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Share Name | Share Symbol | Market | Type |
---|---|---|---|
HealthWarehouse com Inc (QB) | USOTC:HEWA | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.127 | 0.127 | 0.15 | 0.00 | 20:29:58 |
☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
22-2413505
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
7107 Industrial Road, Florence KY
|
41042
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of Class
|
Name of each exchange on which registered
|
|
None
|
None
|
|
|
Page
|
Part I
|
|
|
Item 1.
|
4
|
|
|
|
|
Item 1A.
|
11
|
|
|
|
|
Item 1B.
|
21
|
|
|
|
|
Item 2.
|
21
|
|
|
|
|
Item 3.
|
21
|
|
|
|
|
Item 4.
|
21
|
|
|
|
|
Part II
|
||
Item 5.
|
22
|
|
|
|
|
Item 6.
|
22
|
|
|
|
|
Item 7.
|
22
|
|
|
|
|
Item 7A.
|
29
|
|
|
|
|
Item 8.
|
29
|
|
|
|
|
Item 9.
|
30
|
|
|
|
|
Item 9A.
|
30
|
|
|
|
|
Item 9B.
|
31
|
|
|
|
|
Part III
|
||
Item 10.
|
32
|
|
|
|
|
Item 11.
|
36
|
|
|
|
|
Item 12.
|
40
|
|
|
|
|
Item 13.
|
44
|
|
|
|
|
Item 14.
|
45
|
|
|
|
|
Part IV
|
||
Item 15.
|
46
|
|
Item 16
|
51
|
•
|
significant changes in consumer demand for our products, resulting in volatility of our operating results and financial condition;
|
•
|
our ability to effectively respond to changing market conditions;
|
•
|
whether as a result of market conditions, or our financial condition or otherwise, the possibility that we will not be able to raise sufficient additional capital needed to operate our business;
|
•
|
unexpected costs, lower than expected sales and revenues, and operating deficits;
|
•
|
our ability to obtain supply at favorable rates;
|
•
|
unexpected changes in our industry's competitive forces including the manner and degree in which our competitors serve our target market;
|
•
|
our ability to attract or retain qualified senior management personnel; and
|
•
|
other specific risks that may be referred to in this report including those in Part I, Item 1A, "Risk Factors."
|
Current Healthcare
Distribution Model
|
Our Distribution
Model |
Manufacturer
'
|
Manufacturer or Wholesaler
' |
Wholesaler
|
'
|
'
|
'
|
Distributor
|
HealthWarehouse.com
|
'
|
'
|
Pharmacy
|
'
|
'
|
'
|
Consumer
|
Consumer
|
|
●
Legitimacy
. We have obtained state licenses and certifications to separate ourselves from the numerous uncertified "rogue" pharmacies that exist online. We are the 19
th
pharmacy in the U.S. to receive Verified Internet Pharmacy Practice Sites accreditation, issued by the National Association of Board of Pharmacy. Google, Yahoo, and Bing now all require VIPPS as a prerequisite to advertise on their sites.
|
|
●
Convenience
. Our easy-to-use online store is available to consumers 24 hours a day, 7 days a week through the Internet and includes a robust product search engine and a variety of features, like auto-refill. We deliver medications to any location in the United States including Alaska and Hawaii and offer 6-month and 12-month supplies of medications to reduce the need for refills. All of our products are also available for purchase by phone.
|
|
●
Selection
. Due to our online structure, we are able to offer a significantly broader assortment of products, with greater depth in each product category, because we do not have the shelf display space limitations of brick-and-mortar drugstores.
|
|
●
Information
. We provide a broad array of interactive tools and information on our website to help consumers make informed purchasing decisions. Our information services include detailed product information pages, product user manuals and brochures, detailed product descriptions which contain the manufacturer's phone number, and customer reviews. Our customer support representatives are available by phone or email to answer customers' questions.
|
|
●
Privacy
. When shopping at a "brick-and-mortar" drugstore, many consumers may feel embarrassed or uncomfortable about buying items or asking questions that may reveal personally sensitive aspects of their health or lifestyle to pharmacists, store personnel, or other shoppers. Our customers avoid these problems by shopping from the privacy of their home or office.
|
|
●
Value
. Our goal is to offer shoppers a broad assortment of generic drugs and health products with competitive pricing. We strive to improve our operating efficiencies and to leverage our fixed costs so that we can pass along the savings to our customers in the form of lower prices and exclusive deals. Since we source drugs directly from manufacturers and wholesalers and eliminate third party payors such as insurance companies, we believe that we have lower costs than traditional pharmacies. We also strive to inform customers of additional cost-saving opportunities when they become available. For example, we show the generic equivalents of all brand name products and also offer 6 and 12 month supplies of our medications to consumers to reduce refills and provide better value. The Company was prominently featured in two nationally recognized consumer magazines during the fourth quarter of 2015 as having the lowest price among top pharmacies for five commonly prescribed medications.
|
|
●
Customer Service
. We keenly focus on customer service and endeavor to lead the industry in our policies and procedures. We are prevented by law from accepting returns for prescription medications. The Company has received numerous awards for customer service and satisfaction and won the 2015 BizRate Circle of Excellence Award for outstanding customer service and satisfaction along with 186 other major online retailers, the fourth time since its inception.
|
•
|
shipping charges, which do not apply to purchases made at a "brick-and-mortar" store;
|
•
|
delivery time associated with Internet orders, as compared to the immediate receipt of products at a brick-and-mortar store;
|
•
|
lack of consumer awareness of our website;
|
•
|
additional steps and delays in verifying prescriptions and ensuring insurance coverage for prescription products;
|
•
|
regulatory restrictions or reform at the state and federal levels that could affect our ability to serve our customers;
|
•
|
the general acceptance or legalization of prescription drug re-importation;
|
•
|
customer concerns about the security of online transactions, identity theft, or the privacy of their personal information;
|
•
|
product damage from shipping or shipments of wrong or expired products from us or other suppliers, resulting in a failure to establish, or loss of, customers' trust in buying drugstore items online;
|
•
|
inability to serve the acute care needs of customers, including emergency prescription drugs and other urgently needed products;
|
•
|
delays in responses to customer inquiries;
|
•
|
difficulties or delays in returning or exchanging orders; and
|
•
|
activity that diminishes a user's online experience or subjects online shoppers to security risks, such as viruses, spam, spyware, phishing (spoofing e-mails directed at Internet users), "denial of service" attacks directed at Internet service providers and online businesses, and breaches of data security.
|
•
|
entities engaging in the practice of pharmacy are subject to numerous federal and state regulatory requirements, including those relating to pharmacy licensing and registration, the dispensing of prescription drugs, pharmacy record keeping and reporting, and the confidentiality, security, storage, and release of patient records; and
|
•
|
the sale, advertisement, and promotion of, among other things, prescription, OTC and homeopathic medications, dietary supplements, medical devices, cosmetics, foods, and other consumer products that we sell are subject to regulation by the FDA, the FTC, the Consumer Product Safety Commission, and state regulatory authorities, as the case may be.
