UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM
10-Q


(Mark
One)




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




For
the quarterly period ended September 30, 2009




 ̈
            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.
      Employerof
      Incorporation or Organization)
                
                Identification
      No.)





100 Commerce Boulevard, Cincinnati,
      Ohio
                  
                  45140(Address
      of Principal Executive Offices)
                  
                  (Zip
      Code)





(513)
618-0911


(Registrant’s
Telephone Number, Including Area Code)




(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)




Indicate  by
check mark whether the registrant (1) filed all reports required to
be  filed by Section 13 or 15(d) of the Exchange Act 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  x    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. (Check one):




Large
      Accelerated Filer  ̈
              Accelerated
      Filer   ̈Non-accelerated
      Filer  ̈
              Smaller
      Reporting Company  x(Do
      not check if a smaller reporting company)




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





As
of November 20, 2009, there were 189,557,879 shares of common stock
outstanding.





HEALTHWAREHOUSE.COM,
INC.





QUARTERLY
REPORT ON FORM 10-Q


FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009




TABLE OF
CONTENTS




PagePART
      I. FINANCIAL INFORMATIONITEM
      1. Financial Statements
                
                
                1ITEM
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                
                
                16ITEM
      3. Quantitative and Qualitative Disclosures About Market Risk
                
                
                23ITEM
      4T. Controls and Procedures
                
                
                23PART
      II. OTHER INFORMATIONITEM
      1. Legal Proceedings
                
                
                24ITEM
      1A. Risk Factors
                
                
                24ITEM
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                
                
                24ITEM
      3. Defaults upon Senior Securities
                
                
                24ITEM
      4. Submission of Matters to a Vote of Security Holders
                
                
                24ITEM
      5. Other Information
                
                
                24ITEM
      6. Exhibits
                
                
                24SIGNATURES
                
                
                25





PART
I. FINANCIAL INFORMATION





ITEM
1. Financial Statements




The
condensed consolidated financial statements included herein have been prepared
by us without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that these financial statements be read in conjunction with the audited
financial statements and the notes thereto for the year ended December 31, 2008
included in our current report on Form 8-K as filed on May 15, 2009 with the
Securities and Exchange Commission.




1





HEALTHWAREHOUSE.COM,
INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED BALANCE SHEETS





September
      30, 2009
                                            
                                            
                                            December
      31, 2008(Unaudited)AssetsCurrent
      assetsCash
      and cash equivalents
                                            
                                            $
                                            11,810
                                            
                                            
                                            $
                                            357,938Accounts
      receivable
                                            
                                            
                                            50,265
                                            
                                            
                                            
                                            12,317Inventories
      – finished goods
                                            
                                            
                                            421,796
                                            
                                            
                                            
                                            84,480Prepaid
      expenses and other current assets
                                            
                                            
                                            187,399
                                            
                                            
                                            
                                            -Total
      current assets
                                            
                                            $
                                            671,270
                                            
                                            
                                            $
                                            454,735Property
      and equipment, net
                                            
                                            
                                            429,045
                                            
                                            
                                            
                                            315,969Website
      development costs
                                            
                                            
                                            180,169
                                            
                                            
                                            
                                            70,397Total  assets
                                            
                                            $
                                            1,280,484
                                            
                                            
                                            $
                                            841,101Liabilities
      and Stockholders’ (Deficiency) EquityCurrent
      liabilitiesAccounts
      payable – related parties
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            380,279Accounts
      payable – trade
                                            
                                            
                                            16,733
                                            
                                            
                                            
                                            156,448Accrued
      expenses
                                            
                                            
                                            184,791
                                            
                                            
                                            
                                            -Total
      current liabilities
                                            
                                            $
                                            201,524
                                            
                                            
                                            $
                                            536,727Convertible
      notes, net of deferred debt discount of $26,029
                                            
                                            
                                            1,173,971
                                            
                                            
                                            
                                            -Total
      liabilities
                                            
                                            $
                                            1,375,495
                                            
                                            
                                            $
                                            536,727Commitments
      and contingenciesStockholders’
      equityPreferred
      stock – par value $.001 per share; authorized 1,000,000 shares; 200,000
      shares designated Series A; 155,557 shares issued and outstanding
      (aggregate liquidation preference $280,003)
                                            
                                            
                                            156
                                            
                                            
                                            
                                            -Common
      stock – par value $.001 per share; authorized 750,000,000 shares;
      189,557,879 and 154,876,449 shares issued and outstanding
                                            
                                            
                                            189,558
                                            
                                            
                                            
                                            154,876Additional
      paid-in capital
                                            
                                            
                                            1,799,688
                                            
                                            
                                            
                                            827,456Accumulated
      deficit
                                            
                                            
                                            (2,084,413
                                            )
                                            
                                            
                                            (677,958
                                            )Total
      stockholders’ (deficiency) equity
                                            
                                            
                                            (95,011
                                            )
                                            
                                            
                                            304,374Total
      liabilities and stockholders’ (deficiency) equity
                                            
                                            $
                                            1,280,484
                                            
                                            
                                            $
                                            841,101





The
accompanying notes are an integral part of these condensed consolidated
financial statements.


2


HEALTHWAREHOUSE.COM,
INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)





For the Three
                            Months Ended
                            September 30,
                            2009
                          
                          
                          For the Three
                            Months Ended
                            September 30,
                            2008
                          
                          
                          For the Nine
                            Months Ended
                            September 30,
                            2009
                          
                          
                          For the Nine
                            Months Ended
                            September 30,
                            2008Net
      sales
                          
                          $
                          1,006,610
                          
                          
                          $
                          396,547
                          
                          
                          $
                          2,672,195
                          
                          
                          $
                          726,920Cost
      of sales
                          
                          
                          658,376
                          
                          
                          
                          310,981
                          
                          
                          
                          1,847,196
                          
                          
                          
                          564,530Gross
      profit
                          
                          
                          348,234
                          
                          
                          
                          85,566
                          
                          
                          
                          824,999
                          
                          
                          
                          162,390Operating
      expenses:Selling,
      general and administrative expenses
                          
                          
                          947,465
                          
                          
                          
                          273,062
                          
                          
                          
                          2,181,768
                          
                          
                          
                          518,584Depreciation
      expense
                          
                          
                          16,280
                          
                          
                          
                          -
                          
                          
                          
                          37,504
                          
                          
                          
                          -Total
      operating expenses
                          
                          
                          963,745
                          
                          
                          
                          273,062
                          
                          
                          
                          2,219,272
                          
                          
                          
                          518,544Loss
      from operations
                          
                          
                          (615,511
                          )
                          
                          
                          (187,496
                          )
                          
                          
                          (1,394,273
                          )
                          
                          
                          (356,194
                          )Interest
      income (expense)
                          
                          
                          (3,603
                          )
                          
                          
                          1,197
                          
                          
                          
                          (9,799
                          )
                          
                          
                          -Loss
      before income taxes
                          
                          
                          (619,114
                          )
                          
                          
                          (186,299
                          )
                          
                          
                          (1,404,072
                          )
                          
                          
                          (356,194
                          )Income
      tax expense
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,383
                          )
                          
                          
                          -Net
      loss
                          
                          $
                          (619,114
                          )
                          
                          $
                          (186,299
                          )
                          
                          $
                          (1,406,455
                          )
                          
                          $
                          (356,194
                          )Per
      share data:Net
      loss per common shareBasic
      and diluted
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.00
                          )Weighted
      average number of common shares outstandingBasic
      and diluted
                          
                          
                          189,436,978
                          
                          
                          
                          154,876,449
                          
                          
                          
                          172,553,570
                          
                          
                          
                          154,876,449





The
accompanying notes are an integral part of these condensed consolidated
financial statements


3


HEALTHWAREHOUSE.COM,
INC. AND SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)








For the Nine Months
                        Ended September 30,
                        2009
                      
                      
                      For the Nine Months
                        Ended September 30,
                        2008Cash
      flows from operating activitiesNet
      loss
                      
                      $
                      (1,406,455
                      )
                      
                      $
                      (356,194
                      )Adjustments
      to reconcile net loss to net cash from operating
    activities:Depreciation
      and amortization
                      
                      
                      37,504
                      
                      
                      
                      -Non-cash
      stock-based compensation
                      
                      
                      211,797
                      
                      
                      
                      -Amortization
      of deferred debt discount
                      
                      
                      19,424
                      
                      
                      
                      -Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      (37,948
                      )
                      
                      
                      (6,356
                      )Inventories
      – finished goods
                      
                      
                      (337,316
                      )
                      
                      
                      -Prepaid
      expenses and other current assets
                      
                      
                      (187,399
                      )
                      
