10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

FORM 10-Q

 (Mark One)

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

For the Quarterly Period Ended September 30, 2016

☐ 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   ☐     

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  ☒     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  ☐                                                                       Accelerated Filer                     ☐

Non-accelerated Filer     ☐                                                                       Smaller Reporting Company  ☒

(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  ☒

There were 42,582,613 shares of Common Stock outstanding as of November 7, 2016

HEALTHWAREHOUSE.COM, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION	3
Item 1.      Financial Statements.	3
Item 2.      Management's Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3.      Quantitative and Qualitative Disclosures About Market Risk.	21
Item 4.      Controls and Procedures.	21
PART II – OTHER INFORMATION	22
Item 1.      Legal Proceedings.	22
Item 1A.   Risk Factors.	22
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.	22
Item 3.      Defaults upon Senior Securities.	22
Item 4.      Mine Safety Disclosures.	22
Item 5.      Other Information.	22
Item 6.      Exhibits.	23
SIGNATURES	24

- 2 -

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	September 30,			December 31,
	2016			2015
	(unaudited)
Assets
Current assets:
Cash	$	3,950		$	11,217
Restricted cash		161,792			145,088
Accounts receivable, net of allowance of $47,143 as of September 30, 2016 and
December 31, 2015		57,734			51,627
Inventories - finished goods, net		217,692			182,647
Prepaid expenses and other current assets		105,088			81,718
Total current assets		546,256			472,297
Property and equipment, net of accumulated depreciation of $875,106 and $801,270 as of
September 30, 2016 and December 31, 2015		339,060			409,248
Web development costs, net of accumulated amortization of $197,760 and $146,448 as of
September 30, 2016 and December 31, 2015		33,250			84,562
Total assets	$	918,566		$	966,107
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable – trade	$	1,916,528		$	2,189,649
Accounts payable – related parties		-			862
Accrued expenses and other current liabilities		942,244			597,665
Equipment lease payable		-			46,143
Notes payable and other advances, net of debt discount of $1,722 as of September 30, 2016		1,298,278			991,089
Note payable and other advances – related parties		-			23,889
Redeemable preferred stock - Series C; par value $0.001 per share;
10,000 designated Series C: 10,000 issued and outstanding as of
September 30, 2016 and December 31, 2015 (aggregate liquidation preference of $1,000,000)		1,000,000			1,000,000
Total current liabilities		5,157,050			4,849,297
Total liabilities		5,157,050			4,849,297
Commitments and contingencies
Stockholders' deficiency:
Preferred stock – par value $0.001 per share; authorized 1,000,000 shares; issued and outstanding
as of September 30, 2016 and December 31, 2015 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; 517,359 and 483,512
shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively (aggregate
liquidation preference of $5,145,717 and $4,889,043 as of September 30, 2016 and		517			484
December 31, 2015, respectively)
Common stock – par value $0.001 per share; authorized 100,000,000 shares; 43,761,825 and 38,844,374
shares issued and 42,582,613 and 37,665,162 shares outstanding as of September 30, 2016 and
December 31, 2015, respectively		43,761			38,844
Additional paid-in capital		31,864,288			30,656,598
Treasury stock, at cost, 1,179,212 shares as of  September 30, 2016 and December 31, 2015		(3,419,715	)		(3,419,715	)
Accumulated deficit		(32,727,335	)		(31,159,401	)
Total stockholders' deficiency		(4,238,484	)		(3,883,190	)
Total liabilities and stockholders' deficiency	$	918,566		$	966,107
The accompanying notes are an integral part of these condensed consolidated financial statements.

- 3 -

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30						September 30
	2016			2015			2016			2015
Net sales	$	2,716,982		$	1,689,457		$	7,468,754		$	5,172,974
Cost of sales		928,342			604,153			2,678,998			1,853,707
Gross profit		1,788,640			1,085,304			4,789,756			3,319,267
Selling, general and administrative expenses		2,728,240			1,211,401			6,009,026			3,605,876
Net loss from operations		(939,600	)		(126,097	)		(1,219,270	)		(286,609	)
Interest expense		(38,541	)		(36,507	)		(91,989	)		(156,464	)
Net loss		(978,141	)		(162,604	)		(1,311,259	)		(443,073	)
Preferred stock:
Series B convertible contractual dividends		(85,559	)		(79,960	)		(256,675	)		(239,882	)
Loss attributable to common stockholders	$	(1,063,700	)	$	(242,564	)	$	(1,567,934	)	$	(682,955	)
Per share data:
Net loss – basic and diluted	$	(0.03	)	$	(0.01	)	$	(0.04	)	$	(0.01	)
Series B convertible contractual dividends		(0.00	)		(0.00	)		(0.01	)		(0.01	)
Net loss attributable to common stockholders - basic and diluted	$	(0.03	)	$	(0.01	)	$	(0.04	)	$	(0.02	)
Weighted average number of common shares outstanding - basic and diluted		38,789,595			37,570,383			40,994,678			37,570,383
The accompanying notes are an integral part of these condensed consolidated financial statements.

- 4 -

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Nine Months Ended
	September 30
	2016			2015
Cash flows from operating activities
Net loss	$	(1,311,259	)	$	(443,073	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for employee advance reserve		-			2,143
Depreciation and amortization		125,148			138,157
Stock-based compensation		213,860			258,114
Gain on settlement of accounts payable		(55,432	)		(105,764	)
Amortization of debt discount		13,778			98,134
Changes in operating assets and liabilities:
Accounts receivable		(6,107	)		20,898
Inventories - finished goods		(35,045	)		(28,458	)
Prepaid expenses and other current assets		(23,370	)		(32,768	)
Accounts payable – trade		480,921			(167,259	)
Accounts payable – related parties		(862	)		(44,314	)
Accrued expenses and other current liabilities		370,757			(98,618	)
Deferred revenue		-			(5,017	)
Net cash used in operating activities		(227,611	)		(407,825	)
Cash flows from investing activities
Change in restricted cash		(16,704	)		36,077
Capital expenditures		(3,648	)		(5,539	)
Website development costs		-			(18,125	)
Net cash (used in) provided by investing activities		(20,352	)		12,413
Cash flows from financing activities
Principal payments on equipment leases payable		(46,143	)		(47,665	)
Proceeds from  exercise of common stock options		1,817			-
Proceeds from issuance of notes payable		308,911			-
Repayment of notes payable - related parties		(23,889	)		(37,700	)
Net cash provided by (used in) financing activities		240,696			(85,365	)
Net decrease in cash		(7,267	)		(480,777	)
Cash - beginning of period		11,217			506,019
Cash - end of period	$	3,950		$	25,242
Cash paid for:
Interest	$	69,870		$	58,416
Non-cash investing and financing activities:
Issuance of Series B preferred stock for settlement of accrued dividends	$	319,854		$	298,918
Warrants issued as debt discount in connection with notes payable	$	15,500		$	41,300
Accrual of contractual dividends on Series B convertible preferred stock	$	256,675		$	239,882
Cashless exercise of common stock purchase warrants	$	2,647		$	-
Conversion of accounts payable to common stock	$	698,594		$	-
The accompanying notes are an integral part of these condensed consolidated financial statements.

- 5 -

HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.  Organization and Basis of Presentation

HealthWarehouse.com, Inc. ("HEWA" or the "Company"), a Delaware company incorporated in 1998, is an online mail order pharmacy, licensed and/or authorized to sell and deliver prescriptions in 50 states and the District of Columbia focusing on the out-of-pocket prescription drug market. The Company is Verified Internet Pharmacy Practice Site ("VIPPS") accredited by the National Association of Boards of Pharmacy ("NABP").  The Company markets a complete range of generic, brand name, and pet prescription medications as well as over-the-counter ("OTC") medications and products.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. 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 September 30, 2016 and for the nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the operating results for the full year ending December 31, 2016 or any other period. 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, 2015 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on March 25, 2016.

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 September 30, 2016, the Company had a working capital deficiency of $4,610,794 and an accumulated deficit of $32,727,335.  During the nine months ended September 30, 2016, the Company incurred net losses of $1,311,259 and used cash in operating activities of $227,611.   These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company is subject to a 2013 Notice of Redemption related to its Series C Redeemable Preferred Stock aggregating $1,000,000, whereby 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, including its obligations under a loan and security agreement (see Note 5), 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 U.S. 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.

- 6 -

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 U.S. 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.

Net Earnings (Loss) Per Share of Common Stock

Basic net earnings (loss) per share is computed by dividing net earnings (loss) attributable to Common Stockholders by the weighted average number of common shares outstanding during the period.  Diluted net earnings (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 earnings (loss) per share if their inclusion would be anti-dilutive and consist of the following:

	September 30,
	2016	2015
Options	1,864,716	5,266,128
Warrants	8,076,118	9,976,474
Series B Convertible Preferred Stock	6,032,406	5,507,202
Total potentially dilutive shares	15,973,240	20,749,804

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for the Company beginning January 1, 2017. The Company is currently evaluating the potential impact of adopting this guidance but does not expect it to have a material impact on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), ("ASU 2016-15"). ASU 2016-15 adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows, reducing the existing diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 is effective for us beginning January 1, 2018. Early adoption is permitted. The Company is currently evaluating the impact adopting this guidance will have on classifications in its condensed consolidated statement of cash flows.

- 7 -

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2016		2015
Deferred Rent	$	6,463	$	25,852
Advertising		75,000		76,639
Salaries and Benefits		70,521		64,007
Severance		235,000		-
Dividend Payable		256,675		319,854
Proxy and Solicitation Costs		160,000		-
Accrued Interest		44,249		44,249
Accrued Rent		50,863		49,614
Other		43,473		17,450
Total	$	942,244	$	597,665

5. Notes Payable

The Company is a party to a Loan and Security Agreement (the "Loan Agreement") with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed an aggregate of $1,200,000 from the Lender (the "Loan"), including $200,000 and $308,911 during the three and nine months ended September 30, 2016.  The Loan is evidenced by a promissory note (the "Senior Note") in the face amount of $1,200,000 (as amended).  The Senior Note bears interest on the unpaid principal balance of the Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus 4.25% per annum (7.75% as of September 30, 2016).  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. The principal amount and all unpaid accrued interest on the Note was payable on September 30, 2016, 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 Company's assets, to secure the Company's obligation to repay the Loan, including a Deposit Account Control Agreement, which grants the Lender a security interest in certain bank accounts.  In addition, the Company is required to direct the proceeds of its credit card receipts to a cash collateral account controlled by the Lender.  The Company also borrowed and repaid $50,000 from the Lender in a separate transaction during the three months ended September 30, 2016.  See Note 10 – Subsequent Events for additional information.

Beginning on October 4, 2016, the Company has executed three successive amendments to the Senior Note, effective September 30, 2016, pursuant to which the Lender agreed to extend the maturity date of the Senior Note from September 30, 2016 to November 30, 2016. The Senior Note contained financial covenants which required the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation ("EBITDAS").  In conjunction with the amendments to Senior Note, the Company is no longer required to meet any financial covenant.

On January 11, 2016, the Company executed an Amendment to an existing promissory note ("Promissory Note") in the face amount of $100,000 with a different lender, effective October 31, 2015, which extended the maturity date of the note payable from November 1, 2015 to October 31, 2016.  In consideration of the extension of the maturity date of the note payable, the Company issued to the lender a five-year warrant to purchase 75,000 shares of Common Stock at an exercise price of $0.25 per share. The warrants had a fair value of $15,500 using the Black-Scholes model (see Note 6 – Stockholders' Deficiency) which was established as debt discount during the nine months ended September 30, 2016 and is being amortized using the effective interest method over the remaining term of the Promissory Note.  Including the value of the warrants issued in connection with the extension of the maturity date of the Promissory Note, the Promissory Note has an effective interest rate of 23% per annum during the extension period.

The Company recorded amortization of debt discount associated with notes payable of $5,167 and $13,778 for the three and nine months ended September 30, 2016, respectively, and $18,367 and $98,134 for the three and nine months ended September 30, 2015, respectively.

- 8 -

6. Stockholders' Deficiency

Common Stock

On July 28, 2016, the Company entered an Exchange Agreement with Dellave Holdings LLC ("Dellave") whereby the Company issued an aggregate of 2,253,528 shares of Common Stock in exchange for the extinguishment of accounts payable balances totaling $698,594 held by Dellave.  The exchange was based on the prior day's closing price of $0.31.   The $698,594 aggregate fair value of the common stock issued was credited to equity at conversion. Mr. Timothy Reilly is the managing member of Dellave.  Mr. Reilly is also the managing member of Melrose Capital Advisors, LLC, the Company's senior lender at the time of the transaction.

Preferred Stock

As of September 30, 2016 and December 31, 2015, the Company had accrued contractual dividends of $256,675 and $319,853, respectively, related to the Series B Preferred Stock.  On January 1, 2016 and 2015, the Company issued 33,847 and 31,633 shares of Series B convertible preferred stock valued at approximately $320,000 and $299,000, respectively, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding on each date, to the Series B convertible preferred stock holders as payment in kind for dividends.

Stock Options

Valuation

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Risk free interest rate	1.00%	1.74% to 2.28%	1.00% to 2.12%	1.35% to 2.28%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	199.0%	196.0% to 197.0%	199.0% to 200.0%	195.0% to 197.0%
Expected life in years	5.5	5.5 to 10.0	5.5 to 10.0	5.5 to 10.0

The Company estimated forfeitures at a weighted average annual rate of 3% to 4% for the three and nine months ended September 30, 2016 and 2015.

Grants

The weighted average fair value of the stock options granted during the three and nine months ended September 30, 2016 was $0.35 and $0.29 per share, respectively.  The weighted average fair value of the stock options granted during the three and nine months ended September 30, 2015 was $0.12 and $0.10 per share, respectively.

During the nine months ended September 30, 2016, the Company granted options to consultants and directors of the Company to purchase an aggregate of 428,906 shares of common stock under a previously approved plan at exercise price ranging between $0.24 and $0.35 per share for an aggregate grant date value of $123,931.  The options vested on the grant date and have a term of ten years.

Stock-based compensation expense related to stock options was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $101,421 and $213,860 for the three and nine months ended September 30, 2016, respectively, and $59,546 and $258,114 for the three and nine months ended September 30, 2015, respectively.

