UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q


(Mark
one)


x
            Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
              
              For
      the quarterly period ended September 30,
2008




OR




o
            Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the transition period from _____________ to
      _____________




Commission
file number: 000-51561









HEALTHCARE
PROVIDERS DIRECT, INC.


(Exact
name of registrant as specified in its charter)




Nevada
              (State
      or other jurisdiction
              of
      incorporation or organization)
            
            20-1063591
              (IRS
      Employer
              Identification
      No.)





3371
Route One, Suite 200


Lawrenceville,
New Jersey 08648


(Address
and zip code of principal executive offices)




Telephone
Number: (609) 919-1932


(Registrant’s
telephone number, including area code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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:   [X] Yes   [ ] No




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




Large
accelerated filer
                                                                                                           Accelerated
filer


Non-accelerated
filer(Do not check if a smaller reporting
company)                                        
Smaller reporting companyx





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 19, 2008, there were 45,344,038 outstanding shares of the Issuer’s
Common Stock, par value $0.001 per share.











1









HEALTHCARE
PROVIDERS DIRECT, INC.


Index








Page  NumberPART
      I.
            FINANCIAL
      INFORMATIONItem
      1.
            Financial
      StatementsConslidated
      Condensed Balance Sheets as of September 30, 2008
      (unaudited)  and December 31, 2007 (audited)
            3Consolidated
      Condensed Statements of Operations for the three and nine months ended
      September 30, 2008 and 2007 (unaudited)
            4Consolidated
      Condensed Statements of Cash Flows for the nine months ended September 30,
      2008 and 2007 (unaudited)
            5Notes
      to the Consolidated Condensed Financial Statements
            6Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            18Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            24Item
      4.
            Controls
      and Procedures
            24PART
      II
            OTHER
      INFORMATION
            25Item
      1.
            Legal
      Proceedings
            25Item
      1a.
            Risk
      Factors
            25Item
      2.
            Unregistered
      Sales of Equity Securities and  Use of Proceeds
            25Item
      3.
            Defaults
      Upon Senior Securities
            25Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            25Item
      5.
            Other
      Information
            25Item
      6.
            Exhibits
            25SIGNATURES
            26











2





PART
I - FINANCIAL INFORMATION




Item
1. Financial Statements




HEALTHCARE
      PROVIDERS DIRECT, INC.
                CONSOLIDATED
      CONDENSED BALANCE SHEETSSeptember
      30,
              
              
              December
      31,2008
              
              
              2007(derived
      from(unaudited)
              
              
              auditedstatements)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              3,735
              
              
              $
              277,530Accounts
      receivable, net of allowance for doubtful accounts of
    $9,833
              
              
              10,735
              
              
              
              26,726Other
      receivables – related party, net of allowance for doubtful accounts
      of
                $23,512
              
              
              -
              
              
              
              -Inventories
              
              
              127,089
              
              
              
              236,477Prepaid
      and other current assets
              
              
              95,763
              
              
              
              28,713Total
      current assets
              
              
              237,322
              
              
              
              569,446Equipment,
      net
              
              
              9,206
              
              
              
              16,210Deferred
      financing costs
              
              
              307,553
              
              
              
              394,281Intangible
      assets, net
              
              
              11,111
              
              
              
              19,444Total
      assets
              
              $
              565,192
              
              
              $
              999,381


LIABILITIES AND
      SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            845,543
            
            
            $
            202,056Accrued
      expenses and other current liabilities
            
            
            768,691
            
            
            
            303,865Accrued
      royalties
            
            
            117,809
            
            
            
            108,961Convertible
      notes payable –related parties, net of discounts of
$26,517
            
            
            193,483
            
            
            
            -Note
      payable
            
            
            66,000
            
            
            
            -Convertible
      notes payable, net of discounts of $799,801 and $1,869,911,
              respectively
            
            
            784,592
            
            
            
            280,089Total
      current liabilities
            
            
            2,776,118
            
            
            
            894,971Convertible
      notes payable, net of discounts of $393,350 and $0,
      respectively
            
            
            236,396
            
            
            
            -Note
      payable
            
            
            14,000
            
            
            
            -Note
      payable – related parties
            
            
            90,000
            
            
            
            90,000Total
      liabilities
            
            
            3,116,514
            
            
            
            984,971Commitments
            
            
            -
            
            
            
            -Shareholders'
      equity:Preferred
      stock, $0.001 par value per share; 25,000,000 shares
      authorized;
              no
      shares issued and outstanding for 2008 and 2007,
    respectively
            
            
            -
            
            
            
            -Common
      stock, $0.001 par value per share; 375,000,000 shares authorized;
      45,344,038 and 44,906,538 shares issued and outstanding for 2008 and 2007,
      respectively
            
            
            45,344
            
            
            
            44,907Additional
      paid-in capital
            
            
            8,709,333
            
            
            
            8,516,305Accumulated
      deficit
            
            
            (11,305,999
            )
            
            
            (8,546,802
            )Total
      shareholders' equity
            
            
            (2,551,322
            )
            
            
            14,410Total
      liabilities and shareholders' equity
            
            $
            565,192
            
            
            $
            999,381




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






3










HEALTHCARE
      PROVIDERS DIRECT, INC.
              CONSOLIDATED
      CONDENSED STATEMENTS OF INCOME (UNAUDITED)For
      The Three Months
              Ended
            
            
            For
      The Nine Months
              EndedSeptember
      30,
              2008
            
            
            September
      30,
              2007
            
            
            September
      30,
              2008
            
            
            September
      30,
              2007Revenues,
      net
            
            $
            67,105
            
            
            $
            131,581
            
            
            $
            296,702
            
            
            $
            439,151Cost
      of revenues
            
            
            119,766
            
            
            
            69,828
            
            
            
            258,188
            
            
            
            217,300Gross
      profit (loss)
            
            
            (52,661
            )
            
            
            61,753
            
            
            
            38,514
            
            
            
            221,851Operating
      expenses:Research  and
      development
            
            
            15,200
            
            
            
            63,958
            
            
            
            142,663
            
            
            
            271,645Sales
      and marketing costs
            
            
            192,359
            
            
            
            115,627
            
            
            
            549,436
            
            
            
            600,990Issuance
      of warrants in connection with reverse merger
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,927,285General
      and administrative
            
            
            342,502
            
            
            
            694,402
            
            
            
            1,102,756
            
            
            
            2,026,349Total
      operating expenses
            
            
            550,061
            
            
            
            873,987
            
            
            
            1,794,855
            
            
            
            5,826,269Loss
      from operations
            
            
            (602,722
            )
            
            
            (812,234
            )
            
            
            (1,756,341
            )
            
            
            (5,604,418
            )Interest
      expense
            
            
            (341,523
            )
            
            
            (111,672
            )
            
            
            (1,002,857
            )
            
            
            (116,627
            )Net
      loss
            
            $
            (944,245
            )
            
            $
            (923,906
            )
            
            $
            (2,759,198
            )
            
            $
            (5,721,045
            )Net
      Loss Per Common Share -Basic and Diluted
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.06
            )
            
            $
            (0.13
            )Weighted
      average common shares - Basic and Diluted
            
            
            45,344,038
            
            
            
            44,873,984
            
            
            
            45,104,817
            
            
            
            44,575,443




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







4






HEALTHCARE
      PROVIDERS DIRECT, INC.
              CONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)




,For the Nine Months
      Ended
              September
      302008
            
            
            2007Cash
      flows from operating activities:Net
      loss
            
            $
            (2,759,198
            )
            
            $
            (5,721,045
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
            
            
            8,770
            
            
            
            8,327Amortization
      of intangible assets
            
            
            8,333
            
            
            
            130,556Amortization
      of debt discount on convertible notes
            
            
            733,145
            
            
            
            83,742Amortization
      of deferred financing costs
            
            
            114,736
            
            
            
            10,851Stock-based
      compensation expense
            
            
            69,154
            
            
            
            378,200Issuance
      of common stock for services
            
            
            22,075
            
            
            
            23,550Issuance
      of warrants for services
            
            
            17,127
            
            
            
            27,156Issuance
      of warrants in connection with reverse merger
            
            
            -
            
            
            
            2,927,285Provision
      for doubtful accounts
            
            
            -
            
            
            
