1
HEALTHWAREHOUSE.COM, INC.
A Delaware Corporation
7107 Industrial Road
Florence, KY 41042
(800)748-7001
www.healthwarehouse.com
support@healthwarehouse.com
SIC Code: 5912 - Drugstores and Proprietary Stores
Annual Report
For the year ended December 31, 2024
As of December 31, 2024, the number of shares outstanding of our Common Stock was 55,614,036.
As of September 30, 2024, the number of shares outstanding of our Common Stock was 55,271,180.
Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933 and Rule
12b-2 of the Exchange Act of 1934).
Yes No
Indicate by check mark if whether the company’s shell status has changed since the previous reporting period.
Yes No
Indicate by check mark whether a Change in Control of the company has occurred over this reporting period.
Yes No
We previously were a shell company, therefore the exemption offered pursuant to Rule 144 is not
available. Anyone who purchased securities directly or indirectly from us or any of our affiliates in
a transaction or chain of transactions not involving a public offering cannot sell such securities in an
open market transaction.
2
HEALTHWAREHOUSE.COM, INC.
Annual Report
Table of Contents
PART A
GENERAL COMPANY INFORMATION
Page
Item
1
Name of Issuer and its Predecessors
4
2
Address of Issuer’s principal executive office
4
3
Jurisdiction and date of incorporation
4
PART B
SHARE STRUCTURE
4
Title and class of securities outstanding
4
5
Par or stated value and description of securities
5
6
Number of shares or total amount of securities outstanding for
each class of securities authorized
5
7
Name and address of transfer agent
6
PART C
BUSINESS INFORMATION
8
Issuer’s business
6
9
Products and services offered
13
10
Issuer’s Facilities
14
PART D
MANAGEMENT STRUCTURE AND FINANCIAL
INFORMATION
11
Officers, Board of Directors, Control Persons
14
12
Financial information – For year ended December 31, 2024
19
13
Financial information – For year ended December 31, 2023 and
2022
19
14
Third Party Providers
19
15
Management’s Discussion and Analysis
20
PART E
ISSUANCE HISTORY
16
Securities offerings and shares issued in 2023 and 2024
26
PART F
EXHIBITS
17
Material contracts
27
18
Articles of Incorporation and Bylaws
28
19
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
28
20
Issuer’s Certifications
28
3
PART II
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors’ Report
30
Consolidated Balance Sheets – as of December 31, 2024 and
2023
32
Consolidated Statements of Operations – Years ended
December 31, 2024 and 2023
33
Consolidated Statements of Changes in Stockholders’
Deficiency – Years ended December 31, 2024 and 2023
34
Consolidated Statements of Cash Flows –Years ended
December 31, 2024 and 2023
35
Notes to the Consolidated Financial Statements
36
4
PART A – GENERAL COMPANY INFORMATION
1) Name of the issuer and its predecessors (if any):
HealthWarehouse.com, Inc. (the “Company”, “Issuer” or “HEWA”).
Formerly Ion Networks, Inc., formed on August 5, 1998.
Name changed to Clacendix, Inc. on January 3, 2008.
Name changed to HealthWarehouse.com, Inc. on July 31, 2009.
2) Address of issuer’s principal executive offices and issuer’s place of business.
7107 Industrial Road, Florence, KY 41042
Phone: (800)748-7001
www.healthwarehouse.com; www.healthwarehouse.pharmacy
Investor Relations contact: Daniel Seliga, CFO, dseliga@healthwarehouse.com, (800)748-7001
Check box if principal executive office and the principal place of business are the same address
3) Jurisdiction and date of issuer’s incorporation
The Company is a Delaware corporation, organized on August 5, 1998. The Company is currently active
and in good standing.
PART B – SHARE STRUCTURE
4) Title and class of securities outstanding.
Title and Class of Security
Trading
Symbol
CUSIP
Common Stock
HEWA
42227G202
Series B Convertible
Preferred Stock
Not
Applicable
Not Applicable
Series C Convertible
Redeemable Preferred Stock
Not
Applicable
Not Applicable
5
5) Par or stated value and description of security.
Title and Class of
Security
Par
Value
Description
Common Stock
$0.001
One (1) voting right per share; eligible for dividends if and when
declared; no preemptive rights.
Convertible
Preferred Stock –
Series B
$0.001
Issued at $9.45 per share in November 2010. Voting rights equal to one
vote for each common share equivalent. Liquidation preference equal to
$7,969,139 at December 31, 2024, which is the sum of the original purchase
price of $3,451,754, the value of shares issued as payment-in-kind
dividends of $1,437,289 and accrued dividends of $3,080,096. Receives
preferred dividends equal to 7% of all outstanding shares in either cash or
payment-in-kind. Convertible at option of holder at any time at the dilution
adjusted conversion price ($0.64 per share as of December 31, 2024).
Convertible
redeemable
Preferred Stock –
Series C
$0.001
Issued at $100 per share on October 11, 2011. One (1) voting right per
share. Liquidation value of $650,000 on December 31, 2024. The holder
can exercise redemption rights at $100 per share after January 1, 2028.
Convertible at option of holder into common shares at a conversion price
of 80% of the 30-day weighted average closing share price which was $0.07
per share at December 31, 2024 (limited to 2,500 shares per quarter).
Mandatory conversion if 60-day weighted average closing share price of
the common stock is $0.45 per share or above and minimum 60-day trading
volume of at least 500,000 shares.
6) Number of shares or total amount of the securities outstanding for each class of securities authorized.
Security information as of (a) December 31, 2024 and (b) December 31, 2023:
Title and
Class of
Security
Total Shares
Authorized
Total Shares
Outstanding
Public Float
Beneficial
Shareholders
owning >=
100 shares
Shareholders
of Record
Common
Stock
(a)175,000,000
(b)175,000,000
(a) 55,614,036
(b) 54,683,768
(a) 12,859,817
(b) 13,709,183
(a) 177
(b) 178
(a) 242
(b) 244
Preferred
Stock –
Series B
(a) 790,000
(b) 790,000
(a) 517,359
(b) 517,359
(a) -0-
(b) -0-
(a) 2
(b) 2
(a) 2
(b) 2
Preferred
Stock –
Series C
(a) 10,000
(b) 10,000
(a) 6,500
(b) 6,500
(a) -0-
(b) -0-
(a) 2
(b) 3
(a) 2
(b) 3
6
On April 14, 2017, HEWA filed a Form 15 with the Securities and Exchange Commission terminating the
registration of its Common Stock under Rule 12 g-4(a)(1) of the Securities Exchange Act of 1934. As of this
date, the Company has no plans to reregister the common stock under the Securities Exchange Act of 1934.
In October 2020, at the annual meeting of stockholders of the Corporation, the stockholders approved an
amendment to the Corporation’s Certificate of Incorporation to increase the number of authorized shares of
common stock that may be issued to 125,000,000, which was effective on October 9, 2020. At the meeting,
the stockholders also approved an amendment to the Corporation’s Certificate of Incorporation to effect a
reverse stock split of the Company’s common stock at a ratio of 1-for-50 and to decrease the number of
authorized shares of common stock in proportion to the reverse stock split. However, the Board of Directors
has not yet determined if or when to effect the reverse stock split.
In July 2022, at the annual meeting of stockholders of the Company, the stockholders approved an amendment
to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock
that may be issued to 175,000,000, which was effective on July 28, 2022.
7) Transfer Agent:
Equiniti Trust Company, LLC
55 Challenger Road, Floor 2
Ridgefield Park, NJ 07660
Phone: (800) 937-5449
Is the Transfer Agent registered under the Exchange Act? Yes: X No:
Regulatory authority: Securities and Exchange Commission
PART C – BUSINESS INFORMATION
8) Description of Issuer’s business operations:
HealthWarehouse.com, Inc. (the “Company”), a Delaware corporation, is an online pharmacy, licensed and
authorized to sell and deliver prescriptions in all 50 United States and the District of Columbia focusing on
the out-of-pocket prescription drug market, a market which is expected to continue to grow. The Company
sells directly to individual consumers who purchase prescription medications and over-the-counter (“OTC”)
products over the Internet. HealthWarehouse.com is currently 1 of 86 National Association of Boards of
Pharmacy (“NABP”) accredited digital pharmacies. In addition, the Company also provides fulfillment of
prescription medication, medical devices and other services to customers of other healthcare providers
including manufacturers and telemedicine and online services companies (“Partner Services”). The
Company’s primary SIC Code is 5912 - Drugstores and Proprietary Stores. The Company’s fiscal year end
is December 31.
We process all orders from our distribution center in Florence, Kentucky, 15 miles south of Cincinnati, Ohio.
Processing from this location allows us to reach up to 80% of the U.S. population by standard ground shipping
in two days from shipment date. To maintain high customer satisfaction ratings and quality control over our
entire process, we avoid drop shipping orders. Due to the relatively short lead time required to fill orders for
our products, usually 24 to 48 hours, order backlog has not proven material to our business.
Our customer support representatives operate from our call center in Florence, Kentucky, available 8 a.m. to
8 p.m. Eastern Time, Monday through Friday, and 9 a.m. to 5 p.m. Eastern Time on Saturday. Customers
can contact us via e-mail, online chat, fax, and telephone, plus our online Help Center outlines store policies
and provides answers to customers’ frequently asked questions.
7
Historical Background
In March 2007, Hwareh.com, Inc. (“Old HW”), a Delaware corporation formerly named
HealthWarehouse.com, Inc., was incorporated to carry on the business of selling OTC products. In November
2007, we began to develop the proprietary software necessary for our business, and in February 2008, we
successfully launched our website (www.healthwarehouse.com) running on our own proprietary software. In
March 2008, as part of our expansion into prescription drugs, we completed construction of a full-service
licensed pharmacy within our warehouse in Loveland, Ohio. This pharmacy passed inspection by the Ohio
State Pharmacy Board in April 2008. On August 1, 2011, the Company transferred its operations to the
current facility located in Florence, Kentucky.
In August 2009, Old HW completed a reverse merger into Clacendix, Inc., a shell company formerly known
as Ion Networks, Inc., a Delaware corporation formed on August 5, 1998. As of the date of the reverse
merger, the Company no longer operated as a shell company, changed its corporate name to
HealthWarehouse.com, Inc. and changed the name of its subsidiary to Hwareh.com, Inc.
The wholly-owned subsidiaries of HealthWarehouse.com, Inc. are Hwareh.com, Inc., Hocks.com, Inc., ION
Holding NV, ION Belgium NV. Hocks.com, Inc., ION Holding NV and ION Belgium NV are inactive
subsidiaries.
Reverse stock split
In October 2020, at the annual meeting of stockholders of the Corporation, the stockholders approved an
amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of the Company’s
common stock at a ratio of 1-for-50 and to decrease the number of authorized shares of common stock in
proportion to the reverse stock split. However, the Board of Directors has not yet determined if or when to
effect the reverse stock split.
Government Regulation
Federal and state laws and regulations govern many aspects of our business and are specific to pharmacies
and the sale of OTC drugs. Our pharmacy passed inspection by the Kentucky Board of Pharmacy and we are
presently licensed as a pharmacy authorized to dispense prescription medications to patients in 50 states and
the District of Columbia. We ship our non-prescription products to all 50 states, U.S. Territories, and
APO/FPO military and embassy addresses.
We believe the Company is in substantial compliance with all existing legal and regulatory requirements
material to the operation of our business and have standard operating procedures and controls in place
designed to assist in ensuring compliance with existing contractual requirements and state and federal law.
We diligently monitor and audit our adherence to these procedures and controls and take prompt corrective
and disciplinary action when appropriate. However, we cannot predict how courts or regulatory agencies may
interpret existing laws or regulations or what additional federal or state legislation or regulatory initiatives
may be enacted in the future regarding healthcare or the pharmacy industry, and the application of complex
standards to the operation of our business creates areas of uncertainty.
In addition, although we presently do not accept insurance reimbursement nor do we participate in federal
and state programs such as Medicare and Medicaid, this may change in the future. If in the future we do
accept reimbursement from commercial or governmental payors, we would be subject to extensive
government regulation including numerous state and federal laws and corresponding regulations directed at
preventing fraud and abuse and regulating reimbursement.
Among the federal and state laws and regulations that currently affect or may reasonably affect in the future
aspects of our business are the following:
8
Regulation of Our Pharmacy Operations
The practice of pharmacy is generally regulated at the state level by state boards of pharmacy. Our pharmacy
must be licensed in the state in which it is located. In some states, regulations require compliance with
standards promulgated by the United States Pharmacopeia (USP). The USP creates standards in the
packaging, storage and shipping of pharmaceuticals. Also, many of the states where we deliver
pharmaceuticals, including controlled substances, have laws and regulations that require non-resident
pharmacies to register with that state’s board of pharmacy or similar regulatory body. In addition, some states
have proposed laws to regulate online pharmacies; we may be subject to this legislation if passed.
Furthermore, if our pharmacy dispenses durable medical equipment items, such as infusion pumps, that bear
a federal legend requiring dispensing pursuant to a prescription, we would also be regulated by applicable
state and federal durable medical equipment laws.
Federal agencies further regulate our pharmacy operations. Pharmacies must register with the Drug
Enforcement Administration (DEA) and individual state-controlled substance authorities in order to dispense
controlled substances. We sell controlled substances and therefore require a DEA license and maintain said
DEA license. In addition, the FDA inspects facilities in connection with procedures to effect recalls of
prescription drugs. The Federal Trade Commission (FTC) also has requirements for interstate sellers of
goods. The U.S. Postal Service (USPS) has statutory authority to restrict the transmission of drugs and
medicines through the mail to a degree that could have an adverse effect on our mail-order operations. The
USPS historically has exercised this statutory authority only with respect to controlled substances. If the
USPS restricts our ability to deliver drugs through the mail, alternative means of delivery are available to us.
However, alternative means of delivery could be significantly more expensive. The Department of
Transportation has regulatory authority to impose restrictions on drugs inserted in the stream of commerce.
These regulations generally do not apply to the USPS and its operations.
Additionally, under the Omnibus Budget Reconciliation Act of 1990 and related state and local regulations,
our pharmacists are required to offer counseling to our customers about medication, dosage, delivery systems,
common side effects, adverse effects or interactions and therapeutic contraindications, proper storage,
prescription refill and other information deemed significant by the pharmacists. We are also subject to
requirements under the Controlled Substances Act and federal DEA regulations, as well as related state and
local laws and regulations, relating to our pharmacy operations, including registration, security,
recordkeeping and reporting requirements related to the purchase, storage and dispensing of controlled
substances, prescription drugs and some OTC drugs.
“Compendial standards,” which can also be called “official compendium,” means the standards for drugs
related to strength, purity, weight, quality, labeling and packing contained in the USP, official National
Formulary, or any supplement to any of them. Under the Food, Drug and Cosmetic Act of 1938, a drug
recognized by the Homeopathic Pharmacopeia of the United States must meet all compendial standards and
labeling requirements contained therein, or it will be considered adulterated (for example, lacking appropriate
strength, quality or purity; or containing poisonous or unsanitary ingredients) or misbranded (for example,
having a false or misleading label; or a label containing an inaccurate description of contents). If we add
homeopathic remedies to our product offerings which we currently do not offer, we will be required to comply
with the Food, Drug and Cosmetic Act. The distribution of adulterated or misbranded homeopathic remedies
or other drugs is prohibited under the Food, Drug and Cosmetic Act, and violations could result in substantial
fines and other monetary penalties, seizure of the misbranded or adulterated items, and/or criminal sanctions.
We also are required to comply with the Dietary Supplement Health and Education Act (DSHEA) when
selling dietary supplements and vitamins. The DSHEA generally governs the production, sale and marketing
(including labeling) of dietary supplements, and it requires reporting to the FDA of certain adverse events
regarding dietary supplements.
9
We believe that our operations have the appropriate licenses required under the laws of the states in which
they are located, and that we conduct our pharmacy operations in accordance with the laws and regulations
of these states.
Health Management Services Regulation
All states regulate the practice of medicine and require licensing under applicable state law. It is not our intent
to practice medicine and we have attempted to structure our website and our business to avoid violation of
state licensing requirements. However, the application of this area of the law to digital services such as ours
is not well established and, accordingly, a state regulatory authority could at some time allege that some
portion of our business violates these statutes. Any such allegation could harm our business. Further, any
liability based on a determination that we engaged in the unlawful practice of medicine may be excluded from
coverage under the terms of our general liability insurance policy.
Consumer Protection Laws
Most states have consumer protection laws designed to ensure that information provided to consumers is
adequate, fair and not misleading. We believe that our practices conform to the requirements of state
consumer protection laws. However, we may be subject to further scrutiny under these laws as they are often
interpreted broadly.
Regulation Relating to Data Transmission and Confidentiality of Patient Identifiable Information
Dispensing of prescriptions and management of prescription drug benefits require the ability to utilize patient-
specific information. Government regulation of the use of patient identifiable information has grown
substantially over the past several years. At the federal level, Congress enacted the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), which extensively regulates the transmission, use and
disclosure of health information by all participants in healthcare delivery, including physicians, hospitals,
insurers and other payers. To the extent that our pharmacy operations engage in certain electronic transactions
(including claims for reimbursement by third-party payors), we may be a covered entity which is directly
subject to these requirements. Additionally, regulation of the use of patient-identifiable information is likely
to increase. Many states have passed or are considering laws addressing the use and disclosure of health
information. These proposals vary widely, some relating to only certain types of information, others to only
certain uses, and yet others to only certain types of entities. These laws and regulations have a significant
impact on our operations, products and services, and compliance with them is a major operational
requirement. Regulations and legislation that severely restrict or prohibit our use of patient identifiable
information could materially adversely affect our business.