                      
                      -Accounts
      payable – trade
                      
                      
                      (286,922
                      )
                      
                      
                      315,683Accounts
      payable – related parties
                      
                      
                      (384,282
                      )
                      
                      
                      -Accrued
      expenses
                      
                      
                      16,260
                      
                      
                      
                      -Net
      cash used in operating activities
                      
                      
                      (2,355,407
                      )
                      
                      
                      (46,867
                      )Cash
      flow from investing activitiesCash
      received in share exchange
                      
                      
                      1,220,520
                      
                      
                      
                      -Acquisition
      of property and equipment
                      
                      
                      (150,580
                      )
                      
                      
                      (273,971
                      )Expenses
      paid in conjunction with share exchange
                      
                      
                      (225,000
                      )
                      
                      
                      -Website
      development costs
                      
                      
                      (109,772
                      )
                      
                      
                      (74,063
                      )Net
      cash provided by (used in) investing activities
                      
                      
                      735,168
                      
                      
                      
                      (348,034
                      )Cash
      flows from financing activitiesProceeds
      from sale of common stock
                      
                      
                      50,196
                      
                      
                      
                      872,744Proceeds
      from option/warrant exercises
                      
                      
                      23,915
                      
                      
                      
                      -Proceeds
      from sale of convertible notes
                      
                      
                      1,200,000
                      
                      
                      
                      -Net
      cash provided by financing activities
                      
                      
                      1,274,111
                      
                      
                      
                      872,744Net
      increase(decrease) in cash and cash equivalents
                      
                      
                      (346,128
                      )
                      
                      
                      477,843Cash
      and cash equivalents – beginning of period
                      
                      
                      357,938
                      
                      
                      
                      32,828Cash
      and cash equivalents – end of period
                      
                      $
                      11,810
                      
                      
                      $
                      510,671Non-cash
      investing and financing activities:Net
      assets received in share exchange:Cash
                      
                      $
                      1,220,520Accounts
      payable
                      
                      
                      (147,276
                      )Accrued
      expenses
                      
                      
                      (168,531
                      )Net
      assets
                      
                      $
                      904,713





The
accompanying notes are an integral part of these condensed consolidated
financial statements.


4


HEALTHWAREHOUSE.COM,
INC. AND SUBSIDIARY


Notes to Condensed Consolidated
Financial Statements





1.
 Organization, Basis of Presentation and Reverse
Recapitalization





HealthWarehouse.com,
Inc. (together with its subsidiary, the “Company”) was formed as a New Jersey
corporation in 1982 as MicroFrame, Inc. for the purpose of designing,
developing and marketing a broad range of remote network
management and remote maintenance and security products for
mission critical voice and data communications networks.  In
March 1999, the Company purchased all of the outstanding share capital of SolCom
Systems Limited, a company incorporated under the Companies Act 1985 of the
United Kingdom.  SolCom was a developer of remote monitoring
technology.  Simultaneously with the consummation of the SolCom
acquisition, the Company reincorporated in the State of Delaware and in the
process changed its name to ION Networks, Inc. As ION Networks, the Company
developed and manufactured software and hardware solutions for monitoring and
managing mission-critical voice, data, video and environmental applications and
networking systems. In December 2007, the Company sold substantially all of its
operating assets to Cryptek, Inc., a Delaware corporation. Pursuant to the
Cryptek sale, the Company changed its name to Clacendix, Inc. Following the date
of the Cryptek sale and until the closing of the share exchange transaction with
Hwareh.com, Inc., Clacendix existed as a shell company with no operations that
was seeking a target company with which to merge or to complete a business
combination.





On May
14, 2009, Clacendix completed a share exchange transaction pursuant to the terms
of a Securities Exchange Agreement, dated as of May 14, 2009.  Under
the Securities Exchange Agreement, Clacendix acquired all the outstanding
capital stock of Hwareh.com, Inc. (formerly named HealthWarehouse.com, Inc.). As
a result of the exchange, the former stockholders of Hwareh.com, Inc. owned
155,194,563 shares or approximately 82.4% of the outstanding shares of common
stock of Clacendix. This transaction was accounted for as a reverse
recapitalization, whereby Hwareh.com, Inc. is deemed to be the accounting
acquirer for accounting purposes. Following the closing of the share exchange
transaction with Hwareh.com, Clacendix succeeded to the business of Hwareh.com
as its sole line of business.  Effective August 5, 2009, Clacendix
changed its corporate name to HealthWarehouse.com, Inc.





The
Company is a U.S. licensed virtual retail pharmacy (“VRP”) and healthcare
e-commerce company that sells brand name and generic prescription drugs as well
as over-the-counter (“OTC”) medical products. The Company’s objective is to be
viewed by individual healthcare product consumers as a low-cost, reliable and
hassle-free provider of prescription drugs and OTC medical
products.





The
Company is presently licensed as a mail-order pharmacy for sales to 43 states
and the District of Columbia, and intends to apply for and obtain licenses to
sell prescriptions in all 50 states by the end of 2009. The Company has begun
accepting health insurance as part of its prescription program, contracting with
insurance providers based on customer demand and business
opportunity.




The
condensed consolidated financial statements have been prepared in accordance
with U.S. GAAP for certain financial information and the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, the condensed consolidated
balance sheet as of September 30, 2009, the condensed consolidated statements of
operations for the three and nine months ended September 30, 2009 and 2008 and
cash flows for the nine months ended September 30, 2009 and 2008, have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which include normal recurring adjustments) necessary to make the
Company’s financial position, results of operations and cash flows at September
30, 2009 and for the three and nine months ended September 30, 2009 and 2008 not
misleading have been made.  The results of operations for the three
months ended September 30, 2009 and 2008 are not necessarily indicative of
results that would be expected for the full year or any other interim
period.


5


Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested that
these financial statements be read in conjunction with the financial statements
and notes thereto included in the current report on Form 8-K filed with the
Securities and Exchange Commission on May 15, 2009.





2.
Going Concern and Management’s Liquidity Plans





As of
September 30, 2009, the Company had $11,810 in cash and cash equivalents and
working capital of $469,746.  During the nine months ended September
30, 2009, the Company generated revenue of approximately $2,700,000 and a net
loss of approximately $1,400,000.  For the nine months ended September
30, 2009, cash flows included net cash used in operating activities of
approximately $2,355,000, net cash provided by investing activities of
approximately $735,000 and net cash provided by financing activities of
approximately $1,275,000.





Since
inception, the Company has financed its operations primarily through product
sales to customers, and debt and private equity investments by existing
stockholders, officers and directors.  During the third quarter of
2009, the Company’s cash and cash equivalents were reduced by approximately
$1,400,000, primarily due to an unanticipated sharp reduction in credit terms
offered by the Company’s largest vendor, which resulted in the Company
accelerating payments in excess of $800,000 to that vendor, continued operating
losses and failure of an investor to complete a contractual funding to the
Company of $400,000.





Based
upon projected operating expenses, the Company believes that its working
capital as of September 30, 2009 may not be sufficient to fund its plan of
operations for the next twelve months.  The Company anticipates that
it will need to raise additional capital in order to meet operations and execute
its business plans.  Management has also indicated that the Company is
taking certain steps to improve its operations and cash flows, including the
re-launch of its corporate website, improved inventory management and an
increase in the number of suppliers.   Management has indicated
that the Company is in discussions with certain parties regarding various
financing opportunities including selling additional capital stock and/or
entering into debt facilities.  However, the Company does not know at
this time whether the any such transactions between the Company and any third
party, will be consummated and, if consummated, when it might occur, or if the
terms would be favorable to us.  If the Company cannot raise
sufficient funds on acceptable terms, it may have to curtail its level of
expenditures and scope of operations.





These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Accordingly, the accompanying condensed consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplate 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 financial statements do not necessarily purport to
represent realizable or settlement values. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.





3.
Summary of Significant Accounting Policies




Principles
of Consolidation





The
accompanying consolidated financial statements include the accounts of
HealthWarehouse.com, Inc. and Hwareh.com, Inc., its wholly-owned subsidiary. All
material inter-company balances and transactions have been eliminated in
consolidation.





Cash
and Cash Equivalents





The
Company considers all highly liquid investments with a maturity of three months
or less at the time of purchase to be cash equivalents.


6


Property
and Equipment





Property
and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, which are
generally two to five years. Expenditures for maintenance and repairs, which do
not extend the economic useful life of the related assets, are charged to
operations as incurred. Gains or losses on disposal of property and equipment
are reflected in the statements of operations in the period of
disposal.