As of September 30, 2016, stock-based compensation expense related to stock options of $63,721 remains unamortized, which is being amortized over the weighted average remaining period of 1.7 years.

- 9 -

Exercise

During the nine months ended September 30, 2016, the Company issued an aggregate of 1,492,078 shares of Common Stock to holders of options who elected to exercise options to purchase 3,108,141 shares of Common Stock on a "cashless" basis under the terms of the options.  The options had exercise prices ranging from $0.09 and $0.30 per share.

During the nine months ended September 30, 2016, the Company received proceeds of $1,817 from the exercise of options to purchase 16,666 shares of Common Stock.

The aggregate intrinsic value of the options exercised was $480,041 for the three and nine months ended September 30, 2016.

Summary

A summary of the stock option activity during the nine months ended September 30, 2016 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, January 1, 2016		5,341,284		$	0.70
Granted		428,906			0.29
Exercised		(3,108,141	)		0.16
Forfeited		(797,333	)		2.21
Outstanding, September 30, 2016		1,864,716		$	0.85		7.6	$	224,059
Exercisable, September 30, 2016		1,167,449		$	1.28		6.9	$	96,992

The following table presents information related to stock options at September 30, 2016:

		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
$	0.09 - $2.20	$	0.31		1,582,716	$	0.45	7.8		885,449
$	2.21 - $3.80		2.50		150,000		2.50	3.1		150,000
$	3.81 - $6.99		5.49		132,000		5.49	5.0		132,000
		$	0.85		1,864,716	$	1.28	6.9		1,167,449

- 10 -

Warrants

Valuation

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Risk free interest rate	n/a	1.75%	1.58%	1.26% to 1.75%
Dividend yield	n/a	0.00%	0.00%	0.00%
Expected volatility	n/a	196.0%	200.0%	195.0% to 197.0%
Contractual term in years	n/a	7.10	5.0	5.0 to 7.5

Grants

The weighted average fair value of the stock warrants granted during the nine months ended September 30, 2016 and 2015 was $0.36 and $0.08 per share, respectively.  There were no stock warrants granted during the three months ended September 30, 2016 and 2015.

Exercise

During the nine months ended September 30, 2016, the Company issued an aggregate of 1,155,361 shares of Common Stock to holders of warrants who elected to exercise warrants to purchase 1,795,080 shares of Common Stock on a cashless basis under the terms of the warrants.  The warrants had exercise prices ranging from $0.10 and $0.25 per share.

The aggregate intrinsic value of the warrants exercised was $414,176 and $425,501 for the three and nine months ended September 30, 2016, respectively.

There was no stock-based compensation expense related to warrants recorded in the three and nine months ended September 30, 2016.  Stock-based compensation expense related to warrants for the three and nine months ended September 30, 2015 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses totaled $21 and $12,300, respectively.  As of September 30, 2016, there was no stock-based compensation expense related to warrants that remained unamortized.

A summary of the stock warrant activity during the nine months ended September 30, 2016 is presented below:

				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Outstanding, January 1, 2016		10,046,198		$	0.41
Granted		75,000			0.25
Exercised		(1,795,080	)		0.13
Forfeited		(250,000	)		2.90
Outstanding, September 30, 2016		8,076,118		$	0.39		2.6	$	188,679
Exercisable, September 30, 2016		8,076,118		$	0.39		2.6	$	188,679

- 11 -

The following table presents information related to stock warrants at September 30, 2016:

		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
$	0.10 - $0.35	$	0.29		7,776,118	$	0.29	2.7		7,776,118
$	0.36 - $3.00		2.90		270,000		2.90	0.1		270,000
$	3.01 - $4.95		4.95		30,000		4.95	1.0		30,000
$	0.10 - $4.95	$	0.39		8,076,118	$	0.39	2.6		8,076,118

7. Commitments and Contingent Liabilities

Operating Leases

The Company leases approximately 28,500 square feet of office and storage space.  On March 15, 2016, the Company entered into an amendment of the lease agreement which extended the lease for an additional three years.  The amended monthly lease rate will be $5,462 in 2016, $6,649 in 2017, $6,886 in 2018 and $7,124 in 2019.  The lease expires on December 31, 2019.  The Company accounts for rent expense using the straight-line method of accounting, deferring the difference between actual rent due and the straight-line amount.  Deferred rent payable of $6,463 and $25,852 as of September 30, 2016 and December 31, 2015, respectively, has been included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

On June 7, 2013, Pagosa Health LLC ("Pagosa"), a former wholly-owned subsidiary of the Company, signed a three-year lease for $1,000 per month to house an office, pharmacy as well as inventory and is in Lawrenceburg, IN.  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.  On January 14, 2014, the Company closed Pagosa and vacated its Lawrenceburg facility.  The present value of the remaining lease payments of $50,863 is reflected as a component of accrued expenses and other liabilities on the condensed consolidated financial statements as of September 30, 2016.

Future minimum payments, by year and in the aggregate, under operating leases as of September 30, 2016 are as follows:

For years ending December 31,	Amount
2016  (Remainder)	$	19,384
2017		91,783
2018		87,633
2019		85,482
Total future minimum lease payments	$	284,282

During the three and nine months ended September 30, 2016, the Company recorded aggregate rent expense of $18,147 and $56,985, respectively, and $23,536 and $85,151 (net of sub-lease) during the three and nine months ended September 30, 2015, respectively.

Employment Agreement

On May 9, 2016, the Company entered into an employment agreement (the "Employment Agreement") with Mr. Lalit Dhadphale.  The terms of the Employment Agreement include a term of two years beginning on January 1, 2016 with an extension provision, the titles and positions of Chief Executive Officer and President, an initial base salary of $175,000 per year, subject to certain bonus and severance provisions.  Mr. Dhadphale's agreement was bound by restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.  See Note 9 – Board of Directors and Management Changes for additional information.

- 12 -

Litigation

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 condensed consolidated financial condition or condensed consolidated results of operations.

On June 7, 2016, Shipping & Transit LLC filed suit against the Company for infringing on certain claims of patents held by Shipping & Transit.  On July 20, 2016, the Company entered into a Settlement, Release and License Agreement whereby the Company paid $11,000 for any past violations and future licensing of the patents.

On May 13, 2016, Taft Stettinius & Hollister, LLP (the "Plaintiff") filed a complaint in the Court of Common Pleas for Hamilton County, Ohio against Healthwarehouse.com, Inc. (the "Company").  The complaint alleges that the Plaintiff provided legal services to the Company beginning in April 2011 until January 2015 and billed the Company in the amount of $936,777, and for which the Company has not made payment. The complaint seeks damages against the Company in the amount of $936,777 plus interest.  The Company is in the process of investigating such claims and intends to defend the action vigorously.  The Company has accounted for this matter in accordance with ASC 450 ("Contingencies").

8. Concentrations

During the three months ended September 30, 2016, three vendors represented 40%, 18% and 17% of total inventory purchases and 45%, 17% and 17% of total inventory purchases for the nine months ended September 30, 2016.  During the three months ended September 30, 2015, two vendors represented 61% and 11% of total inventory purchases and 67% and 11% of total inventory purchases for the nine months ended September 30, 2015.  At September 30, 2016, one vendor represented 50% of the accounts payable balance and two vendors represented 43% and 13% of the accounts payable balance as of December 31, 2015.

9.  Board of Directors and Management Changes

On September 2, 2016, the Company's shareholders elected four new directors who had run as an alternative slate to the slate the Company had recommended to its shareholders. These directors are Mr. Jeffrey T. Holtmeier, Mr. Brian A. Ross, Mark Scott and Dr. Stephen Weiss. Effective as of September 12, 2016, the newly elected board along with the remaining director, Joseph Heimbrock, whom the Series B shareholders anointed as a class, elected Mr. Holtmeier as Chairman of the Board on October 11, 2016. On September 12, 2016, the Board of Directors formed audit, compensation and nominating governance committees. Committee membership, which the directors subsequently revised per the appointment of Mr. Holtmeier as CEO (See Note 10 - Subsequent Events), are as follows:

-      Audit: Ross (Chair), Scott and Weiss
-      Compensation: Ross, Scott (Chair)
-      Nominating & Governance: Scott, Weiss (Chair)

Subsequent to the election of the new Board of Directors and on September 13, 2016, the Company's Chief Executive Officer, Mr. Lalit Dhadphale, tendered his resignation which the Board of Directors of the Company subsequently accepted. Mr. Dhadphale's separation from the Company was effective October 13, 2016. Mr. Dhadphale's contract provided for severance payments under certain conditions, including a change in the composition of the Board of Directors, and contained restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.

Subsequent to the election of the new Board of Directors and on September 9, 2016, the Company's Chief Financial Officer, Mr. Daniel Seliga, tendered his resignation which the Board of Directors of the Company subsequently accepted.  Mr Seliga's separation from the Company was effective October 9, 2016. Mr. Seliga's contract provides for severance payments under certain conditions, including a change in the composition of the Board of Directors, and contained restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.

- 13 -

Related to the solicitation of shareholders' proxies and subsequent resignations per certain employment agreements mentioned above, the Company incurred proxy, solicitation and severance costs of $548,303 and severance costs of $240,000 during the three and nine months ended September 30, 2016 of, which are included in Selling, General and Administrative expenses. At September 30, 2016, $204,323 and $395,000 of these costs are recorded in Accounts Payable and Accrued Expenses and Other Current Liabilities, respectfully.

10. 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.

Amended Loan Agreement

On October 4, 2016, the Company and the Lender for its $1,200,000 Senior Note executed an amendment to the Senior Note.  Effective September 30, 2016, the Lender agreed to extend the maturity date of the Senior Note from September 30, 2016 to October 14, 2016. Effective October 14, 2016, the Company and the Lender executed a second amendment to the Senior Note pursuant to which the Lender agreed to extend the maturity date of the Senior Note from October 14, 2016 to October 31, 2016.  On October 29, 2016, the Company and the Lender executed a third amendment to the Senior Note, effective October 31, 2016, pursuant to which the Lender agreed to extend the maturity date of the Senior Note from October 31, 2016 to November 30, 2016.

Employment Agreement

On October 11, 2016, the Board of Directors of the Company appointed Jeffrey T. Holtmeier as the President and Chief Executive Officer of the Company. Subsequently, the Company and Mr. Holtmeier entered into a written agreement outlining compensation and other terms of Mr. Holtmeier's employment.  Mr Holtmeier will be paid an annual salary of $175,000, and will have an annual bonus target of 100% of base salary, with the amount of bonus to be determined according to the Company achieving certain financial metrics. Mr. Holtmeier was also granted options under the Company's Long Term Incentive Plan to purchase 125,000 shares of the Company's Common Stock, at a price of $0.29 per share, which was the closing price for the Company's common stock on the date of grant. Mr. Holtmeier will also be granted an additional 125,000 options after six months of employment, at a price equal to the closing price on the last trading day immediately prior to then-date of grant. After one year of employment, Mr. Holtmeier will also be eligible for severance equal to six months of his salary in the event his employment is terminated by the Company for any reason other than good cause, or if Mr. Holtmeier terminates his employment for good reason, as defined in the employment agreement.

Director Compensation and Options Grant

On November 2, 2016, the Board of Directors of the Company set independent director compensation at $65,000 annually, such compensation to be effective beginning in the third quarter of 2016.  So long as such director is still serving on the Board, director compensation will be paid quarterly in the form of a cash payment of $3,000  and a grant of options to purchase shares of the Company equal to $13,250, vesting immediately, with the exercise price equal to the closing price for the Company's Common stock on the last trading day immediately prior to the date of grant. In addition, the chair of the Audit Committee will receive an additional monthly payment of $2,000, payable quarterly, until such time as the Company has retained a Chief Financial Officer.

- 14 -

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operation.

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 September 30, 2016 and for the nine months ended September 30, 2016 and 2015 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, 2015 filed with the Securities and Exchange Commission (the "SEC") on March 25, 2016.

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

HealthWarehouse.com, Inc. ("HEWA" or the "Company") is America's Trusted Online Pharmacy, licensed in 50 states to focus on the out-of-pocket prescription drug market, a market which is expected to grow to over $80 billion in 2016. HealthWarehouse.com is currently 1 of 45 Verified Internet Pharmacy Practice Websites ("VIPPS") and 1 of 23 Vet-VIPPS accredited by the National Association of Boards of Pharmacy ("NABP") and is the only VIPPS accredited pharmacy licensed in all 50 states and the District of Columbia that processes out-of-pocket prescriptions online.  The Company won the 2015 BizRate Circle of Excellence Award for outstanding customer service and satisfaction along with 186 other major online retailers, the fourth time since its inception and was prominently featured in two nationally recognized consumer magazines during the fourth quarter of 2015 as having the lowest price among top US pharmacies for five commonly prescribed medications.  The Company markets a complete range of generic, brand name, and pet prescription medications as well as over-the-counter ("OTC") medications and products.

Consumers who pay out of pocket for their prescriptions include those:

●     with no insurance coverage;

●     with high insurance deductibles or copays;

●     with Medicare Part D plans with high deductibles;

●     with Health Savings Accounts (HSA) or Flexible Savings Accounts (FSA);

●     with insurance through the Affordable Care Act (ACA) with high deductibles;

●     with drug exclusions and quantity restrictions placed by insurance companies.

Our objectives are to leverage technology and process to reduce the layers within the pharmaceutical supply chain and to pass the savings on to the consumer.  We are becoming recognized within the marketplace as a convenient, reliable, discount provider of over-the-counter products and prescription medications. We intend to continue to expand our product line as our business grows.