|
2016
|
2015
|
|||||||
High
|
Low
|
High
|
Low
|
|||||
First Quarter
|
$ 0.30
|
$ 0.16
|
$ 0.30
|
$ 0.08
|
||||
Second Quarter
|
$ 0.42
|
$ 0.27
|
$ 0.23
|
$ 0.09
|
||||
Third Quarter
|
$ 0.47
|
$ 0.25
|
$ 0.15
|
$ 0.09
|
||||
Fourth Quarter
|
$ 0.42
|
$ 0.22
|
$ 0.33
|
$ 0.10
|
Year ended
|
Year ended
|
|||||||||||||
December 31,
|
% of
|
December 31,
|
% of
|
|||||||||||
2016
|
Net Sales
|
2015
|
Net Sales
|
|||||||||||
Net sales
|
$
|
10,384,893
|
100.0
|
$
|
7,018,137
|
100.0
|
||||||||
Cost of sales
|
3,647,433
|
35.1
|
2,546,392
|
36.3
|
||||||||||
Gross profit
|
6,737,460
|
64.9
|
4,471,745
|
63.7
|
||||||||||
Selling, general & administrative
|
8,026,636
|
77.3
|
4,890,280
|
69.7
|
||||||||||
Loss from operations
|
(1,289,176
|
)
|
(12.4)
|
|
(418,535
|
)
|
(6.0)
|
|
||||||
Interest expense
|
119,027
|
1.0
|
208,147
|
3.0
|
||||||||||
Net loss
|
$
|
(1,408,203
|
)
|
(13.6)
|
|
$
|
(626,682
|
)
|
(9.0)
|
|
Year ended December 31,
|
Change
|
|||||||||||||||
2016
|
2015
|
$ | % | |||||||||||||
Prescriptions
|
$
|
7,999,818
|
$
|
5,021,382
|
$
|
2,978,436
|
59.3
|
|||||||||
OTC Products
|
1,959,602
|
1,229,231
|
730,371
|
59.4
|
||||||||||||
Other
|
425,473
|
767,524
|
(342,051
|
)
|
(44.6
|
)
|
||||||||||
Net Sales
|
$
|
10,384,893
|
$
|
7,018,137
|
$
|
3,366,756
|
48.0
|
Year ended December 31,
|
Change
|
|||||||||||||||
2016
|
2015
|
$ | % | |||||||||||||
Cost of sales
|
$
|
3,647,433
|
$
|
2,546,392
|
$
|
1,101,041
|
43.2
|
|||||||||
Gross margin
|
$
|
6,737,460
|
$
|
4,471,745
|
$
|
2,265,715
|
50.7
|
|||||||||
Gross margin %
|
64.9
|
%
|
63.7
|
%
|
1.2
|
%
|
1.9
|
%
|
Year ended December 31,
|
Change
|
|||||||||||||||
2016
|
2015
|
$ | % | |||||||||||||
S G&A
|
$
|
8,026,636
|
$
|
4,890,280
|
$ |
3,136,356
|
64.1
|
|||||||||
% of Net Sales
|
77.3
|
%
|
69.7
|
%
|
(a)
|
salaries and related payroll taxes expense increased $991,795 after excluding $276,167 of severance pay for departing executives. The increase in salaries expense is primarily the result of increased staffing to process higher levels of call and order volumes, increased time requirements of pharmacy staff to process the higher level of new customer orders and the addition of the Chief Financial Officer in 2016;
|
(b)
|
freight costs and shipping supplies expense increased $531,230 and $77,431, respectively, due to higher order volume and higher expedited shipping costs;
|
(a)
|
legal expenses increased $521,269 which included $370,119 of expenses related to proxy materials for the 2016 annual meeting;
|
(b)
|
shareholder expense increased $193,284 as the result of higher expenses related to the solicitation of votes a contested director election at the 2016 annual meeting;
|
(c)
|
credit card processing fees increased $151,078 directly related to the increase in order volume;
|
(d)
|
adverting expense increased $138,420 because of higher volumes of customers visiting our website through targeted online marketing channels;
|
(e)
|
software engineering and maintenance costs increased $131,085 due to additional outsourcing of projects; and
|
(f)
|
the local and state income and property tax expense increase of $101,175 included $78,942 of tax expense resulting from the settlement of previous years' taxes.
|
(a)
|
accounting services decreased by $65,939 primarily related to the hiring of the Company's Chief Financial Officer in 2016;
|
(b)
|
depreciation and amortization expense was $34,766 lower in 2016; and
|
(c)
|
rent expense was $37,014 lower in 2016 resulting from a reduction in rented space during 2015.
|
Year Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Net loss
|
$
|
(1,408,203
|
)
|
$
|
(626,682
|
)
|
||
Non-GAAP adjustments:
|
||||||||
Interest expense
|
119,027
|
208,147
|
||||||
Depreciation and amortization
|
149,553
|
184,320
|
||||||
Stock-based compensation
|
327,202
|
320,366
|
||||||
Proxy solicitation costs
|
578,484
|
-
|
||||||
Severance
|
276,167
|
-
|
||||||
Adjusted EBITDA
|
$
|
42,230
|
$
|
86,151
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements.
|
Name
|
Age
|
Position
|
||
Current executive officers and directors
:
|
||||
John C. Pauly
|
56
|
Chief Operating Officer, Interim President and Chief Executive Officer
|
||
Brian A. Ross
|
59
|
Director
|
||
Mark D. Scott
|
46
|
Director
|
||
Dr. Steven J. Weiss
|
62
|
Director
|
||
Joseph Heimbrock
|
61
|
Director
|
||
J. Robert Smyjunas, Jr.
|
53
|
Director
|
||
Former executive officers and directors
:
|
||||
Jeffrey T. Holtmeier
|
58
|
President, Chief Executive Officer and Director
|
||
Lalit Dhadphale
|
45
|
President, Chief Executive Officer and Director
|
||
Daniel Seliga
|
51
|
Chief Operating Officer and Chief Financial Officer
|
||
Youssef Bennani
|
50
|
Director
|
||
Joseph Savarino
|
47
|
Director
|
||
Ambassador Ned L. Siegel
|
65
|
Director
|
Section 16 Insider
|
Type of
Late Report
|
Date Report
Required
|
Date Report
Filed
|
Daniel Joseph Seliga
|
Form 3
|
1/13/2016
|
1/19/2016
|
Joe Heimbrock/MVI Partners, LLC
|
Form 3
|
4/22/2016
|
4/29/2016
|
Joseph Savarino
|
Form 4
|
7/8/2016
|
7/12/2016
|
Ned Siegel
|
Form 4
|
7/8/2016
|
7/12/2016
|
Bennani Youssef
|
Form 4
|
7/8/2016
|
7/13/2016
|
Joe Heimbrock/MVI Partners, LLC
|
Form 4
|
7/8/2016
|
7/14/2016
|
Rx Investor Value Corp.
|
Form 3
|
7/26/2016
|
8/19/2016
|
Jeffrey Holtmeier
|
Form 3
|
7/26/2016
|
8/19/2016
|
Brian Ross
|
Form 3
|
7/26/2016
|
8/19/2016
|
Cormag Holdings, Ltd./Mark D. Scott
|
Form 3
|
7/26/2016
|
8/23/2016
|
Bruce Bedrick
|
Form 3
|
7/26/2016
|
8/23/2016
|
Osgar Holdings Ltd./Hong Penner
|
Form 3
|
7/26/2016
|
8/24/2016
|
Robert Smyjunas
|
Form 3
|
7/26/2016
|
8/24/2016
|
SCW Holdings, LLP/Stephen Weiss
|
Form 3
|
7/26/2016
|
8/25/2016
|
Cape Bear Partners, LLC/Lynn Peppel
|
Form 3
|
7/26/2016
|
8/25/2016
|
Patrick Edward Delaney
|
Form 3
|
7/26/2016
|
8/26/2016
|
Mark D. Scott
|
Form 3
|
9/7/2016
|
9/12/2016
|
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option Awards
($) (1)
|
All Other
Compensation
($)
|
Total
($)
|
Jeffrey T. Holtmeier (4)
President, Chief Executive and Financial Officer
|
2016
|
53,061
|
43,750
|
35,495
|
-
|
132,306
|
Lalit Dhadphale (2)
President, Chief Executive Officer
|
2016
2015
|
128,419
150,000
|
-
-
|
-
11,761
|
-
|
128,419
161,761
|
Daniel Seliga (3)
Chief Operating Officer and Chief Financial Officer
|
2016
|
135,000
|
-
|
-
|
-
|
135,000
|
(1)
|
The amounts in the "Option Awards" column reflect the dollar aggregate grant date fair value computed in accordance with ASC Topic 718. The assumptions we used to calculate these amounts are discussed in the notes to our consolidated financial statements included in this report on Form 10-K.