Sanctions for failing to comply with HIPAA standards include criminal and civil penalties. If we are found
to have violated any state or federal statute or regulation with regard to the confidentiality, dissemination or
use of patient medical information, we could be liable for significant damages, fines or penalties.
Fraudulent Billing, Anti-Kickback, Stark, Civil Monetary Penalties and False Claims Laws and Regulations
Our operations may in the future participate in federal and state programs such as Medicare and Medicaid. If
we do, we would be subject to extensive government regulation including numerous state and federal laws
and corresponding regulations directed at preventing fraud and abuse and regulating reimbursement. The
government’s Medicare and Medicaid regulations are complex and sometimes subjective and therefore may
require our management’s interpretation. If we were to participate in federal and state programs such as
Medicare and Medicaid, our compliance with Medicare and Medicaid regulations may be reviewed by federal
or state agencies, including the Department of Health and Human Services’ (HHS) Office of the Inspector
General (OIG), the Centers for Medicare and Medicaid Services (CMS), the Department of Justice (DOJ),
and the FDA. To ensure compliance with Medicare, Medicaid and other regulations, government agencies
conduct periodic audits to ensure compliance with various supplier standards and billing requirements.
10
Similarly, regional health insurance carriers routinely conduct audits and request patient records and other
documents to support claims submitted for payment.
Federal law prohibits the payment, offer, receipt or solicitation of any remuneration that is knowingly and
willfully intended to induce the referral of Medicare, Medicaid or other federal healthcare program
beneficiaries for the purchase, lease, ordering or recommendation of the purchase, lease or ordering of items
or services reimbursable under federal healthcare programs. These laws are commonly referred to as anti-
remuneration or anti-kickback laws. Several states also have similar laws, known as “all payor” statutes,
which impose anti-kickback prohibitions on services covered by any third-party payor (whether or not a
federal healthcare program). Anti-kickback laws vary between states, and courts have rarely interpreted them.
If in the future we accept third-party reimbursement, we may be more explicitly subject to these laws.
Courts, the OIG and some administrative tribunals have broadly interpreted the federal anti-kickback statute
and regulations. Courts have ruled that a violation of the statute may occur even if only one of the purposes
of a payment arrangement is to induce patient referrals or purchases. Should we enter the government payor
sector, it is possible that our current practices in the commercial sector may not be appropriate in the
government payor sector.
The Ethics in Patient Referrals Law (Stark Law) prohibits physicians from making a referral for certain
Medicare-covered health items or services if they, or their family members, have a financial relationship with
the entity receiving the referral. No bill may be submitted in connection with a prohibited referral. Violations
are punishable by civil monetary penalties upon both the person making the referral and the provider
rendering the service. Such persons or entities are also subject to exclusion from Medicare and Medicaid.
Many states have adopted laws similar to the Stark Law, which restrict the ability of physicians to refer
patients to entities with which they have a financial relationship.
The Federal False Claims Act prohibits the submission of a false claim or the making of a false record or
statement in order to secure a reimbursement from a government-sponsored program. In recent years, the
federal government has launched several initiatives aimed at uncovering practices that violate false claims or
fraudulent billing laws. Civil monetary penalties may be assessed for many types of conduct, including
conduct that is outlined in the statutes above and other federal statutes in this section. Under the Deficit
Reduction Act of 2005 (DRA), states are encouraged to pass state false claims act laws similar to the federal
statute.
Sanctions for fraudulent billing, kickback violations, Stark Law violations or violations of the False Claims
Act include criminal and civil penalties. If we do accept third-party reimbursement and/or participate in
federal payor programs in the future and are found to have violated any state or federal kickback, Stark Law
or False Claims Act law, we could be liable for significant damages, fines or penalties and potentially be
ineligible to participate in federal payor programs.
Legislation and Regulation Affecting Drug Prices and Potentially Affecting the Market for Prescription
Benefit Plans and Reimbursement for Durable Medical Equipment
The federal government has increased its focus on methods drug manufacturers employ to develop pricing
information, which in turn is used in setting payments under the Medicare and Medicaid programs. One
element common to many payment formulas, the use of “average wholesale price” (AWP) as a standard
pricing unit throughout the industry, has been criticized as not accurately reflecting prices actually charged
and paid at the wholesale or retail level. The DOJ is conducting, and the House Commerce Committee has
conducted, an investigation into the use of AWP for federal program reimbursement, and whether the use of
AWP has inflated drug expenditures by the Medicare and Medicaid programs. Federal and state proposals
have sought to change the basis for calculating reimbursement of certain drugs by the Medicare and Medicaid
programs.
11
The DRA revised the formula used by the federal government to set the Federal Upper Limit (FUL) for
multiple source drugs by adopting 250 percent of the average manufacturer’s price (AMP) without regard to
customary prompt pay discounts to wholesalers for the least costly therapeutic equivalent. On July 17, 2006,
HHS published a Final Rule for the Medicaid Prescription Drug Program implementing the DRA in which
AMP was defined to exclude discounts and rebates to pharmacy benefit managers and include sales to mail-
order and specialty pharmacies in the AMP calculation by manufacturers.
These proposals and other legislative or regulatory adjustments that may be made to the program for
reimbursement of drugs by Medicare and Medicaid, if implemented, could affect our ability to negotiate
discounts with pharmaceutical manufacturers. They could also impact the reimbursement we may receive
from government payors in the future should we choose to participate in such programs. In addition, they
may affect our relationships with health plans. In some circumstances, they might also impact the
reimbursement that we would receive from managed care organizations that contract with government health
programs to provide prescription drug benefits or otherwise elect to rely on the revised pricing information.
Furthermore, private payers may choose to follow the government’s example and adopt different drug pricing
bases. This could affect our ability to negotiate with plans, manufacturers and pharmacies regarding discounts
and rebates.
Relative to our durable medical equipment operations, The Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (DIMA), established a program for the competitive acquisition of certain covered
items of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). Diabetes testing
supplies, including test strips and lancets, which are commonly supplied via mail-order delivery, are subject
to the competitive acquisition program. Only qualified suppliers that meet defined participation standards
specified in the final rule will be permitted to engage in the competitive acquisition program. Mail-order
diabetes testing supplies may be subject to a national or regional program, which would require mail-order
suppliers to bid on supplying certain DMEPOS items.
Medicare Part D and Part B; State Prescription Drug Assistance Programs
The DIMA also offers far-reaching changes to the Medicare program. The DIMA established a new Medicare
Part D outpatient prescription drug benefit for over 40 million Americans who are eligible for Medicare.
Qualified beneficiaries, including senior citizens and disabled individuals, have had the opportunity to enroll
in Medicare Part D since January 1, 2006.
In addition, many states have expanded state prescription drug assistance programs to increase access to drugs
by those currently without coverage and/or supplement the Medicare Part D benefit of those with coverage
to offer options for a seamless benefit. In accordance with applicable CMS requirements, to participate we
may have to enter into agreements with a number of state prescription drug assistance programs and
collaborate to coordinate benefits with Medicare Part D plans.
If we participate in these state and/or federal payor programs in the future, we will have to comply with the
applicable conditions of participation for such plans, may be subject to competitive bidding requirements
under such plans, and may be subject to adverse pricing limitations imposed by such plans (including the
DRA limits described above).
Industry Standards for Pharmacy Operations
The National Committee on Quality Assurance, the American Accreditation Health Care Commission
(known as URAC), the Joint Commission on Accreditation of Healthcare Organizations and other quasi-
regulatory and accrediting bodies have developed standards relating to services performed by pharmacies,
including mail order, formulary, drug utilization management and specialty pharmacy. While the actions of
these bodies do not have the force of law, pharmacy benefit managers and many clients for pharmacy benefit
manager services seek certification from them, as do other third parties. These bodies may influence the
federal government or states to adopt requirements or model acts that they promulgate. The federal
12
government and some states incorporate accreditation standards of these bodies, as well as the standards of
the National Association of Insurance Commissioners and the National Association of Boards of Pharmacy,
a coalition of state pharmacy boards, into their drug utilization review regulation. Future initiatives of these
bodies are uncertain and resulting standards or legislation could impose restrictions on us in a manner that
could significantly impact our business.
Regulation of Compounded GLP-1 medications
Due to the increased popularity and demand for branded GLP-1 medications, the Food and Drug
Administration (“FDA”) determined in 2022 that there was a shortage of the semaglutide and tirzepatide
injection products in the US market. During such shortages, the FDA allows an essential copy product to be
manufactured and dispensed by compounding pharmacies under section 503A and 503B of the FD&C Act
until the drug manufacturer demonstrates the product availability and manufacturing capacity meets the
present and projected national demand. A majority of the Company’s revenue growth in the Partner Services
business during 2024 was related to the dispensing of the compounded GLP-1 products manufactured by
503B pharmacies and elimination of this category of products would have a significant impact on our Partner
Services business.
In December 2024, the FDA determined that the shortage of branded tirzepatide injection products had been
resolved and that the compounded essential copy products of the 503A and 503B pharmacies may not be
compounded, distributed or dispensed after February 18, 2025 by the 503A pharmacies and after March 19,
2025 for the 503B pharmacies. In February 2025, the FDA determined that the shortage of branded
semaglutide injection products had been resolved and that the compounded essential copy products of the
503A and 503B pharmacies may not be compounded, distributed or dispensed after April 22, 2025 by the
503A pharmacies and after May 22, 2025 for the 503B pharmacies. Pharmacies filling prescriptions and
dispensing these products to patients may continue filling prescriptions for these products until their
inventories are depleted. Other GLP-1 products including Dulaglutide injection and Liraglutide injection
remain in shortage. Many of our Partner Services customers are expanding their product offerings and
formulations in order to serve the needs of this important market while remaining compliant with the FDA
ruling. We are monitoring the situation closely and working with our partners to ensure we have adequate
inventories during the transition.
Litigation
In the ordinary course of business, we may become subject to lawsuits and other claims and proceedings that
might arise from litigation matters or regulatory audits. Such matters are subject to uncertainty and outcomes
are often not predictable with assurance. Our management does not presently expect that any current
outstanding matters will have a material adverse effect on the Company’s consolidated financial condition or
consolidated results of operations. We are not currently involved in any pending or threatened material
litigation or other material legal proceedings nor have we been made aware of any penalties from regulatory
audits, except as described below.
On March 31, 2023, a class action complaint was filed in the United States District Court, Southern District
of California against the Company (Shahnaz Zarif, individually and on behalf of others similarly situated,
Plaintiff, v. Hwareh.com, Inc., Defendant). The Complaint alleges the Company conducted the unauthorized
interception, collection, recording and dissemination of communications and data in violation of the Federal
Wiretap Act, 18 U.S.C. Section 2510 et seq, the California Invasion of Privacy Act, Cal. Pen. Code Section
631; the California Confidentiality of Medical Information Act, Cal. Civ. Code Section 56, et seq; and the
California Consumer Privacy Act Cal. Civ. Code Section 1798.100, et seq. The Plaintiff seeks to certify
several classes of similarly situated persons and is suing for, among other things, injunctive relief, statutory
monetary damages and attorneys’ fees. After retaining local counsel, on May 22, 2023, the Company
responded to the Complaint by filing a motion to transfer venue to the Eastern District of Kentucky and a
motion to dismiss the Complaint for failure to state a claim and lack of personal jurisdiction. On June 12,
2023, Plaintiff filed an amended Complaint alleging the same claims in lieu of an opposition to the Company’s
13
motions. On July 10, 2023, the Company filed a motion to transfer venue to the Eastern District of Kentucky
and a motion to dismiss the amended Complaint for failure to state a claim and lack of personal jurisdiction.
On July 21, 2023, the Plaintiff responded with an opposition to the Company’s motions to which the Company
replied on August 15, 2023. On August 15, 2023, the Judge granted the Company’s Motion to Dismiss all
claims on the basis that the plaintiff had failed to adequately allege personal jurisdiction over the Company.
The Plaintiff amended their Complaint on September 4, 2023 and the Company filed a renewed motion to
dismiss on September 18, 2023. Plaintiff’s opposition to our motion was filed on October 30, 2023 and the
Company filed a response on November 6, 2023. On February 12, 2025, the Court (i) determined that it was
appropriate to exercise jurisdiction based on recent case law, (ii) granted the Company’s request to dismiss
the violations of the Federal Wiretap Act, the California Confidentiality of Medical Information Act, the
California Consumer Privacy Act of 2018 and the California Computer Data Access and Fraud Act and (iii)
allowed the Plaintiff to proceed with the violations of the California Invasion of Privacy Act California Penal
Codes 631 and 638.51. The Plaintiff did not file an amended complaint following the ruling and the Company
has until March 19, 2025 to file and answer to the Third Amended Complaint. The Company believes the
Complaint is without merit and intends to contest this matter vigorously.
Employees
As of March 1, 2025, we employed 97 full-time employees and 11 part-time employees. None of our
employees are subject to a collective bargaining agreement and we believe that relations with our employees
are good. The Company, from time to time, also utilizes independent contractors to supplement its workforce.
9) Description of Issuer’s products and services:
The Company sells directly to individual consumers who purchase prescription medications and OTC
products over the Internet and through our onsite call center. The Company offers over 6,200 prescription
medications and over 6,000 OTC products. The Company also provides fulfillment of prescription
medication, medical devices and other services to customers of other healthcare providers and manufacturers.
Customers
Direct-to-consumer (B2C): We sell directly to individual consumers who purchase prescription medications
and OTC products and medical devices over the Internet and through our onsite call center. B2C net sales
represented 67% and 39% of total net sales in 2023 and 2024, respectively. Uninsured consumers were
predominantly our customers in our early years, while over 90% of our customers carry health insurance
when purchasing from us today. Rising insurance co-pays and high deductible plans due to the Affordable
Care Act have caused more consumers to pay out-of-pocket. The Company is not dependent on any one or
a few B2C customers.
Partner Services: We provided fulfillment of prescription and over-the-counter medication, medical devices
and other services to customers of other healthcare providers and manufacturers. We bill the partner services
customer on a daily, weekly, bimonthly or monthly basis for the services provided including fulfillment fees,
product cost and shipping. Credit terms with partner services customers range from prepay to Net 45 days.
Partner services represented 33% and 61% of net sales in 2023 and 2024, respectively, and two customers
represented 9% and 7% of net sales during 2023 and one customer represented 24% of sales during 2024.
Suppliers
There are a number of suppliers available for the pharmaceutical and non-pharmaceutical products that we
sell. Our principal suppliers are BPI Labs, Amerisource Bergen, Cardinal Health, TopRx and Keysource, as
well as many direct manufacturers like Amneal, Prasco, Greenstone, Inspire, HPS Rx and National Vitamin
Company. While we source our supplies from a limited number of suppliers, with three representing
approximately 87% of purchases in 2024, we do not believe that our business is dependent on any one supplier
since most of the products that we sell are readily available from a number of alternative suppliers. Even if
a significant supplier were to no longer be available to us, we believe that we could source replacement
product through one or more alternative suppliers without having a significant effect on our business.
14
Competition
The market for prescription and OTC health products is intensely competitive and highly fragmented.
However, there are fewer competitors focusing on the out-of-pocket prescription market. Our competitors in
the segment include chain drugstores, mail order pharmacies, pharmacy benefits managers (PBMs), mass
market retailers, warehouse clubs, supermarkets and other online retailers. Many of these potential
competitors in the market are also established organizations with greater access to resources and capital. In
addition, we face competition from foreign online pharmacies that can often sell drugs to U.S. residents at a
lower price because they do not comply with U.S. pharmacy regulations, are not subject to U.S. regulatory
oversight, or both. We also compete with Internet portals and online service providers that feature shopping
services and with other online or mail-order retailers that offer products similar or the same to those that we
sell.
We believe that the principal competitive factors in our market includes brand awareness and preference,
company credibility, product selection and availability, convenience, price, actual or perceived value, website
features, functionality and performance, ease of purchasing, customer service, privacy, quality and quantity
of information supporting purchase decisions (such as product information and reviews), reliability and speed
of order shipment.
Trademarks
We filed for a trademark on the name “HealthWarehouse.com” on August 14, 2007 with the U.S. Patent and
Trademark Office, which trademark was granted with a registration date of May 19, 2009. We also rely on
trade secret law and contractual restrictions to protect our intellectual property, and we do not intend to seek
patent or copyright protection for our intellectual property at this time.
10) Issuer’s Facilities
HealthWarehouse.com, Inc.’s corporate headquarters is located at 7107 Industrial Road, Florence, Kentucky,
41042 which also houses its inventory, pharmacy and customer service operations. The Company occupies
28,494 square feet of office, storage, and warehouse space under a lease with a monthly rental and the lease
expires December 31, 2029. The monthly lease rate ranges between $18,640 and $21,806 during the term of
the lease. See Footnote 9 – Commitments and Contingencies to the Company’s consolidated financial
statements in Part II for more details.
PART D – MANAGEMENT STRUCTURE AND FINANCIAL INFORMATION
11) Officers, Directors and Control Persons
The following table sets forth certain information with respect to the directors and executive officers of the
Company as of December 31, 2024.
