Acquisition of Hocks

9 Months Ended

Sep. 30, 2011

Acquisition of Hocks

12. Acquisition of Hocks

On February 14, 2011, Hocks Acquisition, the Company’s wholly-owned subsidiary (formed February 2011), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Hocks Pharmacy, an Ohio corporation and its shareholders.  Under the Asset Purchase Agreement, Hocks Acquisition purchased all of the inventory and fixed assets (the “Purchased Assets”) owned by Hocks Pharmacy and used in the operation of its internet pharmacy business (the “Internet Business”).  The Internet Business consists primarily of the internet sale of over-the-counter health and medical products and supplies.  Hocks Acquisition paid $200,000 in cash to Hocks Pharmacy for the Purchased Assets.

Also on February 14, 2011, the Company entered into a Merger Agreement (the “Merger Agreement”) with Hocks Pharmacy and its shareholders and Hocks.com Inc. (“Hocks.com”), a newly formed Ohio corporation and a wholly-owned subsidiary of Hocks Pharmacy.  Under the Merger Agreement, Hocks Acquisition merged into Hocks.com and Hocks.com became the Company’s wholly-owned subsidiary.  At the time of the Merger, Hocks.com owned all of the intangible assets of the Internet Business, including trademarks, domain names, and customer accounts. The merger consideration consisted of 166,667 shares of the Company’s Common Stock issued to Hocks Pharmacy, valued at $693,335, based on the share price on the date of the closing of the transaction.

The following table summarizes the preliminary allocation of the purchase price for Hocks.com based on the February 14, 2011 closing price of Healthwarehouse.com, Inc. common stock of $4.16 per share:

Current assets - inventory	$	200,000
Customer relationships		693,335
Net fair value of assets acquired and total purchase price	$	893,335
The following represents a summary of the purchase price consideration:
Common Stock	$	693,335
Cash		200,000
Total purchase price consideration	$	893,335

The Company initially allocated the excess value entirely to customer relationships with an estimated useful life of seven years.

During the three and nine months ended September 30, 2011, the Company recognized $677,552 and $2,044,754, respectively, of revenue generated by Hocks.com.

The following table presents the unaudited pro-forma combined results of operations of the Company and Hocks.com for each of the three and nine months ended September 30, 2011 and the three months ended September 30, 2010, respectively, as if Hocks.com had been acquired at the beginning of each of the periods.

	For the three months ended September 30,			For the nine months ended September 30,
	2010			2011			2010
	(unaudited)			(unaudited)			(unaudited)
Revenue	$	2,315,742		$	7,921,467		$	7,621,444
Net loss	$	(971,417	)	$	(3,515,426	)	$	(1,922,734	)
Pro-forma basic and diluted net loss per common share	$	(0.09	)	$	(0.33	)	$	(0.19	)
Weighted average common shares outstanding – basic and diluted		10,326,394			10,712,133			10,178,412