|
(2)
|
Mr. Dhadphale's resignation from the Company was effective October 13, 2016.
|
(3)
|
Mr. Seliga's employment with the Company was effective January 1, 2016 and his resignation from the Company was effective October 9, 2016.
|
(4)
|
Mr. Holtmeier's employment with the Company was effective October 11, 2016 and his resignation from the Company was effective January 16, 2017.
|
Name
|
Number of
Securities Underlying
Unexercised Options
(#)
Exercisable
|
Number of
Securities Underlying
Unexercised Options
(#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration
Date
|
Jeffrey T. Holtmeier
Chief Executive Officer and President
|
125,000
|
-
|
0.29
|
(1)
|
(1)
|
Any unexercised options will terminate April 15, 2017 as a result of Mr. Holtmeier's resignation on January 16, 2017.
|
Cash
|
Option
|
Total
|
|||||||
Compensation
|
Awards
|
Compensation
|
|||||||
Name
|
($)
|
($) (2)
|
($)
|
||||||
Current Directors
|
|||||||||
Joseph Heimbrock (1)
|
16,000
|
32,951
|
48,951
|
||||||
Brian A. Ross (1)
|
12,000
|
-
|
12,000
|
||||||
Mark Scott (1)
|
4,000
|
-
|
4,000
|
||||||
Dr. Stephen Weiss (1)
|
4,000
|
-
|
4,000
|
||||||
Former Directors
|
|||||||||
Joseph Savarino (2)
|
24,000
|
37,782
|
61,782
|
||||||
Youssef Bennani (2)
|
24,000
|
37,782
|
61,782
|
||||||
Ned Siegel (2)
|
24,000
|
37,782
|
61,782
|
(1)
|
In connection with the current director's annual service on our Board, (i) on July 6, 2016 we granted options to Mr. Heimbrock to purchase 30,728 shares of our common stock at an exercise price of $0.35 per share, and with a term of ten years. The options immediately vested on the grant date; (ii) the non-cash compensation portion of director fees for the third and fourth quarter of 2016 will be settled in 2017. See above note.
|
(2)
|
In connection with the former director's annual service on our Board, (i) on January 13, 2016 we granted options to each director to purchase 38,218 shares of our common stock at an exercise price of $0.24 per share, and with a term of ten years. The options immediately vested on the grant date; (ii) on April 8, 2016 we granted options to each director to purchase 31,616 shares of our common stock at an exercise price of $0.29 per share. The options immediately vested on the grant date; (iii) on July 6, 2016 we granted options to purchase 43,692 shares of our common stock at an exercise price of $0.35 per share, and with a term of ten years. The options immediately vested on the grant date; and (iv) on November 9, 2016 we granted options to purchase 13,953 shares of our common stock at an exercise price of $0.35 per share, and with a term of ten years. The options immediately vested on the grant date.
|
(3)
|
The amounts in the "Option Awards" column reflect the dollar aggregate grant date fair value computed in accordance with ASC Topic 718.
|
Plan category
|
Number of shares
of common stock
to be issued upon
exercise of outstanding
options, warrants,
and rights
(a)
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column
(a) (c)
|
Equity compensation plans approved by security holders
|
1,294,204 (1)
|
$0.51
|
4,948,435 (2)
|
Equity compensation plans not approved by security holders (3)
|
7,806,118
|
$0.30
|
-
|
Total
|
9,100,322
|
$0.33
|
4,948,435
|
Name
(1)
|
Number of Shares
Beneficially Owned
(2)
|
Percentage of
Shares Beneficially
Owned
(3)
|
||
5% or Greater Stockholders:
|
||||
Dr. Bruce Bedrick
(4)
|
5,850,000
|
13.1%
|
||
MVI Partners, LLC and Joe Heimbrock
(5)
|
6,273,372
|
12.8%
|
||
Cormag Holdings, LTD and Mark Scott
(6)
|
4,480,861
|
10.2%
|
||
Dellave Holdings, LLC and Tim Reilly
(7)
|
4,367,457
|
10.2%
|
||
Lalit Dhadphale
|
3,207,479
|
7.5%
|
||
Estate of Wayne Corona
(8)
|
2,770,676
|
6.5%
|
||
Osgar Holdings, LTD and Hong Penner
(9)
|
2,500,000
|
5.8%
|
||
Janice & Ralph Marra
(10)
|
2,215,747
|
5.2%
|
||
Executive Officers and Directors:
|
||||
John C. Pauly
|
-
|
*
|
||
Brian A. Ross
|
-
|
*
|
||
Mark D. Scott
(6)
|
4,480,861
|
10.2%
|
||
Joseph Heimbrock
(5)
|
6,273,372
|
12.8%
|
||
Dr. Stephen Weiss
(11)
|
1,005,000
|
2.3%
|
||
J. Robert Smyjunas
(12)
|
226,400
|
*
|
||
All executive officers and directors as a group –
(6 persons)
|
11,985,633
|
21.9%
|
|
(1)
|
The address of each officer and director is c/o HealthWarehouse.com, Inc., 7107 Industrial Road, Florence, Kentucky 41042.
|
|
(2)
|
This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC. Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as the entities owned or controlled by the named person. Table also includes shares if the named person has the right to acquire those shares within 60 days after December 31, 2016, by the exercise of any warrant, stock option, convertible note or other right. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
|
|
(3)
|
Applicable percentages are based on 42,649,273 shares of common stock outstanding on February 28, 2017, adjusted as required by rules promulgated by the SEC. There were 553,574 shares of Series B Preferred Stock outstanding on February 28, 2017, which shares are convertible into 6,454,673 shares of common stock, based on a conversion factor of 11.66. The shares of common stock and shares underlying convertible preferred stock, and stock options or warrants are deemed outstanding for purposes of computing the percentage of the person holding such convertible preferred stock, convertible notes, and/or stock options or warrants, but are not deemed outstanding for the purpose of computing the percentage of any other person.
|
(4)
|
Consists of (i) 3,900,000 shares of common stock and (ii) warrants to purchase 1,950,000 shares of common stock owned by Dr. Bedrick. The information in this Note 4 is based in part on information contained in the Schedule 13D/A Amendment No. 7 filed with the SEC by the Rx Investor Value Corporation Group on September 9, 2016. Dr. Bedrick's address is 5375 Monterey Circle #32, Delray Beach, FL 33484.
|
|
(5)
|
Consists of (i) 68,009 shares of common stock, (ii) an option to purchase 30,728 shares of common stock and (iii) 529,557 shares of Series B Preferred Stock convertible into 6,174,635 shares of common stock. The shares of common stock and option are owned by Joe Heimbrock individually and the shares of Series B Preferred Stock are owned by MVI Partners, LLC, an Ohio limited liability company ("MVI"). Mr. Heimbrock serves as a managing member of MVI and thus may be deemed to possess shared voting and dispositive power over the shares of Series B Preferred Stock. The address of Mr. Heimbrock and MVI is 3299 Hughes Court, Taylor Mill, Kentucky 41015. The information contained in this note is based in part on a Schedule 13D filed by MVI and Mr. Heimbrock on April 29, 2016.
