UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended: June 30, 2012
For The Quarter Ended: September 30, 2012
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________

Commission File Number: 000-22024

———————

NEW LEAF BRANDS, INC.

(Exact name of registrant as specified in its charter)

———————

Nevada		77-0125664
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

One DeDeWolf ~~Wolf~~ Road, Suite 208, Old Tappan, New Jersey 07675

(Address of principal executive offices) (Zip Code)

(201) 784-2400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

———————

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No þ

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of ~~March~~June 518, 2013, there were ~~328~~337,~~533~~033,316 shares of our common stock, $0.001 par value, outstanding.

NEW LEAF BRANDS, INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements		3
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations		2931
Item 3	Quantitative and Qualitative Disclosures About Market Risk		3538
Item 4	Controls and Procedures		3538
PART II – OTHER INFORMATION
Item 1	Legal Proceedings		3740
Item 1A	Risk Factors		3841
Item 2	Unregistered sales of equity Securities and Use of Proceeds		41
Item 3	Defaults Upon Senior Securities		46
Item 4	Removed and Reserved
Item 5	Other Information		4246
Item 6	Exhibits		4246

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

New Leaf Brands, Inc.

Condensed Consolidated Balance Sheets

	June 30,			December 31,
	September 30,			December 31,
	2012			2011
	(unaudited)
CURRENT ASSETS
Cash & cash equivalents	$	74109,~~163~~453		$	75,762
Accounts receivable, net of allowances for doubtful accounts of approximately $35,351 at June 30, 2012 and $37,689 at December 31, 2011		49,133			169,490
Accounts receivable, net of allowances for doubtful accounts of approximately $20,467 at September 30, 2012 and $37,689 at December 31, 2011		22,804			169,490
Inventory		6570,~~115~~966			163,709
Prepaid expense and other current assets		~~233~~375,~~653~~199			8,462
Total current assets		~~422~~578,~~064~~422			417,423
Property and equipment, net		4133,~~692~~538			58,000
Intangible assets, net		1149,~~035,835~~998			1,117,609
Total assets	$	1761,~~499,591~~958		$	1,593,032
CURRENT LIABILITIES
Accounts payable	$	~~769~~907,~~514~~606		$	1,805,361
Purchase order financing		-			306,037
Accrued liabilities		~~385~~249,~~050~~205			469,447
Accrued liabilities related parties		~~212~~248,~~011~~092			582,787
Accrued dividend		~~204~~216,~~403~~315			196,978
Interest payable		90102,~~928~~999			37,800
Short-term notes - other		585,391			120,490
Short-term debt		523,712			120,490
Notes payable to related parties		844,213			752,787
Notes payable to related parties – current portion		1,250,761			752,787
Current portion of long-term debt		35,457			21,119
Long-term debt – current portion		-			21,119
Other current liabilities		245,275			245,275
Current liabilities of discontinued operations		-			928,082
Total current liabilities		3,~~372~~743,~~242~~965			5,466,~~123~~163
Long-term debt		39,403			14,338
Long-term debt, less current portion		116,974			14,338
Long Term Debt-Related Parties		236,594
Notes payable to related parties, less current portion		88,772			-
Derivative liabilities		~~328~~113,~~297~~366			45,613
Total long-term liabilities		~~604~~319,~~294~~112			59,951
Total liabilities		34,~~976~~063,~~536~~077			5,526,114
Contingencies (Note 17)
Contingencies (Note 12)
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, convertible 10,000,000 shares authorized Series K 10% Convertible Preferred Stock, 1,000 cummulative shares designated; 18.9 and 30 shares issued and outstanding (Liquidation Preference $614,402 and $860,974) at June 30, 2012 and December 31, 2011, respectively		0			0
Preferred stock, $0.001 par value, convertible 10,000,000 shares authorized Series K 10% Convertible Preferred Stock, 1,000 cumulative shares designated; 18.9 and 30 shares issued and outstanding (Liquidation Preference $626,315 and $860,974) at September 30, 2012 and December 31, 2011, respectively		-			-
Common Stock, $0.001 par value, 500,000,000 shares authorized; issued and outstanding 282,260,718 and 150,811,031 at June 30, 2012 and December 31, 2011, respectively		282,261			150,811
Common Stock, $0.001 par value, 500,000,000 shares authorized; issued and outstanding 328,533,316 and 150,811,031 at September 30, 2012 and December 31, 2011, respectively		328,533			150,811
Shares Issuable		~~10,667~~-			5,550
Additional paid-in capital		4748,~~903~~350,~~431~~303			44,025,118
Accumulated deficit		(5051,~~673~~979,~~304~~955	)		(48,114,561	)
Total stockholders' deficit		(23,~~476~~301,~~945~~119	)		(3,933,082	)
Total liabilities and stockholders' deficit	$	1761,~~499,591~~958		$	1,593,032

See accompanying notes to the condensed consolidated financial statements

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New Leaf Brands, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three month period ended June 30,						Year to Date ended June 30,
	Three month period ended September 30,						Year to Date ended September 30,
	2012			2011			2012			2011
Net sales	$	~~174~~83,~~104~~367		$	~~658~~128,~~527~~796		$	~~174~~257,~~104~~471		$	1,~~346~~474,~~113~~909
Cost of goods sold		~~148~~73,~~400~~226			~~496~~115,~~144~~277			~~169~~242,~~128~~354			1,~~053~~168,~~262~~540
		25,704			162,383			4,976			292,851
		10,141			13,519			15,117			306,369
Operating expenses:
Shipping and handling		1422,~~886~~096			8434,~~689~~350			1840,~~294~~390			~~212~~246,~~522~~872
Selling and Marketing		~~120~~37,~~546~~300			~~547~~690,~~367~~009			~~223~~260,~~274~~574			1,~~165~~855,~~364~~373
General and administration		~~580~~230,~~360~~296			~~455~~538,~~824~~702			3,~~296~~526,~~076~~372			1,~~025~~564,~~653~~355
Depreciation and amortization		47,430			129,293			98,082			258,585
Impairment of intangibles		845,000			1,100,000			845,000			1,100,000
Total operating expenses		763,222			1,217,173			3,635,726			2,662,124
Depreciation and amortization		48,992			129,292			147,074			387,877
Loss from continuing operations		(737,518	)		(1,054,790	)		(3,630,750	)		(2,369,273	)
Total operating expenses		1,183,684			2,492,353			4,819,410			5,154,477
Loss from continuing operations		(1,173,543	)		(2,478,834	)		(4,804,293	)		(4,848,108	)
Other income (expense):
Other income (expense)		~~111~~(2,450	)		~~(36~~7,~~865~~629	)		(2527,~~216~~666	)		(3629,~~884~~255	)
Interest expense		(7090,~~249~~514	)		(2050,~~017~~636	)		(~~115~~205,~~111~~625	)		(69120,~~948~~585	)
Change in fair value of derivative liability		42,437			435,456			(214,519	)		371,187
Change in fair value of derivative liabilities		133,136			157,791			(81,383	)		528,978
Gain (loss) on extinguishment of debt		~~480~~(57,~~598~~764	)		11(134,~~153~~406	)		1985,~~043,491~~727			(~~107~~241,~~351~~757	)
Amortization of debt discount & deferred financing costs		(~~242~~103,~~180~~604	)		-(46,454	)		(~~344~~448,~~769~~373	)		(68115,~~943~~397	)
Total other income (expense), net		~~210~~(121,~~717~~196	)		~~389~~(66,~~727~~076	)		~~343~~222,~~876~~680			8821,~~061~~984
Income (loss) from continuing operations before provision for income taxes		(526,801	)		(665,063	)		(3,286,874	)		(2,281,212	)
Loss from continuing operations before provision for income taxes		(1,294,739	)		(2,544,910	)		(4,581,613	)		(4,826,124	)
Provision for income taxes		-			-			-			-
Income (loss) from continuing operations		(526,801	)		(665,063	)		(3,286,874	)		(2,281,212	)
Loss from continuing operations		(1,294,739	)		(2,544,910	)		(4,581,613	)		(4,826,124	)
Dividends on Series K preferred stock		(13,127	)		(1,967,699	)		(30,359	)		(1,967,699	)
Net loss attributable to common stockholders before discontinued operations		(539,928	)		(2,632,762	)		(3,317,233	)		(4,248,911	)
Discontinued operations:
Gain on disposal of discontinued operations		~~758,490~~-			-			758,490			-
Net income (loss) available to common stockholders	$	218,562		$	(2,632,762	)	$	(2,558,743	)	$	(4,248,911	)
Net Loss	$	(1,294,739	)	$	(2,544,910	)	$	(3,823,123	)	$	(4,826,124	)
Net income (loss) per share - continuing operations
Loss attributable to common stockholders and loss per common share:
Basic	$	(0.00	)		(0.03	)	$	(0.02	)		(0.05	)
Net loss	$	(1,294,739	)	$	(2,544,910	)	$	(3,823,123	)	$	(4,826,124	)
Assuming dilution		(0.00	)		(0.03	)		(0.02	)		(0.05	)
Deemed dividends – Series K preferred stock and warrants		-			-			-			(1,967,699	)
Income per share - discontinued operations
Dividends on Series K preferred stock		(11,912	)		(18,994	)		(42,271	)		(177,971	)
Basic	$	0.00			-		$	0.00			-
Loss attributable to common stockholders	$	(1,306,651	)	$	(2,563,904	)	$	(3,865,394	)	$	(6,971,794	)
Assuming dilution		0.00			-			0.00			-
Basic and diluted weighted average common shares outstanding		308,854,864			145,082,300			243,729,907			96,361,621
Net income (loss) available to common stockholders
Net loss per share – basic and diluted	$	(0.00	)	$	(0.02	)	$	(0.02	)	$	(0.07	)
Basic	$	0.00			(0.03	)	$	(0.01	)		(0.05	)
Assuming dilution		0.00		$	(0.03	)	$	(0.01	)	$	(0.05	)
Basic weighted average common shares outstanding		248,598,235			98,768,289			203,671,116			85,706,996
Diluted weighted average common shares outstanding		257,266,706			98,768,289			203,671,116			85,706,996

See accompanying notes to the condensed consolidated financial statements

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New Leaf Brands, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the six months ended June,
	For the nine months ended September 30,
	2012			2011
Operating Activities:
Continuing operations:
Net loss	$	(23,~~528~~823,~~384~~123	)	$	(24,~~281~~826,~~212~~124	)
Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) continuing operating activities:
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
Depreciation and amortization		98147,~~082~~074			~~258~~387,~~585~~877
Gain on settlement of accounts payable and extinguishment of long-term debt		(1,043,491	)		107,351
Allowance of doubtful accounts		(17,222	)		6,300
Change in fair value of notes liability		46,567			-
Gain on settlement of accounts payable and extinguishment of long-term debt		(985,727	)		241,757
Gain on disposal of discontinued operations		(758,490	)		-
Amortization of debt discount & deferred financing cost		~~344~~448,~~769~~373			68162,~~944~~052
Warrants issued for services		200,618			10,398
Stock based compensation		~~169~~173,~~750~~600			90131,~~879~~862
Common stock issued for services		2,~~024~~043,~~400~~854			140,000
Change in fair value of derivatives payable		~~214~~81,~~519~~383			(~~371~~528,~~187~~978	)
Impairment of intangible assets		845,000			1,100,000
Changes in continuing operating assets & liabilities:
Accounts receivable		~~120~~163,~~357~~908			~~(165~~67,~~147~~551	)
Inventory		9892,~~594~~743			~~191~~(137,~~146~~603	)
Prepaid expenses and other current assets		(55196,~~191~~737	)		~~(185~~25,~~969~~550	)
Accounts payable		~~546~~683,~~222~~810			(~~385~~400,~~753~~108	)
Accrued expenses		(~~106~~242,~~429~~274	)		~~(144~~68,~~984~~422	)
Due to related parties		2561,~~413~~494			4454,~~848~~259
Interest payable		~~116~~128,~~081~~152			1959,~~319~~389
Net cash used in continuing operating activities		(~~533~~906,~~180~~997	)		(23,~~602~~437,~~782~~396	)
Financing Activities:
Proceeds from issuance of long-term debt		~~320~~729,~~000~~107			~~765~~1,~~000~~174,600
Exercise of warrants		517,618			500,000
Payments on purchase order financing		(306,037	)		-
Proceeds from sale of common stock and warrants,net		-			425,000
Proceeds from sale of preferred stock and warrants		-			1,068,401
Repayment on long-term debt		-			(~~164~~184,696	)
Net cash provided by financing activities		531,581			2,593,705
Proceeds from purchase order financing		-			460,124
Change in cash & cash equivalents		(1,599	)		(9,077	)
Net cash provided by financing activities		940,688			3,443,429
Change in cash & cash equivalents		33,691			6,033
Cash & cash equivalents beginning of year		75,762			13,024
Cash & cash equivalents end of period		74109,~~163~~453		$	319,~~947~~057
Supplemental disclosures:
Cash paid during the period for:
Interest	$	-		$	6944,~~250~~432
Non-cash investing and financing activities:
Settlement of long-term debt for common stock		666,622			4,129,172
Issuance of common stock in connection with disposal of discontinued operations		180,000
Deemed dividend on Conversion of Series K Preferred and warrants		-			1,967,699
Dividends Series K Preferred stock		42,271			177,971
Settlement of long-term debt for common stock		996,622			4,129,172
Forgiveness of earn-out and reduction of intangibles		-			325,000
Issuance of common stock in connection with disposal of discontinued operations		180,000			-
Settlement of accounts payable for common stock and warrants		-			100,000
Forgivenness of earn-out and reduction of intangibles		-			325,000
Debt discount and beneficial conversion feature on debt issued		260,208			46,655
Fair value of shares used for common stock		-			31,250
Non-cash sale of all assets and liabilities of discontinued operations		938,490			-

See accompanying notes to the condensed consolidated financial statements

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NEW LEAF BRANDS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. - ORGANIZATION AND BASIS OF PRESENTATION

[1] Organization

The condensed consolidated financial statements include NEW LEAF BRANDS, INC. (“the Company”) and its wholly-owned subsidiaries Nutritional Specialties and Baywood New Leaf Acquisition, Inc. Nutritional Specialties was acquired by the Company effective March 30, 2007. Skae Beverage International LLC was acquired by Baywood New Leaf Acquisition, Inc. effective September 9, 2008. On July 24, 2009 the Company sold substantially all of its rights and assets of Nutritional Specialties to Nutra, Inc.

The Company develops markets and distributes healthy and functional ready-to-drink (“RTD”) beverages. The Company distributes its products through independent distributors both internationally and domestically.

The Company incorporated as Baywood Financial, Inc. in Nevada on June 13, 1986. In March 1992, the Company changed its name from Baywood Financial, Inc. to Baywood International, Inc. Between 1992 and 1998, the Company directed most of its sales efforts to nutraceutical international markets. In 1999, the Company expanded its nutraceutical business into domestic markets.

Baywood International, Inc. changed its name effective October 16, 2009 to New Leaf Brands, Inc. to reflect the change in strategic direction with the sale of Baywood International, Inc.’s nutraceutical businesses on October 9, 2009. The name change was effective in the market at the opening of business October 19, 2009, at which time the Company’s ticker symbol changed from BAYW.OB to NLEF.OB.

On April 9, 2012 the Company completed the sale of all of the assets and liabilities of its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). The terms of the divestiture included consideration of $1.00 plus the assumption of certain liabilities by DSCL. In ~~addition~~connection with the disposition, the Company ~~issued~~gave DSCL 6,000,000 shares of the Company’s stock, ~~valued~~with ata fair value of $180,000 asto aDSCL ~~reserve~~to ~~against~~relieve ~~possible~~the ~~offsets~~Company’s responsibility for any future claims. The transaction reduced liabilities of the Company by approximately $928,000 and resulted in a gain on disposal of discontinued operations of approximately $758,000.

[2] Basis of presentation

In the opinion of management, the accompanying unaudited, condensed, consolidated financial statements contain all adjustments necessary to present fairly the financial position of New Leaf Brands, Inc. (“New Leaf” or the “Company”) and its results of operations and cash flows for the interim periods presented. Such financial statements have been condensed in accordance with the applicable regulations of the Securities and Exchange Commission and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with New Leaf's audited consolidated financial statements for the year ended December 31, 2011, included in New Leaf's Annual Report filed on Form 10-K for such fiscal year.

The results of operations for the ~~three~~nine months ended ~~June~~September 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year.