Website
Development Costs





In
accordance with Accounting Standards Codification (“ASC”) 350-50 (prior
authoritative literature: Emerging Issues Task Force (“EITF”) Issue No. 00-2,
“Accounting for Web Site Development Costs”) the Company capitalized $109,772
and $74,063 of website development costs for the nine months ended September 30,
2009 and 2008, respectively. No amortization expense has been recorded through
September 30, 2009 as the capitalized projects have not been
completed.





Shipping
and Handling Costs





Shipping
and handling costs incurred are not billed to the customer and are recognized in
selling, general and administrative expenses. Such amounts aggregated
approximately $87,311 and $219,651 for the three and nine months ended September
30, 2009, respectively, and $43,766 and $45,892 for the three and nine months
ended September 30, 2008, respectively.





Fair
Value of Financial Instruments





The
carrying value of items included in working capital approximates fair value
because of the relatively short maturity of these instruments. The convertible
debt approximates fair value because the terms are substantially similar to
similar debt in the marketplace.





Net
Income/(Loss) Per Share of Common Stock





Basic net
loss per share is computed by dividing net loss attributable to common
stockholders by the weighted average number of common shares outstanding during
the period.  Diluted net loss per share reflects the potential dilution
that could occur if securities or other instruments to issue common stock were
exercised or converted into common stock.  Potentially dilutive securities
of 51,077,156 at September 30, 2009 are excluded from the computation of diluted
net loss per share as their inclusion would be antidilutive. These potentially
dilutive securities consist of stock options to purchase up to 30,096,178 shares
of common stock, warrants to purchase up to 3,570,181 shares of common stock,
convertible promissory notes convertible into 15,855,227 shares of common stock
and convertible preferred stock convertible into 1,555,570 shares of common
stock. The Company had no potentially dilutive securities at September 30,
2008.





Stock-Based
Compensation





The
Company accounts for stock-based compensation in accordance with the fair value
recognition provisions of ASC 718 (prior authoritative literature: SFAS 123R,
“Share-Based Payment”)  . Stock-based compensation expense for all
stock-based payment awards is based on the estimated grant-date fair value. The
Company recognizes these compensation costs over the requisite service period of
the award, which is generally the option vesting term.  Option valuation
models require the input of highly subjective assumptions including the expected
life of the option. Because the Company’s employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management’s opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options. The fair value of stock-based payment awards was estimated using
the Black-Scholes option pricing model using a volatility figure derived from an
index of comparable entities.  Management will review this assumption as
the Company’s trading history becomes a better indicator of value. The Company
accounts for the expected life of options in accordance with the “simplified”
method provisions of SEC Staff Accounting Bulletin (“SAB”) No. 110, which
enables the use of the simplified method for “plain vanilla” share options as
defined in SAB No. 107.


7





Stock-based
compensation for the three and nine months ended September 30, 2009 was recorded
in the consolidated statements of operations in selling general and
administrative line item and totaled $86,157 and $211,797,
respectively.  There was no stock-based compensation incurred during
the three or nine month period ended September 30, 2008.





The fair
value of stock-based payment awards was estimated using the Black-Scholes
pricing model with the following assumptions and weighted average fair
values range as follows:





Three
      and
                  Nine Months Ended
                  September 30, 2009Risk-free
      interest rate
                
                .10%
      to 2.65%Dividend
      yield
                
                
                N/AExpected
      volatility
                
                
                57.6%Expected
      life in years
                
                0.04
      to 6.50Expected
      forfeiture rate (through term)
                
                
                0%





4.
 Income Taxes





The Company
adopted the provisions of ASC Topic 740-10 (prior authoritative literature: FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB Statement No. 109.)  ASC 740-10 prescribes a
recognition threshold and a measurement attribute for the financial statement
recognition and measurement of tax positions taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities.
Differences between tax positions taken or expected to be taken in a tax return
and the benefit recognized and measured pursuant to the interpretation are
referred to as “unrecognized benefits.” A liability is recognized (or amount of
net operating loss carry forward or amount of tax refundable is reduced) for an
unrecognized tax benefit because it represents an enterprise’s potential future
obligation to the taxing authority for a tax position that was not recognized as
a result of applying the provisions of ASC 740-10.




In
accordance with ASC 740-10, interest costs related to unrecognized tax benefits
are required to be calculated (if applicable) and would be classified as
“Interest expense” in the consolidated statements of operations. Penalties would
be recognized as a component of “Selling, general and administrative
expenses.”




In many
cases, the Company’s tax positions are related to tax years that remain
subject to examination by relevant tax authorities. The Company files income tax
returns in the United States (federal) and in various state and local
jurisdictions. In most instances, the Company is no longer subject to federal,
state and local income tax examinations by tax authorities for years prior to
2005.




The
adoption of the provisions of ASC 740-10 on January 1, 2009 did not have a
material impact on the Company’s consolidated financial position and
results of operations. As of September 30, 2009, the Company believes that there
are no significant uncertain tax positions requiring recognition in these
consolidated financial statements.


8





The
Company consummated a share exchange transaction with Hwareh.com, Inc on May 14,
2009. The share exchange transaction is being accounted for as a “reverse
recapitalization,” since the former stockholders of Hwareh.com own a majority of
the outstanding shares of the Company’s common stock immediately following the
transaction, and Hwareh.com is deemed to be the accounting acquirer in the
transaction. As a result, at September 30, 2009, due to the change in control
under Section 382 of the Internal Revenue Code, utilization of any pre-share
exchange tax benefits would be substantially limited.





5.
Convertible Debt





In
contemplation of and contingent to closing the share exchange transaction, in
the quarter ended June 30, 2009, Hwareh.com, Inc. received the proceeds of
convertible promissory notes aggregating $1,200,000(“Convertible
Debentures”). The notes have a maturity date of two years from the date of
issuance and bear interest at 3.25% per annum, payable quarterly in arrears and
in full upon conversion. The notes are convertible into 15,855,227 shares of the
Company’s common stock at an effective conversion price of $0.0756848 per
share.  The notes are convertible at any time at the option of the
holder. The Company can also cause the conversion of the notes at its option at
any time before maturity and after the shares of the Company’s common stock that
are issuable upon conversion of the notes have been registered for resale
pursuant to an effective registration statement. The notes have customary
anti-dilution provisions in connection with any split, subdivision or
combination of our common stock. Payment of principal, if not converted, and
interest under the notes has been guaranteed by the Company’s President and
Chief Executive Officer and a 10% or greater stockholder. (See Note10) The debt
discount applicable to the notes from the issuance of warrants along with the
notes was $45,453 (see below). As of September 30, 2009, none of the Hwareh.com
convertible promissory notes had been converted.





In
connection with the issuance of the Hwareh.com convertible promissory notes,
Hwareh.com, Inc. also issued warrants to purchase common stock for up to
8,068,197 shares of the Company’s common stock (warrants expiring on May 31,
2009, June 30, 2009 and December 31, 2009 to purchase up to a maximum of
927,833, 3,570,182 and 3,570,182 shares, respectively, of the Company’s common
stock at an exercise price of $0.0010778, $0.0560196 and $0.0560196 per share,
respectively). Of these warrants, warrants to purchase 927,833 shares of the
Company’s common stock were exercised on May 31, 2009, warrants to purchase up
to 3,570,182 shares of the Company’s common stock expired on June 30, 2009
without being exercised and warrants to purchase up to 3,570,182 shares of the
Company’s common stock remain outstanding and expire on December 31,
2009. The warrants have customary anti-dilution provisions in connection
with any split, subdivision or combination of the Company’s common
stock. The fair value of the warrants was estimated as $45,453 using the
Black-Scholes option pricing model.  During the three and nine months
ended September 30, 2009, the Company recognized $4,003 and $19,424 in
amortization of the deferred debt discount.





The
convertible promissory notes and warrants have registration rights with respect
to the shares of the Company’s common stock that are issuable upon conversion or
exercise of the notes or warrants, respectively. The Company was obligated to
file an initial registration statement providing for the resale of the shares of
the Company’s common stock underlying the convertible promissory notes and
warrants by August 12, 2009, and to use its best efforts to have the
registration statement declared effective as soon as practicable thereafter.
Since the Company did not file on or before August 12, 2009, it must pay
liquidated damages of $12,000 in the aggregate, an amount equal to 1% of the
aggregate investment amount;  such amount has been accrued in the
accompanying  Condensed Consolidated Financial Statements, however,
the Company is currently in discussions with the holders to waive these
penalties.





6.
Stockholders’ (Deficiency) Equity





Common
Stock





Details
of outstanding shares of common stock are as follows:


9





SharesRecapitalized
      shares of Hwareh.com, Inc’s stockholders
                    
                    
                    155,194,563Shares
      of HealthWarehouse.com, Inc.’s stockholder at exchange
                    
                    
                    33,056,161Warrants
      exercised
                    
                    
                    1,152,833Options
      exercised
                    
                    
                    154,322Common
      stock shares outstanding at September 30, 2009
                    
                    
                    189,557,879





Prior to
the share exchange, Hwareh.com, Inc. sold 318,114 shares of common stock in a
private placement and received proceeds of $50,196.