            -Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            15,991
            
            
            
            19,140Inventories
            
            
            109,388
            
            
            
            8,592Prepaid
      expenses and other current assets
            
            
            (67,050
            )
            
            
            (35,926
            )Accounts
      payable
            
            
            643,487
            
            
            
            (136,715
            )Accrued
      expenses and accrued royalties
            
            
            473,674
            
            
            
            (266,866
            )Net
      cash used in operating activities
            
            
            (610,368
            )
            
            
            (2,543,153
            )Cash
      flows from investing activities:Purchases
      of equipment
            
            
            (1,766
            )
            
            
            (13,367
            )Net
      cash used in investing activities
            
            
            (1,766
            )
            
            
            (13,367
            )Cash
      flows from financing activities:Proceeds
      from convertible notes, net of issuance costs of $25,800 and
      $288,585
            
            
            454,200
            
            
            
            1,861,415Repayment
      of convertible notes payable
            
            
            (95,861
            )
            
            
            -Proceeds
      from notes payable
            
            
            -
            
            
            
            50,000Repayment
      of notes payable
            
            
            (20,000
            )
            
            
            (300,000
            )Proceeds
      from issuance of common stock
            
            
            -
            
            
            
            500,000Proceeds
      from sale of Series B preferred stock, net of issuance costs
      of$158,847
            
            
            -
            
            
            
            1,144,153Net
      cash provided by financing activities
            
            
            338,339
            
            
            
            3,255,568Net
      (decrease)increase in cash and cash equivalents
            
            
            (273,795
            )
            
            
            699,048Cash
      and cash equivalents at beginning of period
            
            
            277,530
            
            
            
            263,494Cash
      and cash equivalents at end of period
            
            $
            3,735
            
            
            $
            962,542Supplemental Disclosures Of
      Cash Flow Information:Cash
      paid during the year for:Interest
            
            $
            50,456
            
            
            $
            19,892Taxes
            
            
            -
            
            
            
            -Non-cash
      financing activities:Conversion
      of Series B preferred stock into common stock
            
            $
            -
            
            
            $
            1,144,153Beneficial
      conversion on convertible notes
            
            
            
            
            
            
            655,830Conversion
      of convertible note into a note payable
            
            
            100,000Warrants
      issued to holders of convertible notes
            
            
            82,902
            
            
            
            1,483,084Warrants
      issued to placement agent on issuance of convertible notes
            
            
            2,208
            
            
            
            118,005




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










5




HEALTHCARE
PROVIDERS DIRECT, INC.


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(UNAUDITED)




NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION:





The
accompanying consolidated condensed financial statements included herein have
been  prepared  by the  Company  pursuant to the rules
and  regulations  of the Securities and Exchange Commission 
(the  "Commission")  for interim  financial
information.  Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial  statement  presentation
and should be read in conjunction with the audited  consolidated 
financial  statements and related footnotes  thereto for the
fiscal year ended December 31, 2007  included in the  Company's 
current  report on Form  10-KSB,  filed  with the 
Commission on April 8, 2008. The financial  statements 
presented  in this  quarterly  report are  unaudited 
but include all adjustments  that are of a normal  recurring 
nature that management considers  necessary for the fair 
statement  of the  results  for the  interim periods. 
The condensed balance sheet as of December 31, 2007 has been derived from the
Company’s Audited Financial Statements. Results for interim periods are not
necessarily indicative of results for the full fiscal year. There have been
no changes in significant accounting policies since December 31,
2007.





The
Company was originally incorporated in Nevada in April 2004 as Alpha Motorsport,
Inc. (“Alpha”), a development stage company that attempted to engage in the
business of automobile sales and had minimal business operations prior to the
time of the Share Exchange and Merger. On January 24, 2007, Alpha formed a
wholly-owned subsidiary, Healthcare Providers Direct, Inc., a Nevada corporation
and on January 24, 2007, completed a short-form merger pursuant to the Nevada
Revised Statutes, and effectively changed its name to “Healthcare Providers
Direct, Inc.”, a Nevada corporation.




Healthcare
Providers Direct, Inc. (“HPD”) was formed as a Delaware corporation incorporated
on October 28, 2004 for the purpose of selling and distributing diagnostic tests
directly to physician offices and other healthcare providers in the United
Sates. After the Share Exchange and Merger, Alpha succeeded to the line of
business of HPD, which will be continued as its sole line of
business.





The
Company’s common stock is quoted on the Over-the-Counter Bulletin Board (the
“OTCBB”) under the symbol “HPRD.”





Effective
February 7, 2007, the Company entered into a definitive Share Exchange Agreement
with Alpha Motorsport, Inc., a Nevada corporation and the shareholders of HPD
pursuant to which HPD became a wholly-owned subsidiary of the Company (the
“Merger”). The share exchange agreement provided for the acquisition of all of
the issued and outstanding capital stock of HPD consisting of 4,683 shares of
common stock (on an as-converted, issued and outstanding basis), in exchange for
34,464,038 shares of the Alpha Motorsport’s common stock, par value $.001 per
share (the “Share Exchange”). The following table shows the exchange of common
stock in the reverse merger:


Common
      stock of HPD before share exchange
            
            
            Shares
      of common stock in registrant after share exchangeSeries
      A Preferred Stock
            
            
            577
            
            
            
            4,246,370Series
      B Preferred Stock
            
            
            2,548
            
            
            
            18,751,734Common
      Stock
            
            
            1,558
            
            
            
            11,465,934Total
            
            
            4,683
            
            
            
            34,464,038Total
      outside shares of Alpha Mortorsport, Inc. issued upon closing of share
      exchange
            
            
            
            
            
            
            10,000,000Total
      shares outstanding subsequent to the share exchange
            
            
            
            
            
            
            44,464,038





In
connection with the Share Exchange Agreement, the Company assumed the obligation
to register up to 400,000 shares of common stock issued by Alpha in a private
placement (the “Alpha Private Placement”).  In return, the Company
received $500,000 upon the closing of the Merger on February 7, 2007 for
issuance of 400,000 shares of common stock.





Upon the
closing of the Share Exchange, Alpha Motorsport, Inc. had 10,000,000 shares of
common stock issued and outstanding and subsequent to the Share Exchange the
Company had 44,464,038 shares of common stock issued and outstanding. Upon the
closing of the Merger on February 7, 2007, HPD became a wholly-owned subsidiary
of the Company. The share exchange was accounted for as a reverse merger for
accounting purposes. As a result, the Company treated the merger as a capital
transaction and has retroactively revised shareholders’ equity to give effect to
the merger. Prior to the reverse merger, each share of Series A and Series B
preferred stock of HPD was automatically converted into one share of common
stock. Effective with the reverse merger, all shares of common stock of HPD were
exchanged for shares in the registrant, in accordance with the Share
Exchange






6






NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED):





Agreement.
In connection with the Series B Private Placement financing, the Company issued
warrants to brokers with the right to purchase up to 1,368,847 shares of common
stock at an exercise price of $0.1359.





Investa
Warrants





On
February 7, 2007, the Company issued warrants to Investa Capital Partners Inc.
(“Investa”) for services performed in connection with the reverse merger
transaction, which were exercisable in two tranches. The warrants also contained
a put feature allowing the Company to require Investa to exercise them. The
tranche A warrants gave Investa the right to purchase 2,705,659 shares of common
stock at an exercise price of $0.1848 per share. The tranche B warrants gave
Investa the right to purchase 2,032,982 shares of common stock at an exercise
price of $0.2459 per share. The Investa warrants expired on February 7, 2008.
Investa did not exercise these warrants and the Company did not exercise the put
feature; however, the warrants had a fair value of $2,927,285 (calculated to be
the fair value based on the Black-Scholes pricing model on the issuance date)
which was recorded as an expense for the nine months ended September 30, 2007.
 Both tranche A and the tranche B warrants were exercisable for a period of
365 days from the date of issuance until the warrants expired on February 7,
2008.