The condensed consolidated financial statements were prepared using accounting principles generally accepted in the United States (“GAAP”). These principles require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassification

In connection with the preparation of its March 31, 2012 financial statements, the Company has reclassed $349,243 (as of March 31, 2012) from notes payable to additional paid in capital to properly account for the convertible debt and warrants issued in December 2011. The Company determined that the amount was not material to the financial statements for the year ended December 31, 2011. There was no impact on the statement of operations for the year ended December 31, 2011 or the quarter and six months ended June 30, 2012.

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2.[3] ~~GOING CONCERN~~Reclassification

~~The~~In ~~Company~~connection ~~has~~with athe ~~history~~preparation of ~~recurring~~its ~~losses~~September ~~from continuing operations~~30, ~~deficiencies~~2012 infinancial ~~working~~statements, ~~capital~~the ~~and~~Company ~~limited~~has ~~cash~~reclassed on$349,243 ~~hand~~ (as of ~~June~~March 3031, 2012.) Tofrom ~~date,~~notes itpayable ~~has also been unable~~ to ~~generate~~additional ~~sustainable~~paid ~~cash~~in ~~flows~~capital ~~from~~to ~~operating~~properly ~~activities.~~account Infor ~~addition,~~ the ~~Company~~convertible ~~has~~debt ~~$3,372,242~~and inwarrants ~~current~~issued ~~liabilities~~in ~~payable~~December ~~within~~2011. ~~the~~The ~~next~~Company ~~twelve~~determined ~~months~~that ~~including~~the anamount ~~obligation~~was ~~which~~not ismaterial ~~currently~~to inthe ~~default~~financial ~~(see~~statements ~~Item~~for ~~3 - DEFAULTS UPON SENIOR SECURITIES). For~~ the ~~six~~year ~~months~~ ended ~~June~~December 3031, ~~2012, the Company’s loss from continuing operations was $3,630,750~~2011. AsThere ofwas ~~June~~no ~~30,~~impact ~~2012,~~on the ~~Company’s~~statement ~~cash~~of ~~and~~operations ~~cash~~for ~~equivalents~~the ~~and~~year ~~working~~ended ~~capital~~December ~~deficiency are $74~~31,~~163~~ ~~and~~2011 ~~($2.950.178)~~or ~~respectively. Collectively, these factors raise substantial doubt about~~ the ~~Company’s~~three ~~ability~~and tonine ~~continue~~months asended aSeptember ~~going~~30, ~~concern~~2012.

~~The~~NOTE ~~Company’s~~2 ~~existence~~- isGOING dependent upon its ability to obtain necessary financing. The Company believes that its existing cash resources, combined with projected cash flows from operations, will not be sufficient to execute its business plan and continue operations for the next twelve months without additional funding. The Company intends to continue to explore various strategic alternatives, including asset sales and private placements of debt and equity securities to raise additional capital. In the first half of 2012, the Company raised gross proceeds of $837,618 pursuant to Unsecured Note Issuances in February 2012 and the Warrant reset and Exchange Offer in March and May 2012. In addition, the Company raised an additional $360,000 in the second half of 2012 and $150,000 in January 2013. In addition to paying down and restructuring its debt, management is actively taking steps to reduce the Company’s future operating expenses and increase future sales. However, the Company cannot provide any assurance that operating results will generate sufficient cash flow to meet its working capital needs and service its existing debt or that it will be able to raise additional capital as needed. As such the Company’s corporate strategy has broadened from solely New Leaf lemonades and teas to an acquirer of mature beverage distributors and manufactures.CONCERN

The Company has a history of recurring losses from continuing operations, deficiencies in working capital and limited cash on hand as of September 30, 2012. To date, it has also been unable to generate sustainable cash flows from operating activities. In addition, the Company has $3,743,965 in current liabilities payable within the next twelve months including an obligation which is currently in default (see Item 3 - DEFAULTS UPON SENIOR SECURITIES). For the nine months ended September 30, 2012, the Company’s loss from continuing operations was $4,581,613. As of September 30, 2012, the Company’s cash and cash equivalents and working capital deficiency are $109,453 and $3,165,543 respectively. Collectively, these factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s existence is dependent upon its ability to obtain necessary financing. The Company believes that its existing cash resources, combined with projected cash flows from operations, will not be sufficient to execute its business plan and continue operations for the next twelve months without additional funding. The Company intends to continue to explore various strategic alternatives, including asset sales and private placements of debt and equity securities to raise additional capital. In the first nine months of 2012, the Company raised gross proceeds of $729,107 pursuant to Unsecured Note Issuances in February and September 2012 and the Warrant reset and Exchange Offer in March and May 2012 and advance under secured credit line in June and August 2012. In addition, the Company raised an additional $150,000 in January 2013. In addition to paying down and restructuring its debt, management is actively taking steps to reduce the Company’s future operating expenses and increase future sales. However, the Company cannot provide any assurance that operating results will generate sufficient cash flow to meet its working capital needs and service its existing debt or that it will be able to raise additional capital as needed. As such the Company’s corporate strategy has broadened from solely New Leaf lemonades and teas to an acquirer of mature beverage distributors and manufactures.

The condensed financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

NOTE 3. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company has identified the policies below as critical to its business operations and the understanding of the results of its operations. The impact and any of its associated risks related to these policies on the Company’s business operations are discussed throughout this section.

[1] Principles of consolidation

The condensed consolidated financial statements include the accounts of all subsidiaries. All significant intercompany accounts and transactions have been eliminated.

[2] Inventories

Inventories consist primarily of raw material and finished product and are recorded at the lower of cost (on an average cost basis) or market. Inventories consisted of the following:

	June 30, 2012		December 31, 2011
	September 30, 2012		December 31, 2011
	(unaudited)
Raw material	$	~~56,344~~-	$	133,376
Finished goods		870,~~771~~966		30,333
	$	6570,~~115~~966	$	163,709

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[3] Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of five years. Property and Equipment consisted of the following:

	June 30 2012		December 31 2011
	September 30, 2012		December 31, 2011
	(unaudited)
Furniture and fixtures	$	19,539	$	19,539
Computers		125,654		125,654
Equipment		21,199		21,199
Total		166,392		166,392
Less: Accumulated depreciation		~~124~~132,~~700~~854		108,392
Net property and equipment	$	4133,~~692~~538	$	58,000

[4] Intangible assets

Intangible assets consist of brand value ~~resulted~~resulting from the September 9, 2008 acquisition of certain net assets from Skae Beverage International, LLC. Intangible assets consisted of the following at ~~June~~September 30, 2012 (unaudited) and December 31, 2011:

	Brand Value – New Leaf Tea
Asset value at December 31, 2011	$	4,760,824
Accumulated amortization		(1,488,215	)
Impairment of intangibles		(2,155,000	)
Net asset value at December 31, 2011	$	1,117,609
Asset value at June 30, 2012	$	2,605,824
Asset value at September 30, 2012	$	2,605,824
Accumulated amortization		(1,~~569~~610,~~989~~826	)
Net asset value at June 30, 2012	$	1,035,835
Impairment of intangibles		(845,000	)
Net asset value at September 30, 2012	$	149,998

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During the quarter ended September 30, ~~2011~~2012, the Company determined that a triggering event occurred and performed an interim impairment analysis. The interim impairment analysis resulted in an impairment of $1845,~~100,~~000 for the third quarter of ~~2011~~2012. ~~During the year ended December 31, 2011, the Company determined that the economic uncertainty surrounding the Company’s ability to remain in business triggered an impairment analysis.~~ The Company’s interim ~~and annual tests~~test, used ~~predominately~~ a discounted cash flow model derived from internal budgets into ~~assuming~~estimate fair values for the impairment testing. Factors that could change the result of our impairment test include, but are not limited to, different assumptions used to forecast future net sales, expenses, capital expenditures and resources, and liquidity and working capital requirements used in our cash flow models. In addition, selection of a risk-adjusted discount rate on the estimated undiscounted cash flow is susceptible to future changes in market conditions, and when unfavorable, can adversely affect our original estimates of fair value. The Company’s key assumptions used in its ~~annual~~interim impairment analysis included the following: a discount rate of 1814% based on the estimated weighted average cost of capital from the market participant point of view; royalty rate of 4.05%; an average perpetual growth rate of 66% for six years and a tax rate of 38%. An increase in the discount rate of 1% or a 1% deterioration of the perpetual revenue growth rate would increase the impairment loss by approximately $382,000 or $111,000, respectively. The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. For the ~~year~~nine months ended ~~December~~September 3130, ~~2011~~2012, the impairment of the Company’s brand value mainly resulted infrom the decline in its projected revenues and operating results and cash flows. ~~The~~However, the Company ~~has~~believes ~~concluded~~ that ~~impairment~~the ~~had~~remaining ~~existed~~amount ~~at December 31, 2011 and has~~ recorded anrepresents ~~impairment charge, measured as~~ the ~~amount~~current byfair ~~which~~value ~~the carrying amount~~ of ~~the long-lived asset exceeds~~ its ~~fair~~intangible ~~value,~~assets ofif ~~$2,155,000~~they ~~for~~were ~~the~~to ~~year~~be ~~ended~~sold ~~December~~to ~~31,~~a ~~2011~~market participant. In conjunction with preparing the revised forecasts, the Company reevaluated the remaining estimated useful lives of the long-lived intangibles and concluded there is no change in its estimated remaining useful lives.

The brand value (including Trademarks and Trade Names) of continuing operations are being amortized over the estimated life of ten years. Amortization expense for the ~~three~~nine months ended ~~June~~September 30, 2012 and 2011 was $81122,~~774~~612 and $~~120~~361,~~624~~872 respectively. The aggregate amortization for the years ended December 31, 2012 through December 31, 2016 and years thereafter is as follows:

Year	Amortization
2012	$	816,~~764~~164
2013		~~163~~24,~~556~~657
2014		~~163~~24,~~556~~657
2015		~~163~~24,~~556~~657
2016		~~163~~24,~~556~~657
Thereafter		~~299~~45,~~847~~206
Total	$	1149,~~035,835~~998

[5] Option -Warrants issued on debt and beneficial conversion

The Company estimates the fair value of each option and warrant grant ~~and beneficial conversion~~ on the date of grant using the Black-Scholes option-pricing model. The option and warrant estimates are based on the following assumptions for the ~~six~~nine months ended ~~June~~September 30, 2012 and 2011 (unaudited):

	June 30, 2012			June 30, 2011
	September 30, 2012			September 30, 2011
Dividend yield		0%	%		0%	%
Volatility	~~125~~281.4620% to ~~202~~397.2847%			5681.47% to 98.07%
Risk free interest rate	0.1735% to 10.0151%			0.203% to 21.476%
Expected term	02.7950 ~~to 5~~ years			0.2919 to 54.35 years

Tables of Contents

The Company accounts for the beneficial conversion feature of debt and preferred stock using intrinsic value method measure at the date of issuance.

~~Derivatives~~9

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[6]	Derivatives

As part of certain note and warrant agreements, the Company has provided holders with the option to convert the note or exercise the warrant into the Company’s common stock at a specified strike price. In order to prevent dilution, if the new strike price may be lower than the original strike price on the day of conversion or exercise, the strike price would be lowered to the new conversion or exercise price. The Company has determined that these types of down round protection terms are considered derivatives.

~~The~~During ~~Company~~2012, ~~originally estimated~~ the ~~fair~~Company ~~value~~began ~~of these warrants~~ using a ~~Black-Scholes~~Monte ~~valuation~~Carlo model. ~~The same valuation model approach is applied~~ to ~~the~~value ~~market~~its ~~price~~warrant ~~of the Company’s common stock at June 30, 2012 and 2011 to determine the amount of the~~ derivative ~~relative to the down round protection~~liability. The change in this derivative value at each reporting period is included in the statement of operations as a change in fair value of derivative liabilities. The Company considers these derivative instruments as used for the purpose of securing financing.

The ~~following~~range ~~table~~of ~~summarizes~~significant ~~the~~assumptions ~~fair~~which ~~value~~the ofCompany ~~warrants~~used ~~classified~~to asmeasure ~~liability~~the ~~instruments,~~fair ~~recorded~~value onof ~~the balance~~derivatives ~~sheet~~liabilities asat ofSeptember ~~June~~ 30, 2012 ~~(all~~is ofas ~~which are calculated using level 3 fair value measurements)~~follows:

Offering	Total Fair Value of Derivative as of June 30, 2012
Stock price	$	0.03
2006 and 2008 Bridge Financing	$	902
Exercise price	$	0.01 – 0.15
Warrants issued to Series I and J Preferred Stock holders		346
Term	0.54 – 5.00 years
October 2009 notes		5,204
Risk-free interest rate		0.18 - 0.51	%
February 2010 stock and warrant issuance		57,486
Volatility		281 - 397	%
April 2010 stock and warrant issuance		61,258
Dividend yield		0.00	%
September 2010 notes		121,306
June 26, 2012 Fuselier Bridge Capital loan		81,795
	$	328,297

The following table summarizes the ~~changes in~~ fair value of ~~warrant~~warrants ~~liabilities~~classified (aas ~~level~~liability 3instruments, ~~fair~~recorded ~~value~~on ~~measurement) during~~ the ~~six~~balance ~~months~~sheet ~~ended~~as ~~June~~of September 30, 2012 (all of which are calculated using level 3 fair value measurements):

Balance at December 31, 2011	$	45,613
Offering	Total Fair Value of Derivative as of September 30, 2012
Reclassification of derivative liability on warrant exercised		(13,630)
2006 and 2008 Bridge Financing	$	793
Fair value of derivative liability on warrants issued		81,795
Warrants issued to Series I and J Preferred Stock holders		409
Change in fair value of derivative instruments included in net loss for the six months ended June 30, 2012		214,519
October 2009 notes		5,812
Balance at June 30, 2012	$	328,297
February 2010 stock and warrant issuance		40,605
April 2010 stock and warrant issuance		22,941
September 2010 notes		42,806
	$	113,366

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OnThe ~~March~~following 7,table ~~2012~~summarizes the ~~Company~~changes ~~commenced~~in afair ~~warrant~~value ~~reset and exercise offer to eligible holders~~ of ~~its~~warrant ~~outstanding~~liabilities ~~warrants,~~(a ~~pursuant~~level to3 ~~which~~fair ~~all~~value ~~issued~~measurement) and outstanding warrants to purchase common stock of the Corporation issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the ~~offer~~nine ~~period.~~months ~~Approximately~~ended 15September ~~investors elected to exercise their warrants for which the Company received $400~~30,~~147~~ ~~and issued 13,338,225 shares of common stock.~~2012:

On June 26, 2012, the Company issued 1,666,666 warrants with a 5 year term exercisable at $.03 per share in connection with a bridge note from an entity controlled by our Chief Executive Officer.

Balance at December 31, 2011	$	45,613
Reclassification of derivative liability on warrant exercised		(13,630)
Change in fair value of derivative instruments included in net loss for the nine months ended September 30, 2012		81,383

Balance at September 30, 2012	$	113,366

~~Revenue~~On ~~Recognition~~March 7, ~~Sales~~2012 ~~Returns~~the Company commenced a warrant reset and ~~Allowances~~exercise offer to eligible holders of its outstanding warrants, pursuant to which all issued and outstanding warrants to purchase common stock of the Company issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the offer period. Approximately 15 investors elected to exercise their warrants for which the Company received $400,147 and issued 13,338,225 shares of common stock.

[7]	Revenue Recognition, Sales Returns and Allowances

Revenue is recognized when the product is shipped. Sales returns are recorded as a reduction to sales when a customer and the Company agree a return is warranted. All returns must be authorized in advance and must be accompanied by an invoice number within 180 days. If returned, the Company’s customers are responsible for returning merchandise in resalable condition. Full credit cannot be given for merchandise that has been defaced, marked, stamped, or priced in any way. The Company does not accept products kept longer than two years. Management communicates regularly with customers to compile data on the volume of product being sold to the end consumer. This information is used by management to evaluate the need for additional sales returns allowance. The Company’s experience has been such that sales returns can be estimated accurately based on feedback from the customer.

[8] Net Income (Loss) per Share of Common Stock

~~Net~~Basic net income (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the period. ~~The Company has adopted the Earnings Per Share Topic of the Codification (ASC Topic 260-10).~~ Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share may not been presented if the effect of the assumed exercise of options and warrants to purchase common shares would have an anti-dilutive effect.

[9] Income Taxes

The Company accounts for income taxes under the liability method under the Income Taxes Topic of the Codification (ASC Topic 740-10). Deferred taxes arise from temporary differences, due to differences between accounting methods for tax and financial statement purposes. The Company establishes a valuation allowance for the uncertainty related to its ability to generate sufficient future taxable income to utilize the net operating loss carry forwards and other deferred items.