15
Name
Title
2024 Compensation (1)
Beneficial Ownership
Joseph B. Peters
President and Chief
Executive Officer,
Director
Cash: $234,000
Options: $329,404 (4,200,000
shares exercisable at $0.13 per
share)
Common: 708,145 shares
Options (vested): 3,287,000
shares
Warrants: 3,000 shares
Convertible Note of $50,000
convertible into 588,235 shares;
Series C Preferred: 3,250 shares
convertible into 4,642,857
common shares:
Beneficial Ownership: 14.4%
Daniel J. Seliga
Chief Financial
Officer
Cash: $225,000
Options: $269,684 (3,600,000
shares exercisable at $0.13 per
share)
Common: 1,466,037 shares
Options (vested): 2,788,000
shares
Series C Preferred: 3,250 shares
convertible into 4,642,857
shares:
Beneficial Ownership: 14.8%
Tim Reilly
Director, Chairman
Cash: $12,000
Stock: $24,000 (232,567 shares
at $0.07 to $0.13 per share)
Options: $40,000 (449,263
shares exercisable at $0.07 to
$0.13 per share)
Common: 5,051,556 shares
Options: 1,384,434 shares
Warrants: 69,000 shares
Convertible Note of $1,350,000:
convertible into 15,882,353
common shares
Beneficial Ownership: 30.7%
Jack Britts
Director
Cash: $12,000
Stock: $24,000 (232,567 shares
at $0.07 to $0.13 per share)
Options: $40,000 (449,263
shares exercisable at $0.07 to
$0.13 per share)
Common: 1,134,190 shares
Options: 1,384,434 shares
Beneficial Ownership: 4.4%
Joseph
Heimbrock
Director
Cash: $12,000
Stock: $24,000 (232,567 shares
at $0.07 to $0.13 per share)
Options: $40,000 (449,263
shares exercisable at $0.07 to
$0.13 per share))
Common: 2,390,640 shares
Options: 1,415,162 shares
Warrants: 1,060,052 shares
Series B Preferred: 494,913
shares (convertible to 7,324,713
common shares)
Beneficial Ownership: 18.6%
Sara Mannix
Director
Cash: $12,000
Stock: $24,000 (232,567 shares
at $0.07 to $0.13 per share)
Options: $40,000 (449,263
shares exercisable at $0.07 to
$0.13 per share)
Common: 660,703 shares
Options: 1,236,614 shares
Beneficial Ownership: 3.3%
(1) The value of the stock and options issued was based on the thirty-day weighted average closing share
price as of the grant date. The value of the options was determined utilizing the Black-Scholes option
pricing model.
16
Control Persons
The following individuals and entities are the beneficial owners of more than five percent (5%) of HEWA’s
Common Stock as of December 31, 2024, in addition to the officers and directors disclosed above. If any of
the beneficial shareholders are corporate shareholders, the name and address of the person(s) owning or
controlling such corporate shareholders and the resident agents of the corporate shareholders are provided.
Name
Affiliation
Address
Number of
shares
owned
Share
Class
Ownership
Percentage
of Class
Outstanding
Beneficial
Ownership
Cormag Holdings, LTD and
Mark D. Scott
>5%
104 Falcon Ridge Drive,
Winnipeg, Manitoba, Canada
R3Y1X6
5,387,588 Common
9.7%
9.7%
Dr. Bruce Bedrick
>5%
5375 Monterey Circle #32,
Delray Beach, FL 33484
3,900,000 Common
7.0%
7.0%
Lalit Dhadphale
>5%
182 Uccello Drive, Las
Vegas, NV 89138
3,022,479 Common
5.4%
5.4%
Biographical Information of Executives and Directors
Joseph Peters, Chief Executive Officer, President and Director, age 39, was appointed Chief Executive
Officer effective January 1, 2018 after serving as interim Chief Executive Officer and President of the
HealthWarehouse.com since April 11, 2017. He joined the Board on July 24, 2017. Mr. Peters joined
HealthWarehouse.com in January of 2012, working in nearly every role in the company before becoming
Customer Service Manager in 2012, Human Resources Manager in 2013, Vice President of Operations in
2014 and President & interim Chief Executive Officer in 2017. With his unique experience at all levels of the
organization, Mr. Peters, who is also a Certified Pharmacy Technician (CpHT), currently oversees all aspects
of the company’s operations, including pharmacy, engineering, customer service, and fulfillment. Prior to
joining HealthWarehouse.com, Mr. Peters was Director of Operations at ToneRite, Inc., a company producing
automatic musical instrument tuners sold on and offline. Mr. Peters oversaw multiple departments from
production and fulfillment to sales and promotion. Mr. Peters received his Bachelor’s Degree from the
University of Florida in Business Management in 2009 and a Master’s Degree in International Business in
2010. Mr. Peters’ business address is 7107 Industrial Road, Florence, KY 41042.
Daniel Seliga, Chief Financial Officer, age 59, became the Chief Financial Officer of the Company effective
January 1, 2018. Mr. Seliga was formerly Chief Operating Officer and Chief Financial Officer of the
Company from January 1, 2016 to October 9, 2016 and had provided financial and operational consulting
services to HealthWarehouse.com since August 2013. Prior to joining the Company full time, Mr. Seliga
was a Managing Director of Melrose Capital. From September 2010 to December 2012, he was General
Manager and Business Manager for MVI Enterprises, the largest truck dealership network in Ohio. From
November 1996 to July 2010, Mr. Seliga was the Chief Financial Officer and Vice President of Operations
for Mae Holding Company, a privately held wholesale distributor of commercial construction materials and
a retail home improvement company. Prior to 1996, Mr. Seliga served as a commercial and real estate lending
officer for Bank of New York and PNC Bank. Mr. Seliga received an MBA in Finance from the University
of Notre Dame and a BS in Accounting from Saint Vincent College. Mr. Seliga’s business address is 7107
Industrial Road, Florence, KY 41042.
Tim Reilly, Chairman of the Board, age 61, is a business owner and investor with several business interests.
He was elected to the Board in September 2019. Mr. Reilly is currently Chairman of MVI Enterprises, Inc.,
a holding company with interests in transportation, finance and real estate. He is also the founder and
Managing Director of Melrose Capital Advisors LLC, a provider of capital and advisory services to small
and mid-sized businesses. Mr. Reilly was the former President and Owner of MVI Group, the largest network
17
of commercial truck and bus dealerships in the state of Ohio. After building a network of 10 locations, Mr.
Reilly sold MVI Group to Rush Enterprises, headquartered in New Braunfels, Texas, in 2012. Prior to his
time in the dealership industry, Mr. Reilly was President and Owner of the Dayton Bomber’s Professional
Hockey Team in Dayton, Ohio which he sold in 2005. Prior to acquiring the hockey team, Mr. Reilly enjoyed
a 17-year career in the commercial banking industry including Managing Director of PNC Capital Markets,
the investment banking unit of PNC Bank. Mr. Reilly’s business address is 1085 Gulf of Mexico Drive,
Longboat Key, FL 34228.
Jack Britts, age 65, currently serves as a business consultant and investor focusing on pharmaceutical and
healthcare companies. He has served on the Board since September 2017. Mr. Britts has over 30 years of
diverse experience including, serving as Co-Chief Executive Officer, Chief Operating Officer and Member
of the Board of Directors of Crown Laboratories from July 2012 through 2014, a fully integrated
pharmaceutical company. Prior to Crown and for more than five years, Mr. Britts was President and Chief
Executive Officer of Merz Pharmaceuticals LLC, a privately held multinational pharmaceutical company
specializing in neurology and dermatology. Mr. Britts also serves on the board of directors for Azova
Healthcare and Manna Foodbank. Mr. Britts’ business address is 590 Windsor Road, Ashville, NC 28804.
Sara Mannix. age 58, is the President of Mannix Marketing, Inc., a company she founded in 1996 focusing
on SEO to help businesses “get found on the web.” Since then, her company has evolved into a full-service
digital marketing agency focusing on helping businesses grow by growing their website traffic, conversions,
leads, and sales. Ms. Mannix has served on the Board since 2020. Mannix Marketing has either been
shortlisted or won the industry’s top award for organic SEO, “Best in Search US,” for seven years in a row.
The business is located in upstate NY, employs a team of 30 digital marketing specialists, and serves over
1000 clients nationwide. Ms. Mannix graduated Summa Cum Laude from the University at Albany with a
double major in Spanish and Italian. Her extensive experience in marketing and executive leadership makes
Ms. Mannix a valuable member of the Board.
Joe Heimbrock, age 69, has served as a director since April 2016 and is the managing partner of MVI Partners,
LLC. Mr. Heimbrock has over 30 years of business experience in the commercial trucking industry, including
sales, marketing and operational management. He most recently served as the Regional General Manager in
Ohio for Rush Enterprises, Inc., which is headquartered in New Braunfels, Texas. Rush Enterprises owns and
operates the nation’s largest network of commercial vehicle dealerships, including new and used trucks
through its Rush Truck Centers. Prior thereto, Mr. Heimbrock was Vice President of MVI Enterprises, the
largest truck dealership network in Ohio which was purchased by Rush Enterprises in 2012. Mr. Heimbrock’s
business address is 3299 Hughes Court, Taylor Mill, KY 41015.
Legal/Disciplinary History
A.
Please identify whether any of the persons listed above have, in the past five years, been
the subject of:
1. A conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding
(excluding traffic violations and other minor offenses);
None
2. The entry of an order, judgment, or decree, not subsequently reversed, suspended or vacated, by
a court of competent jurisdiction that permanently or temporarily enjoined, barred, suspended or
otherwise limited such person’s involvement in any type of business, securities, commodities, or
banking activities;
None
3. A finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and
Exchange Commission, the Commodity Futures Trading Commission, or a state securities
18
regulator of a violation of federal or state securities or commodities law, which finding or
judgment has not been reversed, suspended, or vacated; or
None
4. The entry of an order by a self-regulatory organization that permanently or temporarily barred
suspended or otherwise limited such person’s involvement in any type of business or securities
activities.
None
Related Party Transactions
In 2020, the Company executed convertible note purchase agreements (the”Convertible Purchase
Agreements”) and a security agreement, as amended, (the “Convertible Security Agreement”), and
convertible secured promissory notes totaling $2,200,000 (the “Convertible Notes”) (collectively the
“Convertible Note Agreements”), with $1,661,969 of cash proceeds, net of costs associated with the
transaction. Of the total, $1,000,000 of the Convertible Note Agreements were held by Inspira Financial
Trust LLC (f/k/a Millennium Trust Company LLC) Custodian FBO Timothy E. Reilly IRA (the “Reilly
IRA”). In 2023 and 2024, the Reilly IRA purchased an additional $350,000 of Convertible Notes in
transactions to replace some of the initial investors. The Reilly IRA holds a total of $1,350,000 of the
Convertible Notes and is owned and controlled by Tim Reilly who is Chairman of the Company and a
beneficial owner of more than 5% of the Company’s outstanding shares of common stock. As such, the
Inspira investment in the Convertible Notes transaction is a related party transaction. See Note 6 – Notes
Payable in the Consolidated Financial Statements in Part II.
In 2024, Joseph Peters purchased $50,000 of Convertible Notes in a transaction to replace one of the original
investors. Mr. Peters is the Chief Executive Officer of the Company. As such, the Peters Convertible Note
transaction is a related party transaction. See Note 6 – Notes Payable in the Consolidated Financial
Statements in Part II.
Joe Heimbrock, a director of the Company, is the manager member of MVI Partners LLC. MVI Partners
LLC is the majority owner of the Series B Preferred shares, holding 494,313 shares. When combined, Mr.
Heimbrock and MVI Partners LLC beneficially own more than 5% of the Company. As such, MVI Partners
LLC is deemed to be a related party to the Company.
Effective December 18, 2024, the holders of the Series C Preferred Stock entered into a Stock Purchase
Agreement with Joseph Peters and Daniel Seliga whereby the holders agreed to sell their 6,500 shares of
Series C Preferred Stock and 849,366 shares of common stock to Mr. Peters and Mr. Seliga. Subsequent to
the purchase, Mr. Peters and Mr. Seliga entered into a Conversion and Standstill Agreement effective
December 18, 2024 with the Company whereby they agreed not to issue a redemption notice until after
January 1, 2028. As part of the agreement, the holders may elect to convert up to $250,000 of the Series C
Preferred Stock valued at its original issue price into shares of common stock of the Company each calendar
quarter, with the conversion price being set at 80% of the thirty (30) day weighted average closing price of a
share of common stock on the OTC Market. The transactions are considered related party transactions as Mr.
Peters is the Chief Executive Officer and Director of the Company and Mr. Seliga is the Chief Financial
Officer of the Company. See Note 8- Stockholder’s Deficiency in the Consolidated Financial Statements in
Part II.
The Company entered into an agreement with Mannix Marketing, Inc. in March 2023 to provide various
marketing services including digital advertising and branding. During 2024, Mannix Marketing invoiced
$57,670 to the Company for those services which was included in selling, general and administrative
expenses, of which the Company paid $54,000 as of December 31, 2024. Sarah Mannix is President of
19
Mannix Marketing, Inc. and is a director of the Company. As such, the services provided by Mannix
Marketing are related party transactions.
12) Financial Statements
a) The following consolidated financial statements were prepared in accordance with U.S. GAAP.
Consolidated Balance Sheets as of December 31, 2024 and 2023
Consolidated Statements of Operations for the years ended December 31, 2024 and 2023
Consolidated Statements of Changes in Stockholders’ Deficiency for the years ended December 31,
2024 and 2023
Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023
Notes to the Consolidated Financial Statements
Report of Independent Auditors’ Report
b) The consolidated financial statements for this reporting period were prepared by Daniel Seliga, Chief
Financial Officer of the Company.
See PART II –CONSOLIDATED FINANCIAL STATEMENTS below.
13) Financial Statements for 2 prior fiscal years:
The Consolidated Financial Statements for fiscal years ended December 31, 2022 and 2023 were filed with
the OTC Markets and can be found at www.otcmarkets.com as well as on the Company’s website and are
incorporated by reference herein.
14) Third Party Providers
Legal Counsel
General Counsel
Name:
Mark Kobasuk
Address 1:
7393 Pinehurst Drive
Address 2:
Cincinnati, OH 45244
Phone:
(513) 607-9078
Email:
mgklaw1@gmail.com
Securities Counsel
Name:
Kenneth Tabach
Firm:
Silver, Freedman, Taff & Tiernan LLP
Address 1:
3299 K Street, N.W. Suite 100
Address 2:
Washington, DC 20007
Phone:
(202) 295-4500
Email:
ktabach@sfttlaw.com
and
Name:
Mark J. Zummo
Firm:
Kohnen & Patton, LLP
Address 1:
201 East Fifth Street, Suite 800
Address 2:
Cincinnati, OH 45202
Phone:
(513) 381-0656
Email:
mzummo@kplaw.com
20
Accounting/Auditing Firm
Firm:
CBIZ CPAs P.C.
Address 1:
730 Third Avenue, 11th Floor
Address 2:
New York, NY 10017
Phone:
(212) 485-5500
15) Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The following discussion of results of operations and financial condition is based upon, and should be read
in conjunction with, our consolidated financial statements and accompanying notes thereto, included
elsewhere in this Annual Report.
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties, many of which are beyond our control. Our actual
results could differ materially and adversely from those anticipated in such forward-looking statements as a
result of certain factors, including those set forth in this report. Important factors that may cause actual results
to differ from any forward-looking statements include:
●
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, loss of a large customer, regulatory
changes relative to products currently sold or pharmacy operations 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.
All statements, other than statements of historical facts, included in this report regarding our strategy, future
operations, financial position, estimated revenue or losses, projected costs, prospects and plans and objectives
of management are forward-looking statements. When used in this report, the words “will,” “may,” “believe,”
“anticipate,” “intend,” “estimate,” “expect,” “project,” “plan” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain such identifying words. All
forward-looking statements speak only as of the date of this report. We undertake no obligation to update
any forward-looking statements or other information contained herein. Stockholders and potential investors
should not place undue reliance on these forward-looking statements. Although we believe that our plans,
intentions and expectations reflected in or suggested by the forward-looking statements in this report are
reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations
will be achieved.
Overview
HealthWarehouse.com, Inc., a technology company with a focus on healthcare e-commerce, sells and delivers
prescription and over-the-counter medications to all 50 states as an Approved Digital Pharmacy through the
National Association of Boards of Pharmacy (NABP). HealthWarehouse.com provides a platform focused
21
on increasing access and reducing costs of healthcare products for consumers and business
partners nationwide.
The Company sells directly to individual consumers who purchase prescription medications and over-the-
counter products over the Internet and through its onsite call center. HealthWarehouse.com is currently one
of 86 National Association of Boards of Pharmacy (“NABP”) accredited digital pharmacies. In addition, the
Company also provides fulfillment services of prescription medication and medical devices to customers of
other healthcare providers including telemedicine and online services companies and manufacturers. The
Company’s robust fulfillment offering and active business development team allow the Company to support
many therapeutic areas, providing world class service to current and potential partners alike.