|
|
(6)
|
Consists of (i) 3,147,527 shares of common stock and (ii) warrants to purchase 1,333,334 shares of common stock. The securities are owned by Cormag Holdings, Ltd., a Canadian corporation ("Cormag"). Mark Scott is the President, sole stockholder and director of Cormag and has sole voting and dispositive power with respect to the shares owned by Cormag. The owners address is 104 Falcon Ridge Drive, Winnipeg, Manitoba, Canada R3Y1X6. Mr. Scott is a Canadian citizen. The information in this Note 6 is based in part on information contained in the Schedule 13D/A Amendment No. 2 filed with the SEC by Mr. Scott on February 10, 2017.
|
|
(7)
|
Consists of (i) 97,000 shares of common stock owned by Tim E. Reilly's IRA account, (ii) 1,173,103 shares of common stock owned by Tim E. Reilly's CMA account, (iii) 573,826 shares of common stock owned by Melrose Capital Advisors, LLC, an Ohio limited liability company ("MCA") and (iv) 2,523,528 shares of common stock owned by Dellave Holdings LLC, an Ohio limited liability company ("DH"). Mr. Reilly is the single member of both MCA and DH and has sole voting and dispositive power with respect to the shares owned by MCA and DH. The owners address is 1085 Gulf of Mexico Drive #602, Longboat Key, Florida 34288. The information contained in this note is based in part on a Schedule 13D filed by Tim E. Reilly on August 15, 2016.
|
|
(8)
|
Consists of (i) 2,737,644 shares of common stock owned by the Estate of Wayne Corona and (ii) 33,032 shares of common stock owned by MKW Partners, LLC, an Ohio limited liability company ("MKW"). Mr. Corona was the Managing Member of MKW and had sole voting and dispositive power with respect to the shares owned by MKW. The information contained in this Note 8 is based in part on the information contained in Schedule 13G Amendment No. 1 filed with the SEC by Mr. Corona on July 29, 2013.
|
|
|
(9)
|
Consists of (i) 1,666,667 shares of common stock and (ii) warrants to purchase 833,333 shares of common stock. The securities are owned by Osgar Holdings Ltd., a Canadian corporation ("Osgar"). Hong Penner is the President, sole stockholder and director of Osgar and has sole voting and dispositive power with respect to the shares owned by Osgar. The owners address is 400 St. Mary Avenue, 9
th
Floor, Winnipeg, Manitoba, Canada R3C4K5. Ms. Penner is a Canadian citizen. The information in this Note 9 is based in part on information contained in the Schedule 13D/A Amendment No. 7 filed with the SEC by the Rx Investor Value Corporation Group on September 9, 2016.
|
(10)
|
Consists of (i) 1,935,709 shares of common stock and (ii) 24,017 shares of Series B Preferred Stock which is convertible into 280,038 shares of common stock. Ms. Marra has sole dispositive and voting power with respect to 1,489,029 shares, and shared dispositive and voting power with Ralph Marra with respect to 4,029 shares. Ralph Marra has sole dispositive and voting power with respect to 446,680 shares, and shared dispositive and voting power with Janice Marra with respect to 4,029 shares. Excludes 90,000 shares held in Trust for Janice and Ralph Marra's minor children. The business address for Ms. And Mr. Marra is 5 Post Road, Rumson, NJ 07760. The information contained in this Note 10 is based in part on the information contained in Schedule 13G/A Amendment No. 1 filed with the SEC by Ms. and Mr. Marra on February 14, 2014.
|
|
|
(11)
|
Consists of (i) 670,000 shares of common stock and (ii) warrants to purchase
335,000
shares of common stock. The securities are owned by SCW Holdings, L.L.P., an Arizona limited liability partnership ("SCW"). Dr. Stephen Weiss is the general partner of SCW and has sole voting and dispositive power with respect to the shares owned by SCW. The owners address is 10405 East McDowell Mountain Ranch Road, Scottsdale, Arizona 85255. The information contained in this note is based in part on the information contained in Form 3 filed with the SEC by Mr. Weiss on February 9, 2017.
|
|
(12)
|
Consists of (i) 225,3000 shares of common stock owned by Mr. Smyjunas directly, and (ii) 1,100 shares of common stock owned by RX Investor Value Corporation (RIVC). Mr. Smyjunas is the sole shareholder and officer of RIVC and has sole voting and dispositive power with respect to the shares owned by RIVC. The owners address is 9064 Ridgeway Close Drive, Cincinnati, OH 45236. The information contained in this note is based in part on the information contained in Form 3 filed with the SEC by Mr. Smyjunas on February 7, 2017.
|
Year Ended
|
Year Ended
|
|||||||
December 31, 2016
|
December 31, 2015
|
|||||||
Audit Fees (1)
|
$
|
120,000
|
$
|
120,000
|
||||
Audit-Related Fees (2)
|
-
|
-
|
||||||
Tax Fees (2)
|
-
|
-
|
||||||
All Other Fees (2)
|
-
|
-
|
Exhibit No. | Description | |
2.1
|
Share Exchange Agreement, dated May 14, 2009, between Clacendix, Inc. and HealthWarehouse.com, Inc. (1)
|
|
2.2
|
Asset Purchase Agreement, dated February 14, 2011, among Hocks Acquisition Corporation, and Hocks Pharmacy, Inc. and its shareholders. (9)
|
|
2.3
|
Merger Agreement dated February 14, 2011, among HealthWarehouse.com, Inc., Hocks Acquisition Corporation, Hocks Pharmacy, Inc. and its shareholders, and Hocks.com, Inc. (9)
|
|
3.1
|
Certificate of Incorporation of the Company, as amended through December 31, 2005. (2)
|
|
3.2
|
Certificate of Amendment of the Certificate of Incorporation of the Company, filed on January 4, 2008. (3)
|
|
3.3
|
Certificate of Amendment of the Certificate of Incorporation of the Company, filed on July 14, 2008. (4)
|
|
3.4
|
Certificate of Amendment of the Certificate of Incorporation of the Company, filed on July 31, 2009. (5)
|
|
3.5
|
Certificate of Amendment to the Company's Certificate of Incorporation filed on July 16, 2010. (7)
|
|
3.6
|
State of Delaware Certificate of Amendment of Certificate of Incorporation dated October 17, 2014 (20)
|
|
3.7
|
Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock Pursuant to Section 151 of the Delaware General Corporation Law. (8)
|
|
3.8
|
Amended and Restated By-Laws of the Company. (8)
|
|
3.9
|
Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock Pursuant to Section 151 of the Delaware General Corporation Law, filed on October 17, 2011. (14)
|
|
4.1 |
Warrant to Purchase 156,250 Shares of the common stock of HealthWarehouse.com, Inc. dated November 8, 2010 and Issued to HWH Lending, LLC, as Lender. (10)
|
|
4.2 |
Warrant to Purchase 156,250 Shares of common stock of HealthWarehouse.com, Inc. dated November 8, 2010 and issued to HWH Lending, LLC as Lender. (10)
|
|
4.3 |
Warrant to Purchase 156,250 Shares of common stock of HealthWarehouse.com, Inc. dated November 8, 2010 and issued to Milfam I L.P. (10)
|
|
4.4
|
Warrant to Purchase 156,250 Shares of common stock of HealthWarehouse.com, Inc. dated November 8, 2010 and issued to Milfam I L.P. (10)
|
|
4.5
|
Senior Secured Convertible Promissory Note dated November 8, 2010 in the amount of $500,000 payable by the Company to the order of Milfam I L.P. (8)