The Company recognizes interest and penalties related to uncertain tax positions in interest and general and administrative expense. As of ~~June~~September 30, 2012, the Company has no unrecognized tax positions, including interest and penalties. The tax years 2008-2011 are open to examination by the major tax jurisdictions in which the Company operates.

The tax years 2008-2011 are open to examination by the major tax jurisdictions in which the Company operates.

Comprehensive Income (Loss)

The Company accounts for its Comprehensive Income (Loss) under the Topic of the Codification (ASC Topic 220-10), “Comprehensive Income (Loss),” establishes standards for the reporting and display of comprehensive income (loss) and its components within the financial statements. Other comprehensive income (loss) consists of charges or credits to stockholders’ equity, other than contributions from or distributions to stockholders, excluded from the determination of net income (loss). There were no other components of comprehensive income (loss) other than the net loss for the three and six months ended June 30, 2012 and 2011, respectively.

Financial Instruments

Financial instruments consist primarily of cash and cash equivalents, accounts receivable and obligations under accounts payable, accrued expenses, derivatives and notes payables. The carrying amounts of cash, accounts receivable, accounts payable, short term debt obligations and accrued expenses approximate fair value because of the short term maturity of those instruments.

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~~Fair~~[10] ~~Value~~Comprehensive ~~Measurements~~Income (Loss)

The Company ~~applies~~accounts ~~recurring~~for ~~fair~~its ~~value~~Comprehensive ~~measurements~~Income to(Loss) ~~its~~under ~~derivative~~the ~~liabilities.~~Topic Inof ~~determining~~the ~~fair~~Codification ~~value~~(ASC Topic 220-10), ~~the~~“Comprehensive ~~Company~~Income ~~uses~~(Loss),” aestablishes ~~market~~standards ~~approach~~for the reporting and ~~incorporates~~display ~~assumptions~~of ~~that~~comprehensive ~~market~~income ~~participants~~(loss) ~~would~~and ~~use~~its incomponents ~~pricing~~within the ~~liability,~~financial ~~including~~statements. ~~assumptions~~Other ~~about~~comprehensive ~~risk~~income ~~and/~~(loss) consists of charges or ~~the~~credits ~~risks~~to ~~inherent~~stockholders’ inequity, ~~the~~other ~~inputs~~than contributions from or distributions to stockholders, excluded from the ~~valuation~~determination ~~techniques~~of net income (loss). ~~These~~There ~~inputs~~were ~~can~~no beother ~~readily~~components ~~observable,~~of ~~market~~comprehensive ~~corroborated,~~income or(loss) ~~generally~~other ~~unobservable~~than ~~internally-developed~~the ~~inputs.~~net ~~Based~~loss ~~upon~~for the ~~observation~~three ofand ~~the~~nine ~~inputs~~months ~~used~~ended inSeptember ~~these~~30, ~~valuation~~2012 ~~techniques~~and 2011, ~~the~~respectively ~~Company's~~and ~~derivative~~therefore ~~liabilities~~a ~~are~~Statement ~~classified~~of asComprehensive ~~follows:~~Income (Loss) has not been included with these financial statements.

●

Level 1: The fair value of derivative liabilities classified as Level 1 is determined by unadjusted quoted market prices in active markets for identical liabilities that are accessible at the measurement date. The Level 1 inputs used in calculating the fair value of derivative liabilities include traded market values and volatilities calculated thereon.

●

Level 2: The fair value of derivative liabilities classified as Level 2 is determined by quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. The Level 2 inputs used in calculating the fair value of derivative liabilities include current published yields on United States Treasury securities.

[11]	Financial Instruments

●Financial ~~Level~~instruments 3:consist ~~The~~primarily ~~fair value~~ of ~~derivative~~cash ~~liabilities~~and ~~classified~~cash asequivalents, ~~Level~~accounts 3receivable isand ~~determined~~obligations byunder ~~internally-developed~~accounts ~~models~~payable, ~~and~~accrued ~~methodologies~~expenses, ~~utilizing~~derivatives ~~significant~~and ~~inputs~~notes ~~that~~payables. ~~are~~The ~~generally~~carrying ~~less~~amounts ~~readily~~of ~~observable~~cash, ~~from~~accounts ~~objective~~receivable, ~~sources.~~accounts ~~The~~payable, ~~Level~~short 3term ~~inputs~~debt ~~used~~obligations inand ~~calculating~~accrued ~~the~~expenses approximate fair value ofbecause ~~derivative liabilities include the remaining terms~~ of the ~~warrants~~short ~~and~~term ~~effective~~maturity ~~exercise~~of ~~prices~~those instruments.

4.[12] ~~GEOGRAPHIC~~Fair ~~AREA~~Value ~~INFORMATION~~Measurements

The accounting guidance under Accounting Standards Codification “Fair Value Measurements and Disclosures” (“ASC 820-10”) requires the Company ~~generates~~to make disclosures about the fair value of certain of its ~~revenues~~assets ~~from~~and ~~customers,~~liabilities. ~~primarily~~ASC in820-10 clarifies the ~~United~~principle ~~States.~~that ~~The~~fair ~~following~~value ~~table~~should ~~outlines~~be based on the ~~breakdown~~assumptions ofmarket ~~sales~~participants towould ~~unaffiliated~~use ~~customers~~when ~~domestically~~pricing an asset or liability and ~~internationally~~establishes ~~for~~a fair value hierarchy that prioritizes the ~~six~~information ~~months~~used ~~ended~~to ~~June~~develop 30those assumptions. ASC 820-10 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. A brief description of those three levels is as follows:

	2012		2011
United States	$	174,104	$	1,331,028
Other International		-		15,085
Totals	$	174,104	$	1,346,113

·	Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

·	Level 2: Inputs other than quoted prices that is observable for the asset or liability, either directly or indirectly.

·	Level 3: Significant unobservable inputs

NOTE 4 - GEOGRAPHIC AREA INFORMATION

The Company generates its revenues from customers, primarily in the United States. The following table outlines the breakdown of sales to unaffiliated customers domestically and internationally for the nine months ended September 30 (unaudited):

	2012		2011
United States	$	257,471	$	1,459,824
Other International		-		15,085
Totals	$	257,471	$	1,474,909

The Company holds all its assets in the United States.

5. CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and trade receivables. The Company maintains the majority of its cash and cash equivalents in the form of demand deposits with financial institutions that management believes are creditworthy. At June 30, 2012, the cash balances in these institutions were insured in full by the Federal Deposit Insurance Corporation. Concentrations of credit risk relative to trade receivables are limited due to our diverse client base.

As discussed in the section “NEAR TERM BUSINESS STRATEGY”, on February 14, 2012, the Board elected David Fuselier as New Leaf’s Chairman, President, and Chief Executive Officer and simultaneously, Eric Skae stepped down as our Chairman, President and Chief Executive Officer. Mr. Fuselier immediately implemented a turnaround plan to (a) refocus our sales and marketing efforts to our core product markets, (b) restructure corporate operations and product mix to significantly improve operating margins, (c) achieve significant debt restructurings and interim financings to both strengthen the balance sheet and support sustainable growth and (d) achieve additional tactical and strategic financing to support anticipated growth, research and development and release of new product lines and acquisitions.

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~~While~~NOTE ~~the~~5 ~~Company~~- ~~made~~CONCENTRATION ~~considerable~~OF ~~progress~~CREDIT towards the turnaround plan during the three months ended June 30, 2012, a delay in additional financing limited the ability of management to achieve significant debt reduction that had been negotiated during the period. Production and sales activity resumed during the first week of April, 2012.RISK

~~The~~Financial ~~aggregate~~instruments ~~accounts~~which ~~receivable~~potentially ~~from~~subject ~~three~~the ~~customers~~Company ~~amounted~~ to ~~81%~~concentrations of credit risk consist principally of cash, cash equivalents and trade receivables. The Company maintains the ~~accounts~~majority ~~receivable~~of ~~balance~~its ~~outstanding~~cash atand ~~June~~cash equivalents in the form of demand deposits with financial institutions that management believes are creditworthy. At September 30, 2012, the cash balances in these institutions were insured in full by the Federal Deposit Insurance Corporation.

~~The~~As ~~aggregate~~discussed ~~accounts~~in ~~payable~~the ~~due~~section to“NEAR TERM BUSINESS STRATEGY”, on February 14, 2012, the ~~top~~Board ~~three~~elected ~~vendors~~David ~~amounted~~Fuselier as New Leaf’s Chairman, President, and Chief Executive Officer and simultaneously, Eric Skae stepped down as our Chairman, President and Chief Executive Officer. Mr. Fuselier immediately implemented a turnaround plan to ~~approximately~~(a) ~~23%~~refocus ofour ~~the~~sales ~~accounts~~and ~~payable~~marketing efforts to our core product markets, (b) restructure corporate operations and product mix to significantly improve operating margins, (c) achieve significant debt restructurings and interim financings to both strengthen the balance ~~outstanding~~sheet ~~June~~and 30support sustainable growth and (d) achieve additional tactical and strategic financing to support anticipated growth, ~~2012~~research and development and release of new product lines and acquisitions.

While the Company made considerable progress towards the turnaround plan during the nine months ended September 30, 2012, a delay in additional financing limited the ability of management to achieve significant debt reduction that had been negotiated during the period.

The aggregate accounts receivable from four customers amounted to 88% of the gross accounts receivable balance outstanding at September 30, 2012.

The aggregate accounts payable due to one vendor amounted to approximately 23% of the accounts payable balance outstanding September 30, 2012.

A slowdown or loss of these customers or vendors could materially adversely affect the results of operations and the Company’s ability to generate significant cash flow.

NOTE 6. - NOTES PAYABLE TO RELATED PARTIES

Related party notes payable at ~~June~~September 30, 2012 (unaudited) and December 31, 2011 consisted of the following:

	June 30,			December 31,
Description	2012			2011
Unsecured note payable to a former director with a face amounts of $50,000 bearing interest at 10% per annum and payable on October 31, 2012 (E)(F)(G)(I)	$	50,000		$	50,000
Unsecured note payable to a former director with a face amounts of $5,500 bearing interest at 10% per annum and payable on demand (C)		5,500			5,500
Unsecured note payable to a principal shareholder with a face amounts of $55,000 bearing interest at 10% per annum and payable on September 18, 2012 and October 14, 2012 (E)(F)(G)		55,000			55,000
Unsecured note payable to an officer with a face amount of $20,000 bearing interest at 6% per annum and payable on demand (C)		20,000			20,000
Unsecured note payable to a director with a face amount of $75,000 bearing interest at 12% per annum and payable on demand (C)		75,000			75,000
Unsecured note payable to a director with a face amount of $10,000 bearing interest at 10% per annum and payable on demand (D)		10,000			10,000
10% Secured Convertible Subordinated Notes to a principal shareholder with a face amount of $125,000 bearing interest at 10% payable July 23, 2012 (H)		125,000			125,000
Secured factoring loan agreement to a principal shareholder with a face amount of $298,227 bearing interest at 10% payable July 23, 2012 (E)(F)(G)		298,227			298,227
10% Secured Convertible Subordinated Notes to a director with a face amount of $120,517 bearing interest at 10% payable July 23, 2012 (E)(F)(G)		120,517			120,517
Secured note payable to an officer with a face amount of $30,100 bearing interest at 10% payable August 13, 2012 (H)		30,100			30,100
Unsecured note payable to a former director with a face amount of $50,000 bearing interest, which is payable at maturity on July 15, 2013, at 8% per annum. (A)		50,000			-
Unsecured note payable to a principal shareholder with a face amount of $50,000 which is payable at maturity on July 15, 2013, at 8% annum. (A)		50,000			-
Unsecured note payable to a principal shareholder with a face amount of $37,500 bearing interest, which is payable at maturity on September 3, 2013, at 8% per annum. (A)		37,500			-
Unsecured note payable to a former officer with a face amount of $200,000 bearing interest, which is payable at maturity on August 14, 2013, at 8% per annum. (B)		200,000			-
Unsecured note payable to a former officer with a face amount of $100,000 bearing interest, which is payable on demand, at 8% per annum. (B)		100,000			-
Note payable to a related party with a face amount of $20,000 bearing interest, payable at maturity on November 16, 2013, at 18% per annum (J)		20,000			-
Secured credit line payable to a related party, payable maturity of April 26, 2013 at 18% per annum (K)		50,000			-
Notes payable to related parties	$	1,296,844		$	789,344
Discount on Debt		(216,037	)		(36,557	)
Total notes payable to related parties	$	1,080,807		$	752,787
Less current maturities		844,213			-
Long-term notes payable to related parties	$	236,594		$	752,787

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A) Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”), which Notes were coupled with warrants. One of the investors invested $87,500 and the other was a former director who invested $50,000 in the Unsecured Notes. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided.

	September 30,			December 31,
Description	2012			2011

Unsecured note payable to a former director with a face amounts of $50,000 bearing interest at 10% per annum and payable on October 31, 2012 (E)(F)(G)(I)	$	50,000		$	50,000
Unsecured note payable to a former director with a face amounts of $5,500 bearing interest at 10% per annum and payable on demand (C)		5,500			5,500
Unsecured note payable to a principal shareholder with a face amounts of $55,000 bearing interest at 10% per annum and payable on September 18, 2012 and October 14, 2012 (E)(F)(G)(L)		55,000			55,000
Unsecured note payable to an officer with a face amount of $20,000 bearing interest at 6% per annum and payable on demand (C)		20,000			20,000
Unsecured note payable to a director with a face amount of $75,000 bearing interest at 12% per annum and payable on demand (C)		75,000			75,000
Unsecured note payable to a director with a face amount of $10,000 bearing interest at 10% per annum and payable on demand (D)		10,000			10,000
10% Secured Convertible Subordinated Notes to a principal shareholder with a face amount of $125,000 bearing interest at 10% payable July 23, 2012 (H)(L)		125,000			125,000
Secured factoring loan agreement to a principal shareholder with a face amount of $298,227 bearing interest at 10% payable July 23, 2012 (E)(F)(G)(L)		298,227			298,227
10% Secured Convertible Subordinated Notes to a director with a face amount of $120,517 bearing interest at 10% payable July 23, 2012 (E)(F)(G)(L)		120,517			120,517
Secured note payable to an officer with a face amount of $30,100 bearing interest at 10% payable August 13, 2012 (H)(L)		30,100			30,100
Unsecured note payable to a former director with a face amount of $50,000 bearing interest, which is payable at maturity on July 15, 2013, at 8% per annum. (A)		68,921			-
Unsecured note payable to a principal shareholder with a face amount of $50,000 which is payable at maturity on July 15, 2013, at 8% annum. (A)		68,921			-
Unsecured note payable to a principal shareholder with a face amount of $37,500 bearing interest, which is payable at maturity on September 3, 2013, at 8% per annum. (A)		48,339			-
Unsecured note payable to a former officer with a face amount of $200,000 bearing interest, which is payable at maturity on August 14, 2013, at 8% per annum. (B)		200,000			-
Unsecured note payable to a former officer with a face amount of $100,000 bearing interest, which is payable on demand, at 8% per annum. (B)		100,000			-
Unsecured note payable to a principal shareholder with a face amount of $100,000 bearing interest, which is payable at maturity on March 24, 2014, at 8% per annum (M)		100,000			-
Note payable to a related party with a face amount of $20,000 bearing interest, payable at maturity on November 16, 2013, at 18% per annum (J)		20,000			-
Secured credit line payable to a related party, payable at maturity on April 26, 2013 (face value $50,000) and June 18, 2013 (face value $100,913), bearing interest at 1.50% per month (K)		150,913			-

Notes payable to related parties	$	1,546,438		$	789,344
Discount on Debt		(206,905	)		(36,557	)

Total notes payable to related parties	$	1,339,533		$	752,787
Less current maturities		(1,250,761)			(752,787)

Long-term notes payable to related parties	$	88,772		$	-

~~B) On February~~ 14, 2012, the Company entered into a Mutual Termination and Release agreement between New Leaf Brands, Inc. and Eric Skae. On February 15, 2012, the Company issued Mr. Skae an 8% 18 month Unsecured Note in the Amount of $200,000 which is convertible if asked by Mr. Skae, 13 months after the date of issuance at $0.01 (subject to a beneficial ownership blocker of 4.99%) and an 8% Demand Note in the amount of $100,000.

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Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”) and warrants. One of the investors invested $87,500 and the other, a former director, invested $50,000 in the Unsecured Notes. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided. The Company has accounted for these share based provisions at fair value due to the variable conversion price will require the Company to issue additional shares and accordingly has recorded an additional liability to the notes of approximately $88,000 of which approximately $47,000 has been recorded as change in fair value for the nine months ended September 30, 2012. The Company will fair value these provisions at each reporting period until either settled or forfeited.