Consumers who pay out of pocket for their prescriptions include those:
•
with no insurance coverage;
•
with high insurance deductibles or copays;
•
with Medicare Part D plans with high deductibles;
•
with Health Savings Accounts (I) or Flexible Savings Accounts (FSA);
•
with insurance through the Affordable Care Act (ACA) with high deductibles; and
•
with drug exclusions and quantity restrictions placed by insurance companies.
Our objective is to utilize our proprietary technology to make the pharmaceutical supply chain more efficient
and to pass the savings on to the consumer. We have become known by consumers as a convenient, reliable,
discount provider of over-the-counter products and prescription medication. We were named by Money.com
one of the five best online pharmacies of 2020. This popular personal finance website recognized that the
Company has earned a reputation for being one of the most affordable pharmaceutical options and highlighted
the Company’s customer service offering.
Results of Operations
For The Year Ended December 31, 2024 Compared to The Year Ended December 31, 2023
For year ended
% of
For year ended
% of
In thousands
Ended December 31, 2024
Revenue
Ended December 31, 2023
Revenue
Net sales
33,614
$
100.0%
20,283
$
100.0%
Cost of sales
19,489
58.0%
8,109
40.0%
Gross profit
14,125
42.0%
12,174
60.0%
Selling, general & administrative
14,218
42.3%
13,796
68.0%
Loss from operations
(93)
(0.3%)
(1,622)
(8.0%)
Loss on extinguishment of debt
(3)
(0.0%)
-
0.0%
Interest expense
(237)
(0.7%)
(152)
(0.7%)
Net loss
(333)
$
(1.0%)
(1,774)
$
(8.7%)
Net Sales
For year ended
%
$
For year ended
December 31, 2024
Change
Change
December 31, 2023
In thousands
$33,614
65.7%
$13,331
$20,283
Net sales increased from $20.3 million for the year ended December 31, 2023 to $33.6 million for the year
ended December 31, 2024, an increase of $13.3 million, or 65.7%. Prescription sales were $30.9 million for
22
the year ended December 31, 2024, as compared to $17.4 million for the year ended December 31, 2023, an
increase of $13.5 million, or 77.8%. These increases were primarily due to growth in our partner services
(B2B) business related to fulfillment of brand and compounded GLP-1 medications. Sales for the direct-to-
consumer (B2C) prescription business were flat in 2024. Over-the-counter net sales decreased by 6.3% from
$2.6 million in the year ended December 31, 2023 to $2.4 million in the year ended December 31, 2024. The
reduction in the B2C over-the-counter sales was primarily due to lower marketplace sales, partially offset by
higher partner services sales.
Cost of Sales and Gross Margin
For year ended
%
$
For year ended
December 31, 2024
Change
Change
December 31, 2023
In thousands
Cost of sales
$19,489
140.3%
11,380
$8,109
Gross margin $
$14,125
16.0%
1,951
$12,174
Gross margin %
42.0%
-18.1%
60.0%
Cost of sales were $19.5 million for the year ended December 31, 2024 as compared to $8.1 million for the
year ended December 31, 2023, an increase of $11.4 million or 140.3%, primarily as a result of the growth
in sales of high cost GLP-1 medications in our B2C and B2B prescription businesses. Gross profit for the
year ended December 31, 2024 was $14.1 million, a $2.0 million or 16.0%, increase when compared to the
same period in 2023, due to the increase in sales volume and offset by lower gross margins. Gross margin
percentage decreased year-over-year from 60.0% for the year ended December 31, 2023 to 42.0% for the
year ended December 31, 2024, as a result of decreased year-over-year margins in the prescription business
(due to higher prescription brand and compounded drug sales which have higher costs and lower gross
margins due to competitive market prices).
Selling, General and Administrative Expenses
For year ended
%
$
For year ended
December 31, 2024
Change
Change
December 31, 2023
In thousands
S,G&A
$14,218
3.1%
$422
$13,796
% of sales
42.3%
-38.2%
-26.2%
68.5%
Selling, general and administrative (SG&A) expenses totaled $14.2 million for the year ended December 31,
2024 compared to $13.8 million for the year ended December 31, 2023, an increase of $422,000, or 3.1%.
Despite the increase, SG&A expenses we significantly lower relative to sales, decreasing by 38.2% to 42.3%
of sales for the year ended 2024, as the growth in sales of high cost GLP-1 medications in our B2C and B2B
prescription businesses did not result in a comparable increase in operating expenses. For the year ended
December 31, 2024, increased expenses were primarily related to the growth in order volume in the B2B
segment which included (a) an $832,000 increase in shipping expense; (b) a 247,000 increase in shipping
supplies expense; (c) an $173,000 increase in credit card fees; and (d) a $72,000 increase in depreciation and
amortization expenses. Those increases were offset by (a) a $428,000 decrease in bad debt expense; (b) a
$325,000 reduction in advertising and marketing expenses and (c) a 174,000 decrease in stock-based
compensation.
Other Income and Expense
Other expenses increased from $152,000 in the year ended December 31, 2023 to $240,000 in the year ended
December 31, 2024, an increase of $85,000, or 56.0% primarily due to an increase in amortization of debt
discount related to the extension of the maturity date of the convertible notes and a loss on the extinguishment
of debt, offset by higher interest income earned on excess cash balances. Interest income was $26,000 and
23
$15,000 for the years ended December 31, 2024 and 2023, respectively, as excess funds resulted in higher
average balances invested in interest bearing money market accounts in 2024 offset by lower interest rates.
Net Loss
Net loss decreased from $1.8 million in the year ended December 31, 2023 to $333,000 in the year ended
December 31, 2024, an decrease of $1.4 million, or 81.2% primarily as a result of increased sales and gross
profit.
Adjusted EBITDAS
We believe Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted
Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), financial measures
not included in accounting principles generally accepted in the United States of America (“U.S. GAAP”), are
useful in evaluating our operating performance compared to that of other companies in our industry, as this
metric generally eliminates the effects of certain items that may vary for different companies for reasons
unrelated to overall operating performance. We believe that:
•
EBITDA and Adjusted EBITDA provide investors and other users of our financial information
consistency and comparability with our past financial performance, facilitates period-to-period
comparisons of operations and facilitates comparisons with other companies, many of which use similar
non-U.S. GAAP financial measures to supplement their U.S. GAAP results; and
•
EBITDA is useful because it excludes non-cash charges including depreciation and amortization
expenses, including the amortization of right of use operating lease assets. Adjusted EBITDA is useful
because it excludes other non-cash charges, such as stock-based compensation and one-time charges,
which the amount of such expense in any specific period may not directly correlate to the underlying
performance of our business operations and these expenses can vary significantly between periods.
We use Adjusted EBITDA in conjunction with traditional U.S. GAAP measures as part of our overall
assessment of our performance, to evaluate the effectiveness of our business strategies and to communicate
with our lenders, stockholders and board of directors concerning our financial performance.
Adjusted EBITDA should not be considered as a substitute for other measures of financial performance
reported in accordance with U.S. GAAP. There are limitations to using non-U.S. GAAP financial measures,
including that other companies may calculate these measures differently than we do. We compensate for the
inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations,
presentation of our financial statements in accordance with U.S. GAAP and reconciliation of Adjusted
EBITDA to the most directly comparable U.S. GAAP measure, specifically net loss.
The following provides a reconciliation of net loss to Adjusted EBITDA:
In thousands
2024
2023
Net loss
(333)
$
(1,774)
$
Interest expense
237
152
Depreciation and amortization
434
347
EBITDA (non-GAAP)
338
(1,275)
Adjustments to EBITDA:
Stock-based compensation
750
924
Loss on extinguishment of debt
3
-
Bad debt expense
-
428
Adjusted EBITDA (non-GAAP)
1,091
$
77
$
For year ended December 31,
24
Off-Balance Sheet Arrangements
We have not entered into any transactions with unconsolidated entities in which we have financial guarantees,
subordinated retained interests, derivative instruments or other contingent arrangements that expose us to
material continuing risks, contingent liabilities or any other obligations under a variable interest in an
unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.
Impact of Inflation
The Company has experienced price inflation for shipping and packaging supplies, shipping and labor costs,
and to a lessor extent certain prescription and over-the-counter products due to supply shortages. Despite
increases in those areas, we believe that inflation has not had a material impact on our results of operations
for the years ended December 31, 2024 and 2023. We cannot assure that future inflation will not have an
adverse impact on our operating results and financial condition.
Liquidity and Capital Resources
The Company’s working capital deficiency was $2.4 million as of December 31, 2024 and the stockholder
deficiency was $4.0 million as of December 31, 2024. For the year ended December 31, 2024, the Company
had a net loss of $333,000 and net cash provided by operating activities of $705,000. As of December 31,
2024, the Company had cash and liquid investments totaling $1.1 million.
On September 30, 2023, the Company extended the maturity date of the Convertible Notes to April 20, 2026,
which reduced its current obligations as of December 31, 2024. The primary component of the Company’s
remaining current obligations is the accrued dividends totaling $3.1 million to the holders of the Series B
Preferred shares. The dividends continue to accrue as Company is restricted from paying dividends if there
is no surplus in equity per Delaware law. The Company believes it would satisfy a majority, if not all, of
such dividends through the issuance of additional shares of the Series B Preferred Stock versus a required
cash outlay, which is at the Company’s Board discretion, when allowable under Delaware law.
While the reported levels of working capital deficit, shareholders deficiency and net loss would give
indications of doubt relative to a going concern, management believes that the doubt is alleviated by the (i)
the non-cash nature of $3.1 million of the current liabilities; (ii) the renewed standstill of the redemption
provision related to the Series C Preferred to January 2028; (ii) cash generated from operations and impact
on cash balances in 2024; (iv) year end cash balances of $1.1 million sufficient to cover the $800,000 of
convertible notes not held by related parties; and (iv) the expected continuation of positive EBITDA into
2025 and increasing cash balances.
The Company believes that its current financial resources and management’s plans are sufficient to satisfy
the Company’s estimated liquidity needs for at least twelve months from the date of issuance of the
consolidated financial statements.
Our cash flow from operating, investing and financing activities during these periods were as follows:
For the year ended December 31, 2024, cash flows included net cash provided by operating activities of
$705,000. This amount included a decrease in operating cash related to a net loss of $333,000, offset by
aggregate non-cash adjustments of $1.3 million and aggregate cash used by changes in operating assets and
liabilities of $259,000 (primarily a result of increases in accounts receivable and inventories offset by an
increase in accounts payable and accrued expenses and a decrease in prepaid expenses). For the year ended
December 31, 2023, cash flows included net cash used by operating activities of $164,000. This amount
included a decrease in operating cash related to a net loss of $1.8 million, partially offset by aggregate non-
cash adjustments of $1.8 million, plus aggregate cash used by changes in operating assets and liabilities of
$163,000 (primarily a result of an increase in accounts receivable and inventory, partially offset by an increase
in accounts payable and accrued expenses).
For the year ended December 31, 2024, net cash used in investing activities was $140,000 which included an
asset acquisition for $55,000, equipment purchased for $55,000 to enhance cold chain shipping capabilities
25
and third party engineering and software costs of $30,000. For the year ended December 31, 2023, net cash
used in investing activities was $310,000 primarily related to software development costs to be capitalized
and computer equipment.
There were no financing activities for the year ended December 31, 2024 and 2023.
Changes in Financial Condition
The Company’s total assets were $5.0 million at December 31, 2024, an increase of $1.8 million from $3.2
million at December 31, 2023, primarily due to increases in operating lease right of use asset, cash,
inventories, accounts receivable and other assets, offset by decreases in prepaid expenses, property and
equipment and software development costs. Total liabilities were $8.4 million at December 31, 2024, an
increase of $1.9 million from the balance at December 31, 2023 of $6.6 million, primarily due to increases in
operating lease liability, accounts payable, accrued dividends, convertible notes payable and accrued
expenses. The Company’s stockholders deficiency increased by $31,000 to $4.0 million due to the net loss
offset by additions to paid-in-capital related to stock-based compensation.
26
PART E: ISSUANCE HISTORY
16) Changes to the Number of Outstanding Shares
Check this box to indicate there were no changes to the number of outstanding shares within the past two
completed fiscal years and any subsequent periods: ☐
54,060,240
517,359
6,500
Date
Transaction
Type
Number of
Shares Issued
Class of
Securities
Value of
shares issued
($ per share) at
issuance
Issued at
discount to
market at time
of issuance?
Individual/Entity Shares were
issued to
Reason for share issuance
or Nature of Services
Provided
Restricted or
Unrestricted
as of this
filing?
Exemption or
Registration
Type
2/6/23
New
35,294
Common
$0.17
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
2/6/23
New
35,294
Common
$0.17
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
2/6/23
New
35,294
Common
$0.17
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
2/6/23
New
35,294
Common
$0.17
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
4/17/23
New
35,294
Common
$0.17
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
4/17/23
New
35,294
Common
$0.17
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
4/17/23
New
35,294
Common
$0.17
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
4/17/23
New
35,294
Common
$0.17
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
7/14/23
New
35,294
Common
$0.17
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
7/14/23
New
35,294
Common
$0.17
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
7/14/23
New
35,294
Common
$0.17
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
7/14/23
New
35,294
Common
$0.17
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
10/9/23
New
50,000
Common
$0.12
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
10/9/23
New
50,000
Common
$0.12
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
10/9/23
New
50,000
Common
$0.12
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
10/9/23
New
50,000
Common
$0.12
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
1/15/24
New
46,154
Common
$0.13
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
1/15/24
New
46,154
Common
$0.13
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
1/15/24
New
46,154
Common
$0.13
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
1/15/24
New
46,154
Common
$0.13
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
4/4/24
New
54,545
Common
$0.11
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
4/4/24
New
54,545
Common
$0.11
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
4/4/24
New
54,545
Common
$0.11
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
4/4/24
New
54,545
Common
$0.11
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
7/10/24
New
46,154
Common
$0.13
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
7/10/24
New
46,154
Common
$0.13
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
7/10/24
New
46,154
Common
$0.13
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
7/10/24
New
46,154
Common
$0.13
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
10/11/24
New
85,714
Common
$0.07
No
Joe Heimbrock, Director
Stock Based Compensation
Restricted
Rule 701
10/11/24
New
85,714
Common
$0.07
No
Tim Reilly, Director
Stock Based Compensation
Restricted
Rule 701
10/11/24
New
85,714
Common
$0.07
No
Jack Britts, Director
Stock Based Compensation
Restricted
Rule 701
10/11/24
New
85,714
Common
$0.07
No
Sara Mannix, Director
Stock Based Compensation
Restricted
Rule 701
55,614,036
517,359
6,500
Preferred Series C
Number of Shares
outstanding as of
January 1, 2023
Opening Balance
Common
Preferred Series B
Preferred Series C
Number of Shares
outstanding as of
December 31, 2024
Ending Balance
Common
Preferred Series B
All shares issued in the transactions detailed above, contain a legend that states that the shares were issued in a
transaction not registered under the Securities Act of 1933 and may not be transferred unless registered or pursuant
to an exemption therefrom.
Please see Footnote 14 - Subsequent Events to the Company’s consolidated financial statements in Part II below for
information related to the Company’s issuance of common stock related to stock-based compensation for directors.
Debt Securities, Including Promissory and Convertible Notes
Check this box if there are no outstanding promissory, convertible notes or debt arrangements: ☐
27
Date of Note
Issuance
Outstanding
Balance ($)
as of
12/31/2024
Principal
Amount at
Issuance ($)
Interest
Accrued ($)
as of
12/31/2024
Maturity Date
Conversion
Terms
Name of Note Holder
Reason for Issuance
2/10/20
$ 1,675,000 $ 1,675,000 $ -
4/30/2026
Convertible to
shares of
common stock
at $0.085 per
share
Inspira Financial Trust LLC
Custodian FBO Timothy E.
Reilly IRA; Joseph Peters, Kirt
& Patricia Bjork; Patrick
Mendenhall; Hudson Quinn
Holdings LLC, Dr. David
Cunningham, Member
Repay existing indebtedness;
Conversion of previous note
to Millenium Trust
Company LLC; and
General working capital
purposes.
4/14/20
$ 525,000 $ 525,000 $ -
4/30/2026
Convertible to
shares of
common stock
at $0.085 per
share
Robert B. Ford; Thomas J.
Daley 2019 Trust, Thomas J.
Daley, Trustee; John Pauly;
Inspira Financial Trust LLC
Custodian FBO Timothy E.
Reilly IRA; Dwayne Stephens
Repay existing indebtedness
and General working capital
purposes.
Please see Footnote 6 – Notes Payable to the Company’s consolidated financial statements in Part II for more
information.
PART F: EXHIBITS
17) Material Contracts (as of December 31, 2024):
The Company is party to convertible note purchase agreements and a security agreement, as amended, on
February 7, 2020 and April 12, 2020, and convertible secured promissory notes on February 10, 2020 and
April 12, 2020 (collectively the “Convertible Note Agreements”). Under the terms of the Convertible Note
Agreements, the Company borrowed an aggregate of $2,200,000 from a group of eleven investors. See Note
6 to the Consolidated Financial Statements.
On December 18, 2024, the Company entered into a Conversion and Standstill Agreement with the holders
of $650,000 principal amount of the Company’s Series C Preferred Stock. See Note 8 to the Consolidated
Financial Statements.
The Company is a party to a lease agreement for office and storage space for its headquarters in Florence,
Kentucky. On October 31, 2024, the Company entered into an amendment of the lease agreement which
extended the lease for an additional five years to December 31, 2029. See Note 7 to the Consolidated Financial
Statements.
