 has been provided to HealthWarehouse.com, Inc. and will be retained by HealthWarehouse.com, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events

Note 11 - Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed below.

Private Placement Offerings

On April 11, 2013, the Company completed private placements for an aggregate of $125,000 for the purchase 125,000 units at a price of $1.00 per unit. Each unit consists of (i) one share of the Company’s common stock, and (ii) a five-year warrant to purchase three shares of the Company’s common stock at an exercise price of $0.25 per share. Substantially all of the proceeds from the sale of the units were used by the Company to satisfy all of its obligations under the Notes and Convertible Notes (see Note 7).

Warrant Exercises

Subsequent to March 31, 2013, the Company issued an aggregate of 3,408,147 shares of common stock to holders of warrants who elected to exercise warrants to purchase an aggregate of 4,404,273 shares of common stock on a "cashless" basis under the terms of the warrants. The warrants had exercise prices of $0.25 per share (3,245,925 gross shares), $0.35 per share (750,000 gross shares), and $1.00 per share (408,348 gross shares).

Option Grants

On June 19, 2013, the Company granted an option to a director to purchase 100,000 shares of common stock under the 2009 Plan at an exercise price of $1.45 per share for a grant date value of $109,600.  The option vests over a three year period and has a term of ten years.

Pagosa Health LLC

On June 4, 2013, the Company formed a wholly owned subsidiary called Pagosa Health LLC (“Pagosa”). On June 7, 2013, Pagosa signed a three year lease for $1,000 per month to house an office, pharmacy as well as inventory and is located in Lawrenceburg, Indiana. A redundant facility is required by Verified Internet Pharmacy Practice Sites (“VIPPS”) and a newly acquired contract.  Pagosa will serve as a backup facility and will function as a closed door pharmacy. On July 8, 2013, the parties agreed to extend the lease for two additional years, such that the new termination date is now June 7, 2018.

Related Party Advances

Subsequent to March 31, 2013, an officer advanced approximately $2,000 to the Company and he was repaid approximately $60,000. As of March 31, 2013, the outstanding payable to the officer was approximately $154,000.

Notes Payable

On August 15, 2013, the Company issued a note payable to a related party with a principal balance of $49,000, bearing interest at a rate of 10% per annum.  The note has a maturity date of November 7, 2013 and will be repaid in weekly payments of principal and interest beginning in September 2013.

Effective September 30, 2013, the Company entered into an Amended and Restated Promissory Note (the “September Note”) which supersedes the March Note (see Note 6 – Notes Payable) with the same Lender.  The Company borrowed an additional $100,000 from the Lender, which brought the face value of the September Note to $600,000.  The September Note contains financial covenants which require the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation (“EBITDAS”) for the calendar quarters and years ended between December 31, 2013 and 2014, inclusive. In addition, the September Note extended the deadline for providing the March 31, 2013 and June 30, 2013 quarterly financial statements and financial covenant certifications from 45 days after quarter end to October 31, 2013. The remainder of the material September Note terms are unchanged from the March Note.  In consideration of the Lender providing additional funds and entering into the September Note, the Company granted the Lender a five-year warrant to purchase 150,000 shares of common stock at an exercise price of $0.35 per share. The warrant contains customary anti-dilution provisions. The warrant had a relative fair value of $51,200 which was set up as debt discount and will be amortized using the effective interest method over the term of the September Note.  Including the value of the warrants issued in connection with the March Note and September Note, the September Note had an effective interest rate of 41% per annum.

Sublease Agreement

On October 10, 2013, the Company entered into a sublease agreement for 15,000 square feet of warehouse space at the Company’s corporate headquarters in Florence, Kentucky. The initial term of the sublease expires on January 31, 2014 with rent of $4,688 per month. After the expiration of the initial term, the tenant may extend the term of the sublease agreement on a month to month basis.

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Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2013

Accrued Expenses And Other Current Liabilities

Note 4 - Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	March 31,		December 31,
	2013		2012
Deferred rent	$	40,889	$	39,100
Advertising		75,000		75,000
Salaries and benefits		220,075		166,118
Professional fees		50,000		81,872
Dividends payable		69,840		261,084
Accrued interest		44,250		410,101
Due to investors (1)		125,000		850,002
Customer payables		59,018		51,333
Other		16,186		8,159
Total	$	700,258	$	1,942,769

(1) - Proceeds received from investors in advance of equity offering closing.

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Accrued Expenses and Other Current Liabilities (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Accrued Expenses And Other Current Liabilities Details
Deferred rent	$ 40,889	$ 39,100
Advertising	75,000	75,000
Salaries and benefits	220,075	166,118
Professional fees	50,000	81,872
Dividends payable	69,840	261,084
Accrued interest	44,250	410,101
Due to investors (1)	125,000	850,002
Customer payables	59,018	51,333
Other	16,186	8,159
Total	$ 700,258	$ 1,942,769

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Summary Of Significant Accounting Policies Policies

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, and ION Belgium NV, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets, the valuation of equity instruments and debt discounts.

Reclassifications

Reclassifications

Certain accounts in the prior period condensed consolidated financial statements have been reclassified for comparison purposes to conform to the presentation of the current period condensed consolidated financial statements.  These reclassifications had no effect on the previously reported net loss.

Revenue Recognition

Revenue Recognition

Revenues for the sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is reasonably assured. The Company defers revenue when cash has been received from the customer but delivery has not yet occurred.  Such amounts are reflected as deferred revenues in the accompanying condensed consolidated financial statements.

Net Loss Per Share of Common Stock

Net Loss Per Share of Common Stock

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted net loss per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock.  Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following:

	March 31,
	2013		2012
Options		2,451,483		2,033,807
Warrants		6,047,119		2,916,590
Series B Convertible Preferred Stock		3,407,313		1,973,425
Convertible Promissory Notes		-		529,100
Total potentially dilutive shares		11,905,915		7,452,922

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award. For employees and directors, the award is measured on the grant date.  For non-employees, the award is measured on the grant date and is then remeasured at each vesting date and financial reporting date.  The Company recognizes the estimated fair value of the award as compensation cost over the requisite service period of the award, which is generally the option vesting term.  The Company generally issues new shares of common stock to satisfy option and warrant exercises.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." This ASU addresses the requirements regarding the financial statement presentation of an unrecognized tax benefit within Accounting Standards Codification ("ASC") Topic 740 for the purpose of providing consistency between the financial reporting of U.S. GAAP entities. Generally, this ASU provides guidance for the preparation of financial statements and disclosures when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  This ASU is effective for periods beginning after December 15, 2013 and is not expected to have any impact on the Company’s condensed consolidated financial statements or disclosures.