On May
31, 2009, the holder of a warrant exercised that warrant, at an exercise
price of $0.0010778 per share or $1,000, and received 927,833 shares of the
Company’s common stock.





On June
10, 2009, a former director and holder of a warrant exercised that entire
warrant, at an exercise price of $0.05 per share or $6,250, and received 125,000
shares of the Company’s common stock.  In a separate transaction on
the same day, the same person exercised stock options to purchase 89,822 shares
of common stock at an average price of $0.0869 per share or $7,807.





On August
31, 2009, the holder of a warrant exercised that warrant, at an exercise price
of $0.05 per share or $5,000 in the aggregate, and received 100,000 shares of
the Company’s common stock.





On
September 16, 2009 a former director exercised stock options to purchase 64,500
shares of common stock at an average price of $0.06 per share or
$3,858.





Preferred
Stock





The
Company has designated 200,000 of the 1,000,000 authorized shares of preferred
stock as Series A Preferred Stock (“Preferred Stock”). The Preferred Stock is
non-voting, has a standard liquidation preference equal to its purchase price,
and does not pay dividends. As of September 30, 2009, there were 155,557 shares
of Preferred Stock outstanding, which are convertible into 1,555,570 shares of
common stock. The holders can call the conversion of the Preferred Stock at any
time.





Incentive Compensation/Stock Option
Plans





On May
15, 2009, the Company adopted its 2009 Incentive Compensation Plan (the “2009
Plan”). The total number of shares of common stock that may be subject to the
granting of awards under the 2009 Plan is 30,000,000, plus 3,628,500 shares that
remained available to be issued on May 15, 2009 and were assumed as part of the
share exchange from Clacendix’ previously existing stock option plans. The 2009
Plan imposes individual limitations on the amount of certain awards. Under these
limitations, during any fiscal year of the Company, the number of options, stock
appreciation rights, shares of restricted stock, shares of deferred stock,
performance shares and other stock based-awards granted to any one participant
under the 2009 Plan may not exceed 5,000,000 shares, subject to adjustment in
certain circumstances. The maximum amount that may be paid out as performance
units in any 12-month performance period is an aggregate value of $2,000,000,
and the maximum amount that may be paid out as performance units in any
performance period greater than 12 months is an aggregate value of $4,000,000.
The maximum term of each option or stock appreciation right, the times at which
each option or stock appreciation right will be exercisable, and provisions
requiring forfeiture of unexercised options or stock appreciation rights at or
following termination of employment generally are fixed by the board of
directors or committee of the Company’s board of directors designated to
administer the 2009 Plan (the “committee”), except that no option or stock
appreciation right may have a term exceeding ten years. The exercise price per
share subject to an option and the grant price of a stock appreciation rights
are determined by the committee, but in the case of an incentive stock option
(ISO) must not be less than the fair market value of a share of common stock on
the date of grant.




On May
15, 2009, the Company granted stock options to purchase up to 8,436,000 shares
of its common stock under the 2009 Plan, with an exercise price of $0.04 per
share. Of these stock options, (a) 4,218,000 vested immediately, have a
five-year term, and are valued at $60,739 using the Black-Scholes option pricing
model and (b) 4,218,000 vest 33.33% on May 15, 2010 and then an additional 8.33%
vest on the last day of each calendar quarter commencing on May 15, 2010, have a
ten-year term, and are valued at $97,248 using the Black-Scholes option pricing
model.





On May
20, 2009, the Company granted stock options to purchase up to 21,250,000 shares
of its common stock under the 2009 plan, with exercise prices ranging from $0.10
to $0.11 per share. These stock options vest 33.33% on May 20, 2010, 33.33% on
May 20, 2011 and 33.33% on May 20, 2012. Of these stock options, (a) 5,000,000
have an exercise price of $0.11 per share and a five-year term,  and
are valued at $213,687 using the Black-Scholes option pricing model and (b)
16,250,000 have an exercise price of $0.10 per share and a ten-year term, and
are valued at $936,633 using the Black-Scholes option pricing
model.


10





As of
September 30, 2009, stock options to purchase up to 29,686,000 shares of common
stock have been awarded under the 2009 Plan, with exercise prices ranging from
$0.04 to $0.11 per share, of which 4,718,000 are exercisable. The aggregate
stock compensation expense associated with the aforementioned stock options
totaled approximately $1,308,307, of which $1,182,666 remains unamortized as of
September 30, 2009; such amount is being amortized on a straight-line basis over
three years.





Details
of the options outstanding under all plans are as follows:





Shares
                                
                                
                                Weighted
                                  Average Exercise
                                  Price ($)
                                
                                
                                Weighted-
                                  Average
                                  Remaining
                                  Contractual
                                  Term (yrs)
                                
                                
                                Aggregate
                                  Intrinsic
                                  ValueOptions
      outstanding at January 1, 2009
                                
                                
                                —Assumed
      in exchange
                                
                                
                                689,500
                                
                                
                                $
                                0.14
                                
                                
                                
                                2.25
                                
                                
                                
                                -Granted
                                
                                
                                29,686,000
                                
                                
                                $
                                0.08
                                
                                
                                
                                5.82
                                
                                
                                
                                -Expired
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Canceled
                                
                                
                                (125,000
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Exercised
                                
                                
                                (154,322
                                )
                                
                                $
                                0.07
                                
                                
                                
                                -
                                
                                
                                
                                -Options
      outstanding at September 30, 2009
                                
                                
                                30,096,178
                                
                                
                                
                                0.09
                                
                                
                                
                                5.81
                                
                                
                                $
                                1,475,041Options
      exercisable at September 30, 2009
                                
                                
                                4,718,000
                                
                                
                                $
                                0.05
                                
                                
                                
                                5.69
                                
                                
                                $
                                377,440





Range of Exercise
                  
                  Number
                    Outstanding
                  
                  
                  Weighted Average
                    Remaining Years
                    of Contractual Life
                  
                  
                  Weighted
                    Average
                    Exercise Price
                  
                  
                  Number
                    Exercisable
                  
                  
                  Weighted
                    Average
                    Exercise Price$0.00
      – $0.10
                  
                  
                  8,418,000
                  
                  
                  
                  5.60
                  
                  
                  $
                  0.04
                  
                  
                  
                  4,218,000
                  
                  
                  $
                  0.04$0.10
      – $0.25
                  
                  
                  21,678,178
                  
                  
                  
                  5.82
                  
                  
                  $
                  0.10
                  
                  
                  
                  500,000
                  
                  
                  $
                  0.16$0.00
      – $0.25
                  
                  
                  30,096,178
                  
                  
                  
                  5.81
                  
                  
                  $
                  0.09
                  
                  
                  
                  4,718,000
                  
                  
                  $
                  0.05





Warrants





Details
of outstanding warrants are as follows:





Shares
                    
                    
                    Weighted Average
                      Exercise Price ($)
                    
                    
                    Weighted-
                      Average
                      Remaining
                      Contractual
                      Term (yrs)
                    
                    
                    Aggregate
                      Intrinsic
                      ValueWarrants
      outstanding at January 1, 2009
                    
                    
                    —Assumed
      in exchange
                    
                    
                    275,000
                    
                    
                    $
                    0.05
                    
                    
                    
                    -
                    
                    
                    
                    -Granted
                    
                    
                    8,068,197
                    
                    
                    
                    0.05
                    
                    
                    
                    -
                    
                    
                    
                    -Expired
                    
                    
                    (3,620,183
                    )
                    
                    
                    0.05
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    (1,152,833
                    )
                    
                    
                    0.05
                    
                    
                    
                    -
                    
                    
                    
                    -Warrants
      outstanding at September 30, 2009
                    
                    
                    3,570,181
                    
                    
                    
                    0.05
                    
                    
                    
                    0.25
                    
                    
                    $
                    285,614


11





7.
Commitments





Operating
Leases





The
Company occupies approximately 16,000 square feet of office and storage space
under a Commercial Sublease Agreement with 100 Commerce Boulevard LLC. The
sublease has a current monthly rental rate of $9,417 and has a total value
of $169,500 through March 31, 2011, the expiration date. The annual obligation
under the sublease is $113,000 in the year ended September 30, 2010 and $33,402
in the year ending September 30, 2011.





Rent
expense under operating lease for the nine months ended September 30, 2009 and
2008 was approximately $70,434 and $0, respectively, and for the three months
ended September 30, 2009 and 2008, was approximately $28,251 and $0,
respectively.