- 15 -

Results of Operations

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

	Three months ended			% of		Three months ended			% of
	September 30, 2016			Revenue		September 30, 2015			Revenue
Net sales	$	2,716,982			100.0%	$	1,689,457			100.0%
Cost of sales		928,342			34.2%		604,153			35.8%
Gross profit		1,788,640			65.8%		1,085,304			64.2%
Selling, general & administrative expenses		2,728,240			100.4%		1,211,401			71.7%
Loss from operations		(939,600	)		(34.6%)		(126,097	)		(7.5%)
Interest expense		(38,541	)		(1.4%)		(36,507	)		(2.2%)
Net loss	$	(978,141	)		(36.0%)	$	(162,604	)		(9.7%)

Net Sales

Three months ended		%		$		Three months ended
September 30, 2016		Change		Change		September 30, 2015
$	2,716,982		60.8%	$	1,027,525	$	1,689,457

Net sales for the three months ended September 30, 2016 increased to $2,716,982 from $1,689,457 for the three months ended September 30, 2015, an increase of $1,027,525, or 60.8% due to an increase in core consumer prescription and over-the-counter sales.  The core prescription sales grew by $818,749 or 62.6% as new customers grew 105.1% and repeat customers grew 60.6%, in comparison to the same quarter of the prior year, continuing the upward trend experienced during 2015.  Core over-the-counter sales grew by $187,519 or 63.8% and order volume increased by 84.5% due to continued advertising efforts and improved order fulfillment rates and customer satisfaction.  The combined third quarter core consumer prescription and over-the-counter sales increased 63.8% while order volume increased 86.5% when compared to order levels of the same quarter of the prior year due to new customer acquisition through advertising and customer retention.

The Company has expanded its new customer sales through a combination of on-line advertising, 3^rd-party website referral and had benefited from being prominently featured in two nationally recognized consumer magazines during the fourth quarter of 2015 as having the lowest price among top US Pharmacies for five commonly prescribed medications. We believe the Company will continue its growth as more consumer become aware of the Company's value proposition.

Cost of Sales and Gross Margin

	Three months ended			%		$		Three months ended
	September 30, 2016			Change		Change		September 30, 2015
Cost of sales	$	928,342			53.7%	$	324,189	$	604,153
Gross margin $	$	1,788,640			64.8%	$	703,336	$	1,085,304
Gross margin %		65.8	%		2.5%		1.6%		64.2	%

Cost of sales were $928,342 for the three months ended September 30, 2016 as compared to $604,153 for the three months ended September 30, 2015, an increase of $ 324,189, or 53.7%, primarily as a result of an increase in consumer prescription and over-the-counter order volume. Gross margin percentage increased from 64.2% for the three months ended September 30, 2015 to 65.8% for the three months ended September 30, 2016, primarily due to improved procurement.  There was minimal change in the gross margins on the core consumer prescription and over-the-counter business during the quarter.  Management will continue to focus its advertising and operational efforts on promoting and offering its higher margin product lines to consumers and strategic purchasing efforts to further improve costs.

- 16 -

Selling, General and Administrative Expenses

	Three months ended			%		$		Three months ended
	September 30, 2016			Change		Change		September 30, 2015
S,G&A	$	2,728,240			125.2%	$	1,516,839	$	1,211,401
% of sales		100.4	%						71.7	%

Selling, general and administrative expenses totaled $2,728,240 for the three months ended September 30, 2016 compared to $1,211,401 for the three months ended September 30, 2015, an increase of $1,516,839, or 125.2%.  The three months ended September 30, 2016 expense increases included (a) an increase in salary expense of $512,899, primarily due to $240,000 of severance expense related to departing executives. Other increases were in personnel costs to process higher levels of call and order volumes, reduced efficiency of pharmacy staff due to higher level of new customer orders and the addition of the Chief Financial Officer in 2016;  (b) an increase in freight expense of $146,394 (due to higher volume and higher expedited shipping cost);  (c) an increase in legal expense of $407,609, (primarily related to $370,119 of expenses related to proxy materials for the 2016 annual meeting; (d) a $180,372 increase in shareholder expense directly related to higher expenses of the 2016 annual meeting; (e) a $66,677 increase resulting from the settlement of previous years local and state income and property taxes;  (f) an increase in stock-based compensation of $41,875 related to increased board of directors fees paid in options; (g) an increase in investor and public relations expenses of $20,523 (primarily due to an increase in promotion campaigns and investor conference participation); (h) and an increase in credit card processing expense of $45,369 (primarily due to the increase in order volume).  We will continue to focus on controlling costs and improving efficiencies of our personnel to limit the future growth in expenses.

Interest Expense

Interest expense increased from $36,507 in the three months ended September 30, 2015 to $38,541 in the three months ended September 30, 2016, an increase of $2,034, or 5.6%, primarily due to an increase in amortization of debt discounts, partially offset by higher notes payable balances and interest rates.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

	Nine months ended			% of	Nine months ended			% of
	September 30, 2016			Revenue	September 30, 2015			Revenue
Net sales	$	7,468,754		100.0%	$	5,172,974		100.0%
Cost of sales		2,678,998		35.9%		1,853,707		35.8%
Gross profit		4,789,756		64.1%		3,319,267		64.2%
Selling, general & administrative expenses		6,009,026		80.5%		3,605,876		69.7%
Loss from operations		(1,219,270	)	(16.3%)		(286,609	)	(5.5%)
Interest expense		(91,989	)	(1.2%)		(156,464	)	(3.0%)
Net loss	$	(1,311,259	)	(17.6%)	$	(443,073	)	(8.5%)

- 17 -

Net Sales

Nine months ended		%		$		Nine months ended
September 30, 2016		Change		Change		September 30, 2015
$	7,468,754		44.4%	$	2,295,780	$	5,172,974

Net sales for the nine months ended September 30, 2016 increased to $7,468,754 from $5,172,974 for the nine months ended September 30, 2015, an increase of $2,295,780, or 44.4% due to an increase in core consumer prescription and over-the-counter sales offset by a reduction in business-to-business sales of $474,486.  The core prescription sales grew by $2,108,680 or 58.4% as new customer orders grew by 119.4% and repeat customer orders grew 54.9%, in comparison to the first nine months of the prior year.  Core over-the-counter sales grew by $555,821 or 63.4% as new customer order volume grew by 101.9.0% and repeat customer orders grew by 66.4% due to continued advertising efforts and improved order fulfillment rates and customer satisfaction.  The combined core consumer prescription and over-the-counter sales increased 59% and order volume increased 83.7% for the first nine months of 2016 when compared to order levels of the same period of the prior year due to new customer acquisition through advertising and customer retention.

The Company has expanded its new customer sales through a combination of on-line advertising, 3^rd-party website referral and had benefited from being prominently featured in two nationally recognized consumer magazines during the fourth quarter of 2015 as having the lowest price among top US Pharmacies for five commonly prescribed medications. We believe the Company will continue its growth as more consumer become aware of the Company's value proposition.

Cost of Sales and Gross Margin

	Nine months ended			%		$		Nine months ended
	September 30, 2016			Change		Change		September 30, 2015
Cost of sales	$	2,678,998			44.5%	$	825,291	$	1,853,707
Gross margin $	$	4,789,756			44.3%	$	1,470,489	$	3,319,267
Gross margin %		64.1	%		-0.1%		-0.1%		64.2	%

Cost of sales were $2,678,998 for the nine months ended September 30, 2016 as compared to $1,853,707 for the nine months ended September 30, 2015, an increase of $825,291, or 44.5%, primarily as a result of increased order volume partially offset by improved costs realized through strategic purchasing efforts.  Gross margin percentage decreased slightly from 64.2% for the nine months ended September 30, 2015 to 64.1% for the nine months ended September 30, 2016, primarily due to one-time higher margin business-to-business opportunities in 2015 and a slight reduction in margins for the core consumer prescription and over-the-counter business.  Management will continue to focus its advertising and operational efforts on promoting and offering its higher margin product lines to consumers and strategic purchasing efforts to further improve costs.

Selling, General and Administrative Expenses

	Nine months ended			%		$		Nine months ended
	September 30, 2016			Change		Change		September 30, 2015
S,G&A	$	6,009,026			66.6%	$	2,403,150	$	3,605,876
% of sales		80.5	%						69.7	%

Selling, general and administrative expenses totaled $6,064,458 for the nine months ended September 30, 2016 compared to $3,605,876 for the nine months ended September 30, 2015, an increase of $2,403,150, or 66.6%.  The nine months ended September 30, 2016 expense increases included (a) an increase in salary expense of $848,549, primarily due to $240,000 severance expense related to departing executives.  Other increases were in personnel costs to process higher levels of call and order volumes, reduced efficiency of pharmacy staff due to higher level of new customer orders and the addition of the Chief Financial Officer in 2016);  (b) an increase in freight expense of $406,340 (due to higher volume and higher expedited shipping cost); (c) an increase in advertising, marketing and public relations expenses of $131,556 (primarily due to an increase in the advertising and promotion campaigns);  (d) an increase in legal expense of $489,603 (including $370,119 primarily related to proxy expenses for the 2016 annual meeting and efforts to release the garnishment of funds in our bank account); (e) an increase in shareholder expense of $183,007 directly related to higher expenses of the 2016 annual meeting; (f) a $78,942 resulting from the settlement of previous years local and state income and property taxes; and (g) an increase in credit card processing expense of $111,063 (primarily due to the increase in order volume).  These expense increases were partially offset by a $44,254 decrease in stock-based compensation expense. We will continue to focus on controlling costs and improving efficiencies of our personnel to limit the future growth in expenses.

- 18 -

Interest Expense

Interest expense decreased from $156,464 in the nine months ended September 30, 2015 to $91,989 in the nine months ended September 30, 2016, a decrease of $64,475 or 41.2%, primarily due to a decrease in amortization of debt discounts partially offset by higher notes payable balances and higher interest rates.

 Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, we have disclosed Adjusted Earnings Before Interest, Taxes, Depreciation, Amortization ("Adjusted EBITDA") within this Quarterly Report on Form 10-Q, a non-GAAP financial measure. We have provided a reconciliation below of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.

We believe Adjusted EBITDA 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 EBITDA 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 EBITDA is useful because it excludes non-cash charges, such as depreciation and amortization, stock-based compensation and nonrecurring 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 EBITDA 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 EBITDA 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 EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, specifically net loss.

The Company had reported the calculation of Earnings Before Interest, Taxes, Depreciation, Amortization and Stock-Based Compensation ("EBITDAS") in previous filings because the Company's Senior Note agreement contained financial covenants which required the Company to meet certain minimum levels of EBITDAS.  The Senior Note no longer contains such a requirement; therefore, the Company has discontinued the presentation of EBITDAS.

The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the periods presented:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Net loss	$	(978,141	)	$	(162,604	)	$	(1,311,259	)	$	(443,073	)
Non-GAAP adjustments:
Interest expense		38,541			36,507			91,989			156,464
Depreciation and amortization		36,771			46,184			125,148			138,157
Stock-based compensation		101,421			59,546			213,860			258,114
Proxy solicitation costs		548,303			-			548,303			-
Severance		240,000			-			240,000			-
Adjusted EBITDA	$	(13,105	)	$	(20,368	)	$	(91,959	)	$	109,662

- 19 -

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 nine months ended September 30, 2016 and 2015. We cannot assure you that future inflation will not have an adverse impact on our operating results and financial condition.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through debt and equity financings and advances from stockholders.  As of September 30, 2016, we had a working capital deficiency of $4,610,794 and an accumulated deficit of $32,727,335.  During the nine months ended September 30, 2016, we incurred net losses of $1,311,335 and used cash in operating activities of $227,611. These conditions raise substantial doubt about our ability to continue as a going concern.

The Company is subject to a Notice of Redemption related to our Series C Redeemable Preferred Stock aggregating $1,000,000 and must apply all 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 to fund operations, meet our payment obligations, including its obligations under a loan and security agreement (see Notes 5 and 9 to our condensed consolidated financial statements) and 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 need 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 U.S. GAAP, 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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As of September 30, 2016 and December 31, 2015, the Company had cash on hand, net of restricted cash, of $3,950 and $11,217, respectively.  Our cash flow from operating, investing and financing activities during these periods were as follows:

For the nine months ended September 30, 2016, cash flows included net cash used in operating activities of $227,611.  This amount included a decrease in operating cash related to a net loss of $1,236,259, partially offset by aggregate non-cash adjustments of $185,354 and aggregate cash provided by changes in operating assets and liabilities of $823,294 (primarily a result of increased accounts payable offset by increased inventories).  For the nine months ended September 30, 2015, cash flows included net cash used in operating activities of $407,825.  This amount included a decrease in operating cash related to a net loss of $443,073, offset by aggregate non-cash adjustments of $390,784, plus aggregate cash used by changes in operating assets and liabilities of $355,536 (primarily a result of a reduction of accounts payable).

For the nine months ended September 30, 2016, net cash used in investing activities was $20,352 related primarily to a decrease in restricted cash.   For the nine months ended September 30, 2015, net cash provided by investing activities was $12,413 related to a reduction in restricted cash offset by the capitalization of website development costs and the purchase of computer equipment.

For the nine months ended September 30, 2016, net cash provided by financing activities was $240,696 primarily related to $308,911 of notes payable offset by principal payments on equipment leases and repayment of notes payable.  For the nine months ended September 30, 2015, net cash used by financing activities was $85,365 related to the principal payment on equipment leases and notes payable.

- 20 -

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 March 25, 2016. 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 Chief Executive Officer, in a manner to allow timely decisions regarding required disclosures.

In connection with the preparation of this Form 10–Q, our management, (Chief Executive and Principal Financial Officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. Management had previously identified material weaknesses in our internal control over financial reporting as of December 31, 2015 (see Form 10-K filed with the SEC on March 25, 2016), which is an integral component of our disclosure controls and procedures.  During the year ended December 31, 2015, management implemented policies, procedures and controls to address the weaknesses in various areas including operational and financial systems integration, separation of duties in review and approval of disbursement, cash handling, purchasing, receiving, shipping and invoicing functions, daily transaction processing and monthly financial closing procedures and timelines and board approval of related party and other significant transactions.

Effective January 1, 2016, the Company hired a Chief Financial Officer with sufficient experience with United States generally accepted accounting principles to address the accounting for complex transactions.  The Chief Financial Officer has been developing a plan to continue to evaluate the controls and procedures implemented in the prior year.  The Chief Financial Officer left the employment of the Company on October 9, 2016.  The Company intends to hire a new Chief Financial Officer at a future date. Until the Company hires a Chief Financial Officer, the Company's Chief Executive Officer and the Company's accounting staff, supplemented by external accounting consultants with SEC experience, plan to continue to evaluate the controls and procedures implemented in the prior year and 2016.