|
|
4.6
|
Senior Secured Convertible Promissory Note dated November 8, 2010 in the amount of $500,000 payable by the Company to the order of HWH Lending, LLC. (8)
|
|
4.7
|
Senior Secured Promissory Note dated September 2, 2011 in the principal amount of $1,500,000 payable by the Company to the order of HWH Lending, LLC. (13)
|
|
4.8
|
Warrant to Purchase 250,000 Shares of the common stock of HealthWarehouse.com, Inc., dated September 2, 2011 and Issued to HWH Lending, LLC. (13)
|
|
4.9
|
Senior Secured Promissory Note dated September 2, 2011 in the principal amount of $1,500,000 payable by the Company to the order of Milfam I, L.P. (13)
|
|
4.10
|
Warrant to Purchase 250,000 shares of the common stock of Healthwarehouse.com, Inc. dated September 2, 2011 and issued to Milfam I, L.P. (13)
|
|
4.11
|
Form of common stock Purchase Warrant. (14)
|
|
4.12
|
Warrant to Purchase 750,000 shares of the common stock of HealthWarehouse.com, Inc. dated March 18, 2013 and issued to Melrose Capital Advisors, LLC. (15)
|
|
4.13
|
Warrant to Purchase 150,000 shares of the common stock of HealthWarehouse.com, Inc. dated September 30, 2013 and issued to Melrose Capital Advisors, LLC. (17)
|
|
4.14
|
Warrant to Purchase 150,000 shares of the common stock of HealthWarehouse.com, Inc. dated October 30, 2013 and issued to Steven Deixler. (17)
|
|
4.15
|
Warrant to Purchase 150,000 shares of the common stock of HealthWarehouse.com, Inc. dated March 28, 2014 and issued to Melrose Capital Advisors, LLC. (17)
|
|
4.16
|
Warrant to Purchase 75,000 shares of common stock of HealthWarehouse.com, Inc. dated April 29, 2014 and issued to Melrose Capital Advisors, LLC. (18)
|
|
4.17
|
Warrant to Purchase 500,000 shares of the common stock of HealthWarehouse.com, Inc. dated March 1, 2015 and issued to Melrose Capital Advisors, LLC. (20)
|
|
4.18
|
Common Stock Purchase Warrant dated April 3, 2015 for 137,430 common shares (21)
|
|
4.19
|
Warrant to Purchase 250,000 shares of the common stock of Healthwarehouse.com, Inc. dated November 11, 2015 and issued to Melrose Capital Advisors, LLC. (22)
|
|
4.20
|
Letter Agreement dated November 11, 2015 between the Company and Melrose Capital Advisors, LLC. (22)
|
|
10.1
|
Loan and Security Agreement dated November 8, 2010 among HealthWarehouse.com, Inc. and Hwareh.com, Inc., as Borrowers, and HWH Lending, LLC and Milfam I L.P. as Lenders. (8)
|
|
10.2
|
Securities Purchase Agreement dated August 3, 2011. (11)
|
|
10.3
|
Investor Rights Agreement dated August 3, 2011. (11)
|
|
10.4
|
Indemnification Agreement dated August 3, 2011. (11)
|
|
10.5
|
Lease agreement dated June15, 2011 between the Company and the landlord for 7107 Industrial Road Florence, Kentucky. (12)
|
|
10.6
|
Loan and Security Agreement dated September 2, 2011 among HealthWarehouse.com, Inc., Hwareh.com, Inc. and Hocks.com, Inc., as Borrowers, and HWH Lending LLC, and Milfam I, L.P., as Lenders. (13)
|
|
10.7
|
Stock Purchase Agreement dated September 2, 2011 between the Company and Rock Castle Holdings, LLC. (13)
|
|
10.8
|
Securities Purchase Agreement dated October 17, 2011. (14)
|
|
10.9
|
Amendment No. 1 to Investor Rights Agreement dated October 17, 2011. (14)
|
10.10
|
Form of Subscription Agreement for common stock. (14)
|
|
10.11
|
Security Agreement dated March 28, 2013 between HealthWarehouse.com, Inc., Hwareh.com, Inc. and Hocks.com, Inc., as Debtors, and Melrose Capital Advisors, Inc. as secured party. (15)
|
|
10.12
|
Security Agreement dated September 30, 2013 between Pagosa Health LLC, as Debtor, and Melrose Capital Advisors, Inc. as secured party. (17)
|
|
10.13
|
Promissory Note dated October 30, 2013 in the amount of $100,000 payable by the Company to the order of Steven Deixler (17)
|
|
10.14
|
Subordination Agreement dated October 30, 2013 among Melrose Capital Advisors, LLC, the Company and Steven Deixler (17)
|
|
10.15
|
Deposit Account Control Agreement dated August 18, 2014 between the Company, Melrose Capital Advisors, LLC and The Bank of Kentucky, Inc. (20)
|
|
10.16
|
2009 Incentive Compensation Plan (6)
|
|
10.17
|
2014 Equity Incentive Plan (16)
|
|
10.18
|
Waiver letter dated March 10, 2015 from Melrose Capital Advisors, LLC (20)
|
|
10.19
|
Third Amendment to Lease agreement dated as of April 27, 2015 between the Company and the landlord for 7107 Industrial Road Florence, Kentucky. (21)
|
|
10.20
|
Loan Extension Agreement dated November 11, 2015 between the Company and Melrose Capital Advisers, LLC. (22)
|
|
10.21
|
Amended and Restated Promissory Note dated January 19, 2016 between the Company and Melrose Capital Advisors, LLC. (23)
|
|
10.22
|
Employment Agreement dated January 11, 2016 between the Company and Dan Seliga. (24)
|
|
10.23
|
Fourth Amendment to Lease agreement dated as of March 15, 2016 between the Company and the landlord for 7017 Industrial Road Florence, Kentucky *
|
|
10.24
|
Stock Purchase Agreement dated April 20, 2016 between the Company and MVI Partners, LLC to purchase 494,913 shares of the Series B Preferred Stock of the Company (25)
|
|
10.25
|
Employment Agreement dated May 9, 2016 between the Company and Lalit Dhadphale (26)
|
|
10.26
|
Amendment to Amended and Restated Promissory Note dated June 29, 2016 between the Company and Melrose Capital Advisors, LLC. (27)
|
|
10.27
|
Exchange Agreement dated July 28, 2016 between the Company and Dellave Holdings, Inc. (28)
|
|
10.28
|
Amendment to Amended and Restated Promissory Note dated August 15, 2016 between the Company and Melrose Capital Advisors, LLC. (29)
|
|
10.29
|
Amendment to Amended and Restated Promissory Note dated September 30, 2016 between the Company and Melrose Capital Advisors, LLC. (30)
|
|
10.30
|
Second Amendment to Amended and Restated Promissory Note dated October 14, 2016 between the Company and Melrose Capital Advisors, LLC. (31)
|
|
10.31
|
Third Amendment to Amended and Restated Promissory Note dated October 31, 2016 between the Company and Melrose Capital Advisors, LLC. (32)
|
|
10.32
|
Employment Agreement dated November 4, 2016 between the Company and Jeffrey T. Holtmeier (32)
|
10.33
|
Fourth Amendment to Amended and Restated Promissory Note dated November 30, 2016 between the Company and Melrose Capital Advisors, LLC. (33)
|
|
10.34
|
Separation and Release Agreement dated January 16, 2017 between the Company and Jeffrey T. Holtmeier (34)
|
|
10.35
|
Employment Agreement dated January 18, 2017 between the Company and John Pauly (34)
|
|
10.36
|
Fifth Amendment to Amended and Restated Promissory Note dated November 30, 2016 between the Company and Melrose Capital Advisors, LLC. (35)
|
|
10.37
|
||
21.1
|
||
23.1
|
||
31.1
|
||
31.2
|
||
32.1
|
||
32.2
|
||
101.INS
|
XBRL Instance Document *
|
|
101.SCH
|
XBRL Schema Document *
|
|
101.CAL
|
XBRL Calculation Linkbase Document *
|
|
101.DEF
|
XBRL Definition Linkbase Document *
|
|
101.LAB
|
XBRL Label Linkbase Document *
|
|
101.PRE
|
XBRL Presentation Linkbase Document *
|
1
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on May 15, 2009.