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Stockholders' Deficiency (Details)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Stockholders Deficiency Details
Risk free interest rate	1.13%	1.04%
Dividend yield	0.00%	0.00%
Expected volatility	166.00%	172.20%
Expectd life in years	6 years	6 years

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Notes Payable (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Notes Payable Details Narrative
Notes payable	$ 44,363	$ 133,095

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Commitments and Contingent Liabilities (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Commitments And Contingent Liabilities Details Narrative
Rent Expense	$ 45,719	$ 52,457

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Stockholders' Deficiency (Details 4) (USD $)	3 Months Ended
	Mar. 31, 2013
Number of warrants, outstanding
Outstanding, beginning of period (in shares)	592,846
Granted	13,580,023
Exercised	(8,125,750)
Forfeited
Outstanding, end of period (in shares)	6,047,119
Exercisable, March 31, 2013	5,767,119
Warrants, weighted average exercise price
Outstanding, beginning of period (in dollars per share)	$ 3.01
Granted	$ 0.28
Exercised	$ 0.25
Forfeited
Outstanding, end of period (in dollars per share)	$ 0.58
Exercisable, March 31, 2013	$ 0.46
Weighted Average Remaining Life In Years
Weighted Average Remaining Life (in years) Outstanding	4 years 8 months 12 days
Weighted Average Remaining Life (in years) Exercisable	4 years 9 months 18 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding	$ 4,618,507
Aggregate Intrinsic Value Exercisable	$ 4,618,507

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Convertible Notes Payable (Details Narrative) (USD $)	Mar. 31, 2013
Convertible Notes Payable Details Narrative
Convertible Notes Payable	$ 82,616

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (USD $)	Convertible Series B Preferred Stock	Common Stock	Additional Paid-In Capital	Employee Advances	Treasury Stock	Accumulated Deficit	Total
Beginning Balance, Amount at Dec. 31, 2012	$ 395	$ 13,031	$ 16,460,385	$ (18,858)	$ (3,419,715)	$ (20,828,674)	$ (7,793,436)
Beginning Balance, Shares at Dec. 31, 2012	394,685	13,030,397			1,179,212
Stock-based compensation			330,021				330,021
Warrants issued to 2012 private placement investors			487,200				487,200
Issuance of Series B preferred stock as payment-in-kind for dividend, Amount	27		261,057				261,084
Issuance of Series B preferred stock as payment-in-kind for dividend, Shares	27,630
Cashless exercise of warrants into common stock, Amount		6,934	(6,934)
Cashless exercise of warrants into common stock, Shares		6,934,784
Contractual dividends on Series B convertible preferred stock						(69,840)	(69,840)
Beneficial conversion feature and deemed dividend on Series B convertible preferred stock			1,532,722			(1,532,722)
Warrants issued as debt discount in connection with notes payable			315,300				315,300
Conversion of notes and accounts payable into common stock and warrants, Amount		833	3,625,067				3,625,900
Conversion of notes and accounts payable into common stock and warrants, Shares		833,000
Issuance of common stock and warrants for cash, Amount		3,377	3,373,598				3,376,975
Issuance of common stock and warrants for cash, Shares		3,376,975
Imputed value of services contributed			87,500				87,500
Reduction in value of employee advance reserve				(31,528)			(31,528)
Net loss						(4,078,366)	(4,078,366)
Ending Balance, Amount at Mar. 31, 2013	$ 422	$ 24,175	$ 26,465,916	$ (50,386)	$ (3,419,715)	$ (26,509,602)	$ (3,489,190)
Ending Balance, Shares at Mar. 31, 2013	422,315	24,175,156			1,179,212

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Going Concern and Management's Liquidity Plans

3 Months Ended

Mar. 31, 2013

Going Concern And Managements Liquidity Plans

Note 2 - Going Concern and Management's Liquidity Plans

Since inception, the Company has financed its operations primarily through debt and equity financings and advances from related parties. As of March 31, 2013, the Company had a working capital deficiency of $3,909,308 and an accumulated deficit of $26,509,602.  During the three months ended March 31, 2013 and year ended December 31, 2012, the Company incurred net losses of $4,078,366 and $5,574,775 and used cash in operating activities of $457,373 and $947,911, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Subsequent to March 31, 2013, the Company (a) had a closing of its private placement offering in the amount of $125,000 which funds had been received by the Company during the three months ended March 31, 2013; (b) raised an aggregate of $149,000 in debt financings; and (c) continues to incur net losses, use cash in operating activities and experience cash and working capital constraints. See Note 11.

On February 13, 2013, the Company received a Notice of Redemption related to its Series C Redeemable Preferred Stock aggregating $1,000,000 (see Note 7). As a result of receiving the Notice of Redemption, the Company must now apply all of its assets to redemption of the Series C Preferred Stock and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders (the Company is not permitted to utilize toward the redemption those assets required to pay its debts as they come due and those assets required to continue as a going concern).

The Company recognizes it will need to raise additional capital in order to fund operations, meet its payment obligations and execute its business plan. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, attempt to extend note repayments, attempt to negotiate the preferred stock redemption and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.  If the Company is unable to obtain financing on a timely basis, the Company could be forced to sell its assets, discontinue its operation and /or seek reorganization under the U.S. bankruptcy code.

Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Convertible Notes Payable

3 Months Ended

Mar. 31, 2013

Convertible Notes Payable

Note 5 - Convertible Notes Payable

On February 1, 2013, the Company repaid convertible notes with an outstanding principal balance of $1,000,000 plus outstanding accrued interest of $163,861. The convertible notes bore interest at a rate of 7% per annum compounded annually and were due on December 31, 2012. The Company recorded amortization of debt discount associated with convertible notes payable of $82,616 for the three months ended March 31, 2012 using the effective interest method. As of December 31, 2012, the debt discount had been fully amortized.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Summary Of Significant Accounting Policies

Note 3 - Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, and ION Belgium NV, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets, the valuation of equity instruments and debt discounts.

Reclassifications

Certain accounts in the prior period condensed consolidated financial statements have been reclassified for comparison purposes to conform to the presentation of the current period condensed consolidated financial statements.  These reclassifications had no effect on the previously reported net loss.

Revenue Recognition

Revenues for the sales of products are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is reasonably assured. The Company defers revenue when cash has been received from the customer but delivery has not yet occurred.  Such amounts are reflected as deferred revenues in the accompanying condensed consolidated financial statements.

Net Loss Per Share of Common Stock

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted net loss per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock.  Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following:

	March 31,
	2013		2012
Options		2,451,483		2,033,807
Warrants		6,047,119		2,916,590
Series B Convertible Preferred Stock		3,407,313		1,973,425
Convertible Promissory Notes		-		529,100
Total potentially dilutive shares		11,905,915		7,452,922

Stock-Based Compensation

Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the award. For employees and directors, the award is measured on the grant date.  For non-employees, the award is measured on the grant date and is then remeasured at each vesting date and financial reporting date.  The Company recognizes the estimated fair value of the award as compensation cost over the requisite service period of the award, which is generally the option vesting term.  The Company generally issues new shares of common stock to satisfy option and warrant exercises.

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." This ASU addresses the requirements regarding the financial statement presentation of an unrecognized tax benefit within Accounting Standards Codification ("ASC") Topic 740 for the purpose of providing consistency between the financial reporting of U.S. GAAP entities. Generally, this ASU provides guidance for the preparation of financial statements and disclosures when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  This ASU is effective for periods beginning after December 15, 2013 and is not expected to have any impact on the Company’s condensed consolidated financial statements or disclosures.