 Management believes that the controls implemented in these specific areas are sufficient to address the above weaknesses, however, they have concluded that such controls have not been in place for a sufficient period of time in order to conclude that the identified material weaknesses described above have been fully remediated.  Therefore, management has concluded that as of September 30, 2016, our disclosure controls 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 three months ended September 30, 2016, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting, except as discussed above.

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.

- 21 -

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 May 13, 2016, Taft Stettinius & Hollister, LLP (the "Plaintiff") filed a complaint in the Court of Common Pleas for Hamilton County, Ohio against Healthwarehouse.com, Inc. (the "Company").  The complaint alleges that the Plaintiff provided legal services to the Company beginning in April 2011 until January 2015 and billed the Company in the amount of $936,777, and for which the Company has not made payment. The complaint seeks damages against the Company in the amount of $936,777 plus interest.  The Company is in the process of investigating such claims and intends to defend the action vigorously.

Item 1A. Risk Factors.

Not applicable.

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

None.

Recent Repurchases of Common Stock

There were no repurchases of our Common Stock during the three months ended September 30, 2016. The Company does not currently have an announced repurchase program.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

- 22 -

Item 6. Exhibits.

The following exhibits are provided:

Exhibit Number	Description
10.1	Employment Agreement dated November 7, 2016 between the Company and Jeffrey T. Holtmeier *
10.2	Third Amendment to Amended and Restated Promissory Note dated Octohber 31, 2016 by and between HealthWarehouse.com, Inc., HWAREH.COM, Inc. and Hocks.com, Inc. and Melrose Captial Advisors, LLC *
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 Dcoument *
101.LAB	XBRL Label Linkbase Document *
101.PRE	XBRL Presentation Linkbase Document *

       *      Filed herewith.

- 23 -

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: November 8, 2016 HEALTHWAREHOUSE.COM, INC.       By:/s/   Jeffrey T. Holtmeier                                                              Jeffrey T. Holtmeier               President and Chief Executive Officer               (Principal Executive and Financial Officer) 

- 24 -

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the "Agreement"), is made this 4th day of November, 2016, to be effective as of September 12, 2016 (the "Effective Date"), by and between HealthWarehouse.com, Inc., a Delaware corporation (the "Company"), and Jeffrey T. Holtmeier (the "Employee").

BACKGROUND

A.      The Company desires to employ the Employee as its President and Chief Executive Officer so that it will have the benefit of his ability, experience and services, and the Employee is willing to enter into an agreement to that end, upon the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows:

1.      Employment

The Company hereby agrees to employ the Employee, and the Employee hereby agrees to be in the employ of the Company, on and subject to the terms and conditions of this Agreement.

2.      Term

The period of this Agreement (the "Agreement Term") shall commence on the Effective Date and shall expire on December 31, 2017.  Thereafter, the Agreement Term shall be automatically extended for additional one year periods on January 1 of each calendar year, unless written notice of non-extension is provided by either party to the other party at least ninety (90) days prior to such date.  The period of the Employee's employment hereunder (the "Employment Period") shall commence as of the Effective Date and shall expire at the end of the Agreement Term, unless earlier terminated in accordance with the terms and conditions of this Agreement or except as otherwise set forth herein.

3.      Position and Duties

(a)      Position, Reporting.  Effective October 11, 2016, during the Employment Period, the Employee shall serve as, and with the title, office and authority of, the President and Chief Executive Officer of the Company.  The Employee shall have such duties and authority as are normally associated with such positions and will generally have responsibility for managing Company activities, subject to the authority of the Company's Board of Directors (the "Board").  These activities include but are not limited to Board activities, investor and public relations, fund raising and banking relations.  The Employee shall report directly to the Board.

(b)      Business Time.  During the Employment Period, the Employee agrees to devote his full business time, efforts and skills to the performance of his duties and responsibilities under this Agreement.  Subject to Section 7 hereof, the Employee shall not be precluded from devoting reasonable periods of time to participate in professional, philanthropic or community activities; provided that such activities do not interfere with the Employee's regular performance of his duties and responsibilities hereunder.  In addition, notwithstanding the foregoing but subject to Section 7 hereof, the Employee may continue to serve on all corporate boards that he serves on and engage in all business activities that he engages in as of the Effective Date; provided, that such activities do not interfere with the Employee's regular performance of his duties and responsibilities hereunder.

(c)      Location. The Employee shall perform his duties in the Florence, Kentucky and Cincinnati, Ohio areas and from time to time the Employee will be required to travel to other locations in connection with his responsibilities under this Agreement.

Page 1 of 7

4.      Compensation and Benefits

In consideration of the services rendered by the Employee during the Employment Period, and subject in all respects to the terms and provisions of this Agreement, the Company shall pay or provide the Employee the compensation and benefits set forth below:

(a)      Base Salary. During the Employment Period through September 11, 2017, the Company shall pay the Employee a base salary at the rate of $175,000 per annum (the "Base Salary"), to be paid in accordance with the normal payroll practices of the Company.  The Base Salary shall be increased to $185,000 per year on September 12, 2017 and thereafter may be reviewed from time to time by the Board for possible merit increases.

(b)      Annual Bonus. During the Employment Period, beginning January 1, 2017 the Employee shall have the opportunity to earn an annual bonus (the "Annual Bonus") with a target equal to 100% of Base Salary under the annual bonus program in which management employees of the Company are eligible to participate, as determined by the Board from time to time, with the amount and payment of the Annual Bonus to be based on the achievement of performance metrics to be determined on an annual basis by the Board. For the period beginning on October 1, 2016 and ending December 31, 2016, the Annual Bonus target shall be equal to 25% of the Base Salary.  The Annual Bonus shall be paid no later than 45 days following the end of the period to which such bonus relates. To be eligible for payment of the Annual Bonus, Employee must be employed by the Company on the date of payment of such Annual Bonus.

(c)      Benefits. The Employee shall be entitled to participate in the employee and fringe benefit plans and programs of the Company in which employees of the Company are generally eligible to participate from time to time during the Employment Period, subject to and on a basis consistent with the terms, conditions, eligibility requirements and overall administration of such plans and programs.

(d)      Vacation. The Employee shall be entitled to up to three (3) weeks of vacation per year.

(e)      Business Expenses. The Company shall reimburse all reasonable business expenses and disbursements incurred by the Employee in the performance of his duties under this Agreement in accordance with the Company's normal practices and procedures, upon proper accounting therefor.

(f)      Long Term Incentives.

(i)       Employee shall be eligible to participate in the Company's long term incentive programs in place for executives of the Company.  The timing, amount, target and form of awards shall be determined by the Board.

(ii)      On October 11,2016, the Employee shall be granted an incentive stock option to purchase 125,000 shares of the Company's Common Stock under the Company's 2014 Equity Incentive Plan (the "First Option").  The First Option shall be 100% vested and exercisable on October 11, 2016 at an exercise price equal to the closing price of the Company's common stock on October 10, 2011, have a term of 10 years, and otherwise contain the terms and conditions contained in the Company's model incentive stock option agreement.

(iii)     On April 11, 2017, unless the Employment Period has been terminated on or before such date, the Employee shall be granted an incentive stock option to purchase an additional 125,000 shares of the Company's Common Stock under the Company's 2014 Equity Incentive Plan (the "Second Option").  The Second Option shall be 100% vested and exercisable on April 11, 2017 at an exercise price equal to the closing price of the Company's common stock on April 10, 2017, have a term of 10 years, and otherwise contain the terms and conditions contained in the Company's model incentive stock option agreement.

Page 2 of 7

5.     Termination of Employment

The Employment Period and the Employee's employment hereunder shall be terminated prior to the expiration of the Agreement Term upon the occurrence of any of the following events, subject to the provisions of this Agreement applicable to termination of employment, as follows:

(a)      Resignation for Good Reason. The Employee may voluntarily terminate the Employment Period and the Employee's employment hereunder for Good Reason. For the purposes of this Agreement, "Good Reason" shall mean the occurrence of one of the following: (i) the assignment to the Employee of any duties materially inconsistent with the Employee's position, title, authority or responsibilities as contemplated by Section 3(a) hereof, or any action by the Company that results in a material diminution in such position, title, authority or responsibilities without the Employee's express written consent, or (ii) a Change in Control of the Company occurs following which: (x) there is the assignment to the Employee of any duties materially inconsistent with the Employee's position, title, authority or responsibilities as contemplated by Section 3(a) hereof, or any action by the Company that results in a material diminution in such position, title, authority or responsibilities without the Employee's express written consent, (y) Employee is required to relocate more than 50 miles from his then primary place of employment, or (z), there is a material reduction in Employee's annual salary or bonus target.  For purposes of this provision, "Change of Control" shall mean a change in ownership of the Company, a change in the effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, in each case as provided under Section 409A of the Code and the regulations thereunder. In no event shall the Employee be considered to have terminated his employment for "Good Reason" unless the Employee delivers a written notice of termination to the Company identifying in reasonable detail the acts or omissions constituting "Good Reason" and the provision of this Agreement relied upon, and such acts or omissions are not cured by the Company within 15 days of receipt of such notice. If the acts or omissions are not cured, the Employee may terminate his employment not earlier than 30 days following the date of the written notice of termination referred to in the preceding sentence.

In addition, notwithstanding any other provision of this Agreement to the contrary, the voluntary termination of the Employment Period by the Employee Without Good Reason or without the requirement of stating or having any cause or reason during the 30-day period beginning on the six month anniversary of the effective date of a Change of Control shall be deemed to be a termination by the Executive With Good Reason for all purposes under this Agreement.

(b)      Resignation Without Good Reason. The Employee may voluntarily terminate the Employment Period and the Employee's employment hereunder for any reason that does not constitute Good Reason ("Without Good Reason") by giving the Company 30 days advance written notice of such termination.

(c)      Termination For Cause. The Company may terminate the Employment Period and the Employee's employment hereunder for Cause. For purposes of this Agreement, "Cause" shall mean the occurrence of one of the following: (i) fraud or willful or intentional misrepresentation in connection with the Employee's performance of his duties hereunder; (ii) the failure by the Employee to substantially perform his duties hereunder; (iii) willful or intentional conduct by the Employee that is detrimental to the Company's reputation, goodwill or business operations in any material respect; (iv) breach or threatened breach by the Employee of the restrictive covenants contained in Section 7 hereof; (v) the Employee's conviction for, or plea of nolo contendere to, a charge of commission of a felony or a violation of federal or state securities laws; or (vi) a material breach of the representations in Section 9 hereof.

(d)      Termination Without Cause. The Company may terminate the Employment Period and the Employee's employment hereunder without Cause ("Termination Without Cause") at any time by giving the Employee 30 days' advance written notice of such termination, or in lieu thereof by paying the Employee, in addition to any amounts the Employee is due under Section 6 hereof, his then-current daily Base Salary for each day the Company's written notice of termination is less than 30 days.

(e)      Disability.  The Employment Period and the Employee's employment hereunder shall terminate upon his Disability.  For purposes of this Agreement, "Disability" shall mean the inability of the Employee to perform his essential duties to the Company, with or without accommodation, on account of physical or mental illness or incapacity for a period of three consecutive months, or for a period of six months, whether or not consecutive, during any 12-month period.  The Employee's employment hereunder shall be deemed terminated by reason of Disability on the last day of the applicable period.

Page 3 of 7

(f)      Death. The Employment Period and the Employee's employment hereunder shall terminate immediately upon his death.

6.      Rights Upon Termination

(a)      In the event the Employment Period and the Employee's employment hereunder is terminated prior to the expiration of the Agreement Term as provided in Section 5 hereof, the Employee shall have the rights provided below.

(i)      Resignation for Good Reason; Termination Without Cause. In the event that the Employment Period and the Employee's employment hereunder is terminated by the Employee for Good Reason or by the Company as a Termination Without Cause, the Company shall pay the Employee: (A) any earned but unpaid Base Salary through the date of termination, (B) any unreimbursed business expenses as of the date of termination under Section 4(e) hereof and (C) subject to Section 6(a)(iv) below, severance pay equal to six (6) months of Base Salary at the rate then in effect, payable in equal installments over a six month period following the date of termination in accordance with the normal payroll practices of the Company.  Notwithstanding the foregoing Section 6(a)(i)(C), if the Employee's employment hereunder is terminated by the Employee for Good Reason or by the Company as a Termination without Cause prior to October 11, 2017, the Employee shall not be entitled to any severance pay.

(ii)     Resignation Without Good Reason; Termination for Cause: Death; Disability.  In the event that the Employment Period and the Employee's employment hereunder is terminated by the Employee Without Good Reason, by the Company for Cause or on account of death or Disability, the Employee shall not be entitled to receive, and the Company shall have no obligation to provide, any severance payments, bonus, or benefits under this Agreement; except that the Company shall pay the Employee: (A) any earned but unpaid Base Salary through the date of termination, and (B) any unreimbursed business expenses as of the date of termination under Section 4(e) hereof.

(iii)    Other Obligations.  The benefits payable to the Employee under this Agreement are not in lieu of any benefits payable under any employee benefit plan, program or arrangement of the Company, except as specifically provided herein, and upon termination of employment, the Employee will receive such benefits or payments, if any, as he may be entitled to receive pursuant to the terms and conditions of such plans, programs and arrangements.  Except for the obligations of the Company provided by this Section 6, the Company shall have no other obligations to the Employee upon his termination of employment.

(iv)   Releases of Claims. As a condition of the Employee's entitlement to any severance payment under Section 6(a)(i) or 6(b) hereof, the Employee shall execute and honor a release of claims in the form specified by the Company.

(b)      If but only if the Company gives notice under Section 2 hereof electing not to extend the Agreement Term and Employment Period after December 31, 2017, the Company, subject to Section 6(a)(iv) above, shall pay the Employee severance equal to six (6) months of Base Salary at the rate then in effect, payable in equal installments over the six (6) month period following December 31, 2017 in accordance with the normal payroll practices of the Company.

7.      Restrictive Covenants

(a)      Nondisclosure of Confidential Information.