|
2
|
Incorporated by reference to the Company's Annual Report on Form 10-K SB filed on March 29, 2006.
|
3
|
Incorporated by reference to the Company's Annual Report on Form 10-K filed on March 27, 2009.
|
4
|
Incorporated by reference to the Company's Annual Report Amendment on Form 10-KA filed on May 14, 2009.
|
5
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on August 6, 2009.
|
6
|
Incorporated by reference to the Company's Current Report Amendment on Form 8-KA filed on May 26, 2009.
|
7
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on July 21, 2010.
|
8
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on November 12, 2010.
|
9
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on February 16, 2011.
|
10
|
Incorporated by reference to the Company's Annual Report on Form 10-K filed on April 15, 2011.
|
11
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on August 8, 2011.
|
12
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on August 15, 2011.
|
13
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on September 6, 2011.
|
14
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on October 20, 2011.
|
15
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on April 3, 2013.
|
16
|
Incorporated by reference to the Company's Definitive Proxy Statement filed on September 26, 2014.
|
17
|
Incorporated by reference to the Company's Annual Report on Form 10-K filed on April 14, 2014.
|
18
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on May 16, 2014.
|
19
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2014 filed on November 14, 2014.
|
20
|
Incorporated by reference to the Company's Annual Report on Form 10-K filed on March 30, 2015.
|
21
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2015 filed on May 11, 2015.
|
22
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2015 filed on November 13, 2015.
|
23
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on January 25, 2016.
|
24
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on January 14, 2016.
|
25
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on April 21, 2016.
|
26
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2016 filed on May 12, 2016.
|
27
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on July 1, 2016.
|
28
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on August 3, 2016.
|
29
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on August 19, 2016.
|
30
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on October 4, 2016.
|
31
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on October 11, 2016.
|
32
|
Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the three months ended September 30, 2016 filed on November 8, 2016.
|
33
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on November 30, 2016.
|
34
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on January 20, 2017.
|
35
|
Incorporated by reference to the Company's Current Report on Form 8-K filed on March 3, 2017.
|
Dated: March 20, 2017
|
HEALTHWAREHOUSE.COM, INC.
By:
/s/ John C. Pauly
John C. Pauly
Chief Operating Officer, Interim President
and Chief Executive Officer
|
Name
|
Title
|
Date
|
||
/s/ John C. Pauly
|
Chief Operating Officer, Interim President and
|
March 20, 2017
|
||
John C. Pauly
|
Chief Executive Officer, and Principal Financial
|
|||
and Accounting Officer
|
||||
/s/ Brian A. Ross
|
Director
|
March 20, 2017
|
||
Brian A. Ross
|
||||
/s/ Mark D. Scott
|
Director
|
March 20, 2017 | ||
Mark D. Scott
|
||||
/s/ Dr. Stephen J. Weiss
|
Director
|
March 20, 2017
|
||
Dr. Stephen J. Weiss
|
||||
/s/ Joseph Heimbrock
|
Director
|
March 20, 2017
|
||
Joseph Heimbrock
|
||||
/s/ J. Robert Symjunas
|
Director
|
March 20, 2017 | ||
J. Robert Symjunas
|
Page(s)
|
||
53
|
||
Consolidated Financial Statements:
|
||
54
|
||
55
|
||
56 to 57
|
||
58
|
||
59 to 78
|
Convertible
|
||||||||||||||||||||||||||||||||||||||||
Series B
|
Additional
|
Total
|
||||||||||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-In
|
Employee
|
Treasury Stock
|
Accumulated
|
Stockholders'
|
||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Advances
|
Shares
|
Amount
|
Deficit
|
Deficiency
|
|||||||||||||||||||||||||||||||
Balances, December 31, 2014
|
451,879
|
$
|
452
|
38,749,595
|
$
|
38,750
|
$
|
29,966,040
|
$
|
(2,143
|
)
|
1,179,212
|
$
|
(3,419,715
|
)
|
$
|
(30,212,865
|
)
|
$
|
(3,629,481
|
)
|
|||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
320,366
|
-
|
-
|
-
|
-
|
320,366
|
||||||||||||||||||||||||||||||
Cashless exercise of warrants into
|
||||||||||||||||||||||||||||||||||||||||
common stock
|
-
|
-
|
94,779
|
94
|
(94
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||
Issuance of Series B
preferred stock as
|
||||||||||||||||||||||||||||||||||||||||
payment-in-kind for dividend
|
31,633
|
32
|
-
|
-
|
298,886
|
-
|
-
|
-
|
-
|
298,918
|
||||||||||||||||||||||||||||||
Contractual dividends
on Series B convertible
|
||||||||||||||||||||||||||||||||||||||||
preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(319,854
|
)
|
(319,854
|
)
|
||||||||||||||||||||||||||||
Warrants issued as debt discount in
|
||||||||||||||||||||||||||||||||||||||||
connection with notes payable
|
-
|
-
|
-
|
-
|
69,600
|
-
|
-
|
-
|
-
|
69,600
|
||||||||||||||||||||||||||||||
Debt discount related
to repricing of warrants
|
||||||||||||||||||||||||||||||||||||||||
in connection with notes payable
|
-
|
-
|
-
|
-
|
1,800
|
-
|
-
|
-
|
-
|
1,800
|
||||||||||||||||||||||||||||||
Change in fair value
of collateral securing
|
||||||||||||||||||||||||||||||||||||||||
employee advances
|
-
|
-
|
-
|
-
|
-
|
2,143
|
-
|
-
|
-
|
2,143
|
||||||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(626,682
|
)
|
(626,682
|
)
|
||||||||||||||||||||||||||||
Balances, December 31, 2015
|
483,512
|
$
|
484
|
38,844,374
|
$
|
38,844
|
$
|
30,656,598