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Stockholders' Deficiency (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2013
Number of options, outstanding
Outstanding, beginning of period (in shares)	2,183,899
Granted	330,500
Exercised
Forfeited	(62,916)
Outstanding, end of period (in shares)	2,451,483
Exercisable, March 31, 2013	1,192,649
Options, weighted average exercise price
Outstanding, beginning of period (in dollars per share)	$ 3.42
Granted	$ 1.60
Exercised
Forfeited	$ 3.11
Outstanding, end of period (in dollars per share)	$ 3.18
Exercisable, March 31, 2013	$ 2.66
Weighted Average Remaining Life In Years
Weighted Average Remaining Life (in years) Outstanding	6 years 2 months 12 days
Weighted Average Remaining Life (in years) Exercisable	4 years 8 months 12 days
Aggregate Intrinsic Value Outstanding	$ 77,331
Aggregate Intrinsic Value Exercisable	$ 77,331

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Stockholders' Deficiency (Details 6) (USD $)	Mar. 31, 2013
Number Outstanding	6,047,119
Weighted Average Remaining Contractual Term	4 years 9 months 18 days
Weighted Average Exercise Price Outstanding	$ 0.58
Number Exercisable	5,767,119
Weighted Average Exercise Price Exercisable	$ 0.46
$0.25 - $0.35
Number Outstanding	5,045,925
Weighted Average Remaining Contractual Term	4 years 10 months 24 days
Weighted Average Exercise Price Outstanding	$ 0.26
Number Exercisable	5,045,925
Weighted Average Exercise Price Exercisable	$ 0.26
$0.36 - $1.60
Number Outstanding	408,348
Weighted Average Remaining Contractual Term	4 years 10 months 24 days
Weighted Average Exercise Price Outstanding	$ 1.00
Number Exercisable	408,348
Weighted Average Exercise Price Exercisable	$ 1.00
$1.61 - $3.00
Number Outstanding	562,846
Weighted Average Remaining Contractual Term	3 years 4 months 24 days
Weighted Average Exercise Price Outstanding	$ 2.91
Number Exercisable	312,846
Weighted Average Exercise Price Exercisable	$ 2.91
$3.01 - $4.95
Number Outstanding	30,000
Weighted Average Exercise Price Outstanding	$ 4.95
Number Exercisable
Weighted Average Exercise Price Exercisable

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Current liabilities:
Current Portion Notes Payable, deferred debt discount	$ 0	$ 44,363
Redeemable preferred stock Series C, par value	0.001	0.001
Redeemable preferred stock Series C, shares designated	10,000	10,000
Redeemable preferred stock Series C, shares issued	10,000	10,000
Redeemable preferred stock Series C, shares outstanding	10,000	10,000
Redeemable preferred stock Series C, aggregate liquidation preference	1,000,000	1,000,000
Note payable, net of debt discount	315,300
Stockholders' deficiency:
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	1,000,000	1,000,000
Preferred stock, shares issued	1,000,000	1,000,000
Preferred stock, shares outstanding	1,000,000	1,000,000
Series A Convertible preferred stock, shares designated	200,000	200,000
Series A Convertible preferred stock, shares available to be issued	44,443	44,443
Series A Convertible preferred stock, shares issued	0	0
Series A Convertible preferred stock, shares outstanding	0	0
Series B Convertible preferred stock, shares designated	625,000	625,000
Series B Convertible preferred stock, shares issued	422,315	394,685
Series B Convertible preferred stock, shares outstanding	422,315	394,685
Series B Convertible preferred stock, aggregate liquidation preference	$ 4,060,717	$ 3,990,877
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	50,000,000	50,000,000
Common stock, shares issued	24,175,156	13,030,397
Common stock, shares outstanding	22,995,944	11,851,185
Treasury stock, shares	1,179,212	1,179,212

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Commitments and Contingent Liabilities

3 Months Ended

Mar. 31, 2013

Commitments And Contingent Liabilities

Note 8 - Commitments and Contingent Liabilities

Operating Leases

On March 13, 2013, the Company gave notice of early termination for a lease agreement for a corporate apartment dated May 31, 2011.  Accordingly, the lease expired on March 31, 2013. The Company did not incur any penalties related to the early termination of the lease agreement.

During the three months ended March 31, 2013 and 2012, the Company recorded aggregate rent expense of $45,719 and $52,457, respectively.

Litigation

On February 9, 2012, two of our former stockholders, Rock Castle and Jason Smith (“Plaintiffs”), filed suit against the Company in the Hamilton County, Ohio Court of Common Pleas, alleging that the Company had breached the terms of certain stock options the Company granted to the Plaintiffs in connection with the Company’s now-terminated oral consulting arrangements with the Plaintiffs, by among other things, refusing Plaintiffs’ purported exercise of options to purchase 233,332 shares of the Company’s common stock at an exercise price of $2.00 per share in December 2011.  Plaintiffs have requested that, among other things, the court require the Company to permit the exercise of the 233,332 options.  Plaintiffs have also provided an expert report indicating damages of $2.086 million. Also named as defendants were two individuals, Michael Peppel and Gary Singer, whom Plaintiffs claim acted as agents for the Company in connection with its purchase of shares of its common stock from Plaintiffs in September 2011. On April 26, 2013, Plaintiffs dismissed Mr. Singer from the lawsuit.  Trial of the case is currently scheduled for April of 2014.  The Company denies all of the Plaintiffs’ claims and intends to contest this matter vigorously.

On October 9, 2012, American Express Travel Related Services Company, Inc. brought legal action against the Company in the Boone County, Kentucky Circuit Court. The action seeks to recover the unpaid balance on a credit card account in the amount of $87,029, plus interest and costs. The Company filed an answer in November 2012.  This litigation was resolved on July 10, 2013 by a negotiated settlement. Such amount has been accrued in the accompanying consolidated balance sheet as of March 31, 2013.

On November 5, 2012, HD Smith, Inc., one of the Company’s vendors, (“Plaintiff”) filed a complaint against the Company alleging that it breached its vendor credit agreement. The Plaintiff is seeking damages of $170,316 plus pre-judgment interest and attorneys’ fees. This litigation was resolved on January 25, 2013, as amended on June 20, 2013, by a negotiated settlement. Such amount has been accrued in the accompanying consolidated balance sheet as of March 31, 2013.

On March 13, 2013, a former vendor filed suit against the Company in the Hamilton County, Ohio Court of Common Pleas, alleging that the Company had breached its contract. The plaintiff is seeking damages of $17,800 plus pre-judgment interest and other costs and expenses. The Company answered the complaint and trial was set for June 2014.  This matter was resolved by a negotiated settlement. Such amount has been accrued in the accompanying consolidated balance sheet as of March 31, 2013.