(i)      The Employee acknowledges that during the course of the Employee's employment with the Company, the Employee has had or will have access to and knowledge of certain information that the Company considers confidential, and the release of such information to unauthorized persons would be extremely detrimental to the Company.  As a consequence, the Employee hereby agrees and acknowledges that the Employee owes a duty to the Company not to disclose, and agrees that without the prior written consent of the Company, at any time, either during or after the Employee's employment with the Company, the Employee will not communicate, publish or disclose, to any person anywhere or use, any Confidential Information (as hereinafter defined), except as may be necessary or appropriate to conduct the Employee's duties hereunder, provided the Employee is acting in good faith and in the best interest of the Company, or as may be required by law or judicial process.  The Employee will use reasonable best efforts at all times to hold in confidence and to safeguard any Confidential Information from falling into the hands of any unauthorized person.  The Employee will return to the Company all Confidential Information in the Employee's

Page 4 of 7

possession or under the Employee's control whenever the Company shall so request, and in any event will promptly return all such Confidential Information if the Employee's relationship with the Company is terminated for any or no reason and will not retain any copies thereof.  For purposes hereof, the term "Confidential Information" shall mean any information used by or belonging or relating to the Company or any of its affiliates that is not known generally to the industry in which the Company is or may be engaged and which the Company maintains on a confidential basis, including, without limitation, any and all trade secrets and proprietary information, information relating to the Company's business and services, employee information, customer lists and records, business processes, procedures or standards, know- how, manuals, business strategies, records, financial information, in each case whether or not reduced to writing or stored electronically, as well as any information that the Company advises the Employee should be treated as confidential information.  Further, Confidential Information shall not include information which is independently obtained from a third party whose disclosure violates no duty of confidentiality to the Company.

(ii)      The Employee acknowledges and agrees that all analyses, reports, proposals, software, documentation, machine code and other intellectual property owned by the Company (collectively, the "Company's Intellectual Property") are and shall remain the sole and exclusive property of the Company, or as otherwise may be noted, and that in no event shall the Employee have any ownership interest therein.  In that connection, the Employee hereby irrevocably assigns, transfers and conveys to the Company all of his right, title and interest, if any, in and to the Company's Intellectual Property, including any rights the Employee may have of patent, copyright, trade secret or other proprietary rights in the Company's Intellectual Property.  The Employee agrees to assist the Company in every proper way to obtain and from time to time enforce patents, copyrights, trade secrets and all other proprietary and intellectual property rights and interest in and to all the Company's Intellectual Property in any and all countries, and to that end the Employee will execute and deliver all documents and other papers and materials for use in applying for, obtaining and enforcing such patents, copyrights, trademarks and other proprietary and intellectual property rights and interests, as the Company may request in writing, together with any assignments thereof to the Company or persons designated by it.  The Employee agrees that the Company is appointed as his attorney to execute all such instruments and do all such things for the purpose of assuring to the Company (or its designee) the full benefit of the provisions of this paragraph.

(b)      Noninterference with Clients or Employees.  The Employee agrees that, during the period of the Employment Period and for a period of 12 months from the date of termination of employment for any reason (the "Restricted Period"), the Employee shall not, on the Employee's own behalf or on behalf of any other person or entity, solicit or in any manner influence or encourage any current or prospective client, customer, employee or other person or entity that has a business relationship with the Company or any subsidiary, to terminate or limit in any way their relationship with the Company, or interfere in any way with such relationship.

(c)      Noncompetition.  The Employee agrees that, during the Restricted Period, the Employee shall neither directly nor indirectly, engage or hold an interest in any business engaged in the Business in those geographic areas in which the Company or its subsidiaries conduct the Business, nor directly or indirectly, have any interest in, own, manage, operate, control, be connected with as a stockholder (other than as a stockholder of less than five percent (5%) of the issued and outstanding stock of a publicly held corporation), joint venturer, officer, director, partner, employee or consultant, or otherwise engage or invest or participate in the Business in those geographic areas in which the Company or its subsidiaries engage in the Business.  For purposes of this Agreement, "Business" shall mean (i) the marketing and distribution of pharmaceuticals, prescription medications and over-the- counter ("OTC") medications and products and pet prescription medications in all 50 states and the District of Columbia through the mail or a commercial delivery service, and (ii) any other business in which the Company or its subsidiaries are engaged in during the Restricted Period.

(d)      Survival.  The provisions of this Section 7 shall be applicable and shall survive for the time periods specified herein without regard to the termination of the Employment Period or the expiration of the Agreement Term.

(e)      Enforcement. The Employee acknowledges and agrees that the provisions of this Section 7 are reasonable and necessary for the successful operation of the Company. The Employee further acknowledges that if he breaches any provision of this Section 7, the Company will suffer irreparable injury. It is therefore agreed that the Company shall have the right to enjoin any such breach or threatened breach, without posting any bond, if ordered by a court of competent jurisdiction.  The existence of this right to injunctive and other equitable relief shall not limit any other rights or remedies that the Company may have at law or in equity including, without limitation, the right to monetary and compensatory damages.  In addition, the Employee further acknowledges that if he breaches any provision of this Section 7 following his termination of employment with the Company, the Employee will forfeit the right to any unpaid severance or other payments

Page 5 of 7

due under this Agreement.  If any provision of this Section 7 is determined by a court of competent jurisdiction to be unenforceable in the manner set forth herein, the Employee and the Company agree that it is the intention of the parties that such provision should be enforceable to the maximum extent possible under applicable law.  If any provisions of this Section 7 are held to be invalid or unenforceable, such invalidation or unenforceability shall not affect the validity or enforceability of any other provision of this Section 7 (or any portion thereof).  For purposes of the restrictions of this Section 7, references to the "Company" include reference to its subsidiaries and affiliates.

8.      Successors and Assigns

(a)      This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company upon any sale of all or substantially all of the Company's assets, or upon any merger, consolidation or reorganization of the Company with or into any other corporation, all as though such successors and assigns of the Company and their respective successors and assigns were the Company.  Except as provided above, this Agreement shall not be assignable by the Company to any person without the prior written consent of the Employee.

(b)      This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  The Employee's obligations under this Agreement shall not be assignable by the Employee.

9.      Representations

The Employee represents and warrants that his entering into this Agreement and his employment with the Company will not be in breach of any other agreement with any current or former employer and that he is not subject to any other restrictions on solicitation of clients or customers or competing against another entity.  The Employee understands that the Company has relied on this representation in entering into this Agreement.

10.    Board Membership

At each annual meeting of the Company's stockholders during the Employment Period, the Company will nominate Employee to serve as a member of the Board. Employee's service as a member of the Board will be subject to any required stockholder approval.  Upon the termination of Employee's employment for any reason, unless otherwise requested by the Board, Employee agrees to resign from the Board (and all other positions held at the Company and its affiliates), and Employee, at the Board's request, will execute any documents necessary to reflect his resignation.

11.    Entire Agreement

This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and cancels and supersedes any and all prior agreements between the parties with respect to the subject matter hereof, except to the extent specifically provided herein.  Any amendment or modification of this Agreement shall not be binding unless in writing and signed by the Company and the Employee.  The Company represents that there are no other agreements with the Company or other undertakings to or for the Company which have been executed by the Employee other than as expressly set forth herein.

12.    Severability

In the event that any provision of this Agreement is determined to be invalid or unenforceable, the remaining terms and conditions of this Agreement shall be unaffected and shall remain in full force and effect, and any such determination of invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement.

13.    Tax Withholding

All compensation paid to the Employee under this Agreement shall be subject to all applicable income tax, employment tax and all other federal, state and local tax withholdings and deductions.

Page 6 of 7

14.     Waiver of Breach

The waiver by either party of a breach of any provision of this Agreement by the other party must be in writing and will not operate or be construed as a waiver of any subsequent breach by such other party.

15.     Notices

All notices which may be necessary or proper for either the Company or the Employee to give to the other shall be in writing and shall be delivered by hand or sent by registered or certified mail, return receipt requested, or by air courier (i) if to the Employee at the Employee's then-current address as listed in the Company's payroll records or at such other address as may be provided to the Company for this purpose, and (ii) if to the Company to the Chief Operating Officer and Chief Financial Officer at HealthWarehouse.com, Inc., 7107 Industrial Road, Florence, Kentucky, 41042, and shall be deemed given when sent, provided that any notice given under Section 5 hereof shall be deemed given only when received.  Any party may by like notice to the other party change the address at which he or they are to receive notices hereunder.

16.     Governing Law

This Agreement shall be governed by and enforceable in accordance with the laws of the Commonwealth of Kentucky, without giving effect to the principles of conflict of laws thereof.

17.     Counterparts

This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

18.     Drug Screen

This Agreement is contingent upon the Employee's successful completion of a pre- employment drug screen.  In the event that, for any reason, such drug screen shall not be successfully completed, this Agreement shall be null and void and the Company and the Employee shall have no obligations hereunder.

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date written above.

EMPLOYEE

/s/    Jeffrey T. Holtmeier                                                      

         Jeffrey T. Holtmeier

HEALTHWAREHOUSE.COM, INC.

/s/      Mark Scott                                                                     

By:     Mark Scott

Title:  Chair, Compensation Committee

Page 7 of 7

EX-10.2

Exhibit 10.2

THIRD AMENDMENT TO AMENDED AND RESTATED PROMISSORY NOTE

THIS THIRD AMENDMENT TO AMENDED AND RESTATED PROMISSORY NOTE (this "Amendment") is dated October 31, 2016, by and between HEALTHWAREHOUSE.COM, INC., a Delaware corporation, HWAREH.COM, INC., a Delaware corporation, and HOCKS.COM, INC., an Ohio corporation, jointly and severally (collectively, "Borrower"), and MELROSE CAPITAL ADVISORS, LLC, an Ohio limited liability company (together with its successors and assigns, "Lender").

WHEREAS, Borrower executed an Amended and Restated Promissory Note dated August 15, 2016, payable to the order of Lender in the principal amount of $1,200,000.00, with a maturity date of September 30, 2016, an Amendment to Amended and Restated Promissory Note dated September 30, 2016, which extended the maturity date to October 14, 2016 and a Second Amendment to Amended and Restated Promissory Note dated September 30, 2016, which extended the maturity date to October 31, 2016 (together with all previous amendments or modifications thereto, the "Note");

WHEREAS, Borrower and Lender desire to amend the Note as provided for below;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

1.             The Note is hereby amended as follows:

a.     Section 2 of the Note amended to extend the Maturity Date from October 31, 2016 to November 30, 2016.

2. Capitalized terms used and not otherwise defined herein will have the meanings set forth in the Note.

3. Borrower hereby certifies that: (a) all of its representations and warranties in the Note are  true and correct as of the date of this Amendment; (b) no Event of Default or event which, with the passage of time or the giving of notice or both, would constitute an Event of Default, exists under the Note; and (c) this Amendment has been executed and delivered so that it constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms.  Borrower confirms that the obligations under the Note remain outstanding without defense, set off, counterclaim, discount or charge of any kind as of the date of this Amendment.

4. This Amendment is a continuation of the Note and shall not be construed as a novation or extinguishment of the obligations arising under the Note as originally issued, and the issuance of this Amendment shall not affect the priority of any security interest granted in connection with the Note.  The execution of this Amendment shall not be deemed to be a waiver of any default or Event of Default.

5. Borrower hereby confirms that the collateral for the Note, including but not limited to the following: (i) Security Agreement from HEALTHWAREHOUSE.COM, INC., HWAREH.COM, INC. and HOCKS.COM, INC. dated March 28, 2013, covering all business assets, including but not limited to accounts, inventory, equipment , deposit accounts and general intangibles and (ii) Deposit Account Control Agreement dated October 22, 2015 between Borrower, Lender and Cheviot Savings Bank with respect to Borrower's deposit accounts, as restated by a Deposit Account Control Agreement dated July 8, 2016 between MainSource Bank, successor in interest to Cheviot Savings Bank, Borrower and Lender, with respect to Borrower's deposit accounts at MainSource Bank  ((i) and (ii), collectively, the "Collateral"), shall continue unimpaired and in full force and effect.

Page 1 of 3

6. Borrower hereby releases and/or forever discharges Lender, including its members, managers, employees, agents, attorneys, officers, directors, representatives and affiliates (collectively "Lender Parties"), from any and all claims, demands, actions, causes of action, liabilities, losses or costs, whether known or unknown, which they have, may have, claim to have or allege to have against Lender Parties as of the date this Amendment is executed, which relate to the Note, as amended, or the terms of the Note, as amended, or any instrument related to the Note executed prior to the date this Amendment is executed, including the Loan Documents, and/or any other actions taken or not taken by the Lender Parties in connection with the obligations under the Loan Documents prior to the date this Amendment is executed.

7. This Amendment may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copies shall constitute one and the same instrument.

8. Each party to this Amendment agrees that the terms and conditions of this Amendment are the result of arms-length negotiations between the parties and that this Amendment shall not be construed in favor of or against any party by reason of the extent to which any party, or its counsel, participated in the drafting of this Amendment.

9. This Amendment will be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns.

10. Except as expressly modified hereby, the Note remains unaltered and in full force and effect.  This Amendment shall be considered an integral part of the Note, and all references to the Note in the Note itself or any other Loan Documents shall, on and after the date of this Amendment, be deemed to be references to the Note as amended by this Amendment. Borrower acknowledges that Lender has made no oral representations to Borrower with respect to the Note and this Amendment thereto and that all prior understandings between the parties are merged into the Note as amended by this Amendment.

11. WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AMENDMENT, THE NOTE AND THE TRANSACTIONS CONTEMPLATED HEREBY.

12. CONFESSION OF JUDGMENT.  Borrower authorizes any attorney to appear in any court of record in or of the State of Ohio, after the 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 Lender or any holder hereof for the outstanding principal of and accrued but unpaid interest on the 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.

[EXECUTION PAGE FOLLOWS]

Page 2 of 3

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.

By: /s/            Jeffrey T. Holtmeier
Print Name:   Jeffrey T. Holtmeier
Title:              President & Chief Executive Officer
HWAREH.COM, INC.	HOCKS.COM, INC.
By: /s/           Jeffrey T. Holtmeier	By: /s/             Jeffrey T. Holtmeier
Print Name:  Jeffrey T. Holtmeier	Print Name:    Jeffrey T. Holtmeier
Title:             President & Chief Executive Officer	Title:                President & Chief Executive Officer
MELROSE CAPITAL ADVISORS, LLC
By: /s/      Timothyt E. Reilly                                                                       Timothy E. Reilly,                   Managing Member

Page 3 of 3

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.