The Company adopted the 2014 Equity Incentive Plan, as amended, (the “2014 Plan”) in August 2014 which
provided for a total of 6,000,000 shares of common stock authorized and available for issuance pursuant to
awards granted under the 2014 Plan. The 2014 Plan was amended in 2020, 2021 and 2023 to increase the
number of shares available to 43,000,000 shares. See Note 8 to the Consolidated Financial Statements.
Effective January 1, 2020, the Company entered into employment agreements with Joseph Peters and Daniel
Seliga contracts. See Note 9 to the Consolidated Financial Statements.
The Company has contracts with various suppliers of prescription and over-the-counter medications that
specify the term and conditions for purchasing and returning product, payment terms and other items.
28
The Company has contracts with various partner services customers that specify the obligations of each party,
the services to be provided, pricing for the services, payment terms and other items.
The Company has contracts with various providers of services, including but not limited to software, internet,
data storage, that specify the term and conditions for providing the services, payment terms and other items.
18) Articles of Incorporation and Bylaws:
The Company’s Articles of Incorporation and Bylaws are posted in the Investor Relations section of the
Company’s website, www.healthwarehouse.com/investors-relations, and are incorporated by reference
herein.
19) Purchases of Equity Securities by the Issuer and Affiliated Purchasers: None.
20) Issuer Certifications
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Joseph Peters, certify that:
1.
I have reviewed this annual disclosure statement of HealthWarehouse.com, Inc.
2.
Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this disclosure statement; and
3.
Based on my knowledge, the financial statements, and other financial information included or incorporated by
reference in this disclosure statement, fairly present in all material respects the financial condition, results of
operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
Date: March 25, 2025 /s/ Joseph B. Peters
Joseph B. Peters
Chief Executive Officer and President
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Daniel Seliga, certify that:
1.
I have reviewed this annual disclosure statement of HealthWarehouse.com, Inc.
2.
Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report; and
3.
Based on my knowledge, the financial statements, and other financial information included in this disclosure
statement, fairly present in all material respects the financial condition, results of operations and cash flows of
the issuer as of, and for, the periods presented in this disclosure statement.
Date: March 25, 2025 /s/ Daniel J. Seliga
Daniel J. Seliga
Chief Financial Officer
29
PART II – CONSOLIDATED FINANCIAL STATEMENTS
30
31
32
December 31,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
1,133,319
$
567,959
$
Accounts receivable, net
927,138
608,122
Inventories, net
841,703
509,116
Prepaid expenses and other current assets
113,772
158,146
Total current assets
3,015,932
1,843,343
Property and equipment, net
749,958
910,727
Software development costs, net
274,776
354,556
Other assets
35,524
-
Operating lease right of use asset
971,252
99,880
Total assets
5,047,442
$
3,208,506
$
Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable
1,267,207
$
901,257
$
Accrued dividends
3,080,096
2,737,864
Accrued expenses and other current liabilities
893,949
835,632
Operating lease liability
150,102
108,776
Total current liabilities
5,391,354
4,583,529
Long term liabilities:
Operating lease liability, non-current
843,550
-
Convertible notes payable, net of debt discount of $0 and $218,859 as of December 31, 2024
and 2023, respectively
2,200,000
1,981,141
Total long term liabilities
3,043,550
1,981,141
Total liabilities
8,434,904
6,564,670
Commitments and contingencies
Convertible redeemable preferred stock - Series C; par value $0.001 per share; 10,000 shares designated Series C:
issued and outstanding 6,500 as of December 31, 2024 and December 31, 2023 (aggregate liqidation preference
of $650,000 as of December 31, 2024 and December 31, 2023)
650,000
650,000
Stockholders’ deficiency:
Preferred stock – par value $0.001 per share; authorized 1,000,000 shares; issued and outstanding
as of December 31, 2024 and December 31, 2023 as follows:
Convertible preferred stock - Series B – 790,000 shares designated Series B; 517,359 shares issued and
outstanding as of December 31, 2024 and December 31, 2023 (aggregate liquidation preference
of $7,969,139 and $7,626,907 as of December 31, 2024 and December 31, 2023
517
517
Common stock – par value $0.001 per share; 175,000,000 shares authorized as of December 31, 2024 and
December 31, 2023; 56,793,248 and 55,862,980 shares issued and 55,614,036 and 54,683,768
shares outstanding as of December 31, 2024 and December 31, 2023
56,793
55,863
Additional paid-in capital
38,507,080
37,864,102
Treasury stock, at cost, 1,179,212 shares as of December 31, 2024 and December 31, 2023
(3,419,715)
(3,419,715)
Accumulated deficit
(39,182,137)
(38,506,931)
Total stockholders’ deficiency
(4,037,462)
(4,006,164)
Total liabilities and stockholders’ deficiency
5,047,442
$
3,208,506
$
HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these consolidated financial statements.
33
2024
2023
Total net sales
33,614,067
$
20,283,336
$
Cost of sales
19,489,469
8,109,419
Gross profit
14,124,598
12,173,917
Selling, general and administrative expenses
14,217,358
13,795,597
Loss from operations
(92,760)
(1,621,680)
Other expense:
Loss on extinguishment of debt
(3,250)
-
Interest expense, net
(236,964)
(151,900)
Total other expense
(240,214)
(151,900)
Net loss
(332,974)
(1,773,580)
Preferred stock:
Series B convertible preferred stock contractual dividends
(342,232)
(342,233)
Net loss attributable to common stockholders
(675,206)
$
(2,115,813)
$
Per share data:
Net income (loss) – basic and diluted
(0.01)
$
(0.03)
$
Series B convertible preferred stock contractual dividends
(0.00)
(0.01)
Net loss attributable to common stockholders - basic and diluted
(0.01)
$
(0.04)
$
Weighted average number of common shares outstanding - basic and diluted
55,186,013
54,397,354
The accompanying notes are an integral part of these consolidated financial statements.
HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
34
Total
Additional
Accumulated
Stockholders’
Shares
Amount
Shares
Amount
Shares
Amount
Paid-In Capital
Shares
Amount
Deficit
Deficiency
Balances, January 1, 2023
6,500
650,000
$
517,359
517
$
55,239,452
55,240
$
36,721,616
$
1,179,212
(3,419,715)
$
(36,391,118)
$
(3,033,460)
$
Stock-based compensation, including options
-
-
-
-
482,352
482
899,768
-
-
-
900,250
Common shares issued for previously
accrued compensation
-
-
-
-
141,176
141
23,859
-
-
-
24,000
Contractual dividends on Series B convertible
preferred stock
-
-
-
-
-
-
-
-
-
(342,233)
(342,233)
Change in fair value of embedded conversion feature
related to convertible notes payable
198,859
198,859
Warrants issued as debt discount in
connection with notes payable
-
-
-
-
20,000
-
-
-
20,000
Net loss
-
-
-
-
-
-
-
-
-
(1,773,580)
(1,773,580)
Balances, December 31, 2023
6,500
650,000
$
517,359
517
$
55,862,980
55,863
$
37,864,102
$
1,179,212
(3,419,715)
$
(38,506,931)
$
(4,006,164)
$
Balances, January 1, 2024
6,500
650,000
$
517,359
517
$
55,862,980
55,863
$
37,864,102
$
1,179,212
(3,419,715)
$
(38,506,931)
$
(4,006,164)
$
Stock-based compensation, including options
-
-
-
-
745,652
746
725,342
-
-
-
726,088
Common Shares issued for previously
accrued compensation
-
-
-
-
184,616
184
23,816
-
-
-
24,000
Contractual dividends on Series B convertible
preferred stock
-
-
-
-
-
-
-
-
-
(342,232)
(342,232)
Intrinsic value of embedded conversion feature
related to convertible notes payable
-
-
-
-
(129,412)
-
-
-
(129,412)
Warrants issued as debt discount in
connection with convertible notes payable
-
-
-
-
-
-
23,232
-
-
-
23,232
Net loss
-
-
-
-
-
-
-
-
-
(332,974)
(332,974)
Balances, December 31, 2024
6,500
650,000
$
517,359
517
$
56,793,248
56,793
$
38,507,080
$
1,179,212
(3,419,715)
$
(39,182,137)
$
(4,037,462)
$
The accompanying notes are an integral part of these consolidated financial statements.
Convertible Redeemable
Convertible
Preferred Stock
Preferred Stock
Common Stock
Treasury Stock
Series C
Series B
HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEAR ENDED DECEMBER 31, 2024 AND 2023
35
2024
2023
Cash flows from operating activities
Net loss
(332,974)
$
(1,773,580)
$
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
325,453
253,722
Stock-based compensation
750,087
924,250
Loss on extinguishment of debt
3,250
-
Amortization of debt discount
109,430
12,990
Write down of inventory to net realizable value
-
61,000
Amortization of operating lease right of use asset
108,976
92,650
Bad debt expense
-
427,727
Changes in operating assets and liabilities:
Accounts receivable
(319,016)
(188,282)
Inventories
(313,111)
(67,634)
Prepaid expenses and other current assets
46,274
15,988
Accounts payable
365,950
93,397
Accrued expenses and other current liabilities
56,417
82,209
Operating lease liabilities
(95,472)
(98,274)
Net cash provided by (used in) operating activities
705,264
(163,838)
Cash flows from investing activities
Capital expenditures
(54,904)
(55,881)
Software and website development costs
(30,000)
(254,089)
Acquistion of assets
(55,000)
-
Net cash used in investing activities
(139,904)
(309,970)
Net increase (decrease) in cash
565,360
(473,808)
Cash and cash equivalents - beginning of period
567,959
1,041,766
Cash and cash equivalents - end of period
1,133,319
$
567,959
$
0
Cash paid for:
Interest
154,000
$
154,000
$
Non-cash investing and financing activities:
Accrual of contractual dividends on Series B convertible preferred stock
$ 342,232
$ 342,233
Common stock issued to satisfy accrued directors' fees
$ 96,000
$ 96,000
Options issued to satisfy accrued directors' fees
$ 160,000
$ 160,000
Extinguishment of convertible notes payable
$ (2,090,571)
$ -
Reissuance of convertible notes payable
$ 2,200,000
$ -
Warrants issued in connection with convertible notes payable
$ 23,232
$ 20,000
Reacquisiton of embedded conversion feature related to extinguishment of
convertible notes payable
$ (129,412)
$ -
Operating lease right-of-use asset
$ 980,348
$ -
Operating lease liability, current and non-current
$ 980,348
$ -
The accompanying notes are an integral part of these consolidated financial statements.
HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
December 31
36
HEALTHWAREHOUSE.COM, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statement.
1. Organization and Basis of Presentation
HealthWarehouse.com, Inc. (“HEWA” or the “Company”), a Delaware company incorporated in 1998, is an online
mail order pharmacy, licensed and/or authorized to sell and deliver prescriptions in all 50 United States and the District of
Columbia focusing on the out-of-pocket prescription drug market. The Company is a Verified Internet Pharmacy Practice Site
(“VIPPS”) accredited by the National Association of Boards of Pharmacy (“NABP”). The Company markets a complete range
of generic, brand name, and pet prescription medications as well as over-the-counter“ ("OTC") medications and products.
2. Liquidity and Capital Resources
The Company’s working capital deficiency was $2.4 million as of December 31, 2024 and the stockholder deficiency
was $4.0 million as of December 31, 2024. For the year ended December 31, 2024, the Company had a net loss of $333,000
but had net cash provided by operating activities of $705,000. As of December 31, 2024, the Company had cash and liquid
investments totaling $1.1 million.
On September 30, 2023, the Company extended the maturity date of the Convertible Notes to April 30, 2026, which
reduced its current obligations as of December 31, 2024. The primary component of the Company’s remaining current
obligations is the accrued dividends totaling $3.1 million to the holders of the Series B Preferred shares. The dividends continue
to accrue as Company is restricted from paying dividends if there is no surplus in equity per Delaware law. The Company
believes it would satisfy a majority, if not all, of such dividends through the issuance of additional shares of the Series B
Preferred Stock versus a required cash outlay, which is at the Company’s Board discretion, when allowable under Delaware
law.
While the reported levels of working capital deficit, shareholders deficiency and net loss would give indications of
doubt relative to a going concern, management believes that the doubt is alleviated by the (i) the non-cash nature of $3.1 million
of the current liabilities; (ii) the renewed standstill of the redemption provision related to the Series C Preferred to January 2028;
(ii) cash generated from operations and impact on cash balances in 2024; (iv) year end cash balances of $1.1 million sufficient
to cover the $800,000 of convertible notes not held by related parties; and (iv) the expected continuation of positive EBITDA
into 2025 and increasing cash balances.
The Company believes that its current financial resources and management’s plans are sufficient to satisfy the
Company’s estimated liquidity needs for at least twelve months from the date of issuance of the consolidated financial
statements.
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”), which contemplates continuation of the Company as a going
concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of
assets and liabilities presented in the consolidated financial statements do not necessarily represent realizable or settlement
values. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Principles of Consolidation
The consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc.,
Hocks.com, Inc., ION Holding NV, ION Belgium NV, its wholly-owned subsidiaries. Hocks.com, Inc., ION Holding NV and
ION Belgium NV are inactive subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
37
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reporting period.
Actual results could differ from those estimates. The Company’s significant estimates include reserves related to accounts
receivable, the net realizable value of inventory, the recoverability and useful lives of long-lived assets and website development
costs, the valuation allowance related to deferred tax assets, the valuation of equity instruments, debt discounts and
contingencies.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased
to be cash equivalents. As of December 31, 2024 and 2023, the Company had money market accounts held at banks and other
financial institutions which are classified as cash equivalents.
Current Expected Credit Losses (“CECL”)
The CECL reserve methodology requires companies to measure the expected credit losses on financial instruments
based on the total estimated amount to be collected over the lifetime of the instrument. Under CECL, reserves may be established
against financial asset balances even if the risk of loss is remote. Reserves can be subject to a degree of judgment and can be
subject to macroeconomic factors, including inflation and forecasts of future economic conditions. A change in these factors
could have a material impact on the allowance for credit losses.
The nature of the direct-to-consumer (B2C) business is that the majority of payments are received before the product
is shipped. The Company has accounts receivable related to its partner services business as it has extended terms to its partner
services customers ranging from prepay to 45 days. If the financial conditions of partner services customers were to materially
deteriorate, an increase in the allowance amount could be required. The allowance for credit losses considers several factors,
including historical collection and credit loss experience, current and expected economic trends, estimates of forecasted write-
offs, aging of the accounts receivable, and other factors. During the year ended December 31, 2023, the Company experienced
a credit loss of $427,726 related to one partner services customer that filed bankruptcy in the fourth quarter of 2023 after year
long negotiations to acquire certain assets of the company failed to result in a transaction. As a result, the company recorded
the amount as bad debt expense in the fourth quarter of 2023. The majority of the other partner services customers are paying
on time or within a reasonable variance of the credit terms extended, however. The Company is not aware of any economic
trends that would have a significant impact on the creditworthiness of the partner services customers. The Company recognized
and reported an allowance for credit losses of $19,000 as of December 31, 2024 based on current and estimated potential write-
offs.
Inventories
The Company’s inventory is comprised of finished goods. The Company measures inventory at the lower of cost or
net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of
disposal. The Company performs regular reviews of inventory quantities on hand and evaluates the realizable value of its
inventories. The valuation process for excess or slow-moving inventory contains uncertainty because management must use
judgment to estimate when the inventory will be sold and the quantities and prices at which the inventory will be sold in the
normal course of business. The Company adjusts the carrying value of the inventory as necessary with estimated valuation
reserves for excess, obsolete, and slow-moving inventory by comparing the individual inventory items to forecasted product
demand, taking into account current risks, trends and changes in industry conditions. Obsolescence of inventory items has
historically been immaterial. During the year ended December 31, 2023, the Company wrote down the value of certain inventory
items to net realizable value resulting in reductions in the inventory value of those items of $61,000. There were no write-offs
during the year ended December 31, 2024.
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-
line method over the estimated useful lives of the assets. The costs of additions and betterments are capitalized and expenditures
38
for repairs and maintenance, which do not extend the economic useful life of the related assets, are expensed in the period
incurred. Gains or losses on disposal of property and equipment are reflected in the statements of operations in the period of
disposal. For the years ended December 31, 2024 and 2023, the Company did not record any impairment of property and
equipment.
Leases
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets are
included in right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease
liabilities are included in the current operating lease liabilities and noncurrent operating lease liabilities, respectively, on the
consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future
minimum lease payments over the lease term. The Company uses the rate implicit in the lease or an incremental borrowing rate
based on the information available at the commencement date in determining the present value of future payments. Certain
leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Impairment of Long-Lived Assets
The Company reviews the carrying value of intangibles and other long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived
assets is measured by comparing the carrying amount of the asset or asset group to the undiscounted cash flows that the asset or
asset group is expected to generate. If the undiscounted cash flows of such assets are less than the carrying amount, the
impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair
value. For the years ended December 31, 2024 and 2023, the Company did not record any impairment of long-lived assets.