On February 14, 2012, the Company entered into a Mutual Termination and Release agreement between New Leaf Brands, Inc. and Eric Skae. On February 15, 2012, the Company issued Mr. Skae an 8% 18 month Unsecured Note in the amount of $200,000 which is convertible if asked by Mr. Skae, 13 months after the date of issuance at $0.01 (subject to a beneficial ownership blocker of 4.99%) and an 8% Demand Note in the amount of $100,000.

C)	These notes were issued during the year ended December 31, 2011 to provide short-term financing.

D)	On June 30, 2011, the Company issued a $10,000 Demand 10% Promissory Note to a director of the Company. The note required a $5,000 repayment on July 7, 2011 which the holder converted to due on demand on the same day at no additional cost to the Company.

E) On June 15, 2011, the Company entered into a Secured Factoring Loan with a principal amount of $426,680 with four lenders, the total amount received on the Secured Factoring Loan was $400,000 of which $125,000 was purchased by a director of the Company and $200,000 was purchased by a principal shareholder. These loans matured on August 20, 2011 and are secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities. On August 24, 2011 these notes were converted into the recasted notes described in (G) below. The Company determined that the conversion of the secured notes into the secured recast notes was more than the carrying value of the obligation on the date of the conversion and recorded a loss on extinguishment of debt. F) On July 14, 2011, July 28, 2011 and July 29, 2011 the Company issued Original Issue Discount Notes ~~with~~to three lenders receiving amounts of $75,000 from a principal shareholder, $50,000 and $25,000 respectively from other investors. These notes were to mature on January 14, 2012 at $170,458 and ~~are~~were secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities, of which $85,227 was due to ~~the~~a principal shareholder. On August 24, 2011 these notes were converted into the recast notes described in (G) below. The Company determined that the conversion of the secured notes into the secured recast notes was more than the carrying value of the obligation on the date of the conversion and recorded a loss on extinguishment of debt. G) On August 24, 2011, the Company recast $~~570~~606,~~281~~381 (principal plus accrued interest) in existing secured loans with six parties (entered into between June and July 2011), one of whom is a director of the Company for $120,517, and another who is a principal shareholder for $298,227, in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) which Notes ~~were~~and ~~coupled~~shares ~~with~~of common stock. Each Secured Note is collateralized by all of the Company’s assets and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them totaling 2,881,405 common shares. The Company determined that the conversion of the secured notes into the secured recast notes was more than the carrying value of the obligation on the date of the conversion and recorded a loss on extinguishment of debt of $144,392 for the year ended December 31, 2011.

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H) Between September 13 and 16, 2011, the Company borrowed $250,000 from two investors, one of whom is a principal shareholder of the Company ($125,000) and refinanced an existing unsecured loan with one officer in the amount of $30,100. The Company issued these investors and officers the same 10% Secured Convertible Subordinated Notes we had issued to the lenders reported in the above paragraph. Additionally, such investors received an additional 5 shares of our common stock for each $1.00 invested totaling 1,400,500 common shares (625,000 included in shares issuable). The common shares were fair valued at $62,500 as debt discount and will be amortized over the term of the notes.

On October 18, 2011, November 11, 2011 and November 14, 2011, the Company borrowed $25,000, $50,000, and $30,000 from two investors, both of whom are principal shareholders of the Company. The Company issued these investors the same 10% Secured Convertible Subordinated Notes as we had issued to the lenders reported in the above paragraph H. Additionally, such investors received an additional 5 shares of our common stock for each $1.00 invested, totaling 525,000 common shares. The common shares were fair valued at $18,313 as debt discount and will be amortized over the term of the notes.

On May 16, 2012, the Company borrowed $20,000 from CS Healthcare, a related party (controlled by the Company’s CEO), in exchange for an 8% 18 month Unsecured Promissory Notes (“Unsecured Note”).

K) On June 26, 2012, the Company reached an agreement with related party Fuselier Bridge Capital, LLC (owned by the Company’s CEO)to provide a secured working capital loan facility up to $300,000. The loan facility is secured by all Company assets including general intangibles (including trademarks, formulations, customer lists) and accounts receivables, fixed assets, inventory (all raw, work in progress and finished goods including labels) present and hereafter acquired. Each advance under the loan facility bears an interest rate of 1.5% per month and is due in full ten months after the issuance date. On June 26, 2012, the Company borrowed $50,000 under this loan facility and issued 1,666,666 warrants.

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~~The~~H) ~~following~~Between September 13 and 16, 2011, the Company borrowed $250,000 from two investors, one of whom is a ~~schedule~~principal shareholder of ~~principal~~the ~~maturities~~Company ~~for~~($125,000) and refinanced an existing unsecured loan with one officer in the ~~next~~amount ~~five~~of ~~years~~$30,100. The Company issued these investors and officers the ~~total~~same ~~amount~~10% ~~thereafter~~Secured Convertible Subordinated Notes as issued to the lenders reported in (G) above. Additionally, such investors received an additional 5 shares of common stock for each $1.00 invested totaling 1,400,500 common shares (625,000 included in shares issuable). The fair value of the common shares on the date of issuance of $31,250 was recorded as a debt discount which will be amortized over the term of the notes. I) On October 18, 2011, November 11, 2011 and November 14, 2011, the Company borrowed $25,000, $50,000, and $30,000 from two investors, both of whom are principal shareholders of the Company. The Company issued these investors the same 10% Secured Convertible Subordinated Notes as issued to the lenders reported in (G) above. Additionally, such investors received an additional 5 shares of common stock for each $1.00 invested, totaling 525,000 common shares. The common shares were fair valued at $18,313 as debt discount and will be amortized over the term of the notes. J) On May 16, 2012, the Company borrowed $20,000 from CS Healthcare, a related party (controlled by the Company’s CEO), in exchange for an 8% 18 month Unsecured Promissory Notes (“Unsecured Note”). K) On June 26, 2012, the Company reached an agreement with related party Fuselier Bridge Capital, LLC (owned by the Company’s CEO) to provide a secured working capital loan facility up to $300,000. The loan facility is secured by all Company assets including general intangibles (including trademarks, formulations, customer lists) and accounts receivables, fixed assets, inventory (all raw, work in progress and finished goods including labels) present and hereafter acquired. Each advance under the loan facility bears an interest rate of 1.5% per month and is due in full ten months after the issuance date. On June 26 and August 18, 2012, the Company borrowed $50,000 and $100,913, respectively under this loan facility and issued 1,666,666 and 3,363,767 warrants, respectively. L) These notes matured during the period and remain unpaid as of ~~June~~September 30, 2012:. Therefore they are and classified as current portion of notes payable to related parties. M) Between September 24 and 25, 2012, the Company borrowed an aggregate of $250,000 from two investors in exchange for 8% 18 month Unsecured Promissory Notes (“Unsecured Note”), which is payable at maturity on March 24 and 25, 2014. A substantial portion of these proceeds were loaned to a potential acquisition candidate of the Company.

Year Ending December 31,	Principal Maturities
2012	$	889,344
2013		407,500
Total	$	1,296,844

The following is a schedule of principal maturities for the next five years and the total amount thereafter on these related party notes as of September 30, 2012:

7. SHORT-TERM DEBT

Year Ending December 31,	Principal Maturities
2012	$	889,345
2013		657,093
Total	$	1,546,438

Short-term debt at June 30, 2012 and December 31, 2011 consisted of the following:

	June 30,			December 31,
Description	2012			2011
Secured loan agreement with a face amount of $155,000 bearing interest at 10% payable November 21, 2012 ( A) (B) (D)	$	155,000		$	155,000
Secured loan agreement with a face amount of $175,000 bearing interest at 10% payable November 1, 2012 (A) (B) (D)		175,000			175,000
Secured loan agreement with a face amount of $30,000 bearing interest at 10% payable October 14, 2012 ( A) (B) (C) (E)		30,000			30,000
Secured loan agreement with a face amount of $25,000 bearing interest at 10% payable October 18, 2012 ( A) (B) (C) (E)		25,000			25,000
Secured factoring loan agreement with a face amount of $282,537 bearing interest at 10% payable July 23, 2012 and August 13, 2012 ( A) (B)		282,537			282,537
Total short-term debt before discount on debt		667,537			667,537
Discount on Debt (D)		(82,146	)		(547,047)
Total short-term debt	$	585,391		$	120,490

A) On June 15, 2011, the Company entered into a Secured Factoring Loan with a principal amount of $426,680 with four lenders, total amount received on the Secured Factoring Loans was $400,000 of which $125,000 was purchased by a director of the Company and $200,000 was purchased by a principal shareholder (See Related Party Note 6). These notes matured on August 20, 2011 and are secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities. On August 24, 2011 these notes were converted into recast notes described in (D) below.

B) On July 14, 2011, July 28, 2011 and July 29, 2011 the Company issued Original Issue Discount Notes with three lenders receiving amounts of $75,000 from a principal shareholder, and $50,000 and $25,000 respectively from other investors. These notes mature on January 14, 2012 at $170,458 and are secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities, of which $85,227 was due to Lorraine DiPaolo, a principal shareholder of the Company. On August 24, 2011 these notes were converted into the recast notes described below.

C) Between September 13 and 16, 2011, the Company borrowed $250,000 from two investors, one of whom is a principal shareholder of the Company for $125,000 and refinanced an existing unsecured loan with one officer in the amount of $30,100. The Company issued to these investors and officers the same 10% Secured Convertible Subordinated Notes we had issued to the lenders reported in the above paragraph. Additionally, such investors received an additional 5 shares of our common stock for each $1.00 invested totaling 1,400,500 common shares (625,000 included in shares issuable). The common shares were fair valued at $62,500 as debt discount and will be amortized over the term of the notes.

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D) NOTE ~~Between~~7 ~~December~~- 1SHORT-TERM and December 21, 2011 the Company borrowed $330,000 from an investor. We issued to these investors the same 10% Secured Convertible Subordinated Notes we had issued to the lenders reported in the above paragraph. Additionally, such investors received an additional 5 shares of our common stock for each $1.00 invested totaling 1,650,000 common shares (1,650,000 shares included in shares issuable). The shares were valued at $565,890 as debt discount and will be amortized over the term of notes. In addition we agreed in a side letter to revenue participation based on 2% of the first $2,000,000 of revenue and 3% of revenue above $2,000,000 in 2012. This agreement may be terminated by the Company with a penalty of 3 times the annual revenue participation. On July 11, 2012 both notes were converted into common stock. During first quarter of 2012, the Company reclassified approximately $349,000 of debt discount to additional paid in capital due to previously over allocated embedded beneficial conversation in excess of carrying value of the related notes.DEBT

E)Short-term Ondebt ~~October~~at ~~18,~~September ~~2011 and November 14, 2011 the Company borrowed $25,000 and $~~30,~~000~~ ~~from~~2012 one investor. The Company issued to this investor the same 10% Secured Convertible Subordinated Notes as we had issued to the lenders reported in the above paragraph E. Additionally, such investor received an additional 5 shares of our common stock for each $1.00 invested, totaling 275,000 common shares (~~275,000 included in shares issuable~~unaudited). ~~The~~and ~~common~~December ~~shares were fair valued at $12~~31,~~313~~ as2011 ~~debt~~consisted ~~discount and will be amortized over the term~~ of the ~~notes.~~following:

8. LONG-TERM DEBT

	September 30,		December 31,
Description	2012		2011
Secured loan agreement with a face amount of $155,000 bearing interest at 10% payable on November 21, 2012 ( A) (B) (D)			$	155,000
Secured loan agreement with a face amount of $175,000 bearing interest at 10% payable on November 1, 2012 (A) (B) (D)				175,000
Secured loan agreement with a face amount of $30,000 bearing interest at 10% payable on October 14, 2012 ( A) (B) (C) (E)	$	30,000		30,000
Secured loan agreement with a face amount of $25,000 bearing interest at 10% payable on October 18, 2012 ( A) (B) (C) (E)		25,000		25,000
Secured factoring loan agreement with a face amount of $282,537 bearing interest at 10% payable on July 23, 2012 and August 13, 2012 ( A) (B)		282,537		282,537

Long-term debt at June 30, 2012 and December 31, 2011 consisted of the following:

Unsecured note payable to a shareholder with a face amount of $25,000 bearing interest at 8% per annum and payable July 15, 2013 (F)	34,460	-
Unsecured note payable to a shareholder with a face amount of $50,000 bearing interest at 8% per annum and payable July 15, 2013(F)	68,921	-
Unsecured note payable to a shareholder with a face amount of $37,500 bearing interest at 8% per annum and payable September 3, 2013(F)	48,339	-
Secured promissory note with a face amount of $60,000 bearing interest at 11% per annum and payable September 2013 (G)	58,194	-

Description	June 30, 2012			December 31, 2011
Equipment loan bearing interest at 11% per annum, mature in November 2013 (H)		35,457				-
$822,920 Note payable to a trust, bearing interest at 5% per annum, unsecured(A)
Total short-term debt before discount on debt		582,908			667,537
Unsecured note payable to a shareholder with a face amount of $25,000 bearing interest at 8% per annum and payable July 15, 2013 (C)	$	25,000
Discount on Debt (D)		(59,196	)		(547,047)
Unsecured note payable to a shareholder with a face amount of $50,000 bearing interest at 8% per annum and payable July 15, 2013(C)		50,000
Total short-term debt	$	523,712		$	120,490
Unsecured note payable to a shareholder with a face amount of $37,500 bearing interest at 8% per annum and payable September 3, 2013(C)		37,500
Equipment loan bearing interest at 11% per annum, mature in November 2013 (B)		35,457			35,457
Total long-term debt		147,957			35,457
Less current maturities		(35,457	)		(21,119	)
Discount on Debt		(73,097	)
Long-term debt	$	39,403		$	14,338

~~Interest~~A) ~~expense~~On ~~for~~June 15, 2011, the ~~three~~Company ~~months~~entered ~~ended~~into ~~June~~a 30Secured Factoring Loan with a principal amount of $426,680 ~~2012~~with ~~and~~four ~~2011~~lenders, ~~amounted~~total toamount received on the Secured Factoring Loans was $28400,~~850~~000 of which $125,000 was purchased by a director of the Company and $13200,~~743,~~000 ~~respectively~~was purchased by a principal shareholder (See Related Party Note 6). ~~The~~These ~~weighted~~notes ~~average~~matured ~~interest~~on ~~rate~~August ~~for~~20, 2011 and are secured by all ~~long-term~~of ~~borrowings~~the ~~was~~Company ~~17.34%~~assets, ~~for~~subject ~~2012~~to subordinations of certain assets to present and 6%future ~~for~~factoring facilities. On August 24, 2011 these notes were converted into recast notes described in (D) below.

AB) ~~The~~On ~~Company~~July is14, in2011, ~~negotiation~~July ~~with~~28, ~~certain~~2011 ~~former~~and ~~shareholders~~July ~~of Nutritional Specialties~~29, ~~Inc.~~2011 ~~The~~the Company ~~stopped~~issued ~~making~~Original ~~principal~~Issue ~~and~~Discount ~~interest~~Notes ~~payments~~to onthree ~~these~~lenders ~~notes~~receiving inamounts ~~September~~of ~~2009~~$75,000 ~~and~~from ~~the~~a ~~notes~~principal ~~were~~shareholder, ~~considered~~and to$50,000 beand in$25,000 ~~default~~respectively ~~and~~from ~~presented~~other asinvestors. aThese ~~current~~notes ~~liability~~were ~~(See~~to ~~Note~~mature 12on ~~Contingencies).~~January In14, ~~March~~ 2012 at $170,458 ~~the~~and ~~Company~~were ~~approved~~secured ~~the~~by ~~sale~~all of the ~~Nutritional~~Company ~~Specialties~~assets, ~~Inc~~subject to subordinations of certain assets to present and ~~all~~future ~~outstanding~~factoring ~~liabilities~~facilities, ~~have~~of ~~been~~which ~~reclassified~~$85,227 was due to ~~discontinued~~a ~~operations~~principal ~~for~~shareholder ~~all~~of ~~periods~~the ~~presented~~Company. ~~The~~On ~~sale~~August ~~was~~24, ~~consummated~~2011 inthese ~~April~~notes ~~2012~~were converted into the recast notes described below.