On March 20, 2013, a complaint was filed in the Delaware Court of Chancery by two shareholders of the Company, HWH Lending, LLC and Milfam I L.P., seeking to compel the holding of an annual meeting of stockholders for the election of directors under Delaware law.  The Company filed an answer to the complaint on April 12, 2013.  On May 13, 2013, the Company publicly announced that the Board of Directors had set the date for the Company’s next annual meeting of stockholders as August 15, 2013 at 11:00 a.m. Eastern time.  In lieu of further litigation, on July 18, 2013, the parties submitted to the court a proposed order confirming August 15, 2013 as the annual meeting date and establishing certain procedures related to the annual meeting.  On July 18, 2013, the court entered the proposed order providing that (i) the Company shall notice and hold its annual meeting on August 15, 2013 for the election of directors and for the transaction of any other business properly brought before the meeting, and the date of the  meeting shall not be adjourned, continued or postponed prior to the election of directors absent an order of the court; (ii) the shares of the Company’s stock represented at the annual meeting, either in person or by proxy, and entitled to vote thereat shall constitute a quorum for purposes of the meeting, notwithstanding any contrary provision in the Company’s certificate of incorporation or bylaws, and (iii) the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting is July 1, 2013, and if the annual meeting noticed for August 15, 2013 is adjourned, continued or postponed prior to the election of directors pursuant to an order of the court, the Company may set a new record date in accordance with the Company’s bylaws. In accordance with the Court order, the Company’s annual meeting of stockholders was held on August 15, 2013 at which time Lalit Dhadphale, Youssef Bennani, Joseph Savarino, and Ambassador Ned Siegel each received a plurality of the total votes cast at the annual meeting and each was elected as a director by the stockholders of the Company. On September 24, 2013, this action was dismissed without prejudice by a joint stipulation of dismissal.

 On April 23, 2013, the Company’s Board of Directors formed a Special Committee, chaired by Youssef Bennani, a director and Chairman of the Company’s Audit Committee, to investigate certain stockholder demands.  Since March 1, 2013, the Company has received three letters from stockholders alleging certain breaches of fiduciary duties by directors of the Company and demanding that the Company commence investigations of the alleged conduct.  On March 1, 2013, the Company received a letter on behalf of the holders of the Company’s Series B Preferred Stock (“Preferred Holders”) alleging that a convicted felon appears to be a consultant to the Company, owes the Company money, and exercises control over the Company.  On March 8, 2013, the Company received a letter on behalf of stockholder Wayne Corona alleging that two directors, Matthew Stecker and John Backus, breached their fiduciary duties and demanding that the Company investigate legal claims against those directors.  The letter alleges that the director designee of the holders of the Company’s Series B Preferred Stock and the director designee of New Atlantic Ventures Fund III, L.P. (“NAV”) acted in concert to attempt to scuttle the Company’s recent financing plan.  The letter also alleged that the director designee of the Preferred Holders and the director designee of NAV sought to prevent the Company from paying back its lenders in 2010 and 2011.  On March 18, 2013, the Company received a letter on behalf of the two directors denying the allegations and stating there was no proper basis for launching an investigation.  On March 27, 2013, a letter on behalf of Messrs. Backus and Stecker, in their capacities as directors and stockholders, demanded that the Company (i) investigate alleged breaches of confidentiality and fiduciary duties by the Company’s President and CEO and two other directors in connection with the purported stockholder demand letter of Mr. Corona dated March 8, 2013, and (ii) assert related claims against those individuals.  The letter also asserted that the director constituting the special committee, Youssef Bennani, is subject to alleged conflicts of interest that disqualify him from serving on any proposed special committee to evaluate the pending stockholder demands.  The Special Committee has retained an independent law firm to conduct the investigation and advise the Special Committee.

On April 30, 2013, a purported class-action complaint was filed against the Company in the United States District Court for the Northern District of Illinois.  The complaint alleges that the Company sent an unsolicited advertising fax to Glen Ellyn Pharmacy, the named plaintiff, and other recipients.  The complaint alleges that such a fax violates the federal Telephone Consumer Protection Act (the “TCPA”), the Illinois Consumer Fraud Act and Illinois common law.  Under the TCPA, recipients of unsolicited fax advertisements are entitled to damages of up to $500 per fax for inadvertent violations and up to $1,500 for knowing or willful violations.  At the time of filing the complaint, the plaintiff also filed a motion asking the Court to certify a class of persons and entities who were sent advertising faxes by the Company which did not contain an opt out notice.  On June 19, 2013, the plaintiff filed an amended class-action complaint which withdrew the two counts for alleged violations of the Illinois Consumer Fraud Act and the common law tort of conversion.  The amended complaint eliminates claims for damages under Illinois law and leaves only a single count for an alleged violation of the TCPA.  The Company filed an answer to the amended complaint on July 8, 2013 contesting class certification and liability. The District Court has not established or recognized any class.  This litigation was resolved on September 24, 2013. The settlement amount is deemed to be de minimis.

On May 7, 2013, a putative stockholder derivative action was filed in the Court of Chancery of the State of Delaware against certain directors and the chief executive officer of the Company and against the Company, as a nominal defendant.  The complaint alleges claims for breach of fiduciary duty, entrenchment and corporate waste arising out of the alleged failure to conduct annual meetings, SEC filing obligations, advances to a former employee and a $500,000 secured loan to the Company which the entire board of directors approved.  The derivative complaint seeks unspecified compensatory damages and other relief.  The Company and the individual defendants believe that the allegations stated in the complaint are without merit and they intend to defend themselves vigorously against the allegations. The individual director defendants filed a motion to dismiss the complaint on July 22, 2013 and filed an opening brief in support of the motion to dismiss on August 2, 2013.  The Company joined in the motion to dismiss.  Plaintiff’s brief in opposition to the motion to dismiss was due on September 16, 2013.  Instead of filing a brief in opposition to the motion to dismiss, on September 16, 2013, plaintiff filed an amended complaint against the same defendants alleging two claims for breach of fiduciary duty and corporate waste and deleting the claim for entrenchment.  The claims in the amended complaint arise out of allegations regarding a failure to conduct stockholder annual meetings, a failure to comply with SEC filing obligations, a lack of internal controls and unauthorized advances to a former employee and a $500,000 secured loan approved by the Company’s entire board.  The Company and the individual defendants continue to believe the allegations are without merit and intend to vigorously defend themselves against the allegations. On October 3, 2013, the individual director defendants moved to dismiss the amended complaint, and the Company joined in the motion to dismiss.  Under a briefing schedule approved by the court, defendants’ brief on the motion to dismiss is due by November 4, 2013, plaintiff’s answering brief is due by December 13, 2013, and defendants’ reply brief is due by January 10, 2014.

On May 15, 2013, a former consultant filed suit in Boone County, Kentucky Circuit Court alleging breach of contract and unjust enrichment for unpaid consulting fees and expenses of approximately $27,000.  The Company filed an answer to the complaint on July 22, 2013 and intends to vigorously defend itself against the allegations.

On August 9, 2013, two shareholders of the Company, HWH Lending, LLC and Milfam I L.P., filed in the Delaware Court of Chancery a verified complaint for injunctive and declaratory relief, seeking to prevent the Company from including a 10.5% block of shares held by a stockholder in the vote count at the Company’s upcoming annual meeting of stockholders scheduled for August 15, 2013.  The complaint alleged that the Company and its Chief Executive Officer did not follow proper procedures in issuing the shares to the stockholder and caused those shares to be issued in violation of Delaware law.  Following an expedited briefing schedule, the court held a hearing on August 14, 2013 and denied plaintiffs’ request for a temporary restraining order.  On August 21, 2013, the plaintiffs filed a notice of voluntary dismissal, dismissing the action without prejudice.