Software and Website Development Costs
The Company capitalizes costs associated with the development of its proprietary software and website for internal use
in accordance with ASC 350 – Intangibles, Goodwill and Other. During the years ended December 31, 2024 and 2023, the
Company capitalized $30,000 and $254,000, respectively, of website development costs. The Company began to amortize the
software and website development costs on a three year straight-line basis beginning in June 2023 as the related software was
substantially completed and implemented. Amortization expense for the above capitalized costs is recognized in selling, general
and administrative expenses and totaled $79,780 and $44,344 for the years ended December 31, 2024 and 2023, respectively.
Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. These fair value measurements apply to all financial instruments that are
measured and reported on a fair value basis.
Based on the observability of the inputs used in the valuation techniques, financial instruments are categorized
according to the fair value hierarchy, which ranks the quality and reliability of the information used to determine fair
values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level–1 - Observable inputs such as quoted prices in active markets.
Level–2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level–3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such
cases, the assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant
to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment and considers factors specific to the asset or liability.
39
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820,
“Fair Value Measurement”, approximates the carrying amounts reported in the accompanying balance sheets, primarily due to
their short-term nature.
Income Taxes
Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and
liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years
in which the temporary differences are expected to reverse.
U.S. GAAP prescribes a recognition threshold and measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return.
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in
the Company’s financial statements as of December 31, 2024 and 2023. The Company does not expect any significant changes
in the unrecognized tax benefits within twelve months of the reporting date.
The Company classifies interest expense and any related penalties related to income tax uncertainties as a component
of income tax expense. No interest or penalties have been recognized during the years ended December 31, 2024 and 2023.
Debt Discounts
The Company records, as a discount to notes and convertible notes, the relative fair value of warrants issued in
connection with the issuances and the intrinsic value of any conversion options based upon the differences between the fair
value of the underlying common stock at the commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized to interest expense using the interest method
over the earlier of the term of the related debt or their earliest date of redemption.
Revenue Recognition
The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers, by analyzing
exchanges with its customers using a five-step analysis: (i) identify the contract, (ii) identify performance obligations, (iii)
determine the transaction price, (iv) allocate the transaction price and (v) recognize revenue.
Revenue is generated through the sale of over-the-counter medication and prescription medication directly to the
consumer. The Company also generates revenue by providing fulfillment of prescription medication, medical devices and over-
the-counter products and other services to customers of other healthcare providers (“Partner Services”). These revenue streams
culminate in a single performance obligation to provide the products and the service, and revenue is recorded in an amount that
reflects the net consideration that the Company expects to receive for each revenue stream. Prices for the products are based on
agreed upon rates with customers and do not include financing components or noncash consideration. The amount of
consideration received and revenue recognized is variable for services offered to partner services customers and is impacted by
volume rebates, which are generally tied to the number of prescriptions filled during the fulfillment process by the Company
and settled on a monthly basis.
The Company records an estimate for provisions of discounts and other adjustments for its product shipments and are
reflected as contra revenues in arriving at reported net revenues. The Company’s discounts are known at the time of sale;
correspondingly, the Company reduces gross product sales for such discounts. The Company’s returns have historically been
immaterial, therefore, the Company does not record a provision for returns.
The Company has determined that there is one performance obligation, which is the shipment and delivery of the
product; this performance obligation is transferred at a discrete point in time. The Company recognizes revenue when
performance obligations under the terms of a contract with a customer are satisfied in an amount that reflects the consideration
the Company expects to receive in exchange for the product or service. For all customers, revenue is recognized at a point-in-
time (at the time the medication is shipped or at the time the fulfillment or other service is performed) based on the agreed upon
terms with each customer when customer has control. The Company defers revenue when cash has been received from the
40
customer, but shipment has not yet occurred. Such amounts are reflected as deferred revenues within accrued expenses in the
accompanying consolidated financial statements.
Payments by customers to the Company for the sale of over-the-counter medication and prescription medication are
typically made by credit card payment and received by the Company within 24-48 hours. Payments by customers to the
Company for partner services are either prepaid by the customer or paid by check or electronic funds transfer upon receipt of a
monthly invoice. The Company extends terms to some partner services customers ranging from prepay to 45 days.
The Company receives upfront payments to offset set up costs related to new partner services contracts, which may
include engineering time, setting up workflow, and purchasing computer equipment for a dedicated processing station. The
setup costs are incurred to generate and/or enhance resources that will be used to satisfy performance obligations of the customer
in the future through the services provided via the contract entered into with the customer. As such, the set up costs are recorded
as deferred revenue and recognized over the term of the contract with the customer. The Company had $3,500 and $12,500 of
these costs included in the deferred revenue balance at December 31, 2024 and 2023, respectively, in accrued expenses and
other liabilities on the financial statements.
Taxes assessed by a governmental authority that the Company collects from customers that are both imposed on and
concurrent with revenue producing activities (such as sales tax, value-added tax, and excise taxes) are excluded from revenue
and recorded as sales tax payable in accrued expenses.
Disaggregation of Net Sales
Net sales are primarily generated through the sale of over-the-counter medication, prescription medication and
medical devices (i) sold directly to consumers through the Company’s website and call center (“B2C”) and (ii) through
fulfillment and other services provided to other healthcare providers and manufacturers (“Partner Services”). The following
table summarizes net sales for the years ended December 31, 2024 and 2023.
2024
2023
B2C Sales
$13,171,183
$13,558,868
Partner Services Sales
20,425,514
6,703,096
Other Sales
17,370
21,372
Total Sales
$33,614,067
$20,283,336
For the years ended December 31,
Contract assets and liabilities
Contract liabilities are recorded for arrangements where the Company (i) has received customer deposits from the
customer but has not yet provided the fulfillment services and (ii) has received an upfront payment from the customer to cover
set up costs including equipment and engineering resources. The Company had total contract liabilities of $211,091 and $80,125
recorded in accrued expenses as of December 31, 2024 and 2023, respectively, which were comprised of (i) customer deposits
of $207,591 and $67,625 as of December 31, 2024 and 2023, respectively, which represented refundable customer deposits that
were recorded as deferred revenue and (ii) deferred revenue of $3,500 and $12,500 as of December 31, 2024 and 2023,
respectively, related to upfront payments received from customers that are being amortized over the term of the contract. During
the years ended December 31, 2024 and 2023, the Company recognized net sales of $15,000 and $16,833, respectively, related
to the amortization of the upfront payments. Other than accounts receivable, there were no contract assets as of December 31,
2024 and 2023.
Shipping and Handling Costs
The Company policy is to provide free standard shipping and handling for most direct-to-consumer (B2C) orders.
Shipping and handling costs incurred are recognized in selling, general and administrative expenses. Such amounts aggregated
$3,136,862 and $2,304,927 for the years ended December 31, 2024 and 2023, respectively.
41
In certain circumstances, shipping and handling costs are charged to the direct-to-consumer (B2C) customer and
recognized in Net Sales. The amounts recognized in Net Sales for the years ended December 31, 2024 and 2023 were $335,001
and $331,806, respectively.
Advertising and Marketing Expenses
The Company expenses all advertising and marketing costs as incurred which was $742,207 and $1,067,081 for the
years ended December 31, 2024 and 2023, respectively, and recorded in selling, general and administrative expenses.
Sales Taxes
The net sales of the Company do not include sales tax imposed on its goods and services because the Company is a
pass-through conduit for collecting and remitting sales taxes. Beginning in 2018 and continuing into 2024, various states have
enacted or are considering enacting legislation to require the collection of sales tax on ecommerce transactions shipped to their
state. Such requirements vary by state and are subject to specified de minimis levels and various exclusions, including
prescription medication. Compliance with current legislation enacted is not expected to have a material impact on the
Company’s future operations or results.
Net Loss Per Share of Common Stock
Basic net loss per share is computed by dividing net earnings (loss) attributable to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted net loss per share includes potentially
dilutive securities such as outstanding options, warrants and convertible notes, using the if-converted method in the
determination of dilutive shares outstanding during each reporting period.
2024
2023
Net loss attributable to common shareholders
(675,206)
$
(2,115,813)
$
Weighted-average common shares, basic and diluted
55,186,013
54,397,354
Net loss per common share, basic and diluted
(0.01)
$
(0.04)
$
December 31
The following table sets forth potential common shares issuable upon the exercise of outstanding options, the exercise
of warrants and the conversion of preferred stock and notes, all of which have been excluded from the computation of diluted
weighted average shares outstanding as they would be anti-dilutive:
2024
2023
Options
25,202,311
21,773,925
Warrants
1,240,127
940,127
Series B Convertible Preferred Stock
7,656,914
7,656,914
Series C Convertible Redeemable Preferred Stock *
9,285,714
5,909,091
Convertible Notes Payable
25,882,360
20,000,006
Total potentially dilutive shares
69,267,426
56,280,063
December 31,
* The amount of Series C Convertible Redeemable Preferred Stock as if converted shares of 9,285,714 and 5,909,091 were calculated
based on a conversion price of 80% of the 30 day weighted average closing price of $0.09 and $0.14 as of December 31, 2024 and
2023, respectively.
Stock-Based Compensation
Stock-based compensation expense for all stock-based payment awards is based on the estimated fair value of the
award. For employees, directors and non-employees, the award is measured on the grant date. The Company recognizes the
42
estimated fair value of the award as compensation cost over the requisite service period of the award, which is generally the
option vesting term.
Preferred Stock
Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at
fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred
shares in stockholders’ deficiency.
Convertible Instruments
U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as
free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with
changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded
derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is
deemed to be conventional as that term is described under applicable U.S. GAAP.
When the Company has determined that the embedded conversion options should not be bifurcated from their host
instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options
embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the
commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these
arrangements are amortized over the term of the related debt to their stated date of redemption.
Common Stock Warrants and Other Derivative Financial Instruments
The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii)
provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share
settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities
any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in
shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants
and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and
liabilities is required.
The Company evaluated its free-standing warrants to purchase common stock to assess their proper classification in
the consolidated balance sheets as of December 31, 2024 and 2023 using the applicable classification criteria enumerated under
U.S. GAAP and determined that the common stock purchase warrants contain fixed settlement provisions, therefore they have
been classified as equity.
Risks and Uncertainties
Current Wars: Management continues to evaluate the impact of the current wars in Ukraine and Gaza on the industry
and has concluded that it is reasonably possible that the wars could have a negative effect on the Company’s financial position
or results of its operations. Further, the impact of these actions and related sanctions on the world economy are not determinable
as of the date of these financial statements and the specific impact on the Company’s financial condition, results of operations,
and cash flows is also not determinable as of the date of these financial statements.
Inflation Reduction Act Excise Tax: On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was
signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases
of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign
43
corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its
stockholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the
shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations
are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during
the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the
“Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance
of the excise tax. Any share redemption or other share repurchase that occurs after December 31, 2022, in connection with a
Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company
would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise will depend on a
number of factors, including (i) the fair market value of the redemptions and repurchases in connection with a Business
Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or
other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business
Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other
guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming
stockholder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could reduce
the cash available on hand. The IR Act had limited to no impact on the results of operations and cashflows during the year ended
December 31, 2024 nor the financial condition as of December 31, 2024.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Segment
Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim
periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07, effective December 31,
2024, in these consolidated financial statements. ASU 2023-07 only impacted the disclosures and did not impact the
consolidated financial statements. See Note 13, Segment Information, for disclosures related to the adoption of ASU 2023-07.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax
Disclosures”. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The
amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the
rate reconciliation and income taxes paid information. A public entity should apply the amendments in ASU 2023-09
prospectively to all annual periods beginning after December 15, 2024. For entities other than public business entities, the
amendments are effective for annual periods beginning after December 15, 2025. Early adoption and retrospective application
are permitted. The Company has not adopted ASU 2023-09 and does not know the impact it will have on its consolidated
financial statements and related disclosures.
In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement—
Reporting Comprehensive Income (Topic 220) Disaggregation of Income Statement Expenses (“ASU 2024-03”), to enhance
the transparency and decision usefulness of financial information presented in the income statement by requiring disaggregated
information about certain income statement expense line items. ASU 2024-03 is effective for annual periods beginning after
December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company has not adopted ASU
2024-03 and does not know the impact it will have on its consolidated financial statements and related disclosures.
There were no other recent accounting standard updates that the Company has not yet adopted that we believe would
have a material impact on our consolidated financial statements.
44
4. Property and Equipment, Net
Property and equipment, net consisted of the following:
Useful Life
2024
2023
(Years)
Computer Software
577,566
$
547,566
$
5 years
Equipment
1,349,245
1,314,022
10 years
Office Furniture and Equipment
136,541
132,845
7 years
Computer Hardware
103,136
103,136
5 years
Leasehold Improvements
266,100
250,115
(a)
Total
2,432,588
2,347,684
Less: Accumulated Depreciation
(1,682,630)
(1,436,957)
Property and Equipment, Net
749,958
$
910,727
$
(a) Lesser of useful life or initial term of lease
December 31,
Depreciation and amortization expense for the above assets for the years ended December 31, 2024 and 2023 was
$245,673 and $209,379, respectively.
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
December 31,
December 31,
2024
2023
Salaries and Benefits
244,324
$
197,256
$
Deferred Revenue
212,946
82,377
Sales Tax Payable
142,452
179,970
Accounting
106,611
136,200
Accrued Corporate & Property Taxes
32,314
71,776
Accrued Director Fees
64,000
64,000
Advertising
27,800
38,090
Accrued Legal
37,080
37,080
Other
26,422
28,883
893,949
$
835,632
$
.
45
6. Notes Payable
Notes payable consisted of the following:
December 31,
December 31,
2024
2023
Convertible Promissory Note
2,200,000
2,200,000
Less debt discount
-
(218,859)
Total debt
2,200,000
1,981,141
Less current portion
-
-
Long-term debt, less current portion
2,200,000
$
1,981,141
$
Convertible Promissory Notes
The Company executed convertible note purchase agreements (the “Convertible Purchase Agreements”) and a security
agreement, as amended, (the “Convertible Security Agreement”) on February 7, 2020 and April 12, 2020, and convertible
secured promissory notes on February 10, 2020 and April 12, 2020 (the “Convertible Notes”) (collectively the “Convertible
Note Agreements”). Under the terms of the Convertible Notes, the Company borrowed an aggregate of $2,200,000 from a
group of eleven investors. The Convertible Notes bear interest on the unpaid principal balance until the full amount of principal
has been paid or converted to common shares at a fixed rate equal to 7% per annum. Under the terms of the Convertible Notes,
the Company has agreed to make quarterly payments of accrued interest of $38,500 on the last day of every calendar quarter
beginning on March 31, 2020. Effective September 30, 2024, the Company entered into amendments to the Convertible
Purchase Agreements (the “Fourth Amendment to the Convertible Notes”) and issued amended and restated Convertible
Promissory Notes (the “Amended Notes”) to the Convertible Note investors, whereby the maturity dates of the notes were
extended from April 30, 2025 to April 30, 2026.
As part of the agreement to extend the maturity date, the Company agreed to change the existing conversion rates from
$0.11 per share to $0.085 per share. An incremental 5,882,354 shares of common stock are issuable at conversion of the
Convertible Notes due to the reduction in the conversion rate as compared to the original terms.
The Company determined that the debt was substantially different due to the change in the fair value of the embedded
conversion feature. As a result, the amendment was accounted for as an extinguishment of debt per ASC 470. To affect the
extinguishment per ASC 470, the Company (i) removed the convertible notes balance of $2,200,000 and the remaining debt
discount prior to the amendment of $109,429, (ii) rebooked the convertible notes for $2,200,000, which was the approximate
fair value of the convertible notes after the amendment, (iii) recognized the intrinsic value of the embedded conversion option
of $129,411 as a reacquisition of the option which resulted in a reduction of paid-in capital, (iv) recorded the fair value of
warrants issued to the holders of the Series B convertible preferred stock (see below) of $23,232 as an increase in paid-in capital
and (v) recorded a loss on the extinguishment of the notes payable of $3,250.
The principal amount and all unpaid accrued interest on the Convertible Notes are payable on April 30, 2026. As of
December 31, 2024, the outstanding principal balance on the Convertible Promissory Notes was $2,200,000, and accrued interest
was $0.
Pursuant to the Convertible Security Agreement, the Company granted a junior security interest in all of the Company's
assets, in order to secure the Company's obligation to repay the Convertible Notes. The Convertible Note security interest is
junior to up to $1,000,000 of senior security interests. The Convertible Loan Agreements contain customary negative covenants
restricting the Company's ability to take certain actions without the consent of the agent for the Convertible Note holders,
including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other
payments, and acquiring other businesses. The repayment of the Convertible Promissory Notes may be accelerated prior to the
maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of
representations and warranties.
On September 30, 2024, the Company received a waiver from the majority holder of the Series B convertible preferred
stock, who is a director of the Company, prior to completing the Amendment to the Convertible Notes. The waiver extended
46
the limitation on indebtedness of $3,000,000 to April 30, 2026. As part of the agreement to extend the waiver of the debt
limitation from April 30, 2025 to April 30, 2026 and maintain the limitation on indebtedness at $3,000,000, the Series B
Preferred shareholders were issued warrants to purchase 300,000 shares of common stock at an exercise price equal to $0.085
per share. The 30-day weighted average closing share price on the grant date was $0.09. The warrants have a term of five years
and an aggregate grant date value of $23,232 which was recognized as an increase in paid-in capital.