BC) OnBetween ~~December~~September 313 and 16, ~~2008~~2011, the Company ~~completed~~borrowed ~~the~~$250,000 ~~purchase~~from two investors, one of whom is a ~~new~~principal ~~ERP~~shareholder ~~system~~of the Company for $125,000 and ~~financed~~refinanced ~~that~~an ~~purchase~~existing ~~through~~unsecured aloan ~~third-party~~with ~~equipment~~one ~~financing~~officer ~~arrangement~~in ~~having~~the amount of $30,100. The Company issued to these investors and officers the same 10% Secured Convertible Subordinated Notes as issued to the lenders reported in Note 6 (G) above. Additionally, such investors received an ~~interest~~additional ~~rate~~5 shares of ~~11%~~common ~~and~~stock ~~requiring~~for ~~payments~~each $1.00 invested totaling 1,400,500 common shares (625,000 included in shares issuable). The fair value of ~~monthly~~the ~~interest~~common ~~and~~shares ~~principal~~on the date of issuance of $162,~~719~~500 was recorded as a debt discount which ~~matures~~will bybe ~~December~~amortized ~~2013~~over the term of the notes.

C) Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”), which Notes were coupled with warrants. One of the investors is a principal shareholder who invested $87,500 and the other was a former director who invested $50,000 in the Unsecured Notes. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided.

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~~The~~D) ~~following~~Between isDecember a1 ~~schedule~~and December 21, 2011 the Company borrowed $330,000 from an investor. We issued 10% Secured Convertible Subordinated Notes as issued to the lenders reported in Note 6 (G) above. Additionally, such investor received an additional 5 shares of ~~principal~~common ~~maturities~~stock for ~~the~~each ~~next~~$1.00 ~~five~~invested ~~years~~totaling 1,650,000 common shares that were valued at $565,890 and recorded as a debt discount which will be amortized over the ~~total~~term ~~amount~~of ~~thereafter~~notes. In addition, the Company agreed in a side letter to a revenue participation based on ~~these~~2% ~~notes~~of asthe first $2,000,000 of ~~March~~revenue and 3% of revenue above $2,000,000 in 2012:. This agreement may be terminated by the Company with a penalty of 3 times the annual revenue participation. On July 11, 2012 both notes were converted into common stock. During first quarter of 2012, the Company reclassified approximately $349,000 of debt discount to additional paid in capital due to previously over allocated embedded beneficial conversion in excess of carrying value of the related notes.

Year Ending December 31,	Principal Maturities
2012	$	35,457
2013		112,500
Total	$	147,957

On October 18, 2011 and November 14, 2011 the Company borrowed $25,000 and $30,000 from one investor. The Company issued to this investor the same 10% Secured Convertible Subordinated Notes as issued to the lenders reported in Note 6 (G) above. Additionally, such investor received an additional 5 shares of common stock for each $1.00 invested, totaling 275,000 common shares (275,000 included in shares issuable). The fair value of the common shares on the date of issuance of $12,313 was recorded as a debt discount which will be amortized over the term of the notes.

9F) Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”) and warrants. ~~STOCKHOLDERS’~~One ~~DEFICITS~~of the investors invested $87,500 and the other, a former director, invested $50,000 in the Unsecured Notes. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided. The Company has accounted for these share based provisions at fair value due to the variable conversion price will require the Company to issue additional shares and accordingly has recorded an additional liability to the notes of approximately $88,000 of which approximately $47,000 has been recorded as change in fair value for the nine months ended September 30, 2012. The Company will fair value these provisions at each reporting period until either settled or forfeited.

G)	On September 20, 2012 the Company borrowed $ 60,000 from an outside lender in exchange for an 11% 1 year Secured Promissory Note. The Company’s Chief Executive Officer personally guaranteed the Note.

H)	On December 3, 2008, the Company completed the purchase of a new ERP system and financed that purchase through a third-party equipment financing arrangement having an interest rate of 11% and requiring payments of monthly interest and principal of $1,719 which matures by December 2013.

NOTE 8 - LONG-TERM DEBT

Long-term debt at September 30, 2012 (unaudited) and December 31, 2011 consisted of the following:

Description	September 30, 2012			December 31, 2011
Loan payable bearing interest at 8% per annum, maturing in March 2014 (B)	$	150,000
Equipment loan bearing interest at 11% per annum, mature in November 2013 (A)		-		$	35,457
Total long-term debt		150,000			35,457
Less current maturities		-			(21,119	)
Discount on Debt		(33,026	)		-
Long-term debt	$	116,974		$	14,338

Interest expense for the nine months ended September 30, 2012 and 2011 amounted to $65,670 and $13,743, respectively. The weighted average interest rate for all long-term borrowings was 17.34% for 2012 and 6% for 2011.

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On December 3, 2008, the Company completed the purchase of a new ERP system and financed that purchase through a third-party equipment financing arrangement having an interest rate of 11% and requiring payments of monthly interest and principal of $1,719 which matures by November 2013.B)Between September 24 and 25, 2012, the Company borrowed an aggregate of $250,000 from two investors in exchange for 8% 18 month Unsecured Promissory Notes (“Unsecured Note”), which is payable at maturity on March 24 and 25, 2014. A substantial portion of these proceeds were loaned to a potential acquisition candidate of the Company.

The following is a schedule of principal maturities for the next five years and the total amount thereafter on these notes as of September 2012:

Year Ending December 31,		Principal Maturities
2014		$	150,000

NOTE 9 - STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value per share. The Company designated 1,000 shares of the authorized shares as Series K 10% Convertible Preferred Stock (18.9 and 30 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively) and 1,750 shares of the authorized shares as Series M Convertible Preferred Stock (no shares were outstanding at September 30, 2012 and December 31, 2011).

Common Stock

The Company is authorized to issue 500,000,000 shares of common stock, $0.001 par value per share. At September 30, 2012 and December 31, 2011, 328,533,316 and 150,811,031 shares were issued and outstanding, respectively.

Following is a summary of changes in stockholder’s equity from December 31, 2011 to September 30, 2012:

													Additional
	Preferred Stock					Common Stock				Shares			Paid-in			Accumulated
	Shares			Dollars		Shares		Dollars		issuable			Capital			Deficit			Total

Balance – December 31, 2011		30.0		$	-		150,811,033	$	150,811	$	5,550		$	44,025,118		$	(48,114,561	)	$	(3,933,082	)
Issuance of shares issuable at year end		-			-		5,550,000		5,550		(5,550	)		-			-			-
Settlement of accounts payable for common stock		-			-		25,879,452		25,879		-			1,386,525			-			1,412,404
Shares issued upon conversion of notes payable		-			-		33,000,000		33,000		-			297,000			-			330,000
Shares issued upon conversion of preferred stock		(11.0	)		-		8,305,811		8,306		-			(8,306	)		-			-
Shares issued for services		-			-		54,200,000		54,200		-			1,262,400			-			1,316,600
Shares issued upon warrants exercise		-			-		18,587,020		18,587		-			499,031			-			517,618
Shares issued to terminate revenue participation agreement		-			-		25,000,000		25,000		-			350,000			-			375,000
Derivative liability of warrants issued in connection with notes payable		-			-		-		-		-			353,614			-			353,614
Beneficial conversion feature and debt discount on notes payable		-			-		-		-		-			3,825			-			3,825
Shares issued for release of UCC lien		-			-		1,200,000		1,200		-			34,800			-			36,000
Shares issued in connection with disposal of subsidiary		-			-		6,000,000		6,000		-			174,000			-			180,000
Fair value of conversion rights on notes payable		-			-		-		-		-			(41,334	)		-			(41,334	)
Conversion of derivative warrants		-			-		-		-		-			13,630			-			13,630
Dividends on series K 10% convertible preferred stock		-			-		-		-		-			-			(42,271	)		(42,271	)
Net (loss)		-			-		-		-		-			-			(3,823,123	)		(3,823,123	)
Balance- September 30, 2012		19.0		$	-		328,533,316	$	328,533	$	-		$	48,350,303		$	(51,979,955	)	$	(3,301,119	)

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During the three and nine months ended September 30, 2012, the Company issued 1,272,600 and 13,673,600 common shares in settlement of accounts payable for $57,206 and $717,652, respectively.

On March 21, 2012 the Company granted 25,000,000 restricted shares of common stock to an investor who loaned the Company $330,000 on December 1, 2011 and December 22, 2011 in connection with the termination of the revenue participation agreement. The Company has recorded a share based compensation charge of $375,000 in general and administrative expense.

On March 7, 2012 the Company commenced a warrant reset and exercise offer to eligible holders of its outstanding warrants, pursuant to which all issued and outstanding warrants to purchase common stock of the Corporation issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the offer period. Approximately 15 investors elected to exercise their warrants for which the Company received proceeds of $400,147 and issued 13,338,225 shares of common stock.

During the three and six months ended June 30, 2012, the Company issued 205,852 and 12,401,000 common shares in settlement of accounts payable for $660,446 and 6,176, respectively.

On February 3, 2012 one investor in our Series Preferred K converted 4 preferred shares and Series X, Y and Z warrants to purchase 1,333,333 shares of common stock into 3,600,000 shares of common stock.

On February 24, 2012 and June 5, 2012 three investors in our Series Preferred K converted 1.45 and 5.80 preferred shares into 1,210,000 and 4,829,216 shares of common stock, respectively.

In February 2011, the Company issued 1,000,000 common shares for marketing services at stated market value on the date of the agreement of $0.14 per share. In June 2011 issued and additional 80,000 shares for marketing services at stated market value on the date of the agreement of $0.0625 per share.

On February 3, 2012 one investor in our Series Preferred K converted 4 preferred shares into 2,266,667 shares of common stock and exercised a warrant to purchase 1,333,333 shares of common stock.

On February 24, 2012 one investor in our Series Preferred K converted 1.45 preferred shares into 1,210,000 shares of common stock.

On February 243, ~~2011,~~2012 ~~the~~one ~~Company~~investor ~~received~~in ~~proceeds~~our ofSeries ~~$60,000~~Preferred ~~and~~K ~~$30,000~~converted of4 ~~unsecured~~preferred ~~notes~~shares ~~from~~into ~~investors and a director~~2,266,667 ~~respectively.~~shares Onof ~~April~~common ~~29,~~stock ~~2011,~~and ~~these~~exercised ~~unsecured~~a ~~notes~~warrant ~~were~~to ~~converted~~purchase ~~into 800~~1,~~000~~333,333 ~~and~~shares ~~400,000~~of common ~~shares respectively~~stock.

In February 2011, the Company issued 1,000,000 common shares for marketing services at stated market value on the date of the agreement of $0.14 per share. In June 2011, The Company issued an additional 80,000 shares for marketing services at stated market value on the date of the agreement of $0.0625 per share.

On February 24, 2011, the Company received proceeds from the sale of unsecured convertible notes of $60,000 and $30,000 to investors and a director, respectively. On April 29, 2011, these unsecured notes were converted into 800,000 and 400,000 common shares respectively.

On January 12, 2011, the Company’s OID note holders agreed to extend the maturity of their notes to January 17, 2011. In granting the extensions to January 17, 2011, the OID note holders received 402,045 Common Shares in the Company. As this exchange was to extend the term of the debt the Company accounted for the extension as a material modification and recognized a loss on extinguishment of debt of $66,338 in January 2011.

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On January 21, 2011, the Company completed a unit offering of an aggregate of $1,215,000 of its Series K 10% Convertible Preferred Stock (“Series K Preferred Stock”) and three series (Series X, Y and Z) of common stock purchase warrants (“Warrants”) to eleven accredited investors. Each unit sold consisted of one share of $25,000 stated value (and liquidation preference) of Series K Preferred Stock and Warrants to purchase up to an aggregate of 333,333 shares of common stock at $0.15 per share, subject to adjustment. A total of 48.6 units were sold. The Series X Warrants are five-year warrants, exercisable immediately to purchase an aggregate of 4,049,999 shares of common stock. The Series Y Warrants are exercisable until 45 days after the effectiveness of a certain registration statement and are exercisable to purchase an aggregate of 4,049,999 shares of common stock. The Series Z Warrants are ‘five-year’ warrants whose effectiveness are conditional upon the exercise of the holder’s Y warrants and are exercisable to purchase an aggregate of 8,100,001 shares of common stock. Pursuant to a Registration Rights Agreement described below, Investors also received the right to demand that the Company file one or more registration statements covering the securities into which the Series K Preferred Stock is convertible and as to which the Warrants are exercisable. As a condition to consummation of the offering, certain individuals converted outstanding debt in the original principal amount of $2,050,000 into 82 shares of the Company’s Series K Preferred Stock and 6,833,334 Series Y warrants. Additionally, all subscribers to the Company’s 12% Original Issue Discount Notes sold in September and October 2010, whose then current balances on such Notes aggregated $2,079,171, were automatically converted into 83.16 units of the Company’s Series K Preferred Stock and were issued X, Y and Z warrants pari- passu to the current unit investors (an aggregate of 6,930,571 Series X warrants, 6,930,571 Series Y warrants and 13,861,139 Series Z warrants).

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In connection with the transaction, the Company entered into a Securities Purchase Agreement, dated January 20, 2011, with eleven investors (“SPA”). In addition to providing for the purchase of the Series K Preferred Stock and warrants by such investors as above, the SPA also provided for the Company to amend its earn-out arrangement with Eric Skae, its Chief Executive Officer, as set forth in a certain Amendment to Asset Purchase Agreement; placed certain restrictions on the Company in connection with additional equity offerings by it for a period of 12 months; caused each executive officer and director to enter into a “lock-up” agreement valid until 90 days after the effectiveness of one or more registration statements to be filed pursuant to the Registration Rights Agreement described below; and caused the conversion to equity of certain outstanding debt of the Company as set forth in the last two sentences of the preceding paragraph.

The Company also entered into a Registration Rights Agreement, dated January 20, 2011 with each unit subscriber pursuant to which the Company agreed, at its expense, to file and gain effectiveness for one or more registration statements covering the Company common stock issuable pursuant to exercise of the Warrants and conversion of the Series K Preferred Stock. The Company further agreed to file such registration statement within 60 days of the closing of the offering and to obtain its effectiveness within 90 days of such closing (or 120 days if such registration statement is subject to full Securities and Exchange Commission review), failing which monetary penalties are imposed. The registration statement(s) is (are) to be maintained effective until all securities registered for sale there under have been sold. On April 29, 2011 holders of the rights agreed to amend the Registration Rights Agreement, dated as of January 21, 2011, between the Corporation and each of the several purchasers signatory thereto and eliminated Section 2(b) thereof in its entirety in order to remove the liquidated damages provisions from the agreement.

The Company also filed a Certificate of Designation of its Certificate of Incorporation which created a class of 1,000 shares of Series K 10% Convertible Preferred Stock, par value $.001 per share. The Series K Preferred Stock ranks senior to the common stock, carries a 10% cumulative rate of interest, has a liquidation preference and is convertible into shares of the Company’s common stock at $.15 per share, subject to adjustment and anti-dilution protection. The Series K Stock is callable and redeemable by the Company under certain circumstances. The Series K Stock may be converted by the Company into shares of its common stock if the market price of the common stock is at least 300% of the conversion price for a period of 30 days and at least 200,000 shares have traded each day during such 30 day period. The Series K Preferred Stock has voting rights, voting with the Company’s common stock on an assumed-converted basis. The Certificate of Designation contains additional restrictions on the Company’s operations, including a restriction prohibiting the payment of any dividends on the Company’s common stock without the affirmative consent of the holders of the Stock.

The Warrants are represented by warrant certificates and are exercisable at $.15 per share. They are exercisable in whole or in part and the Series X and Z (but not Y) warrants may be exercised on a cashless basis.

The placement agent for the offering received $72,435 in cash fees and 361,000 warrants valued at $18,804 using the Black-Scholes model described above, to purchase common stock which have terms similar to the Series X warrants.