November 8, 2016
	/s/  JeffreyT. Holtmeier                                                                Jeffrey T. Holtmeier        President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF C.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.

November 8, 2016
	/s/  JeffreyT. Holtmeier                                                                          Jeffrey T. Holtmeier        President and Chief Executive Officer        (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
(Chief Executive Officer)

In connection with the annual report of HealthWarehouse.com, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2016 as filed with the Securities and Exchange Commission (the "Report"), I, Jeffrey T. Holtmeier, 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.

November 8, 2016
	/s/ Jeffrey T. Holtmeier                                                                   Jeffrey T. Holtmeier       President and Chief Executive Officer       (Principal 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.

This certification is being furnished to the SEC with this Report pursuant to Section 906 of the Sarbanes – Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

EX-32.2

Exhibit 32.2

CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(Chief Financial Officer)

In connection with the annual report of HealthWarehouse.com, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2016 as filed with the Securities and Exchange Commission (the "Report"), I, Jeffrey T. Holtmeier, 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.

November 8, 2016
	/s/  Jeffrey T. Holtmeier                                                                  Jeffrey T. Holtmeier        President and Chief Executive Officer        (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.

This certification is being furnished to the SEC with this Report pursuant to Section 906 of the Sarbanes – Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 07, 2016
Document And Entity Information
Entity Registrant Name	HealthWarehouse.com, Inc.
Entity Central Index Key	0000754813
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
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	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		42,582,613
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2016

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash	$ 3,950	$ 11,217
Restricted cash	161,792	145,088
Accounts receivable, net of allowance of $47,143 as of September 30, 2016 and December 31, 2015	57,734	51,627
Inventories - finished goods, net	217,692	182,647
Prepaid expenses and other current assets	105,088	81,718
Total current assets	546,256	472,297
Property and equipment, net of accumulated depreciation of $875,106 and $801,270 as of September 30, 2016 and December 31, 2015	339,060	409,248
Web development costs, net of accumulated amortization of $197,760 and $146,448 as of September 30, 2016 and December 31, 2015	33,250	84,562
Total assets	918,566	966,107
Current liabilities:
Accounts payable - trade	1,916,528	2,189,649
Accounts payable - related parties		862
Accrued expenses and other current liabilities	942,244	597,665
Equipment lease payable		46,143
Notes payable and other advances, net of debt discount of $1,722 as of September 30, 2016	1,298,278	991,089
Note payable and other advances - related parties		23,889
Redeemable preferred stock - Series C; par value $0.001 per share; 10,000 designated Series C: 10,000 issued and outstanding as of September 30, 2016 and December 31, 2015 (aggregate liquidation preference of $1,000,000)	1,000,000	1,000,000
Total current liabilities	5,157,050	4,849,297
Total liabilities	5,157,050	4,849,297
Commitments and contingencies
Stockholders' deficiency:
Preferred stock - par value $0.001 per share; authorized 1,000,000 shares; issued and outstanding as of September 30, 2016 and December 31, 2015 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; 517,359 and 483,512 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively (aggregate liquidation preference of $5,145,717 and $4,889,043 as of September 30, 2016 and December 31, 2015, respectively)	517	484
Common stock - par value $0.001 per share; authorized 100,000,000 shares; 43,761,825 and 38,844,374 shares issued and 42,582,613 and 37,665,162 shares outstanding as of September 30, 2016 and December 31, 2015, respectively	43,761	38,844
Additional paid-in capital	31,864,288	30,656,598
Treasury stock, at cost, 1,179,212 shares as of September 30, 2016 and December 31, 2015	(3,419,715)	(3,419,715)
Accumulated deficit	(32,727,335)	(31,159,401)
Total stockholders' deficiency	(4,238,484)	(3,883,190)
Total liabilities and stockholders' deficiency	$ 918,566	$ 966,107

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Accounts receivable, net of allowance	$ 47,143	$ 47,143
Property and equipment, net of accumulated depreciation	875,106	801,270
Web development costs, net of accumulated amortization	197,760	146,448
Current liabilities:
Current portion of notes payable, net of debt discount	$ 1,722	$ 0
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
Stockholders' deficiency:
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	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	517,359	483,512
Series B Convertible preferred stock, shares outstanding	517,359	483,512
Series B Convertible preferred stock, aggregate liquidation preference	$ 5,145,717	$ 4,889,043
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	100,000,000	100,000,000
Common stock, shares issued	43,761,825	38,844,374
Common stock, shares outstanding	42,582,613	37,665,162
Treasury stock, shares	1,179,212	1,179,212

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Consolidated Statements Of Operations
Net sales	$ 2,716,982	$ 1,689,457	$ 7,468,754	$ 5,172,974
Cost of sales	928,342	604,153	2,678,998	1,853,707
Gross profit	1,788,640	1,085,304	4,789,756	3,319,267
Operating expenses:
Selling, general and administrative expenses	2,728,240	1,211,401	6,009,026	3,605,876
Net loss from operations	(939,600)	(126,097)	(1,219,270)	(286,609)
Interest expense	(38,541)	(36,507)	(91,989)	(156,464)
Net loss	(978,141)	(162,604)	(1,311,259)	(443,073)
Preferred stock:
Series B convertible contractual dividends	(85,559)	(79,960)	(256,675)	(239,882)
Loss attributable to common stockholders	$ (1,063,700)	$ (242,564)	$ (1,567,934)	$ (682,955)
Per share data:
Net loss - basic and diluted	$ (0.03)	$ (0.01)	$ (0.04)	$ (0.01)
Series B convertible contractual dividends	(0.00)	(0.00)	(0.01)	(0.01)
Net loss attributable to common stockholders - basic and diluted	$ (0.03)	$ (0.01)	$ (0.04)	$ (0.02)
Weighted average number of common shares outstanding - basic and diluted	38,789,595	37,570,383	40,994,678	37,570,383

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities
Net loss	$ (1,311,259)	$ (443,073)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for employee advance reserve		2,143
Depreciation and amortization	125,148	138,157
Stock-based compensation	213,860	258,114
Gain on settlement of accounts payable	(55,432)	(105,764)
Amortization of debt discount	13,778	98,134
Changes in operating assets and liabilities:
Accounts receivable	(6,107)	20,898
Inventories - finished goods	(35,045)	(28,458)
Prepaid expenses and other current assets	(23,370)	(32,768)
Accounts payable - trade	480,921	(167,259)
Accounts payable - related parties	(862)	(44,314)
Accrued expenses and other current liabilities	370,757	(98,618)
Deferred revenue		(5,017)
Net cash used in operating activities	(227,611)	(407,825)
Cash flows from investing activities
Change in restricted cash	(16,704)	36,077
Capital expenditures	(3,648)	(5,539)
Website development costs		(18,125)
Net cash (used in) provided by investing activities	(20,352)	12,413
Cash flows from financing activities
Principal payments on equipment leases payable	(46,143)	(47,665)
Proceeds from exercise of common stock options	1,817
Proceeds from issuance of notes payable	308,911
Repayment of notes payable - related parties	(23,889)	(37,700)
Net cash provided by (used in) financing activities	240,696	(85,365)
Net decrease in cash	(7,267)	(480,777)
Cash - beginning of period	11,217	506,019
Cash - end of period	3,950	25,242
Cash paid for:
Interest	69,870	58,416
Non-cash investing and financing activities:
Issuance of Series B preferred stock for settlement of accrued dividends	319,854	298,918
Warrants issued as debt discount in connection with notes payable	15,500	41,300
Accrual of contractual dividends on Series B convertible preferred stock	256,675	239,882
Cashless exercise of common stock purchase warrants	2,647
Conversion of accounts payable to common stock	$ 698,594

XML

Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

1. Organization and Basis of Presentation

HealthWarehouse.com, Inc. ("HEWA" or the "Company"), a Delaware company incorporated in 1998, is an online mail order pharmacy, licensed and/or authorized to sell and deliver prescriptions in 50 states and the District of Columbia focusing on the out-of-pocket prescription drug market. The Company is Verified Internet Pharmacy Practice Site ("VIPPS") accredited by the National Association of Boards of Pharmacy ("NABP").  The Company markets a complete range of generic, brand name, and pet prescription medications as well as over-the-counter ("OTC") medications and products.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. 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 September 30, 2016 and for the nine months ended September 30, 2016 and 2015. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the operating results for the full year ending December 31, 2016 or any other period. 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, 2015 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on March 25, 2016.

XML

Going Concern and Management's Liquidity Plans

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

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 September 30, 2016, the Company had a working capital deficiency of $4,610,794 and an accumulated deficit of $32,727,335.  During the nine months ended September 30, 2016, the Company incurred net losses of $1,311,259 and used cash in operating activities of $227,611.   These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company is subject to a 2013 Notice of Redemption related to its Series C Redeemable Preferred Stock aggregating $1,000,000, whereby 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, including its obligations under a loan and security agreement (see Note 5), 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 U.S. 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.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

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 U.S. 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.

Net Earnings (Loss) Per Share of Common Stock

Basic net earnings (loss) per share is computed by dividing net earnings (loss) attributable to Common Stockholders by the weighted average number of common shares outstanding during the period.  Diluted net earnings (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 earnings (loss) per share if their inclusion would be anti-dilutive and consist of the following:

	September 30,
	2016	2015
Options	1,864,716	5,266,128
Warrants	8,076,118	9,976,474
Series B Convertible Preferred Stock	6,032,406	5,507,202
Total potentially dilutive shares	15,973,240	20,749,804

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for the Company beginning January 1, 2017. The Company is currently evaluating the potential impact of adopting this guidance but does not expect it to have a material impact on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), ("ASU 2016-15"). ASU 2016-15 adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows, reducing the existing diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 is effective for us beginning January 1, 2018. Early adoption is permitted. The Company is currently evaluating the impact adopting this guidance will have on classifications in its condensed consolidated statement of cash flows.

XML

Accrued Expenses and Other Current Liabilities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2016		2015
Deferred Rent	$	6,463	$	25,852
Advertising		75,000		76,639
Salaries and Benefits		70,521		64,007
Severance		235,000		-
Dividend Payable		256,675		319,854
Proxy and Solicitation Costs		160,000		-
Accrued Interest		44,249		44,249
Accrued Rent		50,863		49,614
Other		43,473		17,450
Total	$	942,244	$	597,665

XML

Notes Payable

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

5. Notes Payable

The Company is a party to a Loan and Security Agreement (the "Loan Agreement") with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed an aggregate of $1,200,000 from the Lender (the "Loan"), including $200,000 and $308,911 during the three and nine months ended September 30, 2016.  The Loan is evidenced by a promissory note (the "Senior Note") in the face amount of $1,200,000 (as amended).  The Senior Note bears interest on the unpaid principal balance of the Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus 4.25% per annum (7.75% as of September 30, 2016).  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. The principal amount and all unpaid accrued interest on the Note was payable on September 30, 2016, 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 Company's assets, to secure the Company's obligation to repay the Loan, including a Deposit Account Control Agreement, which grants the Lender a security interest in certain bank accounts.  In addition, the Company is required to direct the proceeds of its credit card receipts to a cash collateral account controlled by the Lender. The Company also borrowed and repaid $50,000 from the Lender in a separate transaction during the three months ended September 30, 2016.  See Note 10 – Subsequent Events for additional information.

Beginning on October 4, 2016, the Company has executed three successive amendments to the Senior Note, effective September 30, 2016, pursuant to which the Lender agreed to extend the maturity date of the Senior Note from September 30, 2016 to November 30, 2016. The Senior Note contained financial covenants which required the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation ("EBITDAS").  In conjunction with the amendments to Senior Note, the Company is no longer required to meet any financial covenant.

On January 11, 2016, the Company executed an Amendment to an existing promissory note ("Promissory Note") in the face amount of $100,000 with a different lender, effective October 31, 2015, which extended the maturity date of the note payable from November 1, 2015 to October 31, 2016.  In consideration of the extension of the maturity date of the note payable, the Company issued to the lender a five-year warrant to purchase 75,000 shares of Common Stock at an exercise price of $0.25 per share. The warrants had a fair value of $15,500 using the Black-Scholes model (see Note 6 – Stockholders' Deficiency) which was established as debt discount during the nine months ended September 30, 2016 and is being amortized using the effective interest method over the remaining term of the Promissory Note.  Including the value of the warrants issued in connection with the extension of the maturity date of the Promissory Note, the Promissory Note has an effective interest rate of 23% per annum during the extension period.

The Company recorded amortization of debt discount associated with notes payable of $5,167 and $13,778 for the three and nine months ended September 30, 2016, respectively, and $18,367 and $98,134 for the three and nine months ended September 30, 2015, respectively.

XML

Stockholders' Deficiency

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

6. Stockholders' Deficiency

Common Stock

On July 28, 2016, the Company entered an Exchange Agreement with Dellave Holdings LLC ("Dellave") whereby the Company issued an aggregate of 2,253,528 shares of Common Stock in exchange for the extinguishment of accounts payable balances totaling $698,594 held by Dellave.  The exchange was based on the prior day's closing price of $0.31.   The $698,594 aggregate fair value of the common stock issued was credited to equity at conversion. Mr. Timothy Reilly is the managing member of Dellave.  Mr. Reilly is also the managing member of Melrose Capital Advisors, LLC, the Company's senior lender at the time of the transaction.

Preferred Stock

As of September 30, 2016 and December 31, 2015, the Company had accrued contractual dividends of $256,675 and $319,853, respectively, related to the Series B Preferred Stock.  On January 1, 2016 and 2015, the Company issued 33,847 and 31,633 shares of Series B convertible preferred stock valued at approximately $320,000 and $299,000, respectively, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding on each date, to the Series B convertible preferred stock holders as payment in kind for dividends.

Stock Options

Valuation

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Risk free interest rate	1.00%	1.74% to 2.28%	1.00% to 2.12%	1.35% to 2.28%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	199.0%	196.0% to 197.0%	199.0% to 200.0%	195.0% to 197.0%
Expected life in years	5.5	5.5 to 10.0	5.5 to 10.0	5.5 to 10.0

The Company estimated forfeitures at a weighted average annual rate of 3% to 4% for the three and nine months ended September 30, 2016 and 2015.