On October 11, 2013, two former directors of the Company sent a letter demanding payment of $80,766 in legal fees and expenses pursuant to certain Company indemnification and advancement provisions.  The Company is evaluating the demand and has requested additional information.

In the normal course of business the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Legal fees for such matters are expensed as incurred and we accrue for adverse outcomes as they become probable and estimable. Currently, other than discussed above, the Company is not involved in any such material matters.

Settlement Agreement

On February 22, 2013, the Company entered into a settlement agreement with a counterparty for amounts owed related to the return of expired goods and inventory and the Company wrote down the accounts receivable to the settlement amount as of December 31, 2012. On February 28, 2013, the Company received $50,000 in connection with the agreement in complete satisfaction of all outstanding and past due accounts receivable from the counterparty, such that there was no balance due to the Company as of March 31, 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Cash flows from operating activities
Net loss	$ (4,078,366)	$ (1,550,312)	$ (5,574,775)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts	(31,528)	10,521
Depreciation and amortization	35,846	111,851
Stock-based compensation	330,021	259,409
Warrants issued to 2012 private placement investors	487,200
Loss on extinguishment of notes and accounts payable	2,792,900
Imputed value of services contributed	87,500
Amortization of debt discount	44,363	215,711
Changes in operating assets and liabilities:
Accounts receivable	(6,238)	21,542
Inventories - finished goods	85,519	106,206
Prepaid expenses and other current assets	10,451	17,386
Accounts payable - trade	(91,216)	550,400
Accounts payable - related parties	185,999	(4,902)
Accrued expenses and other current liabilities	(340,265)	84,793
Deferred revenue	30,441
Net cash used in operating activities	(457,373)	(177,395)	(947,911)
Cash flows from investing activities
Change in restricted cash	725,002
Changes in employee advances		(81,043)
Website development costs	(25,490)
Net cash provided by (used in) investing activities	699,512	(81,043)
Cash flows from financing activities
Principal payments on equipment leases payable	(11,759)	(22,131)
Proceeds from issuance of notes payable	500,000
Repayment of notes payable	(2,000,000)
Repayment of convertible notes payable	(1,000,000)
Proceeds from the sale of common stock	2,526,973	125,000
Proceeds from offering in advance of equity offering closing	125,000
Cash overdraft		(155,656)
Proceeds from notes payable and other advances - related parties		375,000
Repayment of notes payable and other advances - related parties		(63,812)
Net cash provided by financing activities	140,214	258,401
Net increase (decrease) in cash	382,353	(37)
Cash - beginning of year		40	40
Cash - end of year	382,353	3
Interest	367,978	21,491
Taxes
Non-cash investing and financing activities:
Issuance of Series B preferred stock for settlement of accrued dividends	261,084	244,001
Cashless exercise of warrants into common stock	6,934
Cashless exercise of options into common stock		93
Warrants issued as debt discount in connection with notes payable	315,300
Accrual of contractual dividends on Series B convertible preferred stock	69,840	65,271
Deemed dividends on Series B convertible preferred stock	1,532,722
Reclassification of accounts payable - trade to equipment lease payable		257,583
Deemed dividend - redeemable Series C preferred stock		92,916
Common stock and warrants issued in exchange of notes and accounts payable	$ 3,625,900

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2013	Dec. 31, 2012
Current assets:
Cash	$ 382,353
Restricted cash	125,000	850,002
Accounts receivable, net	221,211	214,973
Inventories - finished goods, net	310,065	395,584
Prepaid expenses and other current assets	41,841	52,292
Total current assets	1,080,470	1,512,851
Property and equipment, net	757,665	768,021
Total assets	1,838,135	2,280,872
Current liabilities:
Accounts payable - trade	2,882,558	2,973,774
Accounts payable - related parties	211,932	147,933
Accrued expenses and other current liabilities	700,258	1,942,769
Deferred revenue	104,228	73,787
Current portion of equipment lease payable	50,802	49,122
Convertible notes		1,000,000
Notes payable and other advances, net of debt discount of $0 and $44,363 as of March 31, 2013 and December 31, 2012, respectively	40,000	1,955,637
Note payable and other advances - related parties		765,000
Redeemable preferred stock - Series C; par value $0.001 per share; 10,000 designated Series C: 10,000 issued and outstanding as of March 31, 2013 and December 31, 2012 (aggregate liquidation preference of $1,000,000)	1,000,000	1,000,000
Total current liabilities	4,989,778	9,908,022
Long term liabilities:
Long term portion of equipment lease payable	152,847	166,286
Note payable, net of debt discount of $315,300 as of March 31, 2013	184,700
Total long term liabilities	337,547	166,286
Total liabilities	5,327,325	10,074,308
Preferred stock - par value $0.001 per share; authorized 1,000,000 shares; issued and outstanding as of March 31, 2013 and December 31, 2012 as above and as follows:
Convertible preferred stock - Series A - 200,000 shares designated Series A; 44,443 shares available to be issued; no shares issued and outstanding
Convertible preferred stock - Series B - 625,000 shares designated Series B; 422,315 and 394,685 shares issued and outstanding as of March 31, 2013 and December 31, 2012 , respectively (aggregate liquidation preference of $4,060,717 and $3,990,877 as of March 31, 2013 and December 31, 2012, respectively)	422	395
Common stock - par value $0.001 per share; authorized 50,000,000 shares; 24,175,156 and 13,030,397 shares issued and 22,995,944 and 11,851,185 shares outstanding as of March 31, 2013 and December 31, 2012, respectively	24,175	13,031
Additional paid-in capital	26,465,916	16,460,385
Employee advances	(50,386)	(18,858)
Treasury stock, at cost, 1,179,212 shares as of March 31, 2013 and December 31, 2012	(3,419,715)	(3,419,715)
Accumulated deficit	(26,509,602)	(20,828,674)
Total stockholders' deficiency	(3,489,190)	(7,793,436)
Total liabilities and stockholders' deficiency	$ 1,838,135	$ 2,280,872

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Stockholders' Deficiency (Details 2) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Number Outstanding	2,451,483	2,183,899
Weighted Average Exercise Price Outstanding	$ 3.18	$ 3.42
Number Exercisable	1,192,649
Weighted Average Exercise Price Exercisable	$ 2.66
Weighted Average Remaining Years of Contractual Life	4 years 8 months 12 days
$0.80-2.20
Number Outstanding	806,400
Weighted Average Exercise Price Outstanding	$ 1.59
Number Exercisable	485,900
Weighted Average Exercise Price Exercisable	$ 1.58
Weighted Average Remaining Years of Contractual Life	2 years 6 months
$2.21-3.80
Number Outstanding	924,083
Weighted Average Exercise Price Outstanding	$ 3.19
Number Exercisable	510,083
Weighted Average Exercise Price Exercisable	$ 2.91
Weighted Average Remaining Years of Contractual Life	5 years 7 months 6 days
$3.81-6.99
Number Outstanding	721,000
Weighted Average Exercise Price Outstanding	$ 4.94
Number Exercisable	196,666
Weighted Average Exercise Price Exercisable	$ 4.65
Weighted Average Remaining Years of Contractual Life	8 years 1 month 6 days