8.
 Contingent Liabilities





In the
normal course of business the Company may be involved in legal proceedings,
claims and assessments arising in the ordinary course of business. Such matters
are subject to many uncertainties, and outcomes are not predictable with
assurance. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Company’s business
financial position or results of operations.





9.
  Concentrations





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





10.
Related Party Transactions





Lalit
Dhadphale, the Company’s President and Chief Executive Officer, and Cape Bear
Partners LLC, a 10% or greater stockholder, have guaranteed the Company’s
obligations under certain convertible promissory notes with a principal value of
$1,200,000. The guarantees state that Mr. Dhadphale and Cape Bear Partners LLC
each guarantee the full payment of principal and interest under the notes. The
guarantees terminate with respect to each note upon the earlier of repayment of
principal and interest under each note or conversion of the note to equity. In
the event of note conversion, the guarantees remain in place with respect to any
interest due and unpaid through the date of conversion until that interest has
been paid.  The maximum exposure of each of Mr. Dhadphale and Cape
Bear Partners LLC pursuant to the guarantees is $1,278,000.





The
Company occupies approximately 16,000 square feet of office and storage space
under a Commercial Sublease Agreement with 100 Commerce Boulevard LLC, an entity
controlled by Jason Smith.  Mr. Smith is also the Manager of Rock
Castle Holdings, LLC, a 10% or greater stockholder in the Company. Mr. Smith is
the son of the controlling stockholder of Masters Pharmaceutical, Inc., one of
the Company’s principal suppliers from whom the Company
purchased  $1,124,610 and $612,613 of supplies during the nine months
ended September 30, 2009 and 2008, and $127,567 and $316,804 of supplies during
the three months ended September 30, 2009 and 2008, respectively.





Ron
Ferguson, a former Hwareh.com director, has guaranteed the Company’s obligations
to supplier Prescription Supply Inc. Mr. Ferguson is the spouse of Diane
Ferguson, a stockholder of the Company. The guarantee, and Mr. Ferguson’s
maximum exposure under the guarantee, does not have a fixed dollar limit. As of
September 30, 2009, there was $954 due to Prescription Supply
Inc.


12




11.
 New Accounting Pronouncements





On
September 30, 2009, the Company adopted changes issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards Codification (“Codification”) as
the source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Financial Statements.





In
June 2009 the FASB issued SFAS 167, “Amendments to FASB Interpretation
No. 46(R)” (SFAS 167). SFAS 167 eliminates Interpretation 46(R)’s
exceptions to consolidating qualifying special-purpose entities, contains new
criteria for determining the primary beneficiary, and increases the frequency of
required reassessments to determine whether a company is the primary beneficiary
of a variable interest entity. SFAS 167 also contains a new requirement that any
term, transaction, or arrangement that does not have a substantive effect on an
entity’s status as a variable interest entity, a company’s power over a variable
interest entity, or a company’s obligation to absorb losses or its right to
receive benefits of an entity must be disregarded in applying Interpretation
46(R)’s provisions. The elimination of the qualifying special-purpose entity
concept and its consolidation exceptions means more entities will be subject to
consolidation assessments and reassessments. SFAS 167 will be effective January
1, 2010.   The Company is in the process of evaluating the impact
of this pronouncement on its consolidated financial position and results of
operations.  This standard has not yet been integrated into the
ASC.





In
June 2009 the FASB issued SFAS 166, “Accounting for Transfers of financial
Assets — an amendment of FASB Statement No. 140” (SFAS 166). SFAS 166
eliminates the concept of a qualifying special-purpose entity, creates more
stringent conditions for reporting a transfer of a portion of a financial asset
as a sale, clarifies other sale-accounting criteria, and changes the initial
measurement of a transferor’s interest in transferred financial assets. SFAS 166
will be  effective  January 1, 2010.   The Company is
in the process of evaluating the impact of this pronouncement on its
consolidated financial position and results of operations.  This
standard has not yet been integrated into the ASC.





In
May 2009, the FASB issued ASC 855 (prior authoritative literature: SFAS
No. 165, “Subsequent Events”).  This Statement sets forth: 1) the
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements; 2) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet date in its financial statements; and 3) the disclosures that
an entity should make about events or transactions that occurred after the
balance sheet date. This Statement is effective for interim and annual periods
ending after June 15, 2009. The company adopted this Statement in the
quarter ended September 30, 2009. Subsequent events were evaluated through
November 23, 2009, the date on which the financial statements were
issued.  This Statement did not impact the Company’s consolidated
financial position and results of operations.





In
April 2009, the FASB issued ASC 820 (prior authoritative literature: “Staff
Position (“FSP”) No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value
of Financial Instruments”). This standard requires disclosures about fair
value of financial instruments for interim reporting periods of publicly traded
companies that were previously only required in annual financial statements.
This standard is effective for interim reporting periods ending after
June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. The adoption of this provision did not have a material
impact on the Company’s financial position and results of
operations.


13





In
June 2008, the FASB issued updates to ASC 815-40 (prior authoritative
literature: Issue No. 07-5, “Determining Whether an Instrument (or Embedded
Feature) is Indexed to an Entity’s Own Stock” (“ASC 815-40”). This Issue
addresses the determination of whether an instrument (or an embedded feature) is
indexed to an entity’s own stock, which is the first part of the scope exception
in paragraph 11(a) of ASC 815. ASC 815-40 is effective for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years. Early application is not permitted. The adoption of ASC 815-40 did not
have a material impact on the Company’s results of operations and financial
condition.





In
December 2007, the FASB issued ASC 805 (prior authoritative literature: SFAS No.
141R, "Business Combinations").   ASC 805 establishes principles
and requirements for determining how an enterprise recognizes and measures the
fair value of certain assets and liabilities acquired in a business combination,
including noncontrolling interests, contingent consideration, and certain
acquired contingencies. ASC 805 also requires acquisition-related transaction
expenses and restructuring costs be expensed as incurred rather than capitalized
as a component of the business combination. ASC 805 will be applicable
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. ASC 805 would have an impact on accounting for any businesses
acquired after the effective date of this pronouncement.





In
September 2006, the FASB issued ASC 820, which establishes a single definition
of fair value and a framework for measuring fair value, sets out a fair value
hierarchy to be used to classify the source of information used in fair value
measurements, and requires new disclosures of assets and liabilities measured at
fair value based on their level in the hierarchy. This statement applies under
other accounting pronouncements that require or permit fair value measurements.
In February 2008, the FASB issued Staff Positions (“FSPs”) No. 157-1 and No.
157-2, which, respectively, remove leasing transactions from the scope of ASC
820 and defer its effective date for one year relative to certain nonfinancial
assets and liabilities. As a result, the application of the definition of fair
value and related disclosures of ASC 820 (as impacted by these two FSPs) was
effective for the Company beginning January 1, 2008 on a prospective basis with
respect to fair value measurements of (a) nonfinancial assets and liabilities
that are recognized or disclosed at fair value in the Company’s financial
statements on a recurring basis (at least annually) and (b) all financial assets
and liabilities. Areas impacted by the deferral relate to nonfinancial assets
and liabilities that are measured at fair value, but are recognized or disclosed
at fair value on a nonrecurring basis. This deferral applies to such items as
nonfinancial assets and liabilities initially measured at fair value in a
business combination (but not measured at fair value in subsequent periods) or
nonfinancial long-lived asset groups measured at fair value for an impairment
assessment. The effects of these remaining aspects of ASC 820 are to be applied
to fair value measurements prospectively beginning January 1, 2009. In April
2009, the FASB issued FSP No. 157-4, which provides additional authoritative
guidance in determining whether a market is active or inactive and whether a
transaction is distressed, is applicable to all assets and liabilities (i.e.
financial and non-financial) and will require enhanced
disclosures.  The adoption of these pronouncements did not have a
material impact on the Company’s consolidated results of operations or financial
condition.





12.
Subsequent Events




On
November 9, 2009, Mr. Wayne Corona resigned from the Board of Directors of the
Company. Upon his resignation, all 5,000,000 unvested options issued to Mr.
Corona in May 2009 were cancelled by terms of the 2009 Incentive Stock Option
Plan.


14


On
November 11, 2009, Mr. Youssef Bennani was elected as a member of the Board
of Directors by consent.
 
 On
November 11, 2009, Mr. Bennani and Mr. Patrick E. Delaney, the Company’s Chief
Financial Officer, were issued an options to purchase 3,000,000 and 2,000,000
shares of Company common stock, respectively, with an exercise price of
$0.125 per share. The non-cash stock compensation valuation, based on the
Black-Scholes calculation, is $311,737 and will be recognized over the three
year vesting period.
 