Liquidity





The
Company has net losses of $2,759,198 and negative cash flow from operating
activities of $610,368 for the nine months ended September 30, 2008, and an
accumulated deficit of $11,305,999 as of September 30, 2008. These circumstances
raise substantial doubt about the Company’s ability to continue as a going
concern. The Company has taken steps to mitigate the negative operating results
by attempting to increase their sales by expanding their market, introducing new
products, and increasing the emphasis on sales and marketing. The Company’s
ultimate success is dependent upon fulfilling its operating plans and raising
additional capital or financing. The financial statements have been prepared on
the basis that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. There have been no adjustments to the financial statements
to reflect the outcome of this uncertainty.




NOTE
2 – SIGNIFICANT ACCOUNTING POLICIES:




The
summary of significant accounting policies presented below is designed to assist
in understanding the Company's consolidated financial statements. Such
consolidated financial statements and accompanying notes are the representations
of the Company’s management, who is responsible for their integrity and
objectivity. These accounting policies conform to accounting principles
generally accepted in the United States of America (“GAAP") in all material
respects, and have been consistently applied in preparing the accompanying
consolidated condensed financial statements.





Uses of
Estimates—The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant accounting estimates used in the
Company’s financial statements include allowances for doubtful accounts,
valuations of options and warrants, and the valuation allowance on the deferred
tax assets. Actual results could differ from those estimates.





Share-Based
Compensation—The
Company accounts for its stock options in accordance with SFAS No. 123(R), which
requires the measurement and recognition of compensation expense for all
share-based payment awards based on estimated fair values at the date of the
grant. Determining the fair value of share-based awards at the grant date
requires judgment in developing assumptions, which involve a number of
variables. These variables include, but are not limited to, the expected stock
price volatility over the term of the awards, and expected stock option exercise
behavior. In addition, we also use judgment in estimating the number of
share-based awards that are expected to be forfeited.





Fair Value of
Financial Instruments—Statement No. 107, Disclosure About Fair Value of Financial Instruments,
requires the disclosure of the fair value of certain financial instruments. Cash
and cash equivalents, accounts receivable, accounts payable and accrued
expenses, notes payable and other current liabilities are reflected on the
accompanying consolidated balance sheet at carrying value which approximates
fair value due to the short-term nature of these instruments.




Revenue
Recognition-Revenue
is recognized when goods are shipped, provided that there is evidence of an
arrangement with the customer, the price is fixed and determinable and
collection is reasonably assured.




Reclassification-Certain reclassifications
have been made to prior year’s consolidated condensed financial statements to
conform to the current year presentation.






7







NOTE 3 – PER SHARE
INFORMATION:




In
accordance with SFAS No. 128 “Earnings Per Share”, basic earnings per common
share (“Basic EPS”) is computed by dividing the net income (loss) by the
weighted-average number of common shares outstanding. Diluted earnings per
common share (“Diluted EPS”) is computed by dividing the net income (loss) by
the sum of the weighted-average number of common shares and dilutive common
stock equivalents and convertible securities then outstanding. SFAS No. 128
requires presentation of both Basic EPS and Diluted EPS on the face of the
Company’s Consolidated Statements of Operations. Consolidated common stock
equivalents totaling 26,771,487 and 23,294,129 were excluded from the
computation of Diluted EPS for the three and nine months ended September 30,
2008, respectively, and 26,644,432 for the three and nine months ended September
30, 2007, as their effect on the computation of Diluted EPS would have been
anti-dilutive.





The
following table sets forth the computation of basic and diluted per share
information:




For
      the Three Months Ended September 30,
              June
      30
            
            
            For
      the Nine Months
              Ended
      September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Numerator:Net
      loss
            
            $
            (944,245
            )
            
            $
            (923,906
            )
            
            $
            (2,759,198
            )
            
            $
            (5,721,045
            )Denominator:Weighted-average
      common shares outstanding basic and diluted
            
            
            45,344,038
            
            
            
            44,873,984
            
            
            
            45,104,817
            
            
            
            44,575,443Per
      share information – basic and diluted:Net
      loss
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.06
            )
            
            $
            (0.13
            )




NOTE
4 – CONVERTIBLE NOTES PAYABLE:





2007
Convertible notes payable:




From July
31, 2007 through August 31, 2007, the Company issued $2,150,000 of its 9% Senior
Secured Convertible Debentures (the “9% Debentures”) in a private placement. The
9% Debentures are convertible into the Company’s common stock, at the option of
the holder, at any time up to maturity at an initial conversion price equal to
$0.25 per share. The debentures have a three-year term and accrue interest at
9% per year.




Accrued
interest on the convertible debt is payable semi-annually in cash or in common
stock, at the Company’s option provided, however, payment in shares of common
stock may only occur if during the 20 trading days immediately prior to the
applicable interest payment date (i) the Company shall have given the investor
notice (ii) such shares to be delivered on the interest payment date are
registered at the time of issuance, (iii) at the time of issuance there are a
sufficient number of registered shares to cover all of the shares of common
stock issuable upon conversion of the debenture and (iv) the common stock is
trading on the trading market and the Registrable Securities are listed for
trading on a trading market (and the Company believes, in good faith, that
trading of the common stock on a trading market will continue uninterrupted for
the foreseeable future).  Accrued interest was approximately $159,000
and $76,000 as of September 30, 2008 and December 31, 2007,
respectively.





Beginning
on the six-month anniversary of the closing of each 9% Debenture and continuing
on the same day of each successive month thereafter, the Company must repay
1/29th of the
aggregate face amount of the 9% Debentures, plus all accrued interest thereon,
either in cash or in common stock, at the Company’s option.





The
Company has not made certain payments of interest and principal due beginning in
March 2008. As of September 30, 2008, the Company was in default of $469,656 of
principal and $118,805 of interest on its 9% Debentures. If the redemption
payment and interest are paid in common stock, the number of shares issued will
be based on a 25% discount to the volume weighted average price (VWAP) of the
common stock for the ten (10) trading days immediately preceding (but not
including) the applicable prepayment date. Notwithstanding the foregoing, the
Company’s right to prepay the 9% Debentures in shares of common stock on each
prepayment date is subject to the condition that a Registration Statement be
effective on such prepayment date so that registered shares are available to the
investors.





The
Company will have the ability to cause the investors to convert their 9%
Debentures and any accrued but as yet unpaid interest thereon into common stock
if (i) registered shares are available to the investors on the date the
conversion notice is given by the Company, (ii) the closing price of the common
stock has exceeded $1.00 for each of the 20 consecutive trading days immediately
preceding the date that the conversion notice is given by the Company, and (iii)
the average daily trading volume for the common stock during such 20 consecutive
trading day period has exceeded 125,000 shares.





Each of
the 9% Debenture investors, received a warrant to purchase such number of shares
of common stock equal to the aggregate face amount of their respective 9%
Debenture divided by the conversion price.  The warrants are
exercisable for a period of five years at an exercise price of $0.50 per
share.  As of September 30, 2008 there are 8,600,000
warrants associated with the 9% Debentures






8






NOTE
4 – CONVERTIBLE NOTES PAYABLE (CONTINUED):





outstanding
with an aggregate value of approximately $1,483,000. The costs associated with
the warrants were recorded as a debt discount and are being amortized, using the
effective interest method, over the three year term of the notes.  In
addition, the debentures conversion feature has been valued at approximately
$656,000 due to the excess of the market value of the common stock over the
conversion price at the date of issue. The discount attributable to the
beneficial conversion is also being amortized using the effective interest
method over the term of the debentures.





In
consideration for placement services, the Company has paid the placement agent a
commission of 8% of the gross proceeds from the issuance of the convertible
notes plus 5-year warrants to purchase up to such number of shares of common
stock equal to 8% of the aggregate amount of securities subscribed for at $0.19
per share or 100% of the 5-day average closing price of the common stock for the
five days preceding, but not including, the closing date.  The
commissions paid to the placement agent and other costs of issuance were
recorded as deferred financing costs of approximately $441,000 of which
approximately $153,000 was paid through the issuance of warrants and
approximately $289,000 was paid as cash for placement agent fees and various
other direct costs of issuance.





In
accordance with the terms of the 9% Debenture agreement, the Company may not pay
dividends or other distributions on the Company's equity securities during the
period that any portion of the 9% Debenture is outstanding.