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Summary of Significant Accounting Policies (Details) (USD $)	Mar. 31, 2013	Mar. 31, 2012
Summary Of Significant Accounting Policies Details
Options	$ 2,451,483	$ 2,033,807
Warrants	6,047,119	2,916,590
Series B Convertible Preferred Stock	3,407,313	1,973,425
Convertible Promissory Notes		529,100
Total potentially dilutive shares	$ 11,905,915	$ 7,452,922

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Concentrations (Details Narrative)	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended
	Mar. 31, 2013 Customer 1 [Member]	Dec. 31, 2012 Customer 1 [Member]	Mar. 31, 2013 Customer 2 [Member]	Dec. 31, 2012 Customer 2 [Member]	Mar. 31, 2013 Customer 3 [Member]	Mar. 31, 2013 Vendor 1 [Member]	Mar. 31, 2012 Vendor 1 [Member]	Mar. 31, 2013 Vendor 2 [Member]
Concentration Percentage	16.00%	18.00%	15.00%	14.00%	14.00%	30.00%	41.00%	11.00%

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Related Party Transactions (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Related Party Transactions Details Narrative
General financial and business consulting	$ 0	$ 13,800
Insurance Premium Expense	$ 14,100	$ 11,750

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Stockholders' Deficiency

3 Months Ended

Mar. 31, 2013

Stockholders Deficiency

Note 7 - Stockholders' Deficiency

Common Stock

During the three months ended March 31, 2013, pursuant to a private placement offering of units that commenced on October 4, 2012 (the “Private Placement”), the Company received an aggregate of $3,376,975 of proceeds related to the sale of 3,376,975 units at a price of $1.00 per unit. The aggregate amount includes $500,000, which was received from an officer, and $850,002, which was received during the fourth quarter of 2012 and classified as restricted cash as of December 31, 2012. Each unit consists of (i) one share of the Company’s common stock and (ii) a five-year warrant to purchase three shares of the Company’s common stock at an exercise price of $0.25 per share, such that warrants to purchase an aggregate of 10,130,925 shares of common stock were issued. Substantially all of the proceeds from the sale of the units were used by the Company to satisfy all of its obligations under the convertible notes and notes (see Notes 5 and 6). In connection with the Private Placement, an officer has entered into repurchase agreements with certain purchasers of units, pursuant to which he has agreed to repurchase, subject to certain conditions, one-half of these holder’s units at a purchase price of $1.00 per unit if the closing price of the Common Stock is less than $0.25 on five consecutive trading days at any time within one year of February 1, 2013. Cape Bear, which holds a substantial equity position in the Company, also entered into repurchase agreements with certain purchasers, other than the officer, that are substantially similar to the officer’s agreements, except that Cape Bear’s obligations are secured by a lien over certain real estate.

On March 13, 2013, the Company exchanged $761,000 of notes payable and other advances – related parties and $72,000 of accounts payable to a related party into an aggregate of 833,000 units at a price of $1.00 per unit. Each unit consists of (i) one share of the Company’s common stock, and (ii) a five-year warrant to purchase two and three-quarters shares of the Company’s common stock at an exercise price of $0.25 per share (such that warrants to purchase an aggregate of 2,290,750 shares of common stock were issued). The $3,625,900 aggregate fair value of the securities issued ($2,639,700 related to the warrants and $986,200 related to the common stock) was credited to equity at conversion. The Company recorded a $2,792,900 extinguishment loss which represents the incremental fair value of the securities issued as compared to the carrying value of the liabilities.

Series B Preferred Stock

On January 1, 2013, the Company issued 27,630 shares of Series B Convertible Preferred Stock valued at $261,084, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding to the Series B Convertible Preferred Stockholders as payment in kind for dividends (the “2013 Series B Dividend”). In connection with the 2013 Series B Dividend, the Company recognized a $202,305 beneficial conversion feature during the three months ended March 31, 2013, which represents the difference between the commitment date value of the shares and the effective conversion price. In connection with the outstanding preferred stock, during the three months ended March 31, 2013 and 2012, the Company recorded $69,840 and $65,271 as contractual 7% dividends, respectively. As of December 31, 2012, February 1, 2013, March 13, 2013 and April 11, 2013, Series B holders are entitled to convert into 5.00, 7.61, 8.07 and 8.14 shares, respectively, of the Company’s common stock for each share of Series B Preferred Stock due to the anti-dilution provision. The anti-dilution provision represents a contingent beneficial conversion feature.  As of March 31, 2013, an incremental 1,295,738 shares of common stock are issuable at conversion of the Series B Convertible Preferred Stock as compared to the original terms.   Using the commitment date common stock price in effect, the commitment date value of the incremental shares is $3,332,792. However, recognition of beneficial conversion features is limited to the aggregate gross proceeds allocated to the preferred stock of $3,199,689 (422,315 shares of Series B Convertible Preferred Stock times $9.45 per share less the relative fair value of the warrants of $791,188) less the $1,666,967 beneficial conversion feature already recognized on the original issuance of 365,265 shares of Series B Preferred Stock (prior to the issuance of additional shares as payment-in-kind in lieu of cash dividends) and the $202,305 recognized related to the 2013 Series B Dividend. Due to these limitations, a beneficial conversion feature of $1,330,417 related to the incremental shares was recognized during the three months ended March 31, 2013.

Series C Preferred Stock

On February 13, 2013, the Company received a Notice of Redemption of Series C Preferred Stock. As a result of the Convertible Notes coming due and not being paid on December 31, 2012, the Company accelerated the accretion rate of the deemed dividend on the Redeemable Preferred Stock – Series C and reclassified the Redeemable Preferred Stock – Series C from temporary equity to current liabilities. The Company recorded Series C deemed dividends of $92,916 during the three months ended March 31, 2012.  As of December 31, 2012, the discount associated with the Series C Preferred Stock was fully amortized.

Stock Options

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2013			2012
Risk free interest rate		1.13	%		1.04	%
Dividend yield		0.00	%		0.00	%
Expected volatility		166.0	%		172.2	%
Expectd life in years		6.00			6.00

The weighted average fair value of the stock options granted during the three months ended March 31, 2013 and 2012 was $1.20 and $5.27 per share, respectively.

On February 15, 2013, the Company granted options to employees to purchase an aggregate of 330,500 shares of common stock under the 2009 Plan at an exercise price of $1.60 per share for an aggregate grant date value of $395,041. The options vest over a three year period and have a term of ten years.

Stock-based compensation expense related to stock options for the three months ended March 31, 2013 and 2012 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $312,444 and $259,409, respectively.  As of March 31, 2013, stock-based compensation expense related to stock options of $2,916,160 remains unamortized, including $2,024,591 which is being amortized over the weighted average remaining period of 2.3 years.  The remaining $891,569 is related to a performance based option where vesting is currently deemed to be improbable and no amount is being amortized.