19NOTE 10 - STOCK OPTIONS AND WARRANTS

~~Tables~~[1] ~~of Contents~~Warrants

OnSet ~~January~~forth ~~21,~~below ~~2011,~~is ~~The Company filed~~ a ~~Certificate~~description of ~~Designation~~the toCompany’s ~~its~~warrants ~~Certificate~~as of ~~Incorporation~~September ~~which created a class of 1,000 shares of Series K 10% Convertible Preferred Stock with a par value of $.001 per share. As of June~~ 30, 2012, ~~Series K 10% Preferred stock dividends of $ 191,275 are accrued.~~(unaudited):

10. STOCK OPTIONS AND WARRANTS

Set forth below is a description of the Company’s warrants as of June 30, 2012:

Designation / Reason Granted	Original issue date	Shares of Common Stock Upon Exercise	Exercise Price / Share		Expiration Date
Marketing Program Development	October-07	250,000	$	1.00	October-12
April 2008 Bridge Notes Warrants (1)	April-08	15,625	$	0.80	April-13
September 2008 Bridge Note Warrants (1)	September-08	25,884	$	0.85	September-13
Series J Warrants (1)	December-08	14,368	$	0.87	December-13
October 2009 Note Warrants (1)	October-09	200,000	$	0.25	October-14
Investor Warrants 2009 Private Placement (1)	December-09	531,817	$	0.55	December-14
Investor Warrants 2009 Private Placement (1)	February-10	289,545	$	0.55	February-15
Marketing Program Development	March-10	150,000	$	0.49	March-15
Investor warrants 2009 Private Placement (1)(2)	May-10	1,164,346	$	0.25	May-15
Investor Warrants 2010 Private Placement (1)	June-10	1,821,414	$	0.45	June-15
Investor Warrants 2010 Original Issue Discount Private Placement (1)	September/October 2010	3,338,703	$	0.25	September, October 2015
Placement agent Warrants (1)	October-10	444,609	$	0.25	October-15
Investor X Warrants 2011 Series K Preferred stock	January 2011	6,476,472	$	0.15	January-16
Investor Y Warrants 2011 Series K Preferred stock	January 2011	7,260,786	$	0.15	45 days after registration statement
Investor Z Warrants 2011 Series K Preferred stock	January 2011	14,800,780	$	0.15	January-16
Placement agent X Warrants	January 2011	361,000	$	0.15	January-16
Debt conversion Y Warrants	January 2011	1,833,333	$	0.15	45 days after registration statement
Marketing Program Development	2/1/2011	100,000	$	0.15	February-16
Investor Relations	November-11	5,000,000	$	0.25	11/20/2016
2012 Unsecured Note Warrants	February March 2012	16,566,667	$	0.03	February, March 2017
Warrants issued for services	March 2012	3,750,000	$	0.03	March 2017
Warrants issued for bridge capital	June 2012	1,666,666	$	0.03	June 2017

(1) The exercise price of the warrants and the number of warrant shares subject thereto shall be subject to adjustment in the event of stock splits, stock dividends, reverse stock splits, and similar events. Further, in the event that the Company should issue shares of its Common Stock at an effective price per share less than the then effective exercise price of the warrants, the exercise price and the number of warrant shares subject to such warrants shall be adjusted on a weighted average basis to reflect the dilution represented by the issuance of such shares of Common Stock and such lower effective price on a non-fully-diluted basis, subject to similar exceptions to those described for such adjustments above with respect to the Convertible Preferred Stock. The impact of this provision would be to reduce the exercise price. The warrants contain standard reorganization provisions. Therefore, these warrants are qualified as liability instruments upon issuance.

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(2) In February 2010, the Company issued a side letter to investors in the private placements which closed in December 2009 and February 2010 which effectively amended the terms of the private placements to contain a price protection clause through April 30, 2010. The price protection clause required the Company to issue additional warrants to these investors, based upon a formula contained in the side letter, in the event that common stock was issued during the price protection period at an effective price less than the purchase price paid by such investors, subject to certain exceptions.

During the year ended December 31, 2011, the Company issued 100,000 warrants for marketing services at an exercise price of $0.15 per share with a fair value of $10,388, 43,922,280 warrants were issued in conjunction with the issuance of Series K Preferred shares, 361,000 warrants were issued to the placement agent of the Series K Preferred shares, 6,833,333 warrants were issued for the conversion of certain notes payable into Series K Preferred shares, and 1,000,000 warrants were issued in conjunction with the conversion of vendor payables. In April 2011, the Company made an offer to the series X, Y and Z warrant holders to exercise their warrants at an exercise price of $0.075 per warrant share; certain warrant holders accepted the Company’s offer and exercised 6,666,665 warrants for $500,000. In addition a series K Preferred shareholder forfeited 666,667 series X warrants and 1,333,313 series Y warrants and a warrant holder who, as previously described, received warrants as part of the conversion certain notes payable agreed to forfeit 4,066,667 series X warrants.

The fair value was determined using the Black-Scholes-Merton option valuation model using the following assumptions:

Stock price	$	0.015 to 0.06
Term (Years)	5
Volatility		125.46 to 126.53	%
Risk-free interest rate		0.81 to 1.01	%
Exercise price		0.03
Dividend yield		0	%

On March 7, 2012 the Company commenced a warrant reset and exercise offer to eligible holders of its outstanding warrants, pursuant to which all issued and outstanding warrants to purchase common stock of the Corporation issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the offer period. Approximately 15 investors elected to exercise their warrants for which the Company received $400,147 in proceeds and issued 13,338,225 shares of common stock.

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The following table reflects a summary of common stock warrants outstanding and warrant activity during 2012:

Designation / Reason Granted	Original issue date	Shares of Common Stock Upon Exercise	Exercise Price / Share		Expiration Date

Marketing Program Development	October-07	250,000	$	1.00	October-12
April 2008 Bridge Notes Warrants (1)	April-08	15,625	$	0.80	April-13
September 2008 Bridge Note Warrants (1)	September-08	25,884	$	0.85	September-13
Series J Warrants (1)	December-08	14,368	$	0.87	December-13
October 2009 Note Warrants (1)	October-09	200,000	$	0.25	October-14
Investor Warrants 2009 Private Placement (1)	December-09	531,817	$	0.55	December-14
Investor Warrants 2009 Private Placement (1)	February-10	289,545	$	0.55	February-15
Marketing Program Development	March-10	150,000	$	0.49	March-15
Investor warrants 2009 Private Placement (1)(2)	May-10	1,164,346	$	0.25	May-15
Investor Warrants 2010 Private Placement (1)	June-10	1,821,414	$	0.45	June-15
Investor Warrants 2010 Original Issue Discount Private Placement (1)	September/October 2010	3,338,703	$	0.25	September, October 2015
Placement agent Warrants (1)	October-10	444,609	$	0.25	October-15
Investor X Warrants 2011 Series K Preferred stock (3)	January 2011	6,476,472	$	0.15	January-16
Investor Y Warrants 2011 Series K Preferred stock (3)	January 2011	7,260,786	$	0.15	45 days after registration statement
Investor Z Warrants 2011 Series K Preferred stock (3)	January 2011	14,800,780	$	0.15	January-16
Placement agent X Warrants (3)	January 2011	361,000	$	0.15	January-16
Debt conversion Y Warrants (3)	January 2011	1,833,333	$	0.15	45 days after registration statement
Marketing Program Development (3)	2/1/2011	100,000	$	0.15	February-16
Investor Relations (3)	November-11	5,000,000	$	0.25	11/20/2016
2012 Unsecured Note Warrants (4)	February / March 2012	16,566,667	$	0.03	February, March 2017
Warrants issued for services (4)	March 2012	3,750,000	$	0.03	March 2017
Warrants issued for bridge capital (5)	June 2012	1,666,666	$	0.03	June 2017
Warrants issued for bridge capital (5)	August 2012	3,363,767	$	0.03	August 2017
September 2012 Notes Warrants (6)	September 2012	1,250,000	$	0.03	September 2017

	2012
	# Warrants			Weighted Average Exercise Price		Weighted Average Term (Years)
Warrants outstanding at January 1,		52,893,843			0.20		3.46
Granted during the period		32,202,777			0.03		4.91
Exercised during the period		(18,885,856	)		0.03		4.57
Expired during the period		(148,749	)		0.15		4.57
Warrants outstanding at December 31,		66,062,015		$	0.1658		3.85

Fair values for the warrants (excluding those with down round provisions) were determined using the Black-Scholes-Merton option valuation model with the following assumptions:

The Common Stock warrants expire in years ended December 31 as follows:

Stock price	$	0.015 to 0.06
Exercise price	$	0.03
Term	5 years
Volatility	263.01 to 397.47%
Risk-free interest rate	0.81 to 1.01 %
Dividend yield		0	%

2012			250,000
2013			55,877
2014			731,817
2015			7,208,617
2016 and thereafter			47,928,269
45 days after registration statement			9,887,435
Total			66,062,015

Stock options

Under the Company’s Employee Incentive Stock Option Plan (the “1996 Plan”) approved by the stockholders in 1996, the total number of shares of Common Stock that may be granted is 500,000, amended to 325,000 in 1999. The 1996 Plan provides that shares granted come from the Company’s authorized but unissued Common Stock. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. The options expire ten years from date of grant. At the Company’s Annual Meeting held on December 10, 2004, the Company’s stockholders approved the 2004 Stock Option Plan (the "2004 Plan"). At the Company’s Board of Directors meeting held on July 28, 2007, the Board approved an increase in the number of shares of Common Stock that may be granted to 2,000,000 under all plans. At the Company’s Board of Directors meeting on June 27, 2008, the Board approved a new Stock Option Plan (the “2008 Plan”) for a total of 2,000,000 additional shares. At the Company’s Board of Directors meeting held on February 2, 2010, the Board approved a new Stock Option Plan (the “2010 Plan”) for a total of 3,000,000 additional shares. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. The option vesting period is determined by the Board of Directors at the time of grant and ranges from immediately to five years. The Company did not grant any stock options to directors and employees during the six months ended June 30, 2012. Compensation cost recognized during the three and six months ended June 30, 2012 and 2011 related to stock-based awards was $12,561 and $(16,411), respectively. Options are usually issued at an exercise price equal to or above the fair value at the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option-pricing model

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(1) The ~~summary~~exercise price of ~~activity~~the ~~for~~warrants and the ~~Company's~~number of warrant shares subject thereto shall be subject to adjustment in the event of stock ~~options~~splits, isstock ~~presented~~dividends, ~~below:~~reverse stock splits, and similar events. Further, in the event that the Company should issue shares of its Common Stock at an effective price per share less than the then effective exercise price of the warrants, the exercise price and the number of warrant shares subject to such warrants shall be adjusted on a weighted average basis to reflect the dilution represented by the issuance of such shares of Common Stock and such lower effective price on a non-fully-diluted basis, subject to similar exceptions to those described for such adjustments above with respect to the Convertible Preferred Stock. The impact of this provision would be to reduce the exercise price. Therefore, these warrants were classified as derivative liability instruments upon issuance. The warrants also contain standard reorganization provisions.

	2012		Weighted Average Exercise Price
Options outstanding at beginning of year		2,241,250	$	0.67
Granted		-	$	-
Exercised		-		-
Terminated/Expired		(986,802)	$	0.66
Options outstanding at end of year		1,254,448	$	0. 67
Options exercisable at end of year		1,173,945	$	0.67
Options available for grant at end of year
Price per share of options outstanding	$	$0.65 to 1.02	$	$0.65 to 1.02
Weighted average remaining contractual lives of all options	6.16 years
Weighted Average fair value of options granted during the year		0	$	0

(2)

In February 2010, the Company issued a side letter to investors in the private placements which closed in December 2009 and February 2010 which effectively amended the terms of the private placements to contain a price protection clause through April 30, 2010. The price protection clause required the Company to issue additional warrants to these investors, based upon a formula contained in the side letter, in the event that common stock was issued during the price protection period at an effective price less than the purchase price paid by such investors, subject to certain exceptions. This side letter resulted in the warrants being classified as derivative liability instruments.

~~The~~(3) ~~Common~~During ~~Stock~~the ~~options~~year ~~expire~~ended December 31, 2011, the Company issued 100,000 warrants for marketing services at an exercise price of $0.15 per share with a fair value of $10,388, 43,922,280 warrants were issued in conjunction with the issuance of Series K Preferred shares, 361,000 warrants were issued to the placement agent of the Series K Preferred shares, 6,833,333 warrants were issued for the conversion of certain notes payable into Series K Preferred shares, and 1,000,000 warrants were issued in conjunction with the conversion of vendor payables. In April 2011, the Company made an offer to the series X, Y and Z warrant holders to exercise their warrants at an exercise price of $0.075 per warrant share; certain warrant holders accepted the Company’s offer and exercised 6,666,665 warrants for $500,000. In addition a series K Preferred shareholder forfeited 666,667 series X warrants and 1,333,313 series Y warrants and a warrant holder who, as ~~follows:~~previously described, received warrants as part of the conversion certain notes payable agreed to forfeit 4,066,667 series X warrants.

2012
2013			-
2014			-
2015			-
2016			-
After 2016			1,254,448
			1,254,448

(4)

Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”), which Notes were coupled with warrants. One of the investors is a principal shareholder who invested $87,500 and the other was a former director who invested $50,000 in the Unsecured Notes. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided. The Company has accounted for these share based provisions at fair value due to the variable conversion price will require the Company to issue additional shares and accordingly has recorded an additional liability to the notes of approximately $88,000 of which approximately $47,000 has been recorded as change in fair value for the nine months ended September 30, 2012. The Company will fair value these provisions at each reporting period until either settled or forfeited.

On March 7, 2012 the Company commenced a warrant reset and exercise offer to eligible holders of its outstanding warrants, pursuant to which all issued and outstanding warrants to purchase common stock of the Corporation issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the offer period. Approximately 15 investors elected to exercise their warrants for which the Company received $400,147 in proceeds and issued 13,338,225 shares of common stock.

~~The~~(5) ~~aggregate~~On ~~intrinsic~~June ~~value~~26, of2012 and August 18, 2012, the ~~options~~Company ~~outstanding~~issued at1,666,667 ~~June~~and 303,363,767 ~~2012~~warrants ~~was~~ with a 5 year term exercisable at $0.03 per share in connection with a ~~weighted~~bridge ~~average~~note ~~remaining~~from ~~contract~~an ~~term~~entity ofcontrolled ~~6.16~~by ~~years~~our Chief Executive Officer.

~~Unrecognized~~(6) ~~compensation~~On ~~costs~~September ~~related~~24, to2012, ~~non-vested~~the ~~share-based~~Company ~~compensation~~issued ~~for~~1,250,000 ~~the~~warrants ~~above~~with ~~options~~a ~~amounted~~5 toyear term exercisable at $~~49,006~~0.03 asper ofshare ~~June~~in 30connection with the issuance of $250,000 ~~2012~~in notes to two investors.

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~~11.~~The ~~RELATED~~following ~~PARTIES~~table ~~TRANSACTIONS~~reflects a summary of common stock warrants outstanding and warrant activity during 2012 (unaudited):

	2012
	# Warrants			Weighted Average Exercise Price		Weighted Average Term (Years)
Warrants outstanding at January 1, 2012		52,893,843			0.20		3.46
Granted during the period		36,816,544			0.03		4.91
Exercised during the period		(18,880,856	)		0.03		4.57
Expired during the period		(153,749	)		0.15		4.57
Warrants outstanding at September 30, 2012		70,675,782		$	0.1658		3.85

The Common Stock warrants expire in years ended December 31 as follows:

2012			250,000
2013			55,877
2014			731,817
2015			7,208,617
2016 and thereafter			52,542,036
45 days after registration statement			9,887,435
Total			70,675,782

[2]	Stock options

Under the Company’s Employee Incentive Stock Option Plan (the “1996 Plan”) approved by the stockholders in 1996, the total number of shares of Common Stock that may be granted is 500,000, amended to 325,000 in 1999. The 1996 Plan provides that shares granted come from the Company’s authorized but unissued Common Stock. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. The options expire ten years from date of grant. At the Company’s Annual Meeting held on December 10, 2004, the Company’s stockholders approved the 2004 Stock Option Plan (the "2004 Plan"). At the Company’s Board of Directors meeting held on July 28, 2007, the Board approved an increase in the number of shares of Common Stock that may be granted to 2,000,000 under all plans. At the Company’s Board of Directors meeting on June 27, 2008, the Board approved a new Stock Option Plan (the “2008 Plan”) for a total of 2,000,000 additional shares. At the Company’s Board of Directors meeting held on February 2, 2010, the Board approved a new Stock Option Plan (the “2010 Plan”) for a total of 3,000,000 additional shares. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. The option vesting period is determined by the Board of Directors at the time of grant and ranges from immediately to five years. The Company did not grant any stock options to directors and employees during the nine months ended September 30, 2012. Compensation cost recognized during the three, six and nine months ended September 30, 2012 and 2011 related to stock-based awards was $12,561 and $(16,411), respectively. Options are usually issued at an exercise price equal to or above the fair value at the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton option-pricing model

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The summary of activity during 2012 (unaudited) for the Company's stock options is presented below:

	2012		Weighted Average Exercise Price

Options outstanding at January 1, 2012		2,241,250	$	0.67
Granted		-		-
Exercised		-		-

Terminated/Expired		(986,802)	$	0.66

Options outstanding at September 30, 2012		1,254,448	$	0. 67

Options exercisable at September 30, 2012		1,173,945	$	0.67

Options available for grant at September 30, 2012		4,752,677

Price per share of options outstanding	$	$0.65 to 1.02	$	0.65 to 1.02

Weighted average remaining contractual lives of all options	5.91 years

Weighted Average fair value of options granted during the year	$	0	$	0

The Common Stock options expire as follows:

2016

1,254,448

The aggregate intrinsic value of the options outstanding at September 30, 2012 was $0 with a weighted average remaining contract term of 5.91 years.

