HealthWarehouse.com searches for ways to repay notes, stay afloat

Noteholders say they plan to pursue remedies for lack of payment

By Angela McDaniels

Tacoma, Wash., Jan. 7 - HealthWarehouse.com, Inc. does not have enough resources to repay its 7% convertible promissory notes and 7% promissory notes and is considering alternatives, according to an 8-K filing with the Securities and Exchange Commission.

The alternatives include seeking additional financing and negotiating with the noteholders. The company said there is no assurance that it will be able to pursue any course of action that will allow it to continue to operate its business as a going concern.

The company was supposed to pay $1 million of principal and $180,000 of accrued interest on the convertibles on Dec. 31 but failed to do so. The convertibles were issued to two investors under a Nov. 9, 2010 agreement.

The same investors purchased the 7% promissory notes under an agreement dated Sept. 2, 2011. On Jan. 15, $2 million of principal and $193,000 of accrued interest is due on the 2011 notes.

On Dec. 31, the investors told the company's board of directors that all amounts owed under the 2010 agreement have matured and are immediately due. They also alleged that the company is in violation of some covenants, including the covenants prohibiting the incurrence of certain additional debt and the existence of certain liens over the collateral for the convertibles. The investors said they plan to pursue all rights and remedies available to them.

All of the notes are secured by a first-priority security interest in substantially all the assets of the company and its subsidiaries, including inventory and the equipment the company uses to fill prescriptions, according to the 8-K filing. The agreements also require the company to pay the investors all costs and expenses (including legal fees) incurred in connection with the enforcement and collection of its obligations under the agreement.

The company said the investors have not yet taken any action to exercise their remedies. If they do so, the company may no longer be able to operate, according to the filing. In particular, if the investors take action against the company's inventory or equipment, the company will not be able to fill customer orders, and it will be required by law to transfer those prescriptions to other pharmacies. In addition, the company noted that its suppliers and other vendors may be unwilling to provide it goods and services until it has satisfied its obligations under the 2010 and 2011 agreements.

HealthWarehouse.com is a retail mail-order pharmacy based in Florence, Ky.

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