An SB-2
Registration statement was declared effective January 28, 2008 which registered
11,871,993 shares of common stock. Those shares include 8,600,000 shares of
common stock which are issuable upon conversion of the 9% Debentures at a
conversion price of $0.25 per share.





On May
16, 2008, in consideration for the cancellation of the 9% Debenture to one of
the above mentioned debt holders, the Company issued a $100,000 9% per annum
promissory note, which matures in July 2010.





2008
Convertible notes payable:





From May
30, 2008 through September 30, 2008, the Company received $260,000 by issuing
Secured Convertible Debentures with an annual interest rate of 12% (the “12%
Debentures”). The 12% Debentures are convertible into common stock at a
conversion price of $0.25 and mature in one year. In connection with the
issuance, the Company also issued five year warrants to purchase up to 1,040,000
shares of common stock at an exercise price of $0.25 per shares. The
proceeds from the issuance have been allocated on a relative fair value basis
between the debt and the warrants. The resulting discount of $45,418,
attributable to the warrant value is being amortized as interest expense over
the term of the notes.





The
Company may require the investors to convert their 12% Debentures and any
accrued but as yet unpaid interest thereon into common stock if (i) there are
sufficient registered shares available to the investors on the date the
conversion notice is given by the Company, (ii) the closing price of the common
stock has exceeded $0.40 for each of the 20 consecutive trading days immediately
preceding the date that the conversion notice is given by the Company, and (iii)
the average daily trading volume for the common stock during such 20 consecutive
trading day period has exceeded 150,000 shares.





If at any
time within 150 days of the final closing the Company shall determine to file
with the securities and exchange commission a registration statement relating to
an offering for its own account or the account of others under the Securities
Act of 1933, of any of its equity securities, the Company shall use its best
efforts to include in such registration statement all of the shares issuable
upon conversion of the securities sold pursuant to the terms of the
agreement.





If all or
any of the principal and accrued but unpaid interest underlying the 12%
Debentures remains outstanding prior to the next sale by the Company of its debt
or equity securities which yields gross proceeds to the Company of at least
$2,000,000, the investor shall have the right, at its option, at any time during
the 10 business days following the closing of the financing event, to convert
the outstanding principal balance and accrued and unpaid interest on the 12%
Debentures, or any portion thereof and return his outstanding warrant to be
issued in the this offering, into the number of fully paid and non-assessable
shares of financing securities issued by the Company as a result of the
financing event, at a conversion price per share equal to a 25% discount of the
price by the investors in the financing event.





Each 12%
Debenture received a warrant to purchase such number of shares of common stock
equal to the face amount of the debenture divided by the exercise
price.  The warrants are exercisable for a period of five years at an
exercise price of $0.25 per share.  As of September 30, 2008
there were 1,040,000 warrants associated with the debentures
outstanding.





In
consideration for placement services, the Company paid the Placement Agent a
commission of 8% of a portion of the gross


proceeds
of the offering plus 5-year warrants to purchase up to such number of shares of
common stock equal to 8% of the aggregate  amount of securities
subscribed for at $0.25 per share. The Commissions paid to the placement agent
and other costs of issuance were recorded as deferred financing costs of
approximately $28,000 of which approximately $2,000 were related to
the







9






NOTE
4 – CONVERTIBLE NOTES PAYABLE (CONTINUED):





issuance
of warrants and approximately $26,000 was paid as cash for placement agent fees
and various other direct costs of issuance.





The
following table summarizes the convertible notes transactions as
of:








2007
ConvertibleNotes




September
      30, 2008
            
            
            December
      31, 2007(unaudited)
            
            
            (audited)Convertible
      notes issued
            
            
            
            
            $
            2,150,000
            
            
            
            
            
            $
            2,150,000Less:
      Debenture cancellation
            
            
            
            
            
            (100,000
            )
            
            
            
            
            
            -Less:
      Principal payments
            
            
            
            
            
            (95,861
            )
            
            
            
            
            
            -1,954,139
            
            
            
            
            
            
            2,150,000Debt
      discount on convertible notes
              attributable
      to beneficial conversions
            
            
            655,830
            
            
            
            
            
            
            
            655,830Less:
      Accumulated amortization
            
            
            (295,622
            )
            
            
            (360,208
            )
            
            
            (80,466
            )
            
            
            (575,364
            )Debt
      discount attributable to warrants
            
            
            1,483,084
            
            
            
            
            
            
            
            1,483,084Less:
      Accumulated amortization
            
            
            (682,507
            )
            
            
            (800,577
            )
            
            
            (188,537
            )
            
            
            (1,294,547
            )Convertible
      notes payable, net of
              discounts
            
            
            
            
            
            $
            793,354
            
            
            
            
            
            
            $
            280,089






2008
ConvertibleNotes




September
      30, 2008
              
              
              December
      31, 2007(unaudited)
              
              
              (audited)Convertible
      notes issued
              
              
              
              
              $
              260,000
              
              
              
              
              
              $
              -Debt
      discount attributable to warrants
              
              
              45,418
              
              
              
              
              
              
              
              -Less:
      Accumulated amortization
              
              
              (13,052
              )
              
              
              (32,366
              )
              
              
              -
              
              
              
              -Convertible
      notes payable, net of discounts
              
              
              
              
              
              $
              227,634
              
              
              
              
              
              
              $
              -


ConvertibleNotesCombined







September
      30, 2008
              
              
              December
      31, 2007(unaudited)
              
              
              (audited)Convertible
      notes issued
              
              
              
              
              $
              2,410,000
              
              
              
              
              
              $
              2,150,000Less:
      Debenture cancellation
              
              
              
              
              
              (100,000
              )
              
              
              
              
              
              -Less:  Principal
      payments
              
              
              
              
              
              (95,861
              )
              
              
              
              
              
              -2,214,139
              
              
              
              
              
              
              2,150,000Debt
      discount on convertible notes
                attributable
      to beneficial conversions
              
              
              655,830
              
              
              
              
              
              
              
              655,830Less:
      Accumulated amortization
              
              
              (295,622
              )
              
              
              (360,208
              )
              
              
              (80,466
              )
              
              
              (575,364
              )Debt
      discount attributable to warrants
              
              
              1,528,502
              
              
              
              
              
              
              
              1,483,084Less:
      Accumulated amortization
              
              
              (695,559
              )
              
              
              (832,943
              )
              
              
              (188,537
              )
              
              
              (1,294,547
              )Convertible
      notes payable, net of
                discounts
              
              
              
              
              
              $
              1,020,988
              
              
              
              
              
              
              $
              280,089








10






NOTE
4 – CONVERTIBLE NOTES PAYABLE (CONTINUED):








The
      approximate future minimum principal payments on the convertible notes
      payable as of September 30, 2008 are as
follows:




Year
      Ended
              December
      31,
            
            Amount2008
            
            $
            682,0002009
            
            
            1,108,0002010
            
            
            424,000$
            2,214,000





NOTE
5 – NOTES PAYABLE – RELATED PARTIES:




On June
28, 2007, the maturity date of the loan from management dated June 1, 2006 in
the amount of $90,000 was extended to December 31, 2007 at an annual interest
rate of 11.5%. On January 1, 2008, the maturity date of this loan was extended
to December 31, 2009 at an annual interest rate of 7.0%.





From May
30, 2008 through September 30, 2008, in connection with the 2008 convertible
notes payable, the Company received $220,000 in proceeds from Norman R. Proulx,
President and CEO of the Company, Donald Farley, a member of the Board of
Directors and Janet T. Proulx, Director of Administration in the amounts of
$65,000, $100,000 and $55,000, respectively. The 12% debentures are convertible
into common stock at a conversion price of $0.25 and  mature in one year.
In connection with the issuance, the Company also issued five year warrants to
purchase up to 880,000 shares of common stock with an exercise price of $0.25
per shares.