A summary of the stock option activity during the three months ended March 31, 2013 is presented below:

						Weighted
				Weighted		Average
	Number			Average		Remaining
	of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, January 1, 2013		2,183,899		$	3.42
Granted		330,500			1.60
Exercised		-			-
Forfeited		(62,916	)		3.11
Outstanding, March 31, 2013		2,451,483		$	3.18		6.2	$	77,331
Exercisable, March 31, 2013		1,192,649		$	2.66		4.7	$	77,331

The following table presents information related to stock options at March 31, 2013:

	Options Outstanding		Options Exercisable
	Weighted		Weighted	Weighted
Range of	Average	Outstanding	Average	Average	Exercisable
Exercise	Exercise	Number of	Exercise	Remaining Life	Number of
Price	Price	Options	Price	In Years	Options
$0.80 - $2.20	$         1.59	806,400	$         1.58	2.5	485,900
$2.21 - $3.80	3.19	924,083	2.91	5.6	510,083
$3.81 - $6.99	4.94	721,000	4.65	8.1	196,666
	$         3.18	2,451,483	$         2.66	4.7	1,192,649

Warrants

In applying the Black-Scholes option pricing model to stock warrants granted, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2013			2012
Risk free interest rate		0.88	%		n/a
Dividend yield		0.00	%		n/a
Expected volatility		164.3	%		n/a
Expectd life in years		5.00			n/a

The weighted average fair value of the stock warrants granted during the three months ended March 31, 2013 was $1.38 per share.  There were no warrants granted during the three months ended March 31, 2012.

On February 15, 2013, the Company granted vested five-year warrants to purchase an aggregate of 408,348 shares of common stock at an exercise price of $1.00 per share to investors who purchased shares in private placements at $4.50 per share during 2012. The warrants had an aggregate issuance date fair value of $487,200 which was expensed immediately.

See Note 7 – Stockholders’ Deficiency – Common Stock for details regarding warrants granted in connection with the Private Placement and the conversion of related party notes and accounts payable into equity.

During the three months ended March 31, 2013, the Company issued an aggregate of 6,934,784 shares of common stock to several holders of warrants who elected to exercise warrants to purchase an aggregate of 8,125,750 shares of common stock on a "cashless" basis under the terms of the warrants. The warrants had an exercise price of $0.25 per share. The aggregate intrinsic value of the warrants exercised was $11,840,859 for the three months ended March 31, 2013.

Stock-based compensation expense related to warrants for the three months ended March 31, 2013 and 2012 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $504,777 and $0, respectively. As of March 31, 2013, stock-based compensation expense related to warrants of $674,312 remains unamortized, including $97,472 which is being amortized over the weighted average remaining period of 2.5 years.  The remaining $576,840 is related to a performance based warrant where vesting is currently deemed to be improbable and no amount is being amortized.

A summary of the stock warrant activity during the three months ended March 31, 2013 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Outstanding, January 1, 2013		592,846		$	3.01
Granted		13,580,023			0.28
Exercised		(8,125,750	)		0.25
Forfeited		-			-
Outstanding, March 31, 2013		6,047,119		$	0.58		4.7	$	4,618,507
Exercisable, March 31, 2013		5,767,119		$	0.46		4.8	$	4,618,507

The following table presents information related to stock warrants at March 31, 2013:

	Warrants Outstanding		Warrants Exercisable
	Weighted		Weighted	Weighted
Range of	Average	Outstanding	Average	Average	Exercisable
Exercise	Exercise	Number of	Exercise	Remaining Life	Number of
Price	Price	Warrants	Price	In Years	Warrants
$0.25 - $0.35	$        0.26	5,045,925	$        0.26	4.9	5,045,925
$0.36 - $1.60	1.00	408,348	1.00	4.9	408,348
$1.61 - $3.00	2.91	562,846	2.91	3.4	312,846
$3.01 - $4.95	4.95	30,000	-	-	-
	$        0.58	6,047,119	$        0.46	4.8	5,767,119

Services Contributed

Effective January 1, 2013, an executive officer of the Company waived payment for services contributed during 2013. As a result, the Company imputed the value of the services contributed and recorded salary expense of $87,500 for the three months ended March 31, 2013 with a corresponding credit to stockholders’ deficiency.

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Stockholders' Deficiency (Details 3)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Stockholders Deficiency Details 3
Risk free interest rate	0.88%
Dividend yield	0.00%
Expected volatility	164.30%
Expectd life in years	5 years	0 years

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Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions

Note 10 - Related Party Transactions

During the three months ended March 31, 2013 and 2012, a director was paid $0 and $13,800 for general financial and business consulting. Beginning July 1, 2013, the director is to be paid $3,000 per month and is entitled to expense reimbursements as compensation for serving on the Company’s Board committees.

From March 2011 to April 2013, a wife of a director served as the agent for the Company's D&O insurance. During the three months ended March 31, 2013 and 2012, the Company recorded insurance premium expense of $14,100 and $11,750, respectively.

See Note 7 – Stockholders’ Deficiency – Common Stock for details regarding the exchange of common stock and warrants in satisfaction of related party notes payable, advances and accounts payable.

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Notes Payable

3 Months Ended

Mar. 31, 2013

Notes Payable

Note 6 - Notes Payable

On February 1, 2013, the Company repaid notes with an outstanding principal balance of $2,000,000 plus outstanding accrued interest of $199,260. The notes bore interest at a rate of 7% per annum and were due on January 15, 2013. The Company recorded amortization of debt discount associated with notes payable of $44,363 and $133,095 for the three months ended March 31, 2013 and 2012, respectively, using the effective interest method.

On March 28, 2013, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed $500,000 from the Lender (the “Loan”). The Loan is evidenced by a promissory note (the “March Note”) and bears interest on the unpaid principal balance of the March Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (as of March 31, 2013, the Prime Rate was 3.25% per annum). Under the terms of the Loan Agreement, the Company has agreed to make monthly payments of accrued interest on the first day of every month, beginning on May 1, 2013. The principal amount and all unpaid accrued interest on the March Note is payable on March 1, 2015, or earlier in the event of default or a sale or liquidation of the Company. The Loan may be prepaid in whole or in part at any time by the Company without penalty.

The Company granted the Lender a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to repay the Loan. The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Lender’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. Upon the occurrence of an event of default, the Lender has the right to impose interest at a rate equal to five percent (5.0%) per annum above the otherwise applicable interest rate (the “Default Rate”). The repayment of the Loan may be accelerated prior to the maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties.

In consideration of the Loan, the Company granted the Lender a five-year warrant to purchase 750,000 shares of common stock at an exercise price of $0.35 per share. The warrants contain customary anti-dilution provisions. The warrant had a relative fair value of $315,300 which was set up as debt discount and will be amortized using the effective interest method over the term of the Loan.  Including the value of the warrant, the March Note had an effective interest rate of 40% per annum.

See Note 7 – Stockholders’ Deficiency – Common Stock for details regarding the conversion of outstanding notes payable – related parties into common stock and warrants.

See Note 11 – Subsequent Events for additional details.