|
$
|
-
|
1,179,212
|
$
|
(3,419,715
|
)
|
$
|
(31,159,401
|
)
|
$
|
(3,883,190
|
)
|
Convertible
|
||||||||||||||||||||||||||||||||||||
Series B
|
Additional |
Total
|
||||||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-In
|
Treasury Stock
|
Accumulated
|
Stockholders'
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Deficit
|
Deficiency
|
||||||||||||||||||||||||||||
Balances, December 31, 2015
|
483,512
|
$
|
484
|
38,844,374
|
$
|
38,844
|
$
|
30,656,598
|
1,179,212
|
$
|
(3,419,715
|
)
|
$
|
(31,159,401
|
)
|
$
|
(3,883,190
|
)
|
||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
327,202
|
-
|
-
|
-
|
327,202
|
|||||||||||||||||||||||||||
Cashless exercise of warrants into
|
||||||||||||||||||||||||||||||||||||
common stock
|
-
|
-
|
1,155,179
|
1,155
|
(1,155
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||
Exercise of stock options
|
||||||||||||||||||||||||||||||||||||
into common stock
|
16,666
|
17
|
1,816
|
-
|
-
|
-
|
1,833
|
|||||||||||||||||||||||||||||
Cashless exercise of stock options
|
||||||||||||||||||||||||||||||||||||
into common stock
|
-
|
-
|
1,492,078
|
1,492
|
(1,492
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||
Conversion of accounts payable
|
||||||||||||||||||||||||||||||||||||
into common stock
|
-
|
-
|
2,253,528
|
2,254
|
696,340
|
-
|
-
|
-
|
698,594
|
|||||||||||||||||||||||||||
Issuance of Series B preferred stock
|
||||||||||||||||||||||||||||||||||||
as payment-in-kind for dividend
|
33,847
|
33
|
-
|
-
|
319,820
|
-
|
-
|
-
|
319,853
|
|||||||||||||||||||||||||||
Contractual dividends on Series B
|
||||||||||||||||||||||||||||||||||||
convertible preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(342,233
|
)
|
(342,233
|
)
|
|||||||||||||||||||||||||
Warrants issued as debt discount in
|
||||||||||||||||||||||||||||||||||||
connection with notes payable
|
-
|
-
|
-
|
-
|
15,500
|
-
|
-
|
-
|
15,500
|
|||||||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,408,203
|
)
|
(1,408,203
|
)
|
|||||||||||||||||||||||||
Balances, December 31, 2016
|
517,359
|
$
|
517
|
43,761,825
|
$
|
43,762
|
$
|
32,014,629
|
1,179,212
|
$
|
(3,419,715
|
)
|
$
|
(32,909,837
|
)
|
$
|
(4,270,644
|
)
|
||||||||||||||||||
Year Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$
|
(1,408,203
|
)
|
$
|
(626,682
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Change in fair value of collateral securing employee advances
|
-
|
2,143
|
||||||
Depreciation and amortization
|
149,553
|
184,320
|
||||||
Stock-based compensation
|
327,202
|
320,366
|
||||||
Gain on settlement of accounts payable
|
(99,774
|
)
|
(111,374
|
)
|
||||
Amortization of debt discount
|
15,500
|
129,767
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(13,804
|
)
|
49,259
|
|||||
Inventories
|
(26,768
|
)
|
(38,411
|
)
|
||||
Prepaid expenses and other current assets
|
(3,858
|
)
|
(21,516
|
)
|
||||
Accounts payable – trade
|
527,873
|
(241,915
|
)
|
|||||
Accounts payable – related parties
|
(862
|
)
|
(83,452
|
)
|
||||
Accrued expenses and other current liabilities
|
416,311
|
(110,786
|
)
|
|||||
Net cash used in operating activities
|
(116,830
|
)
|
(548,281
|
)
|
||||
Cash flows from investing activities
|
||||||||
Change in restricted cash
|
|
|
(98,167
|
)
|
|
|
50,000
|
|
Capital expenditures
|
(9,703
|
)
|
(6,331
|
)
|
||||
Website development costs
|
(13,700
|
)
|
(17,972
|
)
|
||||
Net cash (used in) provided by investing activities
|
(121,570
|
)
|
25,697
|
|||||
Cash flows from financing activities
|
||||||||
Principal payments on equipment leases payable
|
(46,143
|
)
|
(64,101
|
)
|
||||
Proceeds from exercise of common stock options
|
1,833
|
-
|
||||||
Proceeds from issuance of notes payable
|
358,911
|
250,000
|
||||||
Repayment of notes payable
|
(50,000
|
)
|
(108,911
|
)
|
||||
Repayment of notes payable - related parties
|
(33,590
|
)
|
(49,206
|
)
|
||||
Net cash provided by financing activities
|
231,011
|
27,782
|
||||||
Net decrease in cash
|
(7,389
|
)
|
(494,802
|
)
|
||||
Cash - beginning of period
|
11,217
|
506,019
|
||||||
Cash - end of period
|
$
|
3,828
|
$
|
11,217
|
||||
Supplemental Cash Flow Information:
|
||||||||
Interest paid
|
$
|
95,186
|
$
|
78,489
|
||||
Non-cash investing and financing activities:
|
||||||||
Issuance of Series B preferred stock for settlement of accrued dividends
|
$
|
319,853
|
$
|
298,918
|
||||
Cashless exercise of warrants and stock options into common stock
|
$
|
2,647
|
$
|
95
|
||||
Warrants issued in connection with notes payable
|
$
|
15,500
|
$
|
71,400
|
||||
Accrual of contractual dividends on Series B convertible preferred stock
|
$
|
342,233
|
$
|
319,854
|
||||
Conversion of accounts payable to notes payable - related party
|
$
|
77,606
|
$
|
-
|
||||
Conversion of accounts payable to common stock
|
$
|
698,594
|
$
|
-
|
December 31,
|
||||||||
2016
|
2015
|
|||||||
Options
|
1,294,204
|
5,341,284
|
||||||
Warrants
|
7,806,118
|
10,046,198
|
||||||
Series B Convertible Preferred Stock
|
6,032,406
|
5,507,202
|
||||||
Total potentially dilutive shares
|
15,132,728
|
20,894,684
|
December 31,
|
Useful Life
|
||||||||
2016
|
2015
|
(Years)
|
|||||||
Computer Software
|
$
|
230,299
|
$
|
230,299
|
5 years
|
||||
Equipment
|
549,365
|
548,156
|
15 years
|
||||||
Office Furniture and Equipment
|
98,192
|
95,754
|
7 years
|
||||||
Computer Hardware
|
32,992
|
32,992
|
5 years
|
||||||
Leasehold Improvements
|
309,374
|
303,318
|
(a)
|
||||||
Total
|
1,220,222
|
1,210,519
|
|||||||
Less: Accumulated Depreciation
|
(888,463
|
)
|
(801,271
|
)
|
|||||
Property and Equipment, Net
|
$
|
331,759
|
$
|
409,248
|
December 31,
|
||||||||
2016
|
2015
|
|||||||
Salaries and Benefits
|
$
|
110,819
|
$
|
64,007
|
||||
Dividend Payable
|
342,233
|
319,854
|
||||||
Advertising
|
75,000
|
76,639
|
||||||
Accrued Interest
|
44,249
|
44,249
|
||||||