At any time prior to the maturity date, each purchaser may convert their Convertible Note balance, in whole or in part,
into shares of the Company’s common stock at conversion rate of $0.085 per share (the “Conversion Rate. The Company may
initiate the conversion of the Convertible Notes at any time prior to the maturity date in the event that the 60-day weighted
average price of a share of the Company’s common stock as reported on OTC Markets exceeds $0.30 per share. The Conversion
Price is subject to adjustment in the event of future dilutive transactions.
Inspira Financial Trust LLC (f/k/a Millennium Trust Company LLC) Custodian FBO Timothy E. Reilly IRA holds
$1,350,000 of the Convertible Note balance, through its initial investment and as part of transactions to replace three of the
original investors. The Timothy E. Reilly IRA is owned and controlled by Tim Reilly who is Chairman of the Company and a
beneficial owner of more than 5% of the Company’s outstanding shares of common stock. As such, the Inspira note is a related
party transaction.
As part of a transaction on November 27, 2024 to replace one of the original investors, Joseph Peters purchased $50,000
of the Convertible Note balance. Mr. Peters is the Chief Executive Officer and a Director of the Company. As such, the Peters
note is a related party transaction.
7. Operating Leases
The Company is a party to a lease agreement for office and storage space for its headquarters in Florence, Kentucky.
On October 31, 2024, the Company entered into an amendment of the lease agreement which extended the lease for an additional
five years to December 31, 2029. The amended monthly lease rate will range between $18,640 and $21,806. The Company
has an option to extend the term by three years, however, the Company determined that it was not reasonably certain to exercise
the renewal option and such renewal was excluded from the operating lease right-of-use, or ROU, asset and operating lease
liability recorded for this lease.
The Company is responsible for real estate taxes, maintenance and other operating expenses applicable to the leased
premises which are recognized as variable lease expense in the period when incurred.
This lease is classified as an operating lease and is included in operating lease ROU assets and operating lease liabilities.
Since the Company's lease did not provide an implicit rate, the Company used its estimated incremental borrowing rate based
on the lease term and other information available at the commencement date in determining the present value of lease payments.
Supplemental balance sheet information as of December 31, 2024 is as follows:
47
Operating lease right-of-use assets
997,529
$
Accumulated amortization
(26,277)
Net operating right-of-use-assets
971,252
$
Current operating lease liabilities
150,102
$
Noncurrent operating lease liabilities
843,550
Total operating lease liabilities
993,652
$
Weighted-average remaining lease term (years)
5.0
Weighted-average discount rate
8.1%
The aggregate future minimum lease payments for operating leases as of December 31, 2024 were as follows:
2025
223,678
$
2026
232,625
$
2027
241,930
2028
251,607
$
2029
261,672
Total gross lease payment
1,211,512
$
Less: Imputed interest
(217,860)
Total lease liabilities, reflecting present
value of future minimum lease payments
993,652
$
During the years ended December 31, 2024 and 2023, the Company recorded aggregate lease expense was $183,600
and $153,170, respectively.
8. Stockholders’ Deficiency
The Company is authorized to issue up to 175,000,000 shares of common stock with a par value of $0.001 per share
and 1,000,000 shares of preferred stock with a par value of $0.001 per share.
In October 2020, at the annual meeting of stockholders of the Corporation, the stockholders of the Corporation
approved an amendment to the Corporation’s Certificate of Incorporation to effect a reverse stock split of the Company’s
common stock at a ratio of 1-for-50 and to decrease the number of authorized shares of common stock in proportion to the
reverse stock split. However, the Board of Directors has not yet determined if or when to effect the reverse stock split.
OTC Market Tier Change
On April 14, 2017, the Company filed a Form 15 with the Securities and Exchange Commission terminating the
registration of its common stock under Rule 12 g-4(a)(1) of the Securities Exchange Act of 1934. The Company transitioned
to the OTC Pink Sheets – Current Information tier of the OTC Market on July 10, 2017. On May 11, 2021, the Company was
approved for listing and began trading on the OTCQB Market.
48
Common Stock
During the years ended December 31, 2024 and 2023, the Company issued an aggregate of 930,268 and 623,528 shares
of common stock, respectively, to directors of the Company for payment of their accrued noncash portion of their director’s
fees. The shares had an aggregate grant date values of $96,000 for the years ended December 31, 2024 and 2023, of which
$24,000 had been accrued and included in accrued expenses and other current liabilities at December 31, 2023 and 2022. The
shares were valued at the 30-day weighted average closing share price on the grant date which ranged between $0.07 and $0.13
per share in 2024 and between $0.12 and $0.17 in 2023.
Stock-based compensation expense related to common stock issued was recorded in the consolidated statements of
operations as a component of selling, general and administrative expenses and totaled $96,000 for the years ended December
31, 2024 and 2023. Stock-based compensation of $24,000 is included in accrued expenses as other liabilities as of December
31, 2024 and 2023.
Preferred Stock
Series A Preferred Stock
The Company had designated 200,000 of the 1,000,000 authorized shares of preferred stock as Series A Convertible
Preferred Stock (“Series A Preferred Stock”). On September 26, 2019, the Board of Directors approved and the Company
subsequently filed a Certificate of Elimination of the Series A Preferred Stock of Healthwarehouse.com, Inc. with the state of
Delaware on October 17, 2019 in order to reduce and eliminate the 200,000 authorized Preferred Shares – A Series. There were
no outstanding Series A Preferred Shares at the time of the elimination.
Series B Preferred Stock
The Company has designated 790,000 of the 1,000,000 authorized shares of preferred stock as Series B Convertible
Preferred Stock (“Series B Preferred Stock”). The Series B Preferred Stock has voting rights equal to one vote for each common
share equivalent, has a liquidation preference equal to its purchase price, and receives preferred dividends equal to 7% of all
outstanding shares in either cash or payment-in-kind. The holders can call for the conversion of the Series B Preferred Stock at
any time and are entitled to five shares of the Company’s common stock for each share of Series B Preferred Stock converted.
MVI Partners, LLC owns a majority of the outstanding shares of the Series B Preferred Stock. Joe Heimbrock is the managing
partner of MVI Partners, LLC and serves as a director of the Company appointed by the Series B Preferred Stock shareholders.
In addition, the Series B Preferred Stock is subject to weighted average anti-dilution protection whereby if shares of
common stock are sold below the current conversion price, the conversion price is reduced pursuant to a pre-defined formula.
As of December 31, 2024 and 2023, Series B holders were entitled to convert into 14.8 shares of the Company’s common stock
for each share of Series B Preferred Stock. The investor rights agreement of the Company’s Series B preferred shares limits the
total debt of the Company to $1 million. See Note 6 for the waivers of the limitation of debt to April 30, 2026.
As of December 31, 2024 and 2023, the Company had accrued contractual dividends of $3,080,096, and $2,737,864,
respectively, related to the Series B Preferred Stock.
Series C Preferred Stock
The Company’s Certificate of Designation designates 10,000 shares of the Company's preferred stock as Series C
Preferred Stock to be issued at an original issue price of $100 per share. The Series C Preferred Stock has voting rights equal to
one vote for each share held, has a liquidation preference equal to its purchase price, and has certain redemption rights available
at the option of the holder. The Series C Preferred Stock is not entitled to dividends.
On October 17, 2011, the Company received net cash proceeds of $1,000,000 for the sale of 10,000 shares of Series C
Preferred Stock to a greater than 10% stockholder of the Company. The Company’s Series C preferred shares are considered to
be an equity host with a conversion option that is clearly and closely related to the equity host. However, the Series C Preferred
shares contain redemption rights which are not solely within the Company’s control, therefore, the Series C Preferred stock is
presented as temporary equity. On February 13, 2013, the Company received a Notice of Redemption of Series C Preferred
Stock.
49
On October 29, 2020, the Company entered into a Conversion and Standstill Agreement (the “Agreement”) with the
holders of $1,000,000 principal amount of the Company’s Series C Preferred Stock (10,000 shares). Pursuant to the terms of
the Agreement, the holders agreed (i) to retract the redemption request previously submitted in 2013 to the Company, (ii) not to
issue a redemption notice until after October 29, 2022 and (iii) to convert up to $100,000 of the Series C Preferred Stock valued
at its original issue price of $100.00 per share into shares of the Company’s common stock at a conversion price of $0.18 per
share. In addition, the holders may elect to convert up to $200,000 of the Series C Preferred Stock valued at its original issue
price into shares of common stock of the Company each calendar quarter in 2021 and $250,000 each calendar quarter beginning
in 2022. The conversion price was $0.18 per share through December 31, 2021 and at 80% of the thirty (30) day weighted
average closing price of a share of common stock on the OTC Market in 2022 and thereafter. The Company, at its discretion,
may initiate the conversion of the remaining outstanding shares of Series C Preferred Stock if the sixty (60) day weighted
average closing price exceeds $0.45 per share and the cumulative trading volume during the same 60-day period exceeds 500,000
shares. The Agreement includes other terms, including provisions relating to change of control and terms related to stock splits,
reorganizations, subsequent issuance of preferred stock and piggyback registration rights.
In 2020 and 2022, the holders converted 1,000 and 2,500 of the shares of the Series C Preferred Stock, respectively,
which reduced the outstanding shares of the Series C Preferred Stock to 6,500 shares.
The holders of the Series C Preferred Stock entered into a Stock Purchase Agreement effective December 18, 2024
whereby the holders agreed to sell their 6,500 shares of Series C Preferred Stock and 849,366 shares of common stock to Joseph
Peters and Daniel Seliga. The transaction is considered a related party transaction as Mr. Peters is the Chief Executive Officer
and Director of the Company and Mr. Seliga is the Chief Financial Officer of the Company. This transaction did not have an
impact on the financial statements since it was between the two parties and not with the Company.
Subsequent to the purchase, Mr. Peters and Mr. Seliga entered into a Conversion and Standstill Agreement effective
December 18, 2024 with the Company whereby they agreed not to issue a redemption notice until after January 1, 2028. As
part of the agreement, the holders may elect to convert up to $250,000 of the Series C Preferred Stock valued at its original issue
price into shares of common stock of the Company each calendar quarter, with the conversion price being set at 80% of the
thirty (30) day weighted average closing price of a share of common stock on the OTC Market. The Company, at its discretion,
may initiate the conversion of the remaining outstanding shares of Series C Preferred Stock if the sixty (60) day weighted
average closing price exceeds $0.45 per share and the cumulative trading volume during the same 60-day period exceeds 500,000
shares. The Agreement includes other terms, including provisions relating to change of control and terms related to stock splits,
reorganizations and subsequent issuance of preferred stock.
Incentive Compensation / Stock Option Plans
In 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”) which made a total of 6,000,000
shares of common stock authorized and available for issuance pursuant to awards granted under the 2014 Plan.
The 2014 Plan limit imposes individual limitations on the amount of certain awards. Under these limitations during
any fiscal year of the Company, the number of options, stock appreciation rights, shares of restricted stock, shares of deferred
stock, performance shares and other stock-based awards granted to any one participant under the 2014 Plan may not exceed
1,500,000 shares, subject to adjustment in certain circumstances. The maximum number of shares that may be awarded that are
not subject to performance targets is an aggregate of 1,200,000 shares. The maximum term of each option or stock appreciation
right, the times at which each option or stock appreciation right will be exercisable, and provisions requiring forfeiture of
unexercised options or stock appreciation rights at or following termination of employment generally are fixed by the Committee
designated to administer the 2014 Plan, except that no option or stock appreciation right may have a term exceeding ten years.
The exercise price per share subject to an option and the grant price of a stock appreciation rights are determined by the
Committee, but in the case of an incentive stock option (ISO) must not be less than the fair market value of a share of common
stock on the date of grant.
Following the approval of the Board of Directors and stockholders of record as of May 8, 2023, the Company modified
certain terms of the 2014 Plan including an increase in the total of shares of common stock authorized and available for issuance
pursuant to awards granted under the 2014 Plan to 43,000,000. In addition, an extension of the term of the 2014 Plan was to
April 19, 2033 was approved in May 2023.
50
Stock Options
Grants
The weighted average fair value of the stock options granted during the year ended December 31, 2024 was $0.12.
During the year ended December 31, 2024, the Company granted stock options to two executives to purchase an
aggregate of 7,800,000 shares of common stock under the 2014 Plan at an exercise price of $0.13 per share, which was the 30-
day weighted average closing price for the Company’s common stock on the date of grant. The total options granted included
options to purchase an aggregate of 6,000,000 shares of common stock that were issued to replace options previously issued to
executives in 2021, 2022 and 2023. The new and reissued options had an aggregate grant date value of $599,088, vest over a
three-year period and have a term of ten years. The issuance of the replacement options was treated as a modification of the
original options granted. The grant date value of the replacement options was the total of the remaining unamortized grant date
value of the original options of $296,582 plus the incremental value of the new options over the value of the original options
prior to the grant date of $91,160. The grant date value of the new options will be amortized over the vesting period of the new
options.
During the year ended December 31, 2024, the Company granted options to directors of the Company to purchase an
aggregate of 1,797,052 shares of common stock under a previously approved plan at exercise price ranging from $0.07 to $0.13
per share for an aggregate grant date value of $160,000. The options vested on the grant date and have a term of ten years.
Stock based compensation related to these grants for the year ended December 31, 2024 was $160,000, of which $40,000 was
included in accrued expenses and other liabilities as of December 31, 2023.
During the year ended December 31, 2023, the Company granted options to key employees and executives of the
Company to purchase an aggregate of 5,100,000 shares of common stock under a previously approved plan at an exercise price
$0.17 per share for an aggregate grant date value of $776,639. The options vest over a three-year period and have a term of ten
years. Stock based compensation related to these grants for the year ended December 31, 2023 was $232,653.
During the year ended December 31, 2023, the Company granted options to directors of the Company to purchase an
aggregate of 1,195,212 shares of common stock under a previously approved plan at exercise price ranging from $0.12 to $0.17
per share for an aggregate grant date value of $160,000. The options vested on the grant date and have a term of ten years.
Stock based compensation related to these grants for the year ended December 31, 2023 was $160,000, of which $40,000 was
included in accrued expenses and other liabilities as of December 31, 2022.
Valuation
In applying the Black-Scholes option pricing model to stock options granted during the years ended December 31,
2024 and 2023, the Company used the following weighted average assumptions:
2024
2023
Risk-free interest rate
3.84% to 4.35%
3.82% to 4.75%
Expected dividend yield
0.0%
0.0%
Expected volatility
126.8% to 130.8%
128.0% to 132.3%
Weighted average expected life in years
5.0 to 6.0
5.0 to 6.0
Year Ended December 31
The expected volatility is calculated using the historical volatility of our stock using the daily closing price of our
shares. Forfeitures are accounted for as they occur. The expected life of our employee stock options are calculated by using the
“simplified” method, whereby, the expected life equals the average of the vesting term and the original contractual term of the
option. The risk-free interest rates were based on the U.S. Treasury yield curve in effect during the period the options were
granted and based on a maturity similar to the expected life of the option. The stock price used on the grant date was calculated
using the 30-day weighted average closing share price on the grant date which ranged between $0.07 and $0.13 per share in
2024 and between $0.12 and $0.17 in 2023.
51
Stock-based compensation expense related to stock options was recorded in the consolidated statements of operations
as a component of selling, general and administrative expenses and totaled $654,087 and $828,250 for the years ended December
31, 2024 and 2023, respectively. Stock-based compensation of $40,000 is included in accrued expenses and other liabilities as
of December 31, 2024.
As of December 31, 2024, stock-based compensation expense related to stock options of $610,337 remains
unamortized which is being amortized over the weighted average remaining period of 1.7 years.
Summary
A summary of the stock option activity during the years ended December 31, 2024 and 2023 is presented below:
Outstanding, January 1, 2023
15,830,547
0.18
$
Granted
6,295,212
0.16
Exercised
-
-
Forfeited/Cancelled
(351,834)
0.30
Outstanding, January 1, 2024
21,773,925
0.17
$
Granted
9,597,052
0.12
Exercised
-
-
Forfeited/Cancelled
(6,168,666)
0.17
Outstanding, December 31, 2024
25,202,311
0.16
$
7.4
13,315
$
Exercisable, December 31, 2024
14,435,649
0.17
$
6.4
13,315
$
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Number of
Options
Aggregate
Intrinsic
Value
The following table presents information related to stock options outstanding and exercisable at December 31, 2024:
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
$0.07 - $0.20
0.14
$
22,920,703
0.14
$
6.8
12,154,041
$0.22 - $0.36
0.32
$
2,281,608
0.32
$
4.1
2,181,608
$0.07 - $0.36
0.16
$
25,202,311
0.17
$
6.4
14,335,649
.
Options Outstanding
Options Exercisable
Warrants
Valuation
In applying the Black-Scholes option pricing model to stock warrants granted, the Company used the following
weighted average assumptions:
52
2024
2023
Risk-free interest rate
3.58%
3.84%
Expected dividend yield
0.00%
0.00%
Expected volatility
126.5%
132.2%
Weighted average expected life
(contractual term) in years
5.0
5.0
Year Ended December 31
The expected volatility is calculated using the historical volatility of our stock using the daily closing price of our
shares. The expected life of the warrants is based on the original contractual term of the warrant. The risk-free interest rates
were based on the U.S. Treasury yield curve in effect during the period the warrants were granted and based on a maturity
similar to contractual term of the warrant. The stock price used on the grant date was calculated using the 30-day weighted
average closing share price on the grant date which was $0.09 and $0.13 per share in 2024 and 2023, respectively.