 Subsequent
to September 30, 2009, noteholders holding $575,000 of Convertible
Debentures agreed to convert into 7,597,232 shares of common
stock.
  15
 
 ITEM 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
 
 Information
Regarding Forward-Looking Statements
  This
report contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 that involve risks and uncertainties,
many of which are beyond our control.  Our actual results could differ
materially and adversely from those anticipated in such forward-looking
statements as a result of certain factors, including those set forth in this
report.  Important factors that may cause actual results to differ
from projections include, but are not limited to, for example:
  ·
              adverse
      economic conditions;
  ·
              inability
      to raise sufficient additional capital to operate our
      business;
  ·
              unexpected
      costs, lower than expected sales and revenues, and operating
      deficits;
  ·
              adverse
      results of any legal proceedings;
  ·
              the
      volatility of our operating results and financial condition;
      and
  ·
              inability
      to attract or retain qualified senior management
  personnel.
  All
statements, other than statements of historical facts, included in this
quarterly report regarding our strategy, future operations, financial position,
estimated revenue or losses, projected costs, prospects and plans and objectives
of management are forward-looking statements.  When used in this
report, the words “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,”
“expect,” “project,” “plan” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
such identifying words.  All forward-looking statements speak only as
of the date of this report.  We undertake no obligation to update any
forward-looking statements or other information contained
herein.  Stockholders and potential investors should not place undue
reliance on these forward-looking statements.  Although we believe
that our plans, intentions and expectations reflected in or suggested by the
forward-looking statements in this report are reasonable, we cannot assure
stockholders and potential investors that these plans, intentions or
expectations will be achieved.  We disclose important factors that
could cause our actual results to differ materially from our expectations under
“Risk Factors” in our annual reports and, most recently, in our current report
on Form 8-K filed on May 15, 2009.  These cautionary statements
qualify all forward-looking statements attributable to us or persons acting on
our behalf.
  The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and related notes included
in this report.
  Overview
  On May
14, 2009, we completed a share exchange transaction with Hwareh.com, Inc.
pursuant to the terms of a Securities Exchange Agreement, dated as of May 14,
2009. Under the Securities Exchange Agreement, we acquired all the outstanding
capital stock of Hwareh.com, Inc. (formerly named HealthWarehouse.com, Inc.). As
a result of the exchange, the former stockholders of Hwareh.com, Inc. owned
approximately 82.4% of the outstanding shares of our common stock. This
transaction was accounted for as a reverse recapitalization, whereby Hwareh.com,
Inc. is deemed to be the accounting acquirer for accounting purposes. Following
the closing of the share exchange transaction with Hwareh.com, we succeeded to
the business of Hwareh.com as our sole line of business.  Effective
August 5, 2009, we changed our corporate name to HealthWarehouse.com,
Inc.
  We are a
licensed U.S. pharmacy and healthcare e-commerce company that sells discounted
brand name and generic prescription drugs and over-the-counter (OTC) medical
products. Our web address is http://www.healthwarehouse.com. At present, we
sell:
  16
  ·
              a
      range of prescription drugs;
  ·
              diabetic
      supplies including glucometers, lancets, syringes and test
      strips;
  ·
              OTC
      medications covering a range of conditions from allergy and sinus to pain
      and fever to smoking cessation
aids;
  ·
              home
      medical supplies including incontinence supplies, first aid kits and
      mobility aids; and
  ·
              diet
      and nutritional products including supplements, weight loss aids, and
      vitamins and minerals.
  Our
objective is to make the pharmaceutical supply chain more efficient by
eliminating costs and passing on the savings to the consumer.  We are
becoming known by consumers as a convenient, reliable, discount provider of over
the counter and prescription medications and products. We intend to continue to
expand our product line as our business grows. We are presently licensed as a
mail-order pharmacy for sales to 43 states and the District of Columbia, and we
intend to apply for and obtain licenses to sell prescriptions in all 50 states
by the end of 2009.
  We have
begun accepting health insurance as part of our prescription program, initially
contracting with a limited number of insurance providers based on customer
demand and business opportunity. Our customers tend to be under or uninsured
consumers who rely on our service for their daily medications.  In
addition, due to the savings we pass on to the consumer, our prices are often
below insurance co-pay amounts making insurance unnecessary when purchasing from
us. We intend to continue expanding the number of health insurance providers
that we accept as customer demand warrants.
  To date,
we have incurred operational losses for all historic periods.  We have
financed our activities to date through revenues from our online sales, the
proceeds from sales of our equity securities in private placement financings and
the proceeds from the issuance of our promissory notes in private
financings.
  Results
of Operations
  Three
months ended September 30, 2009 compared to three months ended September 30,
2008.
  Three months
                      ended
                      September 30,
                      2009
                    
                    
                    % of
                      Revenue
                    
                    
                    Three months
                      ended September
                      30, 2008
                    
                    
                    % of
                      RevenueRevenue
                    
                    $
                    1,006,610
                    
                    
                    
                    100.0
                    %
                    
                    $
                    396,547
                    
                    
                    
                    100.0
                    %Cost
      of sales
                    
                    
                    658,376
                    
                    
                    
                    65.4
                    %
                    
                    
                    310,981
                    
                    
                    
                    78.4
                    %Gross
      profit
                    
                    
                    348,234
                    
                    
                    
                    34.6
                    %
                    
                    
                    85,566
                    
                    
                    
                    21.6
                    %Selling,
      general & administrative  expenses
                    
                    
                    947,465
                    
                    
                    
                    94.1
                    %
                    
                    
                    273,062
                    
                    
                    
                    68.9
                    %Depreciation
      expense
                    
                    
                    16,280
                    
                    
                    
                    1.6
                    %
                    
                    
                    -
                    
                    
                    
                    -
                    %Total
      operating expenses
                    
                    
                    963,745
                    
                    
                    
                    95.7
                    %
                    
                    
                    273,062
                    
                    
                    
                    68.9
                    %Loss
      from operations
                    
                    
                    (615,511
                    )
                    
                    
                    (61.1
                    )%
                    
                    
                    (187,496
                    )
                    
                    
                    (47.3
                    )%Interest
      income (expense)
                    
                    
                    (3,603
                    )
                    
                    
                    (.4
                    )%
                    
                    
                    1,197
                    
                    
                    
                    .3
                    %Net
      loss before taxes
                    
                    
                    (619,114
                    )
                    
                    
                    (61.5
                    )%
                    
                    
                    (186,299
                    )
                    
                    
                    (47.0
                    )%Income
      tax expense
                    
                    
                    -
                    
                    
                    
                    -
                    %
                    
                    
                    -
                    
                    
                    
                    -
                    %Net
      loss
                    
                    $
                    (619,114
                    )
                    
                    
                    (61.5
                    )%
                    
                    $
                    (186,299
                    )
                    
                    
                    (47.0
                    )%
  17
  Revenue
  Three
                        months
                        ended
                        September
                        30,
      2009
                      
                      
                      %
                        Change
                      
                      
                      Three
                        months
                        ended
                        September
                        30,
      2008Total
      revenue
                      
                      $
                      1,006,610
                      
                      
                      
                      153.9
                      %
                      
                      $
                      396,547Total
      customer orders shipped
                      
                      
                      22,523
                      
                      
                      
                      237.6
                      %
                      
                      
                      6,672Total
      average net sales per order
                      
                      $
                      48.23
                      
                      
                      
                      (16.1
                      )%
                      
                      $
                      57.51
 
 Revenues
for the three months ended September 30, 2009 grew to $1,006,610 from $396,547
for the three months ended September 30, 2008. Revenues increased for the three
months ended September 30, 2009 compared to the corresponding period in the
prior year as a result of an increase in order volume.  This increase
is due primarily to the maturing of business activities from a company with
limited operating activities, the initial rollout of our prescription business
model at the end of 2008, the impact of increased advertising and the issuance
of new licenses to sell prescription drugs by additional states.
  Another
indicator of increased business activity was that our website attracted over
310,396 visits with over 1,111,595 pageviews during the three months ended
September 30, 2009 compared to fewer than 72,750 visits and 288,750 pageviews
during the three months ended September 30, 2008.
  Costs
and Expenses
  Cost
of Sales and Gross Margin
  Three months
                      ended
                      September 30,
                      2009
                    
                    
                    %
                      Change
                    
                    
                    Threemonths
                      ended
                      September 30,
                      2008Total
      cost of sales
                    
                    $
                    658,376
                    
                    
                    
                    111.7
                    %
                    
                    $
                    310,981Total
      gross profit dollars
                    
                    $
                    348,234
                    
                    
                    