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Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2013

Organization And Basis Of Presentation

Note 1 - Organization and Basis of Presentation

HealthWarehouse.com, Inc., a Delaware company incorporated in 1998, (the “Company”) is a U.S. licensed virtual retail pharmacy (“VRP”) and healthcare e-commerce company that sells brand name and generic prescription drugs as well as over-the-counter (“OTC”) medical products. The Company’s objective is to be viewed by individual healthcare product consumers as a low-cost, reliable and hassle-free provider of prescription drugs and OTC medical products. The Company is presently licensed as a mail-order pharmacy for sales to 50 states and the District of Columbia.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2013 and for the three months ended March 31, 2013 and 2012. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the operating results for the full year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2012 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on July 23, 2013.

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Stockholders' Deficiency (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Aggregate Shares	3,376,975
Shares Price	1.00%
Beneficial Conversion Feature	$ 202,305
Preferred Stock Outstanding	1,000,000	65,271	1,000,000
Deemed Dividends		92,916
Preferred Stock Dividends	7.00%
Common Stock Issuable	1,295,738
Beneficial Conversion Feature Related to Incremental Shares	1,330,417
Stock-Based Compensation Expense	330,021	259,409
Common Stock Warrant Issued	6,934,784
Warrants Exercise Purchase	8,125,750
Warrants Exercise Price Per Share	$ 0.25
Salary expense	87,500
Series C Preferred Stock
Deemed Dividends	92,916
Stock Options [Member]
Weighted Average Fair Value	$ 1.20	$ 5.27
Selling, General And Administrative Expenses	312,444	259,409
Stock-Based Compensation Expense	2,916,160
Weighted Average Remaining Period	2 years 3 months 18 days
Stock Warrants [Member]
Weighted Average Fair Value	$ 1.38	$ 0
Selling, General And Administrative Expenses	504,777	0
Stock-Based Compensation Expense	$ 674,312
Weighted Average Remaining Period	2 years 6 months
Warrants Exercise Purchase	11,840,859

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2013

Summary Of Significant Accounting Policies Tables

Schedule of Potentially Dilutive Securities

Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following:

	March 31,
	2013		2012
Options		2,451,483		2,033,807
Warrants		6,047,119		2,916,590
Series B Convertible Preferred Stock		3,407,313		1,973,425
Convertible Promissory Notes		-		529,100
Total potentially dilutive shares		11,905,915		7,452,922

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Concentrations

3 Months Ended

Mar. 31, 2013

Concentrations

Note 9 - Concentrations

The Company maintains deposits in financial institutions which are insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in these financial institutions in excess of the amount insured by the FDIC.

As of March 31, 2013, three companies represented approximately 16%, 15% and 14% of accounts receivable.  As of December 31, 2012, two companies represented approximately 18% and 14% of accounts receivable.

During the three months ended March 31, 2013, two vendors represented 30% and 11% of total inventory purchases. During the three months ended March 31, 2012, one vendor represented 41% of total inventory purchases.

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Going Concern and Management's Liquidity Plans (Details Narrative) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Going Concern And Managements Liquidity Plans Details Narrative
Working Capital Deficiency	$ 3,909,308
Accumulated deficit	26,509,602		20,828,674
Net Losses	4,078,366	1,550,312	5,574,775
Net Cash Used in Operating Activities	$ 457,373	$ 177,395	$ 947,911

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Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Accrued Expenses And Other Current Liabilities Tables

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

	March 31,		December 31,
	2013		2012
Deferred rent	$	40,889	$	39,100
Advertising		75,000		75,000
Salaries and benefits		220,075		166,118
Professional fees		50,000		81,872
Dividends payable		69,840		261,084
Accrued interest		44,250		410,101
Due to investors (1)		125,000		850,002
Customer payables		59,018		51,333
Other		16,186		8,159
Total	$	700,258	$	1,942,769

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Oct. 18, 2013
Document And Entity Information
Entity Registrant Name	HealthWarehouse.com, Inc.
Entity Central Index Key	0000754813
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		26,529,091
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

XML

Stockholders' Deficiency (Tables)

3 Months Ended

Mar. 31, 2013

Stockholders Deficiency Tables

Schedule of Stock Options Granted

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2013			2012
Risk free interest rate		1.13	%		1.04	%
Dividend yield		0.00	%		0.00	%
Expected volatility		166.0	%		172.2	%
Expectd life in years		6.00			6.00

Summary of Stock Option Activity

A summary of the stock option activity during the three months ended March 31, 2013 is presented below:

						Weighted
				Weighted		Average
	Number			Average		Remaining
	of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, January 1, 2013		2,183,899		$	3.42
Granted		330,500			1.60
Exercised		-			-
Forfeited		(62,916	)		3.11
Outstanding, March 31, 2013		2,451,483		$	3.18		6.2	$	77,331
Exercisable, March 31, 2013		1,192,649		$	2.66		4.7	$	77,331

Summary of Stock Option Outstanding and Exercisable

The following table presents information related to stock options at March 31, 2013:

	Options Outstanding		Options Exercisable
	Weighted		Weighted	Weighted
Range of	Average	Outstanding	Average	Average	Exercisable
Exercise	Exercise	Number of	Exercise	Remaining Life	Number of
Price	Price	Options	Price	In Years	Options
$0.80 - $2.20	$         1.59	806,400	$         1.58	2.5	485,900
$2.21 - $3.80	3.19	924,083	2.91	5.6	510,083
$3.81 - $6.99	4.94	721,000	4.65	8.1	196,666
	$         3.18	2,451,483	$         2.66	4.7	1,192,649

Schedule of Stock Warrants Granted

In applying the Black-Scholes option pricing model to stock warrants granted, the Company used the following weighted average assumptions:

	For The Three Months Ended
	March 31,
	2013			2012
Risk free interest rate		0.88	%		n/a
Dividend yield		0.00	%		n/a
Expected volatility		164.3	%		n/a
Expectd life in years		5.00			n/a

Summary of Stock Warrant Activity

A summary of the stock warrant activity during the three months ended March 31, 2013 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Outstanding, January 1, 2013		592,846		$	3.01
Granted		13,580,023			0.28
Exercised		(8,125,750	)		0.25
Forfeited		-			-
Outstanding, March 31, 2013		6,047,119		$	0.58		4.7	$	4,618,507
Exercisable, March 31, 2013		5,767,119		$	0.46		4.8	$	4,618,507

Summary of Stock Warrants Outstanding and Exercisable

The following table presents information related to stock warrants at March 31, 2013:

	Warrants Outstanding		Warrants Exercisable
	Weighted		Weighted	Weighted
Range of	Average	Outstanding	Average	Average	Exercisable
Exercise	Exercise	Number of	Exercise	Remaining Life	Number of
Price	Price	Warrants	Price	In Years	Warrants
$0.25 - $0.35	$        0.26	5,045,925	$        0.26	4.9	5,045,925
$0.36 - $1.60	1.00	408,348	1.00	4.9	408,348
$1.61 - $3.00	2.91	562,846	2.91	3.4	312,846
$3.01 - $4.95	4.95	30,000	-	-	-
	$        0.58	6,047,119	$        0.46	4.8	5,767,119