Accrued Rent
|
51,181
|
49,614
|
||||||
Proxy & Solicitation Costs
|
130,000
|
-
|
||||||
Severance
|
232,417
|
-
|
||||||
Deferred Rent
|
-
|
25,852
|
||||||
Other
|
50,457
|
17,450
|
||||||
$
|
1,036,356
|
$
|
597,665
|
December 31,
|
||||||||
2016
|
2015
|
|||||||
Senior Note
|
$
|
1,200,000
|
$
|
891,089
|
||||
Promissory Note
|
100,000
|
100,000
|
||||||
$
|
1,300,000
|
$
|
991,089
|
•
|
Audit: Ross (Chair), Scott and Weiss
|
•
|
Compensation: Ross, Scott (Chair)
|
•
|
Governance and Nominating: Heimbrock, Scott, Weiss (Chair)
|
Year Ended December 31,
|
||||
2016
|
2015
|
|||
Risk-free interest rate
|
1.00% to 2.12%
|
1.35% to 2.28%
|
||
Expected dividend yield
|
0.00%
|
0.00%
|
||
Expected volatility
|
196% to 200.0%
|
195% to 199.0%
|
||
Weighted average expected life
|
||||
(contractual term) in years
|
5.5 to 10.0
|
5.5 to 10.0
|
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding, January 1, 2015
|
3,944,557
|
$
|
1.27
|
|||||||||||||
Granted
|
2,491,200
|
0.10
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
(1,094,473
|
)
|
1.40
|
|||||||||||||
Outstanding, December 31, 2015
|
5,341,284
|
$
|
0.70
|
|||||||||||||
Granted
|
660,265
|
0.30
|
||||||||||||||
Exercised
|
(3,108,141
|
)
|
0.16
|
|||||||||||||
Forfeited
|
(1,599,204
|
)
|
1.73
|
|||||||||||||
Outstanding, December 31, 2016
|
1,294,204
|
$
|
0.51
|
8.0
|
$
|
145,533
|
||||||||||
Exercisable, December 31, 2016
|
804,204
|
$
|
0.76
|
7.7
|
$
|
54,267
|
||||||||||
Options Outstanding
|
Options Exercisable
|
||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||
Range of
|
Average
|
Outstanding
|
Average
|
Average
|
Exercisable
|
||||||||||||
Exercise
|
Exercise
|
Number of
|
Exercise
|
Remaining Life
|
Number of
|
||||||||||||
Price
|
Price
|
Options
|
Price
|
In Years
|
Options
|
||||||||||||
$0.09 - $0.12
|
$0.10
|
786,667
|
$0.11
|
8.5
|
296,667
|
||||||||||||
$0.25 - $0.35
|
0.32
|
262,087
|
0.32
|
9.8
|
262,087
|
||||||||||||
$0.53 - $1.60
|
0.87
|
188,450
|
0.87
|
4.3
|
188,450
|
||||||||||||
$4.10 - $6.99
|
5.80
|
57,000
|
5.80
|
5.1
|
57,000
|
||||||||||||
$0.09 - $6.99
|
$0.51
|
1,294,204
|
$0.76
|
7.7
|
804,204
|
Year Ended December 31,
|
||||
2016
|
2015
|
|||
Risk-free interest rate
|
1.58%
|
1.22% to 1.75%
|
||
Expected dividend yield
|
0.00%
|
0.00%
|
||
Expected volatility
|
200.0%
|
194.0% to 197.0%
|
||
Contractual term in years
|
5.00
|
2.90 to 7.50
|
Weighted
|
|||||||||||||
Weighted
|
Average
|
||||||||||||
Average
|
Remaining
|
Aggregate
|
|||||||||||
Number of
|
Exercise
|
Life
|
Intrinsic
|
||||||||||
Warrants
|
Price
|
In Years
|
Value
|
||||||||||
Outstanding, January 1, 2015
|
9,339,044
|
$
|
0.45
|
||||||||||
Granted
|
887,430
|
0.10
|
|||||||||||
Exercised
|
(137,430
|
)
|
0.09
|
||||||||||
Forfeited
|
(42,846
|
)
|
3.00
|
||||||||||
Outstanding, December 31, 2015
|
10,046,198
|
$
|
0.41
|
||||||||||
Granted
|
75,000
|
0.25
|
|||||||||||
Exercised
|
(1,795,080
|
)
|
0.13
|
||||||||||
Forfeited
|
(520,000
|
)
|
2.90
|
||||||||||
Outstanding, December 31, 2016
|
7,806,118
|
$
|
0.30
|
2.4
|
$ |
91,257
|
|||||||
Exercisable, December 31, 2016
|
7,806,118
|
$
|
0.30
|
2.4
|
$ |
91,257
|
Warrants Outstanding
|
Warrants Exercisabe
|
|||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||
Range of
|
Average
|
Outstanding
|
Average
|
Average
|
Exercisable
|
|||||||||||
Exercise
|
Exercise
|
Number of
|
Exercise
|
Remaining Life
|
Number of
|
|||||||||||
Price
|
Price
|
Warrants
|
Price
|
In Years
|
Warrants
|
|||||||||||
$0.15 - $0.25
|
$0.25
|
2,116,120
|
$0.25
|
1.7
|
2,116,120
|
|||||||||||
$0.30 - $0.35
|
0.30
|
5,659,998
|
0.30
|
2.7
|
5,659,998
|
|||||||||||
$4.95
|
4.95
|
30,000
|
4.95
|
0.8
|
30,000
|
|||||||||||
$0.15 - $4.95
|
$0.30
|
7,806,118
|
$0.30
|
2.4
|
7,806,118
|
Years ending December 31
,
|
Amount
|
|||
2017
|
$
|
79,783
|
||
2018
|
82,633
|
|||
2019
|
85,482
|
|||
Total minimum lease payments
|
$
|
247,898
|
Year Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Federal:
|
||||||||
Current
|
$
|
-
|
$
|
-
|
||||
Deferred
|
(453,586
|
)
|
(269,394
|
)
|
||||
State and local:
|
||||||||
Current
|
-
|
-
|
||||||
Deferred
|
(53,684
|
)
|
(21,621
|
)
|
||||
(507,270
|
)
|
(291,015
|
)
|
|||||
Change in valuation allowance
|
507,270
|
291,015
|
||||||
Income tax provision (benefit)
|
$
|
-
|
$
|
-
|
December 31,
|
||||||||
2016
|
2015
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
$
|
6,098,963
|
$
|
5,585,989
|
||||
Stock-based compensation
|
700,295
|
767,443
|
||||||
Inventory reserves
|
8,842
|
8,800
|
||||||
Allowance for bad debt
|
-
|
17,915
|
||||||
Deferred Revenue
|
3,318
|
2,575
|
||||||
Deferred Rent
|
-
|
9,824
|
||||||
Contingent Liability
|
-
|
1,910
|
||||||
Charitable contribution carryforwards
|
2,711
|
5,772
|
||||||
Accruals
|
104,397
|
22,491
|
||||||
Total deferred tax assets
|
6,918,526
|
6,422,719
|
||||||
Valuation allowance
|
(6,886,459
|
)
|
(6,379,189
|
)
|
||||
Deferred tax assets, net of valuation allowance
|
32,067
|
43,530
|
||||||
Deferred tax liabilities:
|
||||||||
Property and equipment
|
(32,599
|
)
|
(29,881
|
)
|
||||
Web Development
|
532
|
(13,649
|
)
|
|||||
Deferred tax liabilities
|
$
|
(32,067
|
)
|
$
|
(43,530
|
)
|
||
Net deferred tax assets
|
$
|
-
|
$
|
-
|
||||
Change in valuation allowance
|
$
|
502,270
|
$
|
291,015
|
Year Ended December 31,
|
||||||
2016
|
2015
|
|||||
US federal statutory rate
|
(34.0%)
|
(34.0%)
|
|
|||
State tax rate, net of federal benefit
|
(4.0%)
|
4.0%
|
|
|||
Permanent differences:
|
||||||
Stock based compensation
|
2.5%
|
12.3%
|
|
|||
Adjustments to prior deferred tax balances
|
(0.5%)
|
(20.7%)
|
|
|||
Change in valuation allowance
|
36.0%
|
46.4%
|
|
|||
Income tax provision (benefit)
|
0.0%
|
0.0%
|
|
1 Year HealthWarehouse com (QB) Chart |
1 Month HealthWarehouse com (QB) Chart |
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