Unrecognized compensation costs related to non-vested share-based compensation for the above options amounted to $12,048 as of September 30, 2012 which will be amortized over the next eighteen months.

NOTE 11 - RELATED PARTIES TRANSACTIONS

From time to time, certain officers and directors loan the Company money as well as defer payment of salaries in order to assist the Company in its cash flow needs.

The table below sets forth the amounts of notes payable and accrued salaries of the Company’s officers and directors as of June 30, 2012, the title reflects the position held by the individual as of March 18, 2013:25

Officer/Director	Notes Payable				Earn-out	Accrued Salaries &
	Amount		Accrued Interest		Amount	Bonus Amount
Eric Skae, Former C.E.O. & President	$	330,100	$	2,970	$	$
David N. Fuselier, C.E.O.	$	50,000	$
O. Lee Tawes, III Former Director	$	311,017	$	78,690

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The table below sets forth the amounts of notes payable and accrued salaries of the Company’s officers and directors as of September 30, 2012, the title reflects the position held by the individual as of September 30, 2013:

Officer/Director	Notes Payable				Accrued Salaries &
	Amount		Accrued Interest		Bonus Amount

Eric Skae, Former C.E.O. & President	$	330,100	$	2,970		-
David N. Fuselier, C.E.O.	$	150,913		-	$	93,750
O. Lee Tawes, III Former Director	$	311,017	$	78,690		-

On January 12, 2011, O. Lee Tawes, a then director of the Company, lent the Company an aggregate of $75,000 for which he received a demand promissory note bearing interest at the rate of 12% per annum. Mr. Tawes lent the Company an additional $30,000 on February 24, 2011 for which he received a promissory note bearing interest at the rate of 0% per annum. This note was converted into 400,000 shares of common stock on April 29, 2011 at $0.075 per share. On June 30, 2011, O. Lee Tawes lent the Company an additional $10,000 for which he received a promissory note bearing interest at the rate of 10% per annum.

On January 12, 2011, Eric Skae, the Company's then CEO and a director, lent the Company an aggregate of $20,000 for which he received a demand promissory note bearing interest at the rate of 0% per annum. On January 28, 2011, the Company repaid $7,500 of this loan. During September 2011, the Company refinanced an existing unsecured loan with one officer in the amount of $30,100. The Company issued the officer the same 10% Secured Convertible Subordinated Notes they had issued to the lenders with the recast notes. Additionally, the officer received an additional 5 shares of its common stock for each $1.00 of interest and principal due them. The Company determined that the conversion of the secured notes into the secured recast notes was more than the carrying value of the obligation on the date of the conversion and recorded a loss on extinguishment of debt of $7,525.

Between August 24, 2011 and December 22, 2011 we borrowed an aggregate of $ 1,346,381 from eight investors, in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) which Notes were coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lender was granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

OnIn February 142012, ~~2012~~ the Company and Eric Skae, former CEO and director entered into a Mutual Termination and Release agreement ~~between~~to ~~New~~settle ~~Leaf~~aggregate ~~Brands~~$508,193 ~~Inc.~~indebtedness ~~and~~comprised ~~Eric~~of ~~Skae.~~$260,000 Onearn-out ~~February~~payable 15and ~~the~~$166,667 ~~Company~~accrued ~~issued~~bonus whereby Mr. Skae anagreed 8%to 18convert ~~month~~$300,000 ~~Unsecured~~debt ~~Note~~into ina ~~the Amount of~~ $200,000 ~~which~~8% is18 month unsecured convertible ifnote ~~asked~~(convertible byat ~~Mr.~~holder’s ~~Skae,~~option 13 months after the date of issuance at $0.01, (subject to a beneficial ownership blocker), ~~and~~a an$100,000 8% ~~Demand~~demand ~~Note~~note inand ~~the~~also ~~amount~~forfeited ofthe remaining $~~100~~178,~~000. As~~093 of ~~February~~debt. ~~14,~~During 2012, ~~Mr.~~the ~~Skae’s~~Company ~~accrued~~recorded ~~earn~~a ~~out~~gain ofon ~~$260,000~~the ~~and~~settlement ~~accrued bonus~~ of ~~$166, 667 was part of~~ the ~~total~~long ~~indebtedness~~term ~~of $508,193 which was recasted into $300,000 in~~ debt ~~and~~of $178,093 ~~of which was forgiven by Mr~~. ~~Skae.~~

On May 4, 2012 the Company commenced a warrant reset and exercise offer to eligible holders of its outstanding warrants, pursuant to which all issued and outstanding warrants to purchase common stock of the Corporation issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the offer period. Approximately 7 investors elected to exercise their warrants for which the Company received $117,471 and issued 3,915,295 shares of common stock.

24Between May 10 and May 17, 2012 six of the eight lenders agreed to waive and release its first priority and perfected security interest in and lien on the Company’s assets, and consents to the filing of a form UCC3 for the above UCC1 financing statements. In consideration for this waiver, we issued each lender 200,000 shares of common stock in New Leaf Brands, Inc. The Company issued 1,200,000 shares of common stock to these six parties in connection with the UCC release.

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On May 16, 2012, the Company borrowed $20,000 from CS Healthcare, a related party, in exchange for an 8% 18 month Unsecured Promissory Notes (“Unsecured Note”).

On June 26, 2012, the Company reached an agreement with related party Fuselier Bridge Capital, LLC to provide a secured working capital loan facility up to $300,000. The loan facility is secured by all Company assets including general intangibles (including trademarks, formulations, customer lists) and accounts receivables, fixed assets, inventory (all raw, work in progress and finished goods including labels) present and hereafter acquired. Each advance under the loan facility bears an interest rate of 1.5% per month and is due in full ten months after the issuance date. The investor also received up to 10,000,000 5 year warrants at a strike price of $0.03 per share and up to 10,000,000 shares of common stock at a price of $0.03 per share. On June 26, 2012, the Company borrowed $50,000 under this loan facility and issued 1,666,666 warrants. On August 18, 2012, the Company borrowed an additional $100, 913 under this loan facility and issued 3,363,767 warrants. Fuselier Bridge Capital, LLC has waived its rights to the issuance of the common shares for the June 26, 2012 and the August 18, 2012 borowings.

On August 2, 2012 David Fuselier was elected as a director and chairman and appointed the position of chief executive officer of Integrated Freight Corp (Ticker: IFCR.OTCBB), a related party.

Between May 10 and May 17, 2012 six of the eight lenders agreed to waive and release its first priority and perfected security interest in and lien on the Company’s assets, and consents to the Uniform Commercial Code (‘UCC”) filing of a form UCC3 for the above UCC1 financing statements. In consideration for this waiver, we issued each lender 200,000 shares of common stock in New Leaf Brands, Inc. The Company issued 1,200,000 shares of common stock to these six parties in connection with the UCC release and recorded a charge of $36,000 based on the fair value of the shares issued.

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12. CONTINGENCIES

In connection with the acquisition of Skae Beverage International LLC (“Skae”) in 2008, the Company agreed to provide the former member of Skae, who is also the Company’s current Chief Executive Officer through February 14, 2012, with a three year earn-out arrangement. Under the terms of the earn-out arrangement, the Company can be required to pay an additional $4,776,100 to the owner of Skae if the acquired operations meet certain performance targets related to sales and gross profit. As of September 30, 2011 and December 31, 2010, the Company has accrued $260,000 and $535,000 respectively related to the achievement of the performance targets. Currently, the Company is unable to determine the likelihood that future performance targets will be met or estimate the future liability that will be incurred. In January 2011, the Company amended the earn-out agreement with the CEO; where by Mr. Skae forgave his 2010 earn-out of $325,000 which also reduced the intangible by the same amount.

On January 29, 2009, the Company was notified that it was named as a defendant, along with 54 other defendants, in a class action lawsuit under California Proposition 65 for allegedly failing to disclose the amount of lead in one of its products. The Company has responded to discovery requests from the Attorney General of California. To date, no trial date has been set. The Company is currently investigating the merits of the allegation and is unable to determine the likelihood of an unfavorable outcome or a range of possible loss. This matter remains pending.

On December 7, 2009, the Company received a demand notice for payment for $822,920 from the estate of a former owner of Nutritional Specialties, Inc. Without acknowledging liability, the Company offered to settle any claims against us in this matter for cash and restricted common stock. The Company's offer lapsed before it was accepted. The Company intends to continue to attempt to negotiate a settlement for this debt. The Company has accrued for this payment of $822,920 as of December 31, 2010 as a current portion of note payable. On July 7, 2010, the Company was served with a Complaint demanding payment of the remaining balance of a $1,200,000 note payable with a current balance of $822,920 from the estate of a former owner of Nutritional Specialties, Inc. The parties have attended mediation and the Company is hopeful that this may be amicably resolved.On April 9, 2012 the Company completed the sale its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). As part of the security purchase agreement, DSCL assumed this obligation and indemnified the Company for the note payable with a current balance of $822,920 from the estate of a former owner of Nutritional Specialties, Inc

On March 12, 2010, the Company was notified that it was named as a defendant in lawsuit in the United States District Court, Eastern District of Texas, brought by Vitro Packaging de Mexico, SA de CV, the assignee of a former supplier. Vitro Packaging alleges the Company owed unpaid accounts payable and is seeking payment of approximately $345,000. The Company has entered into a Side Compromise Settlement Agreement, Indemnity and Release with Vitro Packaging De Mexico, S.A. DE C.V. with Vitro agreeing not to execute on an Agreed Final Judgment for $245,275 until after May 16, 2011, which the Company has not paid and is recorded as a current liability. On August 17, 2011, the judgment was recorded in the State of New Jersey. During September 2012, the Company re-initiated negotiations to settle this matter. In October 2012, Management negotiated an agreement with Vitro whereby the Company would pay $125,000 in three installments to settle all claims relating to the litigation. To date, no payments have been made under the agreement, however, Vitro and Company continue to discuss a beginning date for the installment payments.

On July 11, 2011, the Company was served with a complaint from Bett-A-Way Traffic Systems, Inc. demanding payment of $90,928 in an accounts payable collection matter. The parties settled this matter on April 15, 2012 for a combination of stock and cash. The stock component has been paid and the cash component remains open. At March 2013, the parties continue to discuss payment of the cash component.

On January 12, 2012, Key Equipment filed a complaint demanding payment of $81,943 and on August 29, 2012 a Final Judgment was attained. In November 2012, the parties agreed to a Stipulation of Settlement for $65,000 requiring an initial payment of $5,000 and subsequent monthly payments of $1,666 until fully retired. To date, the Company has not begun the payments as required under the Stipulation.

On February 4, 2012, we were served with a complaint by Hartford Meir, Inc demanding payment of $160,009 in a collection matter regarding a trade receivable conveyed to them by Mode Transportation (with whom the Company originally incurred the debt). We have accrued for this payment of $136,920 as of December 31, 2011 as part of accounts payable. The Company reached a settlement agreement with this creditor which was consummated on July 18, 2012. The case has been dismissed.

On January 9, 2013, we received a complaint from Stephen Gould Corporation alleging that we were in breach of contract and sought $47,587 for such breach. The Company’s counsel is reviewing the complaint.

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On June 26, 2012, the Company reached an agreement with related party Fuselier Bridge Capital, LLC to provide a secured working capital loan facility up to $300,000. The loan facility is secured by all Company assets including general intangibles (including trademarks, formulations, customer lists) and accounts receivables, fixed assets, inventory (all raw, work in progress and finished goods including labels) present and hereafter acquired. Each advance under the loan facility bears an interest rate of 1.5% per month and is due in full ten months after the issuance date. The investors also received up to 10,000,000 5 year warrants at a strike price of $0.03 per share and up to 10,000,000 shares of common stock at a price of $0.03 per share. On June 26, 2012, the Company borrowed $50,000 under this loan facility. On August 18, 2012, the Company borrowed an additional $100,913 under this loan facility.

On August 2, 2012 David Fuselier was elected as a director and chairman and appointed the position of Chief Executive Officer of Integrated Freight Corp (Ticker: IFCR.OTCBB), a related party.

NOTE 12 - CONTINGENCIES

In connection with the acquisition of Skae Beverage International LLC (“Skae”) in 2008, the Company agreed to provide the former member of Skae, who was also the Company’s Chief Executive Officer through February 14, 2012, with a three year earn-out arrangement. Under the terms of the earn-out arrangement, the Company can be required to pay an additional $4,776,100 to the owner of Skae if the acquired operations meet certain performance targets related to sales and gross profit. As of September 30, 2011 and December 31, 2010, the Company has accrued $260,000 and $535,000 respectively related to the achievement of the performance targets. Currently, the Company is unable to determine the likelihood that future performance targets will be met or estimate the future liability that will be incurred. In January 2011, the Company amended the earn-out agreement with the CEO; where by Mr. Skae forgave his 2010 earn-out of $325,000 which also reduced the intangible by the same amount.

On December 7, 2009, the Company received a demand notice for payment for $822,920 from the estate of a former owner of Nutritional Specialties, Inc. Without acknowledging liability, the Company offered to settle any claims against us in this matter for cash and restricted common stock. The Company's offer lapsed before it was accepted. The Company intends to continue to attempt to negotiate a settlement for this debt. The Company has accrued for this payment of $822,920 as of December 31, 2010 as a current portion of note payable. On July 7, 2010, the Company was served with a Complaint demanding payment of the remaining balance of a $1,200,000 note payable with a current balance of $822,920 from the estate of a former owner of Nutritional Specialties, Inc. The parties have attended mediation and the Company is hopeful that this may be amicably resolved. This matter remains pending. As discussed in Note 14 “Subsequent Events” on April 9, 2012 the Company completed the sale its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). As part of the security purchase agreement, DSCL assumed this obligation and indemnified the Company for the note payable with a current balance of $822,920 from the estate of a former owner of Nutritional Specialties, Inc

On January 21, 2011, the Company filed a Certificate of Designation to its Certificate of Incorporation which created a class of 1,000 shares of Series K 10% Convertible Preferred Stock with a par value of $.001 per share. As of June 30, 2012, Series K 10% Preferred stock dividends of $ 191,275 are accrued.

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On July 11, 2011, the Company was served with a complaint from Bett-A-Way Traffic Systems, Inc. demanding payment of $90,928 in an accounts payable collection matter. The parties settled this matter on April 15, 2012 for a combination of stock and cash. The stock component has been paid and the cash component remains open. At September 30, 2012, the parties continue to discuss payment of the cash component. The remaining balance is included in accounts payable at September 30, 2012.

On July 17, 2012, former CEO Eric Skae served a notice of default on the Settlement and Mutual Release Agreement and the Consulting Agreement signed on February 15, 2012. Amounts owed under the Settlement and Mutual Release Agreement are included in the Notes Payable to related parties totaling $300,000.

On January 9, 2013, we received a complaint from Stephen Gould Corporation alleging that we were in breach of contract and sought $47,587 for such breach and are included in accrued expenses. The Company’s counsel is reviewing the complaint.

Purchase Order Financing

On September 20, 2011 the Company entered into secured Purchase Order Financing agreements with certain suppliers for additional trade ~~payable~~credit to produce and ship approximately $750,000 in orders to Company customers. The agreements are secured by certain future sales and inventory provided by the suppliers. The agreement provided for the repayment of $307,563 of outstanding accounts payable at September 30, 2011 and $443,000 in additional trade credit by the Company.

In connection with this facility, the Company also received consent from Secured Note holders to consent to (a) the Company entering into the Escrow Agreement with the Escrow Agent and the Suppliers for the benefit of each Supplier, and (b) consent to the Company’s segregation of proceeds from Customer accounts receivable to the Escrow Account and waive each such Secured Note holder’s security interest in and lien on all cash proceeds in the Escrow Account so long as the Escrow Agreement and the Escrow Account remains in place.

As of ~~June~~September 30, 2012 the Company’s accounts payable to those Suppliers was $~~120~~82,~~917~~893 of which $0 represented Purchase Order Financing.