                    307.0
                    %
                    
                    $
                    85,566Total
      gross margin percentage
                    
                    
                    34.6
                    %
                    
                    
                    13.0
                    %
                    
                    
                    21.6
                    %
 
 Total
cost of sales increased to $658,376 for the three months ended September 30,
2009 as compared to $310,981 for the three months ended September 30, 2008 as a
result of growth in order volume and revenue. Gross margin percentage increased
year-over-year from 13.0% for the three months ended September 30, 2008 to 34.6%
for the three months ended September 30, 2009, due to a more representative
relationship between revenues and cost of sales per our business model as the
amount of low-priced generic prescription products became a larger portion of
our mix of revenues.
  Selling,
General and Administrative Expenses
  Three
                      months
                      ended
                      September
                      30, 2009
                    
                    
                    %
                      Change
                    
                    
                    Three
                      Months
                      Ended
                      September
                      30, 2008Selling,
      general and administrative expenses
                    
                    $
                    947,465
                    
                    
                    
                    247.0
                    %
                    
                    $
                    273,062Percentage
      of revenue
                    
                    
                    94.1
                    %
                    
                    
                    25.2
                    %
                    
                    
                    68.9
                    %
 
 Selling,
general and administrative expenses increased by $674,402 in the three months
ended September 30, 2009 compared to the same period in 2008, an increase of
347.0%.  The expense increases were due primarily to expenses related
to the maturing of business activities including increases of approximately
$383,785 for payroll, advertising, shipping and fulfillment expenses related to
revenue growth compared to the three months ended September 30,
2008.
  18
  Nine
months ended September 30, 2009 compared to nine months ended September 30,
2008.
  Nine months
                      ended September
                      30, 2009
                    
                    
                    % of
                      Revenue
                    
                    
                    Nine months ended
                      September 30,
                      2008
                    
                    
                    % of
                      RevenueRevenue
                    
                    $
                    2,672,195
                    
                    
                    
                    100.0
                    %
                    
                    $
                    726,920
                    
                    
                    
                    100.0
                    %Cost
      of sales
                    
                    
                    1,847,196
                    
                    
                    
                    69.1
                    %
                    
                    
                    564,530
                    
                    
                    
                    77.7
                    %Gross
      profit
                    
                    
                    824,999
                    
                    
                    
                    30.9
                    %
                    
                    
                    162,390
                    
                    
                    
                    22.3
                    %Selling,
      general and administrative expenses
                    
                    
                    2,181,768
                    
                    
                    
                    81.7
                    %
                    
                    
                    518,584
                    
                    
                    
                    71.4
                    %Depreciation
      expense
                    
                    
                    37,504
                    
                    
                    
                    1.4
                    %
                    
                    
                    -
                    
                    
                    
                    -
                    %Total
      operating expenses
                    
                    
                    2,219,272
                    
                    
                    
                    83.1
                    %
                    
                    
                    518,584
                    
                    
                    
                    71.4
                    %Loss
      from operations
                    
                    
                    (1,394,273
                    )
                    
                    
                    (52.2
                    )%
                    
                    
                    (356,194
                    )
                    
                    
                    (49.1
                    )%Interest
      income(expense)
                    
                    
                    (9,799
                    )
                    
                    
                    (0.4
                    )%
                    
                    
                    -
                    
                    
                    
                    -
                    %Loss
      before income tax
                    
                    
                    (1,404,072
                    )
                    
                    
                    (52.6
                    )%
                    
                    
                    (356,194
                    )
                    
                    
                    (49.1
                    )%Income
      tax expense
                    
                    
                    (2,383
                    )
                    
                    
                    (.1
                    )%
                    
                    
                    -
                    
                    
                    -
                    %Net
      loss
                    
                    $
                    (1,406,455
                    )
                    
                    
                    (52.6
                    )%
                    
                    $
                    (356,194
                    )
                    
                    
                    (49.1
                    )%
  Revenue
  Nine
                      months
                      ended
                      September
                      30, 2009
                    
                    
                    %
                      Change
                    
                    
                    Nine
                      months
                      ended
                      September
                      30, 2008Total
      revenue
                    
                    $
                    2,672,195
                    
                    
                    
                    268.0.
                    %
                    
                    $
                    726,920Total
      customer orders shipped
                    
                    
                    56,703
                    
                    
                    
                    348.4
                    %
                    
                    
                    12,647Total
      average net sales per order
                    
                    $
                    48.23
                    
                    
                    
                    (15.84
                    )%
                    
                    $
                    57.31
 
 Revenues
for the nine months ended September 30, 2009 grew to $2,672,306 from $726,920
for the nine months ended September 30, 2008. Revenues increased for the nine
months ended September 30, 2009 compared to the corresponding period in the
prior year as a result of an increase in order volume.  This increase
is due primarily to the maturing of business activities from a company with
limited operating activities and the initial rollout of the business model
during 2008, the impact of increased advertising and the issuance of new
licenses to sell prescription drugs by additional states.
  Another
indicator of increased business activity was that our website attracted over
857,200 visits with over 3,159,000 pageviews during the first nine months of
2009 compared to fewer than 177,200 visits and 648,500 pageviews during the
first nine months of 2008.
  19
  Costs
and Expenses
  Cost
of Sales and Gross Margin
 
 Nine
                    months
                    ended
                    September
                    30, 2009
                  
                  
                  %
                    Change
                  
                  
                  Nine months
                    ended
                    September 30,
                    2008Total
      cost of sales
                  
                  $
                  1,847,196
                  
                  
                  
                  227.2
                  %
                  
                  $
                  564,530Total
      gross profit dollars
                  
                  $
                  824,999
                  
                  
                  
                  408.0
                  %
                  
                  $
                  162,390Total
      gross margin percentage
                  
                  
                  30.9
                  %
                  
                  
                  8.6
                  %
                  
                  
                  22.3
                  %
 
 Total
cost of sales increased for the nine months ended September 30, 2009 as compared
to the nine months ended September 30, 2008 as a result of growth in order
volume and revenue. Gross margin percentage increased year-over-year from 8.6%
for the nine months ended September 30, 2008 to 30.9% for the nine months ended
September 30, 2009, due to a more representative relationship between revenues
and cost of sales per our business model as the amount of low-priced generic
prescription products became a larger portion of our mix of
revenues.
  Selling,
General and Administrative Expenses
 
 Nine
                      months
                      ended
                      September
                      30,
      2009
                    
                    
                    %
                      Change
                    
                    
                    Nine
                      months
                      ended
                      September
                      30,
      2008Selling,
      general and administrative expenses
                    
                    $
                    2,181,768
                    
                    
                    