The
proceeds from the issuance placement have been allocated on a relative fair
value basis between the debt and the warrants. The resulting discount of $37,484
on the 12% Debentures will be amortized as interest expense over the term of the
notes





The
following table summarizes the convertible notes payable to related parties as
of September 30, 2008:




Convertible
      notes issued
              
              
              
              
              $
              220,000Debt
      discount attributable to warrants
              
              
              37,484Less:
      Accumulated amortization
              
              
              (10,967
              )
              
              
              (26,517
              )Convertible
      notes payable, net of discounts
              
              
              
              
              
              $
              193,483




The
      approximate future minimum principal payments on these convertible notes
      payable as of September 30, 2008 are as
follows:




Year
      Ended
              December
      31,
            
            Amount2009
            
            $
            220,000











11




NOTE
6 – NOTE PAYABLE:





On August
16, 2007, the Company and debt holder entered into a Subscription Agreement
pursuant to which a convertible debt holder purchased a 9% Senior Secured
Convertible Debenture for an aggregate principal amount of $100,000 (the
“Debenture”). On May 16, 2008, the Company issued a $100,000 9% per annum
promissory note to the above mentioned debt holder in consideration for the
cancellation of the Debenture. This note is payable in twelve
installments.




The
      approximate future minimum principal payments on the promissory note as of
      September 30, 2008 are as follows:




Year
      Ended
              December
      31,
            
            Amount2008
            
            $
            66,0002009
            
            
            -2010
            
            
            14,000$
            80,000








NOTE
7 – ACCRUED EXPENSES:





The
Company’s accrued expenses as of September 30, 2008 and December 31, 2007, are
as follows:




September
      30,
            
            
            December
      31,2008
            
            
            2007(Unaudited)
            
            
            (Audited)Salaries-related  parties
            
            $
            404,585
            
            
            $
            204,583Salaries-other
            
            
            133,550
            
            
            
            15,000Insurance
            
            
            38,741
            
            
            
            1,853Professional
      fees
            
            
            -
            
            
            
            2,562Interest
            
            
            187,759
            
            
            
            76,462Other
            
            
            4,056
            
            
            
            3,405Total
            
            $
            768,691
            
            
            $
            303,865











12










NOTE
8 – COMMITMENTS:





Purchase
Commitments





The
Company has a purchase agreement for a diagnostic test, which requires the
Company to order minimum amounts of diagnostic tests. Should the Company fail to
meet this minimum ordering requirement, this agreement can be terminated by the
vendor. The Company’s purchase commitment required under the agreement as
of September 30, 2008, is as follows:




Year
      Ended
              December
            
            Number
      of Units
            
            
            AmountRemainder
      - 2008
            
            
            22,000
            
            
            $
            77,0002009
            
            
            187,500
            
            
            
            656,2502010
            
            
            512,500
            
            
            
            1,793,7502011
            
            
            375,000
            
            
            
            1,312,500Total
            
            
            1,097,000
            
            
            $
            3,839,500





Donation
Commitment





The
Company pledges to make a $2.00 donation to Crossing the Finish Line, Inc.
(“CFL”), a Pennsylvania not-for-profit corporation for each direct-to-consumer
Fecal Occult Blood Test kit sold in consideration of CFL providing all
individual testimonials for the sixty second direct response commercial,
including three colon cancer victims and two physicians.









13







NOTE
9 – COMMON STOCK, OPTIONS AND WARRANTS:




Common
Stock





On
January 8, 2008 the Company issued 5,000 shares of restricted common stock for
legal services rendered, valued at $450.





On June
26, 2008, the Company issued 7,500 and 425,000 shares of restricted common stock
for legal and investor relation services rendered, valued at $375 and $21,250,
respectively.





Stock
Options





On
December 18, 2006, the HPD Board of Directors adopted the Healthcare Providers
Direct, Inc. Stock Option Plan (the “Plan”) which provides for the grant of
incentive stock options and nonqualified stock options. On December 27, 2006 the
Company’s


shareholders
approved the Plan.





The Board
of Directors has approved and adopted the 2007 Stock Incentive Plan effective
and dated June 26, 2007. Options, with an exercise price of $1.20 which were
granted on March 28, 2007 to HPD employees, were exchanged for options granted
under the 2007 HPD’s Incentive Stock Option Plan for an equal number of options
as originally granted, but at the exercise price of $0.60, representing the
closing price of the Company’s common stock on June 26, 2007.





Key
employees, consultants and non-employee directors of the Company are eligible to
receive awards under the Plan. Except to the extent set forth in any award
agreement to the contrary, options granted under the Plan vest in three equal
annual installments for non-employee directors and in four equal annual
installments for all other option holders commencing on the first anniversary of
the date of grant. Options are granted at no less than fair market value of the
Company’s stock on the date of grant.





There are
6,402,672 shares of common stock reserved for issuance upon the exercise of
options. Options have a term of ten years. In the event of a termination of
employment or service, options that are vested at the time of such termination
generally remain exercisable for ninety days in the event of involuntary
termination or termination due to retirement or disability, and for one year in
the event of termination due to death. Vested options are immediately canceled
upon termination for “Cause”. All unvested









14






NOTE
9 – COMMON STOCK, OPTIONS AND WARRANTS (CONTINUED):





options
are canceled immediately upon termination for any reason. Upon the date of a
“change in control”, all outstanding unvested options become immediately vested
and fully exercisable.





The
Company’s compensation expense related to stock option awards (“stock options”)
was approximately $16,000 and $35,000 for the three months ended September 30,
2008 and 2007, respectively, and $69,000 and $378,000 for the nine months ended
September 30, 2008 and 2007, respectively.





Compensation expense related to stock options granted is recognized ratably over the service vesting period for the entire option award. The total number of stock option awards
expected to vest is adjusted by the estimated forfeiture rate. The
Company does not anticipate any forfeitures. The Company determined the fair
market value of each stock option issued on the date of grant using the
Black-Scholes option-pricing model based on the following weighted-average
assumptions for the nine months ended September 30, 2008 and 2007:





Assumptions:
            
            2008
            
            
            2007Risk-free
      interest rate
            
            
            3.5
            %
            
            
            4.9
            %Expected
      option life in years
            
            
            5.0
            
            
            
            5.0Expected
      stock price volatility
            
            
            227.6
            %
            
            
            71.0
            %Expected
      dividend yield
            
            
            0.0
            %
            
            
            0.0
            %





The
computation of the expected option life is based on a weighted-average
calculation combining the average life of options that have already been
exercised and post-vest cancellations with the estimated life of the remaining
vested and unexercised options. The expected volatility is based on the
Company’s historical stock price. The risk-free interest rate is based on the
U.S. Treasury yield curve over the expected term of the option. The Company has
never paid cash dividends on its common stock and does not anticipate paying
cash dividends in the foreseeable future. Consequently, the Company uses an
expected dividend yield of zero in the Black-Scholes option valuation
model.





The
Company’s determination of the fair value of its stock options is affected by
the Company’s stock price as well as a number of assumptions that require
judgment. The weighted-average fair value per share was approximately $0.04 and
$0.08 for the three and nine months ended September 30, 2008. No options were
exercised during the three and nine months ended September 30, 2008. As of
September 30, 2008, total unrecognized compensation cost related to all stock
options granted was approximately $21,000 and the related weighted-average
period over which it is expected to vest and be recognized is approximately 0.9
years. The maximum term to exercise the Company’s stock options is ten
years.




A summary
of the status of stock option activity for the nine months ended September 30,
2008 is as follows:





Summary of activity:
            
            Number
      of SharesOutstanding
      as of December 31, 2007
            
            
            2,347,209Granted
            
            
            1,200,000Exercised
            
            
            -Cancelled,
      forfeited or expired
            
            
            (1,058,281
            )Outstanding
      as of September 30, 2008
            
            
            2,488,928Vested
      and Expected to vest as of
              September
      30, 2008
            
            
            2,488,928Exercisable:
            
            
            1,794,552Available
      for future grants:
            
            
            3,913,744








15





NOTE
9 – COMMON STOCK, OPTIONS AND WARRANTS (CONTINUED):





Warrants





On
January 10, 2008, the Company issued 5-year warrants to Lincoln Associates LLC,
a related party, for general business services to be performed during 2008,
which are exercisable in two tranches.  Tranche A warrant gives
Lincoln Associates LLC the right to purchase up to 100,000 shares of the
Company’s common stock. This warrant is exercisable at any time at an exercise
price of $0.09 per share, valued at $8,643 (calculated to be the fair value
based on the Black-Scholes pricing model on the issuance date).  The
tranche B warrant gives Lincoln Associates LLC the right to purchase up to
100,000 shares of the Company’s common stock. This warrant is exercisable at any
time at an exercise price of $0.19 per share, valued at $8,484 (calculated to be
the fair value based on the Black-Scholes pricing model on the issuance
date).