Grants

The weighted average fair value of the stock options granted during the three and nine months ended September 30, 2016 was $0.35 and $0.29 per share, respectively.  The weighted average fair value of the stock options granted during the three and nine months ended September 30, 2015 was $0.12 and $0.10 per share, respectively.

During the nine months ended September 30, 2016, the Company granted options to consultants and directors of the Company to purchase an aggregate of 428,906 shares of common stock under a previously approved plan at exercise price ranging between $0.24 and $0.35 per share for an aggregate grant date value of $123,931.  The options vested on the grant date and have a term of ten years.

Stock-based compensation expense related to stock options was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $101,421 and $213,860 for the three and nine months ended September 30, 2016, respectively, and $59,546 and $258,114 for the three and nine months ended September 30, 2015, respectively.

As of September 30, 2016, stock-based compensation expense related to stock options of $63,721 remains unamortized, which is being amortized over the weighted average remaining period of 1.7 years.

Exercise

During the nine months ended September 30, 2016, the Company issued an aggregate of 1,492,078 shares of Common Stock to holders of options who elected to exercise options to purchase 3,108,141 shares of Common Stock on a "cashless" basis under the terms of the options.  The options had exercise prices ranging from $0.09 and $0.30 per share.

During the nine months ended September 30, 2016, the Company received proceeds of $1,817 from the exercise of options to purchase 16,666 shares of Common Stock.

The aggregate intrinsic value of the options exercised was $480,041 for the three and nine months ended September 30, 2016.

Summary

A summary of the stock option activity during the nine months ended September 30, 2016 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, January 1, 2016		5,341,284		$	0.70
Granted		428,906			0.29
Exercised		(3,108,141	)		0.16
Forfeited		(797,333	)		2.21
Outstanding, September 30, 2016		1,864,716		$	0.85		7.6	$	224,059
Exercisable, September 30, 2016		1,167,449		$	1.28		6.9	$	96,992

The following table presents information related to stock options at September 30, 2016:

		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
$	0.09 - $2.20	$	0.31		1,582,716	$	0.45	7.8		885,449
$	2.21 - $3.80		2.50		150,000		2.50	3.1		150,000
$	3.81 - $6.99		5.49		132,000		5.49	5.0		132,000
		$	0.85		1,864,716	$	1.28	6.9		1,167,449

Warrants

Valuation

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Risk free interest rate	n/a	1.75%	1.58%	1.26% to 1.75%
Dividend yield	n/a	0.00%	0.00%	0.00%
Expected volatility	n/a	196.0%	200.0%	195.0% to 197.0%
Contractual term in years	n/a	7.10	5.0	5.0 to 7.5

Grants

The weighted average fair value of the stock warrants granted during the nine months ended September 30, 2016 and 2015 was $0.36 and $0.08 per share, respectively.  There were no stock warrants granted during the three months ended September 30, 2016 and 2015.

Exercise

During the nine months ended September 30, 2016, the Company issued an aggregate of 1,155,361 shares of Common Stock to holders of warrants who elected to exercise warrants to purchase 1,795,080 shares of Common Stock on a cashless basis under the terms of the warrants.  The warrants had exercise prices ranging from $0.10 and $0.25 per share.

The aggregate intrinsic value of the warrants exercised was $414,176 and $425,501 for the three and nine months ended September 30, 2016, respectively.

There was no stock-based compensation expense related to warrants recorded in the three and nine months ended September 30, 2016.  Stock-based compensation expense related to warrants for the three and nine months ended September 30, 2015 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses totaled $21 and $12,300, respectively.  As of September 30, 2016, there was no stock-based compensation expense related to warrants that remained unamortized.

A summary of the stock warrant activity during the nine months ended September 30, 2016 is presented below:

				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Outstanding, January 1, 2016		10,046,198		$	0.41
Granted		75,000			0.25
Exercised		(1,795,080	)		0.13
Forfeited		(250,000	)		2.90
Outstanding, September 30, 2016		8,076,118		$	0.39		2.6	$	188,679
Exercisable, September 30, 2016		8,076,118		$	0.39		2.6	$	188,679

The following table presents information related to stock warrants at September 30, 2016:

		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
$	0.10 - $0.35	$	0.29		7,776,118	$	0.29	2.7		7,776,118
$	0.36 - $3.00		2.90		270,000		2.90	0.1		270,000
$	3.01 - $4.95		4.95		30,000		4.95	1.0		30,000
$	0.10 - $4.95	$	0.39		8,076,118	$	0.39	2.6		8,076,118

XML

Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

7. Commitments and Contingent Liabilities

Operating Leases

The Company leases approximately 28,500 square feet of office and storage space.  On March 15, 2016, the Company entered into an amendment of the lease agreement which extended the lease for an additional three years.  The amended monthly lease rate will be $5,462 in 2016, $6,649 in 2017, $6,886 in 2018 and $7,124 in 2019.  The lease expires on December 31, 2019.  The Company accounts for rent expense using the straight-line method of accounting, deferring the difference between actual rent due and the straight-line amount.  Deferred rent payable of $6,463 and $25,852 as of September 30, 2016 and December 31, 2015, respectively, has been included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

On June 7, 2013, Pagosa Health LLC ("Pagosa"), a former wholly-owned subsidiary of the Company, signed a three-year lease for $1,000 per month to house an office, pharmacy as well as inventory and is in Lawrenceburg, IN.  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.  On January 14, 2014, the Company closed Pagosa and vacated its Lawrenceburg facility.  The present value of the remaining lease payments of $50,863 is reflected as a component of accrued expenses and other liabilities on the condensed consolidated financial statements as of September 30, 2016.

Future minimum payments, by year and in the aggregate, under operating leases as of September 30, 2016 are as follows:

For years ending December 31,	Amount
2016  (Remainder)	$	19,384
2017		91,783
2018		87,633
2019		85,482
Total future minimum lease payments	$	284,282

During the three and nine months ended September 30, 2016, the Company recorded aggregate rent expense of $18,147 and $56,985, respectively, and $23,536 and $85,151 (net of sub-lease) during the three and nine months ended September 30, 2015, respectively.

Employment Agreement

On May 9, 2016, the Company entered into an employment agreement (the "Employment Agreement") with Mr. Lalit Dhadphale.  The terms of the Employment Agreement include a term of two years beginning on January 1, 2016 with an extension provision, the titles and positions of Chief Executive Officer and President, an initial base salary of $175,000 per year, subject to certain bonus and severance provisions.  Mr. Dhadphale's agreement was bound by restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.  See Note 9 – Board of Directors and Management Changes for additional information.

Litigation

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 condensed consolidated financial condition or condensed consolidated results of operations.

On June 7, 2016, Shipping & Transit LLC filed suit against the Company for infringing on certain claims of patents held by Shipping & Transit.  On July 20, 2016, the Company entered into a Settlement, Release and License Agreement whereby the Company paid $11,000 for any past violations and future licensing of the patents.

On May 13, 2016, Taft Stettinius & Hollister, LLP (the "Plaintiff") filed a complaint in the Court of Common Pleas for Hamilton County, Ohio against Healthwarehouse.com, Inc. (the "Company").  The complaint alleges that the Plaintiff provided legal services to the Company beginning in April 2011 until January 2015 and billed the Company in the amount of $936,777, and for which the Company has not made payment. The complaint seeks damages against the Company in the amount of $936,777 plus interest.  The Company is in the process of investigating such claims and intends to defend the action vigorously.  The Company has accounted for this matter in accordance with ASC 450 ("Contingencies").

XML

Concentrations

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

8. Concentrations

During the three months ended September 30, 2016, three vendors represented 40%, 18% and 17% of total inventory purchases and 45%, 17% and 17% of total inventory purchases for the nine months ended September 30, 2016.  During the three months ended September 30, 2015, two vendors represented 61% and 11% of total inventory purchases and 67% and 11% of total inventory purchases for the nine months ended September 30, 2015.  At September 30, 2016, one vendor represented 50% of the accounts payable balance and two vendors represented 43% and 13% of the accounts payable balance as of December 31, 2015.

XML

Board of Directors and Management Changes

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

9. Board of Directors and Management Changes

On September 2, 2016, the Company's shareholders elected four new directors who had run as an alternative slate to the slate the Company had recommended to its shareholders. These directors are Mr. Jeffrey T. Holtmeier, Mr. Brian A. Ross, Mark Scott and Dr. Stephen Weiss. Effective as of September 12, 2016, the newly elected board along with the remaining director, Joseph Heimbrock, whom the Series B shareholders anointed as a class, elected Mr. Holtmeier as Chairman of the Board on October 11, 2016. On September 12, 2016, the Board of Directors formed audit, compensation and nominating governance committees. Committee membership, which the directors subsequently revised per the appointment of Mr. Holtmeier as CEO (See Note 10 - Subsequent Events), are as follows:

· Audit: Ross (Chair), Scott and Weiss

· Compensation: Ross, Scott (Chair)

· Nominating & Governance: Scott, Weiss (Chair)

Subsequent to the election of the new Board of Directors and on September 13, 2016, the Company's Chief Executive Officer, Mr. Lalit Dhadphale, tendered his resignation which the Board of Directors of the Company subsequently accepted. Mr. Dhadphale's separation from the Company was effective October 13, 2016. Mr. Dhadphale's contract provided for severance payments under certain conditions, including a change in the composition of the Board of Directors, and contained restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.

Subsequent to the election of the new Board of Directors and on September 9, 2016, the Company's Chief Financial Officer, Mr. Daniel Seliga, tendered his resignation which the Board of Directors of the Company subsequently accepted.  Mr Seliga's separation from the Company was effective October 9, 2016. Mr. Seliga's contract provides for severance payments under certain conditions, including a change in the composition of the Board of Directors, and contained restrictive covenants regarding disclosure of confidential information, non-solicitation and employee non-competition.

Related to the solicitation of shareholders' proxies and subsequent resignations per certain employment agreements mentioned above, the Company incurred proxy, solicitation and severance costs of $548,303 and severance costs of $240,000 during the three and nine months ended September 30, 2016 of, which are included in Selling, General and Administrative expenses. At September 30, 2016, $204,323 and $395,000 of these costs are recorded in Accounts Payable and Accrued Expenses and Other Current Liabilities, respectfully.

XML

Subsequent Events

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

10. 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.

Amended Loan Agreement

On October 4, 2016, the Company and the Lender for its $1,200,000 Senior Note executed an amendment to the Senior Note.  Effective September 30, 2016, the Lender agreed to extend the maturity date of the Senior Note from September 30, 2016 to October 14, 2016. Effective October 14, 2016, the Company and the Lender executed a second amendment to the Senior Note pursuant to which the Lender agreed to extend the maturity date of the Senior Note from October 14, 2016 to October 31, 2016.  On October 29, 2016, the Company and the Lender executed a third amendment to the Senior Note, effective October 31, 2016, pursuant to which the Lender agreed to extend the maturity date of the Senior Note from October 31, 2016 to November 30, 2016.

Employment Agreement

On October 11, 2016, the Board of Directors of the Company appointed Jeffrey T. Holtmeier as the President and Chief Executive Officer of the Company. Subsequently, the Company and Mr. Holtmeier entered into a written agreement outlining compensation and other terms of Mr. Holtmeier's employment.  Mr Holtmeier will be paid an annual salary of $175,000, and will have an annual bonus target of 100% of base salary, with the amount of bonus to be determined according to the Company achieving certain financial metrics. Mr. Holtmeier was also granted options under the Company's Long Term Incentive Plan to purchase 125,000 shares of the Company's Common Stock, at a price of $0.29 per share, which was the closing price for the Company's common stock on the date of grant. Mr. Holtmeier will also be granted an additional 125,000 options after six months of employment, at a price equal to the closing price on the last trading day immediately prior to then-date of grant. After one year of employment, Mr. Holtmeier will also be eligible for severance equal to six months of his salary in the event his employment is terminated by the Company for any reason other than good cause, or if Mr. Holtmeier terminates his employment for good reason, as defined in the employment agreement.

Director Compensation and Options Grant

On November 2, 2016, the Board of Directors of the Company set independent director compensation at $65,000 annually, such compensation to be effective beginning in the third quarter of 2016.  So long as such director is still serving on the Board, director compensation will be paid quarterly in the form of a cash payment of $3,000  and a grant of options to purchase shares of the Company equal to $13,250, vesting immediately, with the exercise price equal to the closing price for the Company's Common stock on the last trading day immediately prior to the date of grant. In addition, the chair of the Audit Committee will receive an additional monthly payment of $2,000, payable quarterly, until such time as the Company has retained a Chief Financial Officer.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Summary Of Significant Accounting Policies 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 U.S. 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.