                    320.7
                    %
                    
                    $
                    518,584Percentage
      of revenue
                    
                    
                    81.6
                    %
                    
                    
                    10.2
                    %
                    
                    
                    71.4
                    %
 
 Selling,
general and administrative expenses increased by $ 1,663,184 in the nine months
ended September 30, 2009 compared to the same period in 2008, an increase of
420.7%.  The expense increases were due primarily to expenses related
to the maturing of business activities including increases of approximately
$803,046 for payroll, advertising, shipping and fulfillment expenses related to
revenue growth compared to the nine months ended September 30,
2008.
  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, 2009 and 2008. We cannot
assure you that future inflation will not have an adverse impact on our
operating results and financial condition.
  20
  Liquidity and Capital
Resources
  As of
September 30, 2009, the Company had $11,810 in cash and cash equivalents and
working capital of $469,746.  During the nine months ended September
30, 2009, the Company generated revenue of approximately $2,700,000 and a net
loss of approximately $1,400,000.  For the nine months ended September
30, 2009, cash flows included net cash used in operating activities of
approximately $2,355,000, net cash provided by investing activities of
approximately $735,000 and net cash provided by financing activities of
approximately $1,275,000.
 Since
inception, the Company has financed its operations primarily through product
sales to customers, and debt and private equity investments by existing
stockholders, officers and directors.  During the third quarter of
2009, the Company’s cash and cash equivalents were reduced by approximately
$1,400,000, primarily due to an unanticipated sharp reduction in credit terms
offered by the Company’s largest vendor, which resulted in the Company paying in
excess of $800,000 to that vendor, continued operating losses and failure of an
investor to complete a contractual funding to the Company of
$400,000.
 During
the nine months ended September 30, 3009, the Company had a net decrease in cash
and cash equivalents of approximately $346,000.  Our sources and uses
of funds during this period were as follows:
 For the
nine months ended September 30, 2009, cash flows included net cash used in
operating activities of approximately $2,355,000.  This amount
included a decrease in operating cash related to a net loss of approximately
$1,406,000 and additions for the following items: (i) depreciation and
amortization, $37,504; (ii) stock-based compensation expense, $211,797; The
increase in cash used in operating activities in 2009 was primarily offset by
the following decreases: (i) accounts payable, $671,204; (ii) accounts
receivable, $37,948; (iii) prepaid expenses and other current assets, $187,399;
and (iv) inventories, $337,316.  For the nine months ended September
30, 2008, net cash used in operating activities was $46,867. This amount
included decreases in operating cash related to a net loss of $356,194 and
increase in accounts receivable of $6,356 offset by a decrease in prepaid
expenses and other current assets of $314,212.
  For the
nine months ended September 30, 2009, net cash provided by investing activities
was approximately $735,000 and was attributable to cash received in share
exchange of $1,220,520, offset by expenses paid in conjunction with share
exchange of $225,000; acquisitions of property and equipment of $150,580 and
website development costs of $109,772.  For the nine months ended
September 30, 2008, net cash used in investing activities was $348,034 and was
attributable to acquisition of property and equipment $273,971 and website
development costs $74,063.
  For the
nine months ended September 30, 2009, net cash provided by financing activities
was approximately $1,274,000, consisting of a sale of convertible notes of
$1,200,000; sale of common stock of $50,196 and proceeds from option and warrant
exercises of $23,915. For the nine months ended September 30, 2008, net cash
provided by financing activities was $872,744 from sale of common stock
$872,744.
 Subsequent
to September 30, 2009 noteholders holding $575,000 of Convertible Debentures
agreed to convert into 7,597,232 shares of common stock.
  Going
Concern
  Based
upon projected operating expenses, the Company believes that its working
capital as of September 30, 2009 may not be sufficient to fund its plan of
operations for the next twelve months.  The Company anticipates that
it will need to raise additional capital in order to meet operations and execute
its business plans.  Management has indicated that the Company is in
discussions with certain parties regarding various financing opportunities
including selling additional capital stock and/or entering into debt
facilities.  However, the Company does not know at this time whether
any such transactions between the Company and any third party will be
consummated and, if consummated, when it might occur, or if the terms would be
favorable to us.  If the Company cannot raise sufficient funds on
acceptable terms, it may have to curtail its level of expenditures and scope of
operations.
 These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Accordingly, the accompanying condensed consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplate 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 financial statements do not necessarily purport to
represent realizable or settlement values. The accompanying financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
  21
 
 Management
has indicated that the Company is taking certain steps to improve its operations
and cash flows, including the re-launch of its corporate website, improved
inventory management and an increase in the number of suppliers.  The
enhanced website’s functionality should provide a greatly improved total
customer experience, our conversion rate should improve, which we believe will
translate into significant growth of both our OTC product and prescription
sales. In addition, the launching of our first direct partnership with a health
care provider originally estimated to begin on September 1, 2009 but due to
state regulatory issues with the provider it is now estimated to begin in early
January 2010, is anticipated to increase revenues.
 In
addition, our cash needs to fund the anticipated growth should be mitigated
somewhat since we are often able to source items in 24 hours, thereby reducing
the amount of required inventory on-hand.  Furthermore, our customers
usually purchase their products with an upfront credit card payment, and we
typically have terms of up to 30 days with our suppliers.  With our
anticipated growth in revenues, we expect that our cash flow from operating
activities will be a growing source of funds for us. We also anticipate that
during the fourth quarter of 2009, we will increase our number of suppliers,
which should have a positive impact on gross margin due to increased
competition.
  Critical
Accounting Policies and Estimates
  The
preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires our management to exercise its judgment. We exercise considerable
judgment with respect to establishing sound accounting polices and in making
estimates and assumptions that affect the reported amounts of our assets and
liabilities, our recognition of revenues and expenses, and disclosures of
commitments and contingencies at the date of the financial
statements.
  On an
ongoing basis, we evaluate our estimates and judgments. We base our estimates
and judgments on a variety of factors including our historical experience,
knowledge of our business and industry, current and expected economic
conditions, the composition of our products/services and the regulatory
environment.  We periodically re-evaluate our estimates and
assumptions with respect to these judgments and modify our approach when
circumstances indicate that modifications are necessary.
  While we
believe that the factors we evaluate provide us with a meaningful basis for
establishing and applying sound accounting policies, we cannot guarantee that
the results will always be accurate.   Since the determination of
these estimates requires the exercise of judgment, actual results could differ
from such estimates.
  We
account for stock-based compensation in accordance with the fair value
recognition provisions of Accounting Standards Codification (“ASC”) 718 ( prior
authoritative literature: SFAS No. 123R, “Share-Based Payment”, for all
stock-based payment awards is based on the estimated grant-date fair value. We
recognize these compensation costs over the requisite service period of the
award, which is generally the option vesting term.  Option valuation models
require the input of highly subjective assumptions including the expected life
of the option. Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
our management’s opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of our employee stock options. The
fair value of stock-based payment awards was estimated using the Black-Scholes
option pricing model using a volatility figure derived from an index of
comparable entities.  Our management will review this assumption as our
trading history becomes a better indicator of value. We account for the
expected life of options in accordance with the “simplified” method provisions
of SEC Staff Accounting Bulletin (“SAB”) No. 110, which enables the use of the
simplified method for “plain vanilla” share options as defined in SAB No.
107.
  22
  Recently-issued
Accounting Pronouncements
  The
information contained in Footnote 11 to the Company’s condensed consolidated
financial statements included in Part I, Item 1 to this quarterly report is
incorporated herewith by reference.
  ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk
 
 Not
required.
 
 ITEM 4T. Controls and
Procedures
 
 Disclosure
Controls and Procedures
 
 Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of our
“disclosure controls and procedures” (as defined in the Securities Exchange Act
of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this quarterly report on Form 10-Q (the “Evaluation Date”).
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures are not effective to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act (i) is
recorded, processed, summarized and reported, within the time periods specified
in the SEC rules and forms and (ii) is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required
disclosure.
 
 Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. 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. Further, the design
of a control system must reflect the fact that there are resource constraints
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected.
 
 Internal
Control over Financial Reporting
 
 In
connection with the review of our consolidated financial statements, our
independent registered public accountants identified certain material weaknesses
in our internal control over financial reporting. These material weaknesses
primarily relate to our lack of appropriate resources to both manage the
financial close process on a timely basis and handle the accounting for the
reverse recapitalization transaction and other transactions, which was due in
part to the small size of our company prior to our May 14, 2009 share exchange
transaction.
 
 To ensure
the proper remediation of the above-mentioned material weaknesses, we intend to
hire additional staff as necessary to mitigate these weaknesses, as well as to
implement other planned improvements. Additional staff will enable us to
document and apply transactional and periodic controls procedures, permit a
better review and approval process, and improve the quality of our financial
reporting.
 
 Changes
in Internal Control over Financial Reporting
 
 There
were no changes in our internal control over financial reporting that occurred
during our third quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
  23
  PART II. OTHER
INFORMATION
 
 ITEM 1. Legal
Proceedings
 
 We are
not currently involved in any legal proceedings other than routine litigation
incidental to the business.
 
 ITEM 1A.
Risk Factors
 
 Not
required.
 
 ITEM 2. Unregistered Sales of Equity
Securities and Use of Proceeds
 
 Unregistered Sales of Equity
Securities during the Three Months ended September 30, 2009
 
 On August
31, 2009, the holder of a warrant exercised that warrant, at an exercise price
of $0.05 per share, and received 100,000 shares of our common stock. The
issuance of common stock upon exercise of the warrant was made without
registration in reliance on the exemption from registration afforded by Section
4(2) under the Securities Act and corresponding provisions of state securities
laws, which exempts transactions by an issuer not involving any public
offering.
 
 ITEM 3. Defaults upon Senior
Securities
 
 None.
 
 ITEM 4. Submission of Matters to a
Vote of Security Holders
 
 None.
 
 ITEM 5. Other
Information
 
 None.
 
 ITEM 6. Exhibits
 
 The
following exhibits are filed as part of thisquarterly
report:
 
 Exhibit Number and
    Description31.1
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act.31.2
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act.32.1
                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act.32.2
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act.
 
  24
 
 SIGNATURES
  In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
  Dated:
 November 23, 2009
  HEALTHWAREHOUSE.COM,
      INC.By:
                /s/ Lalit DhadphaleLalit
      DhadphalePresident
      and Chief Executive Officer(principal
      executive officer)By:
                /s/ Patrick E. DelaneyPatrick
      E. DelaneyChief
      Financial Officer and Treasurer(principal
      financial and accounting
officer)
  25
  Exhibit
Index
 
 Exhibit Number and
    Description31.1
      *
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act.31.2
      *
                Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act.32.1
      *
                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act.32.2
      *
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act.
 
 * filed herewith
  26