On May
30, 2008, in connection with the 2008 Convertible Notes Payable, the Company
issued warrants to brokers with the right to purchase up to 16,000 shares of the
Company’s common stock at an exercise price of $0.25. Such warrants were valued
at $948 (calculated to be the fair value based on the Black-Scholes pricing
model on the issuance date). The value of these warrants of $948 was charged to
deferred financing costs and is being amortized over the life of the
notes.





On June
26, 2008, in connection with the 12% Debentures, the Company issued warrants to
brokers with the right to purchase up to 8,000 shares of the Company’s common
stock at an exercise price of $0.25. Such warrants were valued at $396
(calculated to be the fair value based on the Black-Scholes pricing model on the
issuance date). The value of these warrants of $396 was charged to deferred
financing costs and is being amortized over the life of the notes.





From May
30, 2008 through September 30, 2008, in connection with the 12% Debentures (See
note 4 Convertible Notes Payable), each investor received a warrant to purchase
such number of shares of common stock equal to the aggregate face amount of
their respective debenture divided by the exercise price. The warrants are
exercisable for a period of five years at an exercise price of $0.25 per share.
At September 30, 2008, there were 1,040,000 warrants associated with the
debentures outstanding with an aggregate value of approximately
$45,000.





From May
30, 2008 through September 30, 2008, in connection with the 12% Debentures sold
to related party (See Note 5 Notes Payable-Related Party), in connection with
the issuance, the Company also issued five year warrants to purchase up to
880,000 shares of common stock with an exercise price of $0.25 per share with an
aggregate value of approximately $37,000.





On
July 3, 2008, in connection with the 12% Debentures, the Company issued
warrants to brokers with the right to purchase up to 6,400 shares of the
Company’s common stock at an exercise price of $0.25. Such warrants were valued
at $315 (calculated to be the fair value based on the Black-Scholes pricing
model on the issuance date). The value of these warrants of $315 was charged to
deferred financing costs and is being amortized over the life of the
notes.





On
July 7, 2008, in connection with the 12% Debentures, the Company issued
warrants to brokers with the right to purchase up to 8,000 shares of the
Company’s common stock at an exercise price of $0.25. Such warrants were valued
at $314 (calculated to be the fair value based on the Black-Scholes pricing
model on the issuance date). The value of these warrants of $314 was charged to
deferred financing costs and is being amortized over the life of the
notes.





On August
29, 2008, in connection with the 12% Debentures, the Company issued warrants to
brokers with the right to purchase up to 4,800 shares of the Company’s common
stock at an exercise price of $0.25. Such warrants were valued at $237
(calculated to be the fair value based on the Black-Scholes pricing model on the
issuance date). The value of these warrants of $237 was charged to deferred
financing costs and is being amortized over the life of the notes.




A summary of the warrant activity for the nine
months ended September 30, 2008 is as follows:





Summary of activity:
            
            Number
      of SharesOutstanding
      as of December 31, 2007
            
            
            15,740,223Granted
            
            
            2,163,200Exercised
            
            
            -Cancelled,
      forfeited or expired
            
            
            (4,738,641
            )Outstanding
      as of September 30, 2008
            
            
            13,164,782








16








NOTE
10 – PREFERRED STOCK:





The
Company has authorized 25,000,000 shares of preferred stock, $0.001 par value.
The Company had no issued and outstanding preferred stock as of September 30,
2008 or December 31, 2007.




NOTE
11 – SUBSEQUENT EVENTS:




On October 31, 2008, the Company
received $250,000 from the President and CEO through the issuance of the
12%Debentures (See Note
4). The 12% debentureisconvertible into common stock at a
conversion price of $0.25 and matures in one year. In connection with the
issuance, the Company also issued five year warrants to purchase up to 1,000,000
shares of common stock with an exercise price of $0.25 per share.The proceeds from the issuance
placement have been allocated on a relative fair value basis between the debt
and the warrants. The resulting discount of $26,374, attributable to the value of the
warrants,will be
amortizedasinterest expense over the term of the
note.







17








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




This
Report contains certain forward-looking statements and information relating to
the Company that is based on the beliefs of the Company’s management, as well as
assumptions made by, and information currently available to, the Company’s
management. When used in this Report, the words “anticipate”, “believe”,
“estimate”, “expect”, “there can be no assurance”, “may”, “could”, “would”,
“might”, “intends” and similar expressions and their negatives, as they relate
to the Company or the Company’s management, are intended to identify
forward-looking statements. Such statements reflect the view of the Company at
the date they are made with respect to future events, are not guarantees of
future performance and are subject to various risks and uncertainties as
identified in the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2007 and those described from time to time in previous and future
reports filed with the Securities and Exchange Commission. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein with
the forward-looking statements referred to above and as set forth in the Form
10-Q. The Company does not intend to update these forward-looking statements for
new information, or otherwise, for the occurrence of future events.




Results
of Operations




For the Three Months EndedSeptember30, 2008, as Compared to the
Comparable Period in 2007




Revenues





Net
revenues for the three months ended September 30, 2008 and 2007 were $67,105 and
$131,581, respectively.  The decrease in revenues of $64,476 or 49.0%
was primarily due to significant competitive activity during the period, which
negatively affected the average selling price for our Rapid HIV Diagnostic Test.
In addition, there was an approximate $43,000 decrease in overall product
sales.





Cost
of Sales





Our cost
of sales increased to $119,766 for the three months ended September 30, 2008, as
compared to $69,828 for the three months ended September 30, 2007. This increase
of $49,938 was primarily attributed to an increased per item cost resulting from
the Company’s inability to meet volume purchase requirements that would result
in unit cost savings. This increase was offset by the overall decrease in
product mix sales. Cost of sales as a percentage of product sales increased to
178.5% for the three months ended September 30, 2008 from 53.1% for the three
months ended September 30, 2007.  This increase was primarily
attributed to the HIV test average product cost increase and the increase
in lower profit margin product mix sales.




Gross
Profit (Loss)





Gross
profit (loss) for the three months ended September 30, 2008 decreased to
($52,662) or (78.5%) of revenues from $61,753 or 46.9% of revenues for the three
months ended September 30, 2007. The decrease in the gross profit percentage was
due primarily to the increase in the HIV test average product cost and a
decrease in higher profit product sales.





Expenses





For the
three months ended September 30, 2008, operating expenses decreased $323,926 to
$550,061, as compared to $873,987 for the three months ended September 30,
2007.  Expenses consist of clinical research and development work on
one new diagnostic test, sales and marketing expenses and general and
administrative expenses.





Research
and Development





Research
and development expenses were $15,200 and $63,958 for the three months ended
September 30, 2008 and 2007, respectively.  The majority of research
and development expenses consist of external costs for studies and analysis
activities. The decrease of $48,758 was the result of completing various
projects, during the three months ended September 30, 2007. We expect our
research and development costs to increase in future periods primarily due to
the expenses associated with the completion of clinical trials.





Sales
and Marketing





Sales and
marketing expenses were $192,359 and $115,627 for the three months ended
September 30, 2008 and 2007, respectively. This increase of $76,732 was the
result of an approximate $49,000 increase in salaries and benefits for the three
months ended September 30, 2008, as a result of additional staff hired. In
addition, there was an approximate $41,000 increase for the production of
new product marketing materials for the three months ended September 30,
2008. To offset these increases, there was an approximate $13,000 decrease
in spending on existing customer communications during the three months ended
September 30, 2008.









18









General
and Administrative




General
and administrative expenses decreased $351,900 to $342,502 for the three months
ended September 30, 2008, as compared to $694,402 for the three months ended
September 30, 2007.  This decrease was partially the result of an
approximate $100,000 decrease in the amortization of the Company’s intangible
asset relating to the Zstat Flu test which expired in September 2007 and the
Company’s decision not to utilize the remaining term of the licensing
component. Investor relation fees also decreased by approximately $100,000,
additionally, reimbursement coding work decreased approximately $95,000 during
the three months ended September 30, 2008. There was also an approximate $45,000
and $36,000 decrease in accounting and legal fees during the three months ended
September 30, 2008, respectively. Additionally, there was an approximate
$19,000 decrease in the recording of stock based compensation expense and the
issuance of stock and warrants for services rendered.