Net Earnings (Loss) Per Share of Common Stock

Basic net earnings (loss) per share is computed by dividing net earnings (loss) attributable to Common Stockholders by the weighted average number of common shares outstanding during the period.  Diluted net earnings (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 earnings (loss) per share if their inclusion would be anti-dilutive and consist of the following:

	September 30,
	2016	2015
Options	1,864,716	5,266,128
Warrants	8,076,118	9,976,474
Series B Convertible Preferred Stock	6,032,406	5,507,202
Total potentially dilutive shares	15,973,240	20,749,804

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for the Company beginning January 1, 2017. The Company is currently evaluating the potential impact of adopting this guidance but does not expect it to have a material impact on our condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230), ("ASU 2016-15"). ASU 2016-15 adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows, reducing the existing diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 is effective for us beginning January 1, 2018. Early adoption is permitted. The Company is currently evaluating the impact adopting this guidance will have on classifications in its condensed consolidated statement of cash flows.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2016

Summary Of Significant Accounting Policies Tables

Schedule of Potentially Dilutive Securities

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

	September 30,
	2016	2015
Options	1,864,716	5,266,128
Warrants	8,076,118	9,976,474
Series B Convertible Preferred Stock	6,032,406	5,507,202
Total potentially dilutive shares	15,973,240	20,749,804

XML

Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2016

Accrued Expenses And Other Current Liabilities Tables

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

	September 30,		December 31,
	2016		2015
Deferred Rent	$	6,463	$	25,852
Advertising		75,000		76,639
Salaries and Benefits		70,521		64,007
Severance		235,000		-
Dividend Payable		256,675		319,854
Proxy and Solicitation Costs		160,000		-
Accrued Interest		44,249		44,249
Accrued Rent		50,863		49,614
Other		43,473		17,450
Total	$	942,244	$	597,665

XML

Stockholders' Deficiency (Tables)

9 Months Ended

Sep. 30, 2016

Stock Option [Member]

Schedule of Stock Granted

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Risk free interest rate	1.00%	1.74% to 2.28%	1.00% to 2.12%	1.35% to 2.28%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	199.0%	196.0% to 197.0%	199.0% to 200.0%	195.0% to 197.0%
Expected life in years	5.5	5.5 to 10.0	5.5 to 10.0	5.5 to 10.0

Summary of Stock Activity

A summary of the stock option activity during the nine months ended September 30, 2016 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value
Outstanding, January 1, 2016		5,341,284		$	0.70
Granted		428,906			0.29
Exercised		(3,108,141	)		0.16
Forfeited		(797,333	)		2.21
Outstanding, September 30, 2016		1,864,716		$	0.85		7.6	$	224,059
Exercisable, September 30, 2016		1,167,449		$	1.28		6.9	$	96,992

Summary of Stock Outstanding and Exercisable

The following table presents information related to stock options at September 30, 2016:

		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
$	0.09 - $2.20	$	0.31		1,582,716	$	0.45	7.8		885,449
$	2.21 - $3.80		2.50		150,000		2.50	3.1		150,000
$	3.81 - $6.99		5.49		132,000		5.49	5.0		132,000
		$	0.85		1,864,716	$	1.28	6.9		1,167,449

Warrant [Member]

Schedule of Stock Granted

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2016	2015	2016	2015
Risk free interest rate	n/a	1.75%	1.58%	1.26% to 1.75%
Dividend yield	n/a	0.00%	0.00%	0.00%
Expected volatility	n/a	196.0%	200.0%	195.0% to 197.0%
Contractual term in years	n/a	7.10	5.0	5.0 to 7.5

Summary of Stock Activity

A summary of the stock warrant activity during the nine months ended September 30, 2016 is presented below:

				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value
Outstanding, January 1, 2016		10,046,198		$	0.41
Granted		75,000			0.25
Exercised		(1,795,080	)		0.13
Forfeited		(250,000	)		2.90
Outstanding, September 30, 2016		8,076,118		$	0.39		2.6	$	188,679
Exercisable, September 30, 2016		8,076,118		$	0.39		2.6	$	188,679

Summary of Stock Outstanding and Exercisable

The following table presents information related to stock warrants at September 30, 2016:

		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
$	0.10 - $0.35	$	0.29		7,776,118	$	0.29	2.7		7,776,118
$	0.36 - $3.00		2.90		270,000		2.90	0.1		270,000
$	3.01 - $4.95		4.95		30,000		4.95	1.0		30,000
$	0.10 - $4.95	$	0.39		8,076,118	$	0.39	2.6		8,076,118

XML

Commitments and Contingent Liabilities (Tables)

9 Months Ended

Sep. 30, 2016

Commitments And Contingent Liabilities Tables

Summary of future minimum payments under operating leases

Future minimum payments, by year and in the aggregate, under operating leases as of September 30, 2016 are as follows:

For years ending December 31,	Amount
2016  (Remainder)	$	19,384
2017		91,783
2018		87,633
2019		85,482
Total future minimum lease payments	$	284,282

XML

Going Concern and Management's Liquidity Plans (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Going Concern And Managements Liquidity Plans Details Narrative
Working Capital Deficiency	$ (4,610,794)		$ (4,610,794)
Accumulated deficit	(32,727,335)		(32,727,335)		$ (31,159,401)
Net losses	$ (978,141)	$ (162,604)	(1,311,259)	$ (443,073)
Net Cash Used in Operating Activities			$ (227,611)	$ (407,825)

XML

Summary of Significant Accounting Policies (Details) - shares	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Total potentially dilutive shares	15,973,240	20,749,804
Stock Option [Member]
Total potentially dilutive shares	1,864,716	5,266,128
Warrant [Member]
Total potentially dilutive shares	8,076,118	9,976,474
Series B Convertible Preferred Stock [Member]
Total potentially dilutive shares	6,032,406	5,507,202

XML

Accrued Expenses and Other Current Liabilities (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Accrued Expenses And Other Current Liabilities Details
Deferred rent	$ 6,463	$ 25,852
Advertising	75,000	76,639
Salaries and benefits	70,521	64,007
Severance	235,000
Dividends payable	256,675	319,854
Proxy and Solicitation Costs	160,000
Accrued interest	44,249	44,249
Accrued Rent	50,863	49,614
Other	43,473	17,450
Total	$ 942,244	$ 597,665

XML

Notes Payable (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Borrowed loan	$ 200,000		$ 308,911
Borrowed and repaid amount			$ 50,000
Interest rate on Senior Note	7.75%		7.75%
Fair value related to warrants	$ 15,500		$ 15,500
Amortization of debt discount	$ 5,167	$ 18,367	13,778	$ 98,134
Lender [Member]
Borrowed loan			$ 1,200,000

XML

Stockholders' Deficiency (Details) - Stock Option [Member]	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Risk free interest rate	1.00%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	199.00%
Expected life in years	5 years 6 months
Minimum [Member]
Risk free interest rate		1.74%	1.00%	1.35%
Expected volatility		196.00%	199.00%	195.00%
Expected life in years		5 years 6 months	5 years 6 months	5 years 6 months
Maximum [Member]
Risk free interest rate		2.28%	2.12%	2.28%
Expected volatility		197.00%	200.00%	197.00%
Expected life in years		10 years	10 years	10 years

XML

Stockholders' Deficiency (Details 1) - Stock Option [Member]	9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Number of Options, outstanding
Outstanding, beginning of period (in shares) | shares	5,341,284
Granted | shares	428,906
Exercised | shares	(3,108,141)
Forfeited | shares	(797,333)
Outstanding, end of period (in shares) | shares	1,864,716
Exercisable, September 30, 2016 | shares	1,167,449
Weighted average exercise price
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 0.70
Granted | $ / shares	0.29
Exercised | $ / shares	0.16
Forfeited | $ / shares	2.21
Outstanding, end of period (in dollars per share) | $ / shares	0.85
Exercisable, September 30, 2016 | $ / shares	$ 1.28
Weighted Average Remaining Life In Years
Weighted Average Remaining Life (in years) Outstanding	7 years 7 months 6 days
Weighted Average Remaining Life (in years) Exercisable	6 years 10 months 24 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding | $	$ 224,059
Aggregate Intrinsic Value Exercisable, September 30, 2016 | $	$ 96,992

XML

Stockholders' Deficiency (Details 2) - Stock Option [Member] - $ / shares	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Weighted Average Exercise Price Outstanding	$ 0.85	$ 0.70
Number Outstanding	1,864,716	5,341,284
Weighted Average Exercise Price Exercisable	$ 1.28
Weighted Average Remaining Years of Contractual Life	6 years 10 months 24 days
Number Exercisable	1,167,449
$0.09 - $2.20
Weighted Average Exercise Price Outstanding	$ 0.31
Number Outstanding	1,582,716
Weighted Average Exercise Price Exercisable	$ 0.45
Weighted Average Remaining Years of Contractual Life	7 years 9 months 18 days
Number Exercisable	885,449
$2.21 - $3.80
Weighted Average Exercise Price Outstanding	$ 2.50
Number Outstanding	150,000
Weighted Average Exercise Price Exercisable	$ 2.50
Weighted Average Remaining Years of Contractual Life	3 years 1 month 6 days
Number Exercisable	150,000
$3.81 - $6.99
Weighted Average Exercise Price Outstanding	$ 5.49
Number Outstanding	132,000
Weighted Average Exercise Price Exercisable	$ 5.49
Weighted Average Remaining Years of Contractual Life	5 years
Number Exercisable	132,000

XML

Stockholders' Deficiency (Details 3) - Warrant [Member]	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Risk free interest rate		1.75%	1.58%
Dividend yield		0.00%	0.00%	0.00%
Expected volatility		196.00%	200.00%
Contractual term in years		7 years 1 month 6 days	5 years
Minimum [Member]
Risk free interest rate				1.26%
Expected volatility				195.00%
Contractual term in years				5 years
Maximum [Member]
Risk free interest rate				1.75%
Expected volatility				197.00%
Contractual term in years				7 years 6 months

XML

Stockholders' Deficiency (Details 4) - Warrant [Member]	9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Number of Warrants, outstanding
Outstanding, beginning of period (in shares) | shares	10,046,198
Granted | shares	75,000
Exercised | shares	(1,795,080)
Forfeited | shares	(250,000)
Outstanding, end of period (in shares) | shares	8,076,118
Exercisable, September 30, 2016 | shares	8,076,118
Weighted average exercise price
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 0.41
Granted | $ / shares	0.25
Exercised | $ / shares	0.13
Forfeited | $ / shares	2.90
Outstanding, end of period (in dollars per share) | $ / shares	0.39
Exercisable, September 30, 2016 | $ / shares	$ 0.39
Weighted Average Remaining Life In Years
Weighted Average Remaining Life (in years) Outstanding	2 years 7 months 6 days
Weighted Average Remaining Life (in years) Exercisable	2 years 7 months 6 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding | $	$ 188,679
Aggregate Intrinsic Value Exercisable, September 30, 2016 | $	$ 188,679

XML

Stockholders' Deficiency (Details 5) - Warrant [Member] - $ / shares	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Weighted Average Exercise Price Outstanding	$ 0.39	$ 0.41
Number Outstanding	8,076,118	10,046,198
Weighted Average Exercise Price Exercisable	$ 0.39
Weighted Average Remaining Years of Contractual Life	2 years 7 months 6 days
Number Exercisable	8,076,118
$0.10 - $0.35
Weighted Average Exercise Price Outstanding	$ 0.29
Number Outstanding	7,776,118
Weighted Average Exercise Price Exercisable	$ 0.29
Weighted Average Remaining Years of Contractual Life	2 years 8 months 12 days
Number Exercisable	7,776,118
$0.36 - $3.00
Weighted Average Exercise Price Outstanding	$ 2.9
Number Outstanding	270,000
Weighted Average Exercise Price Exercisable	$ 2.9
Weighted Average Remaining Years of Contractual Life	1 month 6 days
Number Exercisable	270,000
$3.01 - $4.95
Weighted Average Exercise Price Outstanding	$ 4.95
Number Outstanding	30,000
Weighted Average Exercise Price Exercisable	$ 4.95
Weighted Average Remaining Years of Contractual Life	1 year
Number Exercisable	30,000
$0.10 - $4.95
Weighted Average Exercise Price Outstanding	$ 0.39
Number Outstanding	8,076,118
Weighted Average Exercise Price Exercisable	$ 0.39
Weighted Average Remaining Years of Contractual Life	2 years 7 months 6 days
Number Exercisable	8,076,118

XML

Stockholders' Deficiency (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2016
Proceeds from exercise of options			$ 1,817
Stock Option [Member]
Weighted Average Fair Value	$ 0.35	$ 0.12	$ 0.29	$ 0.10
Common stock purchased			16,666
Proceeds from exercise of options			$ 1,817
Selling, General And Administrative Expenses	$ 101,421	$ 59,546	213,860	$ 258,114
Stock-based compensation expense, unamortized			$ 63,721
Weighted Average Remaining Period			1 year 8 months 12 days
Intrinsic value of the warrants exercised	$ 480,041		$ 480,041
Aggregate shares of Common Stock			1,492,078
Exercise options to purchase			3,108,141
Stock option exercise price	$ 1.28		$ 1.28
Stock Option [Member] | Minimum [Member]
Weighted average forfeited shares	3.00%	3.00%	3.00%	3.00%
Stock option exercise price	$ 0.09		$ 0.09
Stock Option [Member] | Maximum [Member]
Weighted average forfeited shares	4.00%	4.00%	4.00%	4.00%
Stock option exercise price	$ 0.30		$ 0.30
Warrant [Member]
Weighted Average Fair Value	$ 0.36	$ 0	$ 0.08	$ 0
Selling, General And Administrative Expenses		$ 21		$ 12,300
Intrinsic value of the warrants exercised	$ 414,176		$ 425,501
Aggregate shares of Common Stock			1,155,361
Exercise options to purchase			1,795,080
Stock option exercise price	$ 0.39		$ 0.39
Warrant [Member] | Minimum [Member]
Stock option exercise price	0.10		0.10
Warrant [Member] | Maximum [Member]
Stock option exercise price	$ 0.25		$ 0.25
Series B Preferred Stock [Member]
Preferred Stock Contractual Dividends	$ 256,675		$ 256,675		$ 319,853
Consultants [Member] | Stock Option [Member]
Common stock purchased			428,906
Aggregate grant date value			$ 123,931
Consultants [Member] | Stock Option [Member] | Minimum [Member]
Weighted Average Fair Value			$ 0.24
Consultants [Member] | Stock Option [Member] | Maximum [Member]
Weighted Average Fair Value			$ 0.35

XML

Commitments and Contingent Liabilities (Details)	Sep. 30, 2016 USD ($)
Commitments And Contingent Liabilities Details
2016 (Remainder)	$ 19,384
2017	91,783
2018	87,633
2019	85,482
Total future minimum lease payments	$ 284,282

XML

Commitments and Contingent Liabilities (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Commitments And Contingent Liabilities Details Narrative
Deferred rent payable	$ 6,463		$ 6,463		$ 25,852
Accrued expenses and other liabilities	50,863		50,863
Rent Expense	$ 18,147	$ 23,536	$ 56,985	$ 85,151

XML

Concentrations (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Vendor 1 [Member]
Concentration Inventory Purchases Percentage	40.00%	61.00%	45.00%	67.00%
Concentration Accounts Payable Percentage	50.00%		50.00%		43.00%
Vendor 2 [Member]
Concentration Inventory Purchases Percentage	18.00%	11.00%	17.00%	11.00%
Concentration Accounts Payable Percentage					13.00%
Vendor 3 [Member]
Concentration Inventory Purchases Percentage	17.00%		17.00%

XML

Board of Directors and Management Changes (Details Narrative)	Sep. 30, 2016 USD ($)
Board Of Directors And Management Changes Details Narrative
Accounts Payable and Accrued Expenses	$ 204,323
Other Current Liabilities	$ 395,000