Grants
During the year ended December 31, 2024, the Company issued warrants to purchase an aggregate of 300,000 shares
of common stock to the holders of the Series B Preferred as part of the agreement to extend the waiver of the debt limitation.
The warrants were issued at an exercise price of $0.085 and the 30-day weighted average closing share price on the grant date
was $0.09. The warrants have a term of five years and an aggregate grant date value of $23,232 which was recognized as an
increase in paid-in capital on the grant date. See Footnote 6 – Notes Payable.
During the year ended December 31, 2023, the Company issued warrants to purchase an aggregate of 176,127 shares
of common stock to the holders of the Series B Preferred as part of the agreement to extend the waiver of the debt limitation.
The warrants were issued at an exercise price of $0.13 which was the 30-day weighted average closing share price on the grant
date. The warrants have a term of five years and an aggregate grant date value of $20,000 which was recognized as a debt
premium on the grant date. See Footnote 6 – Notes Payable.
A summary of the stock warrant activity during the years ended December 31, 2024 and 2023 is presented below:
Weighted
Weighted
Average
Average
Remaining
Aggregate
Number of
Exercise
Life
Intrinsic
Warrants
Price
In Years
Value
Outstanding, January 1, 2023
764,000
0.11
$
Granted
176,127
0.13
Exercised
-
-
Forfeited
-
-
Outstanding, January 1, 2024
940,127
0.12
$
Granted
300,000
0.09
Exercised
-
-
Forfeited
-
-
Outstanding, December 31, 2024
1,240,127
0.11
$
2.2
-
$
Exercisable, December 31, 2024
1,240,127
0.11
$
2.2
-
$
The following table presents information related to stock warrants at December 31, 2024:
53
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
$0.08 - $0.14
0.11
$
1,240,127
0.11
$
2.2
1,240,127
Warrants Outstanding
Warrants Exercisable
9. Commitments and Contingent Liabilities
Employment Agreement
Effective January 1, 2020, the Company entered into employment agreements with Joseph Peters and Daniel Seliga
contracts (the “Employment Agreements”). The terms of the Employment Agreements include a term of one year beginning on
January 1, 2020 with an extension provision allowing for automatic one-year extensions unless the Company or the employee
provides advanced written notice of non-renewal, the titles and positions of Chief Executive Officer and Chief Financial Officer,
respectively, a base salary, subject to certain bonus and severance provisions. Effective January 1, 2024, the Compensation
Committee approved an increase in the base salaries for Mr. Peters and Mr. Seliga to $174,000 and $170,000 per year,
respectively. Each of the officers are bound by restrictive covenants contained in the Employment Agreements regarding
disclosure of confidential information, non-solicitation and employee non-competition.
On February 8, 2023, Mr. Peters and Mr. Seliga were granted options to purchase 1,000,000 and 800,000 shares of
common stock, respectively, under the 2014 Plan at an exercise price of $0.17 per share for an aggregate grant date value of
$274,108. The options vest over a three-year period and have a term of ten years. On January 28, 2022, Mr. Peters and Mr.
Seliga were granted options to purchase 1,000,000 and 800,000 shares of common stock, respectively, under the 2014 Plan at
an exercise price of $0.15 per share for an aggregate grant date value of $278,941. The options vest over a three-year period
and have a term of ten years.
On January 17, 2024, Mr. Peters and Mr. Seliga were granted options to purchase 4,200,000 and 3,600,000 shares of
common stock, respectively, under the 2014 Plan at an exercise price of $0.13 per share for an aggregate grant date value of
$274,108. The options vest over a three-year period and have a term of ten years. The options granted included options to
purchase an aggregate of 6,000,000 shares of common stock that were issued to replace options previously issued to executives
in 2021, 2022 and 2023.
On January 24, 2025, Mr. Peters and Mr. Seliga were granted options to purchase 1,000,000 and 800,000 shares of
common stock, respectively, under the 2014 Plan at an exercise price of $0.08 per share for an aggregate grant date value of
$129,082. The options vest over a three-year period and have a term of ten years. See Footnote 14 – Subsequent Events.
Litigation
In the ordinary course of business, we may become subject to lawsuits and other claims and proceedings that might
arise from litigation matters or regulatory audits. Such matters are subject to uncertainty and outcomes are often not predictable
with assurance. Our management does not presently expect that any current outstanding matters will have a material adverse
effect on the Company’s consolidated financial condition or consolidated results of operations. We are not currently involved
in any pending or threatened material litigation or other material legal proceedings nor have we been made aware of any penalties
from regulatory audits, except as described below.
On March 31, 2023, a class action complaint was filed in the United States District Court, Southern District of
California against the Company (Shahnaz Zarif, individually and on behalf of others similarly situated, Plaintiff, v.
Hwareh.com, Inc., Defendant). The Complaint alleges the Company conducted the unauthorized interception, collection,
recording and dissemination of communications and data in violation of the Federal Wiretap Act, 18 U.S.C. Section 2510 et
seq, the California Invasion of Privacy Act, Cal. Pen. Code Section 631; the California Confidentiality of Medical
Information Act, Cal. Civ. Code Section 56, et seq; and the California Consumer Privacy Act Cal. Civ. Code Section
1798.100, et seq. The Plaintiff seeks to certify several classes of similarly situated persons and is suing for, among other
things, injunctive relief, statutory monetary damages and attorneys’ fees. After retaining local counsel, on May 22, 2023, the
54
Company responded to the Complaint by filing a motion to transfer venue to the Eastern District of Kentucky and a motion to
dismiss the Complaint for failure to state a claim and lack of personal jurisdiction. On June 12, 2023, Plaintiff filed an
amended Complaint alleging the same claims in lieu of an opposition to the Company’s motions. On July 10, 2023, the
Company filed a motion to transfer venue to the Eastern District of Kentucky and a motion to dismiss the amended Complaint
for failure to state a claim and lack of personal jurisdiction. On July 21, 2023, the Plaintiff responded with an opposition to
the Company’s motions to which the Company replied on August 15, 2023. On August 15, 2023, the Judge granted the
Company’s Motion to Dismiss all claims on the basis that the plaintiff had failed to adequately allege personal jurisdiction
over the Company. The Plaintiff amended their Complaint on September 4, 2023 and the Company filed a renewed motion to
dismiss on September 18, 2023. Plaintiff’s opposition to our motion was filed on October 30, 2023 and the Company filed a
response on November 6, 2023. On February 12, 2025, the Court issued a ruling finding (i) that it is appropriate to exercise
jurisdiction based on recent case law, (ii) granted the Company’s request to dismiss the violations of the Federal Wiretap Act,
the California Confidentiality of Medical Information Act, the California Consumer Privacy Act of 2018 and the California
Computer Data Access and Fraud Act and (iii) allowed the Plaintiff to proceed with the violations of the California Invasion
of Privacy Act California Penal Codes 631 and 638.51. The Plaintiff did not file a fourth amended complaint following the
ruling and the Company has until March 19, 2025 to file and an answer to the Third Amended Complaint. The Company
believes the Complaint is without merit and intends to contest this matter vigorously.
10. Concentrations
The Company maintains deposits in financial institutions which are insured by the Federal Deposit Insurance
Corporation (“FDIC”). At various times, the Company has deposits in these financial institutions in excess of the amount
insured by the FDIC.
During the year ended December 31, 2024, one customer represented 38% of total sales. During the year ended
December 31, 2023, two customers represented 9% and 6% of total sales.
Four customers represented 19%, 17%, 11% and 11% of the accounts receivable balance as of December 31, 2024.
Three customers represented 25%, 24%, and 22% of the accounts receivable balance as of December 31, 2023. The customers
noted above are related to Partner Services sales.
During the year ended December 31, 2024, three suppliers represented 54%, 24% and 9% of total inventory purchases.
During the year ended December 31, 2023, three suppliers represented 35%, 26% and 12% of total inventory purchases.
Three vendors represented 33%, 12% and 11% of the accounts payable balance as of December 31, 2024. Two vendors
represented 26% and 16% of the accounts payable balance as of December 31, 2023.
11. Related Party Transactions
The Company executed convertible note purchase agreements (the”Convertible Purchase Agreements”) and a security
agreement, as amended, (the “Convertible Security Agreement”) and convertible secured promissory notes (the “Convertible
Notes”) (collectively the “Convertible Note Agreements”) totaling $2,200,000 with $1,661,969 of cash proceeds, net of costs
associated with the transaction. Of the total, $1,000,0000 of the Convertible Note Agreements were held by Inspira Financial
Trust LLC (f/k/a Millennium Trust Company LLC) Custodian FBO Timothy E. Reilly IRA. In 2023 and 2024, Inspira Financial
Trust LLC Custodian for Timothy E. Reilly IRA purchased an additional $350,000 of Convertible Notes in transactions to
replace some of the initial investors. The Timothy E. Reilly IRA is owned and controlled by Tim Reilly who is Chairman of
the Company. As such, the Inspira investment in the Convertible Notes transaction is a related party transaction. See Note 6 –
Notes Payable.
In 2024, Joseph Peters purchased $50,000 of Convertible Notes in a transaction to replace one of the original investors.
Mr. Peters is the Chief Executive Officer of the Company. As such, the Peters Convertible Note transaction is a related party
transaction. See Note 6 – Notes Payable.
Joe Heimbrock, a director of the Company, is the manager member of MVI Partners LLC. MVI Partners LLC is the
majority owner of the Series B Preferred shares, holding 494,313 shares. When combined, Mr. Heimbrock and MVI Partners
LLC beneficially own more than 5% of the Company. As such, MVI Partners LLC is deemed to be a related party to the
Company.
55
Effective December 18, 2024, the holders of the Series C Preferred Stock entered into a Stock Purchase Agreement
with Joseph Peters and Daniel Seliga whereby the holders agreed to sell their 6,500 shares of Series C Preferred Stock and
849,366 shares of common stock to Mr. Peters and Mr. Seliga. Subsequent to the purchase, Mr. Peters and Mr. Seliga entered
into a Conversion and Standstill Agreement effective December 18, 2024 with the Company whereby they agreed not to issue
a redemption notice until after January 1, 2028. As part of the agreement, the holders may elect to convert up to $250,000 of
the Series C Preferred Stock valued at its original issue price into shares of common stock of the Company each calendar quarter,
with the conversion price being set at 80% of the thirty (30) day weighted average closing price of a share of common stock on
the OTC Market. The transactions are considered related party transactions as Mr. Peters is the Chief Executive Officer and
Director of the Company and Mr. Seliga is the Chief Financial Officer of the Company. See Note 8- Stockholder’s Deficiency.
The Company entered into an agreement with Mannix Marketing, Inc. in March 2023 to provide various marketing
services including digital advertising and branding. During 2024, Mannix Marketing invoiced $57,670 to the Company for
those services which was included in selling, general and administrative expenses, of which the Company paid $54,000 as of
December 31, 2024. Sarah Mannix is President of Mannix Marketing, Inc. and is a director of the Company. As such, the
services provided by Mannix Marketing are related party transactions.
12. Income Taxes
The income tax provision (benefit) for the years ended December 31, 2024 and 2023 was as follows:
2024
2023
Federal:
Current
-
$
-
$
Deferred
30,378
(202,032)
State and local:
Current
-
-
Deferred
(18,496)
(12,103)
11,882
(214,135)
Change in valuation allowance
(11,882)
214,135
Income tax provision (benefit)
-
$
-
$
For The Years Ended
December 31,
56
The effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December
31, 2024 and 2023 are as follows:
December 31,
2023
2023
Deferred tax assets:
Net operating loss carryforwards
$ 4,056,293
$ 4,188,591
Stock-based compensation
421,668
368,221
Inventory reserves
2,660
1,451
Deferred revenue
48,801
3,293
Accruals
86,137
69,321
Lease Liability
5,219
1,986
Total deferred tax assets
4,620,778
4,632,863
Valuation allowance
(4,552,940)
(4,564,821)
Deferred tax assets, net of valuation allowance
67,838
68,042
Deferred tax liabilities
Property and equipment
(67,838)
(68,042)
Deferred tax liabilities
(67,838)
(68,042)
Net deferred tax assets
$ -
$ -
Change in valuation allowance
$ (11,881)
$ 214,135
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not
likely, a valuation allowance is established. Management believes that it is more likely than not that all of the future benefits
of deferred tax assets may not be realized and has established a full valuation allowance for the years ended December 31, 2024
and 2023.
The Company files income tax returns in the U.S. Federal jurisdiction and various state and local jurisdictions, and its
federal, state and local income tax returns for the tax years beginning in 2020 remain subject to examination. The Company
does not currently have any Federal or State audit examinations in process by taxing authorities. The Company is in the process
of filing its federal and state tax returns for the year ended December 31, 2024. When these returns are filed for the year ended
December 31, 2024, the Company will have $17,531,011 and $18,112,893 of federal net operating loss (NOL’s) carryforwards
that may be available to offset future taxable income as of December 31, 2024 and 2023, respectively. The federal net operating
loss carryforwards generated prior to 2018, if not utilized, will expire from 2027 to 2038. The federal net operating loss
carryforwards generated in 2018 will carryforward indefinitely. As of December 31, 2024 and 2023, the Company had
approximately $9,434,776 and $9,524,943 of state net operating loss carryforwards available to offset future taxable income.
The state NOLs, if not utilized, will expire beginning in 2031.
In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss
carryforwards could be limited in the event of a change in ownership. Based upon a study that analyzed the Company’s stock
ownership, a change of ownership was deemed to have occurred in 2011. This change of ownership created an annual limitation
on the usage of the Company’s losses which are available through 2031. A full Section 382 analysis has not been prepared
since 2011 and any NOLs arising since 2011 could be subject to limitation under Section 382. Such limitation would not have
a material impact on the financial statements given that the deferred tax assets for the NOL’s are fully offset by the valuation
allowance.
For the years ended December 31, 2024 and 2023, the expected tax expense (benefit) based on the statutory rate is
reconciled with the actual tax expense (benefit) as follows:
57
2023
2023
US federal statutory rate
21.0%
21.0%
State tax rate, net of federal benefit
2.3%
1.3%
Permanent differences
- Stock based compensation
(31.5%)
(8.4%)
- Other Permanent adjustments
(0.8%)
(0.1%)
Other true ups
(4.4%)
(0.3%)
Adjustment to PY NOLs
0.0%
(1.6%)
Impact of taxes based upon gross receipts
(4.8%)
(0.6%)
Change in State Tax Rate
5.4%
(0.1%)
Change in valuation allowance
3.6%
(12.1%)
Income tax provision (benefit)
(9.1%)
(0.9%)
For The Years Ended
December 31,
13. Segment Information
Operating segments are defined as components of an entity for which separate financial information is available and
that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an
individual segment and in assessing performance. The Company operates as a single reporting segment, focusing on the sale
and fulfillment of prescription and over-the-counter medications and medical devices. The accounting policies of the segment
are the same as those described in the summary of significant accounting policies. The Company’s measure of segment profit
or loss is net loss. The Chief Executive Officer (“CEO”) of the Company is the CODM, who manages and allocates resources
to the operations of the Company on a total company basis through the review of the consolidated financial information.
Managing and allocating resources on a consolidated basis enables the CEO to assess the overall level of resources available
and how to best deploy these resources across the organization and align with the Company’s long-term strategic goals.
Consistent with this decision-making process, the CEO uses consolidated financial information for purposes of evaluating
performance, forecasting future period financial results, allocating resources and setting incentive targets.
The following table is representative of the significant expense categories regularly provided to the CODM when
managing the Company’s single reporting segment.
(000's)
2024
2023
Sales
33,614
$
20,283
$
Cost of Goods Sold
(19,489)
(8,109)
Salary & Related Expense
(5,871)
(5,879)
Shipping & Shipping Supplies Expense
(3,629)
(2,550)
Advertising & Marketing
(742)
(1,067)
Non Cash Expenses
(1,076)
(1,178)
Other Expenses
(3,140)
(3,274)
Net Loss
(333)
$
(1,774)
$
Year Ended December 31,
58
14. Subsequent Events
The Company evaluates events that have occurred after the balance sheet date through the date the financial statements
are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that
would have required adjustment or disclosure in the consolidated financial statements, except as noted below:
Issuance of Common Stock and Options to Directors
On January 8, 2025, the Company issued an aggregate of 300,000 shares of common stock and options to purchase
579,052 shares of common stock to directors of the Company for payment of their accrued noncash portion of their director’s
fees for the fourth quarter of 2024. The shares had an aggregate grant date value of $24,000 and were valued at $0.08 per share,
which was the 30-day weighted average closing price for the Company’s common stock on the date of grant. The options had
an exercise price of $0.08 per share and had a grant date value of $40,000. The aggregate amount of the grant date value of the
common stock and options is included in accrued expenses as other liabilities as of December 31, 2024.
Issuance of Options to Executives
On January 24, 2025, the Company granted stock options to purchase an aggregate of 1,800,000 shares of common
stock under the 2014 Plan to executives of the Company as recognition of their contributions to the Company. The options had
an exercise price of $0.08 per share which was the 30-day weighted average closing price for the Company’s common stock on
the date of grant. The options vest over a three-year period and have a term of ten years. The options had an aggregate grant
date value of $129,082.