Operating
Loss





Our
operating loss was $602,722 for the three months ended September 30, 2008, as
compared to an operating loss of $812,234 for the three months ended September
30, 2007. The decrease of $209,512 in the operating loss is primarily due to the
aforementioned factors as described above.





Interest
Expense





Interest expense
was $341,523 and $111,672 for the three months ended September 30, 2008 and
2007, respectively. The increase of $229,851 was primarily due to the increase
in amortization expense of both the deferred financing and the debt discount on
convertible debentures of approximately $200,000 and interest expense on these
debentures of approximately $30,000.





Net
Loss





The
aforementioned factors resulted in a net loss of $944,245 during the three
months ended September 30, 2008, as compared to a net loss of $923,906 during
the three months ended September 30, 2007, an increase of approximately
2%.




For theNineMonths EndedSeptember30, 2008, as Compared to the
Comparable Period in 2007




Revenues





Net
revenues for the nine months ended September 30, 2008 and 2007 were $296,702 and
$439,151, respectively.  The decrease in revenues of $142,449 or 32.4%
was primarily due to significant competitive activity during the period, which
negatively affected the average selling price for our Rapid HIV Diagnostic Test.
In addition, there was an approximate $121,000 decrease in overall product
sales.




Cost
of Sales





Our cost
of sales increased to $258,188 for the nine months ended September 30, 2008, as
compared to $217,300 for the nine months ended September 30, 2007. This increase
of $40,888 was primarily attributed to an increased per item cost resulting from
the Company’s inability to meet volume purchase requirements that would result
in unit cost savings. This increase was offset by the overall decrease and
change in product mix sales. The Zstat Flu test which was sold until September
2007 (the product expiration date), had a low product cost and was replaced with
a higher product cost flu test. Cost of sales as a percentage of product sales
increased to 87.0% for the nine months ended September 30, 2008 as compared to
49.5% for the nine months ended September 30, 2007.  This increase was
attributed to the HIV test average product cost increase and the
change in product mix sales as discussed above.




Gross
Profit





Gross
profit for the nine months ended September 30, 2008 decreased to $38,514 or
13.0% of revenues from $221,851 or 50.5% of revenues for the nine months ended
September 30, 2007. The decrease in the gross profit percentage was due
primarily to the increase in the HIV test average product cost and a
decrease in higher profit and overall product sales.





Expenses





For the
nine months ended September 30, 2008, operating expenses decreased $4,031,414 to
$1,794,855, as compared to $5,826,269 for the nine months ended September 30,
2007.  This decrease was primarily the result of recording merger
related expenses of $2,927,285 during the nine months ended September 30, 2007.
Expenses consist of clinical research and development work on one new diagnostic
test, sales and marketing expenses, merger related and general and
administrative expenses.








19

















Research
and Development





Research
and development expenses were $142,663 and $271,645 for the nine months ended
September 30, 2008 and 2007, respectively.  The majority of research
and development expenses consist of external costs for studies and analysis
activities. The decrease of $128,982 was the result of completing various
projects, during the first nine months of 2007. We expect our research and
development costs to increase in future periods primarily due to the expenses
associated with the completion of clinical trials.





Sales
and Marketing





Sales and
marketing expenses were $549,436 and $600,990 for the nine months ended
September 30, 2008 and 2007 respectively. This decrease of $51,554 was the
result of an approximate decrease of $200,000 for marketing efforts during the
nine months ended September 30, 2007, to establish existing business
relationships (EBR’s) with potential new customers. To offset this decrease,
there was an approximate $118,000 increase in salaries and benefits in 2008 as a
result of additional staff hired. Additionally, there was an approximate $30,000
increase for the production of new product marketing materials for the nine
months ended September 30, 2008.




Merger
Related





Merger
related expenses were $0 for the nine months ended September 30, 2008, as
compared to $2,927,285 for the nine months ended September 30, 2007. This
decrease was the result of recording the Investa Capital Partners warrant
expense issued for services performed in connection with the reverse merger
transaction (see note 1 to the financial statements included
herein).




General
and Administrative




General
and administrative expenses decreased $923,593 to $1,102,756 for the nine months
ended September 30, 2008, as compared to $2,026,349 for the nine months ended
September 30, 2007.  This decrease was partially the result of
recording stock based compensation expense and the issuance of stock and
warrants for services rendered in the approximate amounts of $106,000 for the
nine months ended September 30, 2008, as compared to $429,000 for the nine
months ended September 30, 2007. There was an approximate $91,000 decrease in
legal expense in 2008 as compared to 2007. There were no expenses incurred for
new hire recruitment fees and reimbursement coding work during the nine months
ended September 30, 2008, respectively, as compared to $75,000 and $145,000 for
the nine months ended September 30, 2007, respectively.  There was an
approximate $122,000 decrease in the amortization of the Company’s intangible
asset relating to the Zstat Flu test which expired in September 2007 and the
Company’s decision not to utilize the remaining term of the licensing
component. There was an approximate, $80,000 and $43,000 decrease in
investor relation and accounting fees for the nine months ended September 30,
2008, respectively. Additionally, there was an approximate $36,000 decrease
in salaries and benefits in 2008 as a result of a reduction in staff. There
was also an approximate $32,000 and $18,000 decrease in consulting and
other fees for the nine months ended September 30, 2008,
respectively.





Operating
Loss





Our
operating loss was $1,756,341 for the nine months ended September 30, 2008, as
compared to an operating loss of $5,604,418 for the nine months ended September
30, 2007. The decrease of $3,848,077 in the operating loss is primarily due to
the aforementioned factors as described above.





Interest
Expense





Interest
expense was $1,002,857 and $116,627 for the nine months ended September 30, 2008
and 2007, respectively. The increase of $886,230 was primarily due to the
increase in amortization expense of both the deferred financing and the debt
discount on convertible debentures of approximately $763,000 and interest
expense on these debentures of approximately $123,000.





Net
Loss





The
aforementioned factors resulted in a net loss of $2,759,198 during the nine
months ended September 30, 2008, as compared to a net loss of $5,721,045 during
the nine months ended September 30, 2007, a decrease of approximately
52%.





20







Liquidity
and Capital Resources




The
Company has not historically generated, and does not currently generate, enough
revenue to provide the cash needed to support its operations, and has continued
to operate primarily by raising capital and incurring debt. In order to better
position the Company to take advantage of potential growth opportunities and to
fund future operations, the Company sold $2,150,000 of its 9% Senior Secured
Convertible Debentures (the “9% Debentures”) in a private placement from July
31, 2007 through August 31, 2007. The debentures are convertible into the
Company’s common stock at the option of the holder at any time up to maturity at
an initial conversion price equal to $0.25 per share. The 9% Debentures have a
three-year term.





Accrued
interest on the convertible debt  is payable semi-annually in cash or
in common stock, at the Company’s option provided,however,
payment in shares of common stock may only occur if during the 20 trading days
immediately prior to the applicable interest payment date (i) the Company shall
have given the investor notice (ii) such shares to be delivered on the interest
payment date are registered at the time of issuance, (iii) at the time of
issuance there are a sufficient number of registered shares to cover all of the
shares of common stock issuable upon conversion of the debenture and (iv) the
Common Stock is trading on the trading market and the registrable securities are
listed for trading on a trading market (and the Company believes, in good faith,
that trading of the common stock on a trading market will continue uninterrupted
for the foreseeable future).  Accrued interest as of September 30,
2008 is approximately $159,000.





Beginning
on the six-month anniversary of the Closing of each 9% Debenture, and continuing
on the same day of each successive month thereafter, the Company must repay
1/29th  of the aggregate face amount of the 9% Debentures,
plus all accrued interest thereon, either in cash or in common stock, at the
Company’s option.





The
Company has not made certain payments of interest and principal due beginning in
March 2008. If the redemption payment and interest are paid in common stock, the
number of shares issued will be based on a 25% discount to the volume weighted
average price (VWAP) of the common stock for the ten (10) trading days
immediately preceding (but not including) the applicable prepayment
date.





The
Company will have the ability to cause the investors to convert their 9%
Debentures and any accrued but as yet unpaid interest thereon into common stock
if (i) the Registration Statement is effective and available for use by the
Investors on the date the conversion notice is given by the Company, (ii) the
closing price of the common stock exceeded $1.00 for each of the 20 consecutive
trading days immediately preceding the date that the conversion notice is given
by the Company, and (iii) the average daily trading volume for the common stock
during such 20 consecutive trading day period exceeded 125,000
shares.





Each 9%
Debentures purchased received a warrant to purchase such number of shares
of common stock equal to the aggregate face amount of their 9% Debenture divided
by the conversion price.  The warrants are exercisable for a period of
five years at an exercise price of $0.50 per share.  At September 30,
2008 there are 8,600,000 warrants associated with the 9% Debentures
outstanding.





From May
30, 2008 through September 30, 2008, the Company received $480,000 in proceeds
through the issuance of Secured Convertible Debentures with an annual interest
rate of 12% (the “12% Debentures”). The 12% debentures are convertible into
common stock at a conversion price of $0.25 and mature in one year. In
connection with the issuance, the Company also issued five year warrants to
purchase up to 1,920,000 shares of common stock with an exercise price of $0.25
per shares.





The
Company will have the ability to cause the investors to convert their Debentures
and any accrued but as yet unpaid interest thereon into Common Stock if (i) the
Registration Statement is effective and available for use by the Investors on
the date the conversion notice is given by the Company, (ii) the closing price
of the Common Stock exceeded $0.40 for each of the 20 consecutive trading days
immediately preceding the date that the conversion notice is given by the
Company, and (iii) the average daily trading volume for the Common Stock during
such 20 consecutive trading day period exceeded 150,000 shares.





If at any
time within 150 days of the final closing the Company shall determine to file
with the securities and exchange commission a registration statement relating to
an offering for its own account or the account of others under the Securities
Act of 1933, of any of its equity securities, the Company shall use its best
efforts to include in such registration statement all of the shares issuable
upon conversion of the securities sold pursuant to the terms of the
agreement.





If all or
any of the principal and accrued but unpaid interest underlying the 12%
Debentures remains outstanding prior to the next sale by the Company of its debt
or equity securities which yields gross proceeds to the Company of at least
$2,000,000, the investor shall have the right, at its option, at any time during
the 10 business days following the closing of the financing event, to convert
the outstanding principal balance and accrued and unpaid interest on the 12%
Debentures, or any portion thereof and return his outstanding warrant to be
issued in the this offering, into the number of fully paid and non-assessable
shares of financing securities issued by the Company as a result of the
financing event, at a conversion price per share equal to a 25% discount of the
price by the investors in the financing event.






21






For each
12% Debenture purchased, the investor received a warrant to purchase such number
of shares of common stock equal to the face amount of the debenture divided by
the exercise price.  The warrants are exercisable for a period of five
years at an exercise price of $0.25 per share.  As of September 30,
2008 there were 1,920,000 warrants associated with the debentures
outstanding.





As of
September 30, 2008, Healthcare Providers Direct, Inc. had a working capital
deficit of $2,538,796 and cash on hand of $3,735.  During the nine
months ended September 30, 2008, cash flows used in operating activities were
$610,368. This was principally due to the net loss of $2,759,198, less non-cash
items of $973,340. The non-cash items consisted of principally amortization of
the convertible notes and deferred financing costs and the recording of stock
based compensation expense. Accounts payable and accrued expenses increased
approximately $1,118,000 which provided cash flow.





For
the nine months ended September 30, 2008, cash flows used in investing
activities were $1,766 for purchase of equipment.





For
the nine months ended September 30, 2008, cash flows provided by financing
activities were $338,339 due principally to the current financing, less
payments on the convertible notes as described
above.




Future
Liquidity and Capital Needs





Based
upon our current working capital position, current operating plans and expected
business conditions, management believes that the Company needs additional debt
and/or equity financing to finance operations in 2008. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from our possible inability to continue as a going
concern.




Significant
additional capital resources are required from sources including equity and/or
debt financings, license arrangements, grants and/or collaborative research
arrangements in order to develop products. Thereafter, additional working
capital will need to be raised.





Additional
investments are being sought, but we cannot guarantee that we will be able to
obtain such investments. The trading price of our common stock and a downturn in
the U.S. stock and debt markets could make it more difficult to obtain financing
through the issuance of equity or debt securities. Even if we are able to raise
the funds required, it is possible that we could incur unexpected costs and
expenses, fail to collect significant amounts owed to us, or experience
unexpected cash requirements that would force us to seek alternative financing.
Furthermore, if we issue additional equity or debt securities, stockholders may
experience additional dilution or the new equity securities may have rights,
preferences or privileges senior to those of existing holders of our common
stock. If additional financing is not available or is not available on
acceptable terms, we will have to curtail our operations.




The
timing and degree of any future capital requirements will depend on many
factors, including:





·
            The
      magnitude and scope of our research and development programs and our
      ability to establish, enforce and maintain strategic arrangement for
      research, development, clinical testing, manufacturing and
      marketing;




·
            our
      progress with preclinical development and clinical
  trials;




·
            the
      time and costs involved in obtaining regulatory
  approvals;




·
            the
      costs involved in preparing, filing, prosecuting, maintaining, defending
      and enforcing patents; and claims;
and




·
            the
      number and type of product candidates that we
  pursue





Further,
if additional funds are obtained through arrangements with collaborative
partners, these arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would otherwise seek to
develop and commercialize on our own. If sufficient capital is not available, we
may be required to delay, reduce the scope of or eliminate one or more of our
product lines.





Off-Balance
Sheet Arrangements




An
off-balance sheet arrangement is any contractual arrangement involving an
unconsolidated entity under which a company has (a) made guarantees,
(b) a retained or a contingent interest in transferred assets, (c) any
obligation under certain derivative instruments or (d) any obligation under
a material variable interest in an unconsolidated entity that provides
financing, liquidity, market risk, or credit risk support to the Company, or
engages in leasing, hedging, or research and development services within the
Company.




The
Company does not have any off-balance sheet financing.









22







Management’s
Discussion of Critical Accounting Policies and Estimates




Accounting
estimates and assumptions are those that we consider to be the most critical to
an understanding of our financial statements because they inherently involve
significant judgments and uncertainties. For all of these estimates, we caution
that future events rarely develop exactly as forecast, and the best estimates
routinely require adjustments. Management believes that these policies, are
fully described under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2007. The Company has made no changes to
these policies during 2008.

















23













Item3.Quantitative
and Qualitative Disclosures about Market Risk





N/A




Item4T. Controls and
Procedures




(a)   Evaluation
      of Disclosure Controls and
Procedures




Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as
of December 31, 2007. In designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. In addition, the design of disclosure
controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their
costs.





Based
on our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are designed at a
reasonable assurance level and are effective to provide reasonable assurance
that information we are required to disclose in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms, and that such information 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.




(b)   Changes
      in Internal Controls




There
were no changes that occurred during the fiscal quarter covered by this
Quarterly Report on Form 10-Q that have materially affected, or are reasonably
likely to materially affect, the Company’s internal controls over financial
reporting.







24











PART
II - OTHER INFORMATION




Item
1. Legal
Proceedings




None.




Item 1a. Risk
Factors





None





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




None




Item 3. Defaults upon Senior
Securities




As of
September 30, 2008, Healthcare Providers Direct, Inc. has not made payments of
$469,656 of principal and $118,805 of interest on its 9% Senior Convertible
Debentures and is in default under the terms of such debentures.




Item 4. Submission of
Matters to a Vote of Security Holders




None




Item 5. Other
Information




None.




Item 6.
Exhibits






Exhibit
      Number
            
            Description
      of Exhibit31
            
            Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and
      Exchange Act of 1934, as amended32
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief
      Financial Officer)









25









SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




HEALTHCARE PROVIDERS DIRECT,
      INC.Date:
      November 19, 2008
              By:
              /s/Norman
      ProulxChief
      Executive Officer (Principal Executive Officer) and Chief Financial
      Officer (Principal Financial Officer and Accounting Officer) and
      Director
















26