~~13. NET LOSS PER SHARE~~28

~~Convertible~~Back ~~preferred~~to ~~stock~~Table ~~and outstanding options and warrants were not considered in the calculation for diluted net loss per share for the periods ended June 30, 2012 and 2011 because the effect~~ of their inclusion would be anti-dilutive. For the three months ended June 30, 2012, convertible preferred stock and warrants totaling 9,245,834 were included in the calculation of diluted net income per share for the quarter ended June 30, 2012, there are none for the three months ended June 30, 2011 because the effect of their inclusion would be anti-dilutive.Contents

AsNOTE of13 ~~June~~- ~~30,~~NET ~~2012,~~LOSS ~~there~~PER ~~were warrants and options to purchase 66,062,015 shares of common stock outstanding and Series K Preferred shares were convertible into 15,750,784 shares of common stock.~~SHARE

~~14.~~Convertible ~~DISCONTINUED~~preferred ~~OPERATIONS~~stock and outstanding options and warrants were not considered in the calculation for diluted net loss per share for the periods ended September 30, 2012 and 2011 because the effect of their inclusion would be anti-dilutive.

As of September 30, 2012, there were warrants and options to purchase 70,675,782 and 1,254,448, respectively shares of common stock outstanding and Series K Preferred shares were convertible into 15,750,784 shares of common stock.

NOTE 14 - DISCONTINUED OPERATIONS

On April 9, 2012 the Company completed the sale its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). The terms of the divestiture was for a consideration of $1.00 plus the assumption of certain liabilities by DSCL. In addition, the Company issued 6,000,000 shares of the Company’s stock valued at approximately $180,000 to DSCL as a reserve against possible offsets. The Company estimated a charge of approximately $180,000 in connection with this transaction.

The accompanying condensed financial statements have been reclassified for all prior periods to report the assets and liabilities of this subsidiary.

The major classes of assets and liabilities of the discontinued operations on the balance sheet are as follows:

	June 30, 2012 (unaudited)		December 31, 2011
	September 30, 2012 (unaudited)		December 31, 2011
ASSETS	$	—	$	—
LIABILITIES
Note payable and accrued interest to trust		0		915,390
Accounts payable and accrued expenses		0		12,692
Current liabilities of discontinued operations	$	0	$	928,082

27NOTE 15 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~Tables~~In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220), Presentation of ~~Contents~~Comprehensive Income. This update is intended to increase the prominence of other comprehensive income in the financial statements by requiring public companies to present comprehensive income either as a single statement detailing the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income or using a two statement approach including both a statement of income and a statement of comprehensive income. The option to present other comprehensive income in the statement of changes in equity has been eliminated. The amendments in this update, which should be applied retrospectively, are effective for public companies for fiscal years, and interim periods beginning after December 15, 2011. The Company adopted this pronouncement in the first quarter of 2012. During all of the periods presented the Company did not have any amounts of other comprehensive income, therefore a separate Statement of Comprehensive Income has not been included in these financial statements.

~~15. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~29

InBack ~~June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income. This update is intended~~ to ~~increase~~Table ~~the prominence~~ of other comprehensive income in the financial statements by requiring public companies to present comprehensive income either as a single statement detailing the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income or using a two statement approach including both a statement of income and a statement of comprehensive income. The option to present other comprehensive income in the statement of changes in equity has been eliminated. The amendments in this update, which should be applied retrospectively, are effective for public companies for fiscal years, and interim periods beginning after December 15, 2011. The Company adopted this pronouncement in the first quarter of 2012.Contents

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Testing Goodwill for Impairment” (ASU 2011-08). Under ASU 2011-08, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If an entity believes, as a result of its qualitative assessment that the fair value of a reporting unit is greater than its carrying amount, performing the current two-step impairment test is not required. The guidance also includes a number of events and circumstances that an entity to consider in conducting the qualitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, if an entity has not yet issued financial statements for the most recent annual or interim period, provided the entity has not yet performed its annual impairment test. The adoption of this guidance did not have a material impact on these financial statements.

~~Under~~NOTE ~~ASU~~16 ~~2011~~-~~08,~~ anSUBSEQUENT entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If an entity believes, as a result of its qualitative assessment that the fair value of a reporting unit is greater than its carrying amount, performing the current two-step impairment test is not required. The guidance also includes a number of events and circumstances that an entity to consider in conducting the qualitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, if an entity has not yet issued financial statements for the most recent annual or interim period, provided the entity has not yet performed its annual impairment test. We do not expect this guidance to have a material impact on our financial statements.EVENTS

16On December 7, 2012, the Company’s Chief Executive Officer executed a promissory note for $105,000 with a creditor of the Company. ~~SUBSEQUENT~~The ~~EVENTS~~Company’s Chief Executive Officer and Fuselier and Co, Inc., personally and corporately, guaranteed the Note.

On June 26, 2012, the Company reached an agreement with related party Fuselier Bridge Capital, LLC to provide a secured working capital loan facility up to $300,000. The loan facility is secured by all Company assets including general intangibles (including trademarks, formulations, customer lists) and accounts receivables, fixed assets, inventory (all raw, work in progress and finished goods including labels) present and hereafter acquired. Each advance under the loan facility bears an interest rate of 1.5% per month and is due in full ten months after the issuance date. The lender also received up to 10,000,000 5 year warrants at a strike price of $0.03 per share and up to 10,000,000 shares of common stock at a price of $0.03 per share. On August 18, 2012, the Company borrowed $100,913 under this loan facility. Fuselier Bridge Capital, LLC has waived its rights to issuace of the common shares.

On July 10, 2012, Mr. Terry L. Kinder was appointed to our Board of Directors.

On July 17, 2012, former CEO Eric Skae served a notice of default on the Settlement and Mutual Release Agreement and the Consulting Agreement signed on February 15, 2012.

On August 2, 2012, David Fuselier was elected as a director and chairman and appointed the position of chief executive officer of Integrated Freight Corp (Ticker: IFCR.OTCBB), a related party.

On August 23, 2012, Edward (Ted) H. Eppel was appointed to our Board of Directors.

On September 20, 2012 the Company borrowed $ 60,000 from an outside lender in exchange for an 11% 1 year Secured Promissory Note. The Company’s Chief Executive Officer personally guaranteed the Note.

Between September 24 and 25, 2012, the Company borrowed an aggregate of $250,000 from two investors in exchange for an 8% 18 month Unsecured Promissory Notes (“Unsecured Note”). A substantial portion of these proceeds were loaned to a potential acquisition candidate of the Company.

On December 7, 2012, the Company’s Chief Executive Officer executed a promissory note for $105,000 with the Company’s auditor. The Company’s Chief Executive Officer and Fuselier and Co, Inc., personally and corporately, guaranteed the Note.

On December 14, 2012 the Company borrowed $ 50,000 from an investor in exchange for a 12% 14 month Unsecured Promissory Notes (“Unsecured Note”). The Company’s Chief Executive Officer and Fuselier and Co, Inc., personally and corporately, guaranteed the Note.

Between January 8, 11 and 30, 2013, the Company borrowed an aggregate of $150,000 from three investors in exchange for an 8% 18 month Unsecured Promissory Notes (“Unsecured Note”) and an additional $50,000 was borrowed in February 2013.

28On May 17, 2013, the Company designated 1,750 of the 10,000,000 shares of preferred stock the Company is authorized to issue as Series M Preferred Stock with a par value of $0.001 per share and a stated value of $1,000 per share with privileges and conversion rights as stated.

~~Tables~~On April 19, 2013 the Company through its wholly owned subsidiary, New Leaf Distribution, Inc. entered into a Stock Purchase Agreement to acquire 100% of ~~Contents~~the shares of Master Distributors Inc. (“Master”), which operates as Beverage Network of Maryland, Inc. The total purchase price of $2.9 million is comprised of $1.15 million of cash, of which $125,000 was paid on or prior to closing, and $1.75 million through the issuance of 1,750 shares of the Company’s Series M Convertible Preferred Stock with a liquidation preference of $1,000 per share. The balance of the cash portion of the purchase price is due in installments ranging from $100,000 to $16,666 over the 30 months following the closing. Beverage Network of Maryland distributes a variety of beverage products based in Maryland.

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q contains forward-looking statements that involve risk and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this report, our annual report on Form 10-K and other filings we make from time to time with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our Financial Statements, including the related Notes, appearing in our annual report on Form 10-K for the year ended December 31, 2011.

The preparation of this quarterly report on Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our Financial Statements, and the reported amounts of revenue and expenses during the reporting period. Our actual results reported in the future may differ from those estimates and revisions of these estimates may become necessary in the future.

GENERAL STRATEGY

We are a diversified beverage holding company acquiring brands, distributors and co-packers within the beverage industry. Our strategy follows the initial success of our award winning New Leaf Brands ready-to-drink teas and lemonades. We intend to continue to market broadly our New Leaf branded products as well as acquire additional regional beverage brands in complementary categories. As part of our brand acquisition strategy, we will acquire a portfolio of branded proprietary products, with distinctive packaging and deep regional appeal, in the following categories:

●· Ready–to-drink Lemonades and Teas

●· Carbonated Beverages

●· Juice and Juice Blends

●· Weight Control drinks

●· Water and Enhanced Water

●· Functional/Health and Wellness drinks

These categories are tailored toward premium, gourmet and healthy lifestyles for the “quality-value” expectations of our consumers. We believe that each acquired brand, in its category, will provide established regional distribution for the Company’s full array of other beverage products and, ultimately, lead to more channels of distribution.

New Leaf is the company’s flagship brand in the ready to drink Lemonade and Iced Tea category. We ~~intend to acquire additional brands to enhance our flagship brand in 2012. We~~ believe that our products are well-positioned to continue to grow and possess a competitive advantage in creativity, flavor, ingredients and packaging. As of ~~June~~September 30, 2012, New Leaf Brands’ beverages are sold throughout the northeast corridor, through select distributors. We anticipate organic expansion of our business by targeting additional wholesale distributors, larger mainstream grocery stores, convenience and drug store channels.

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At New Leaf Beverages we develop, market and distribute healthy and functional ready-to-drink teas and lemonades under the New Leaf® brand. We focus primarily on functional ready-to-drink beverages, which include teas, lemonades and other functional drinks. New Leaf offers natural iced-tea and lemonade beverage which are sweetened with evaporated pure cane sugar and specifically formulated to address an unmet consumer demand in the very competitive but rapidly growing ready-to-drink beverage market. The pure cane sugar sweetening creates a premium product with 20-30% fewer calories than competing brands who use high fructose corn syrup. New Leaf is available in 17 varieties of teas (including white, black, green, and blue teas) and lemonades (including half tea/half lemonade beverages).

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Our broader strategy is to acquire established beverage distributors and manufacturers who choose to utilize New Leaf’s financial structure and access to capital. We intend to pursue moderate-sized regional distributors who will internalize our array of beverage products through proprietary distribution channels. Similarly, we intend to pursue beverage production, where appropriate, to reduce our internal cost of production and to increase our delivered margin per case.

NEAR TERM BUSINESS STRATEGY

During the second half of 2011 we experienced significant financial challenges. We reported in our quarterly report for the nine months ended September 20, 2011 on Form 10-Q, filed on January 3, 2012, that without additional funding we would be forced to cut back or cease operations. We sought legal counsel to investigate reorganization and bankruptcy options and, upon consideration of the opinion of our advisors and the Board, retained Fuselier and Co. to evaluate turnaround alternatives. After consideration of the alternatives, on February 14, 2012, the Board elected David Fuselier as New Leaf’s Chairman, President, and Chief Executive Officer. Simultaneously, Eric Skae stepped down as our Chairman, President and Chief Executive Officer. Mr. Fuselier immediately began implementing a restructuring and ~~turnaround~~turnarounds plan that:

Refocused New Leaf Brands beverages to:

●· Focus and deliver growth on the core product markets

●· Focus on four key geographic markets: New York Metro, Mid-Atlantic, Florida, Southern California

●· Reduce supply chain costs

●· Focus on key distributors and value added partnerships

●· Restructure corporate operations and product mix to significantly improve operating margins.

●· Achieve significant debt restructurings and interim financings to both strengthen the balance sheet and support sustainable growth.

●· Seek additional tactical and strategic financing to support anticipated growth, research and development and release of new product lines.

Our ability to acquire new products is limited by our access to capital. We intend to continue to explore various strategic alternatives, including business combinations and private placements of debt and or equity securities to raise capital to grow our Company. We also intend to expand our business through mergers and acquisitions of appropriate complementary brands, distributors and manufacturers companies in our industry. We can provide no assurance that we will be able to raise sufficient capital under appropriate terms to complete our strategic objectives.

OUR PRODUCTS

TEAS New Leaf is a natural iced-tea beverage sweetened with organic cane sugar and specifically formulated to address what we believe is an unmet consumer demand in the very competitive, but rapidly growing, ready-to-drink beverage market. The organic cane sugar sweetening creates a premium and healthier product with 20-30% fewer calories than high fructose corn syrup competitors. New Leaf is available in 17 varieties that are all-natural and organically-sweetened, of which 6 are lemonades varieties. Varieties include white, black, green and blue teas, lemonades and half tea/half lemonade beverages. New Leaf products include:

Blue Teas White Tea ● Blue Tea with Lemon ● White Tea with Honey Dew Melon ● Blue Tea with Peach ● White Tea with Strawberry ● Blue Tea with Raspberry ● Black Tea ● Diet Blue Tea with Lemon ● Sweet Tea ● Diet Blue Tea with Peach Green Teas Lemonades ● Green Tea with Ginseng and Honey ● Green Tea with Plum ● Strawberry ● Green Tea with Mango ● Homemade ● Black Cherry ● Tiger – Half and Half ● Lite Tiger – Half and Half ● Mango Lemonade32

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~~Tables~~Blue ofTeas ~~Contents~~White Tea ● Blue Tea with Lemon ● White Tea with Honey Dew Melon ● Blue Tea with Peach ● White Tea with Strawberry ● Blue Tea with Raspberry ● Black Tea ● Diet Blue Tea with Lemon ● Sweet Tea ● Diet Blue Tea with Peach Green Teas Lemonades ● Green Tea with Ginseng and Honey ● Strawberry ● Green Tea with Plum ● Homemade ● Green Tea with Mango ● Black Cherry ● Tiger – Half and Half ● ● Lite Tiger – Half and Half Mango Lemonade

We also distinguish the New Leaf brand by creating unique flavors. For example, New Leaf introduced blue tea, also known as Oolong tea, to mainstream consumers. Oolong tea is sometimes referred to as “blue tea” because its dried leaves have a bluish hue. We believe that unique flavors will continue to attract the attention of consumers.

LEMONADES In April 2010, we introduced a lemonade brand available in three flavors -- Homemade, Black Cherry and Strawberry. Additionally, "The Tiger," half tea / half lemonade, debuted as part of our lemonade offerings. In October 2011, we introduced two new flavors, Mango Lemonade and Lite Tiger – Half and Half (sweetened with Sucralose and pure cane sugar). Our 100% natural lemonades are made with pure cane juice and contain 10% real fruit juice.

Our products are sold in a proprietary 16.9 ounce bottle designed specifically for our New Leaf brand. The bottles are labeled with vibrant colors and the New Leaf logo appeals to, and is recognizable by, consumers. New Leaf products emphasize wellness and innovation. Our non-diet varieties of New Leaf Tea have 70-80 calories per 8 ounce serving and are sweetened with pure cane sugar instead of high-fructose corn syrup.

Results of Continuing Operations for the ~~three~~nine months ~~Ended~~ended ~~June~~September 30, 2012 and 2011

As discussed in the section “NEAR TERM BUSINESS STRATEGY”, on February 14, 2012, the Board elected David Fuselier as New Leaf’s Chairman, President, and Chief Executive Officer and simultaneously, Eric Skae stepped down as our Chairman, President and Chief Executive Officer. Mr. Fuselier immediately implemented a turnaround plan to (a) refocus our sales and marketing efforts to our core product markets, (b) restructure corporate operations and product mix to significantly improve operating margins, (d) achieve significant debt restructurings and interim financings to both strengthen the balance sheet and support sustainable growth and (e) achieve additional tactical and strategic financing to support anticipated growth, research and development and release of new product lines.

While the Company made considerable progress ~~towards the turnaround plan~~ during the ~~three~~nine months ended ~~June~~September 30, 2012, a delay in ~~interim financing delayed~~ production, shipment of open customer orders and inventory purchases from distributors ~~until~~existed ~~after~~during the period ~~ended~~. ~~Production and sales activity resumed during the first week of April, 2012.~~

~~Results of Continuing Operations for the Three and Six Months Ended June 30, 2012 and 2011~~33

~~Net~~Back ~~sales from our continuing operations, New Leaf Brands, for the six months ended June 30, 2012 were $174,104 compared~~ to ~~$1,346,113~~Table ~~for the same period last year. The decrease in net sales is primarily due to capital constraints which resulted in the temporary cessation~~ of operations. Management is actively working to alleviate the capital constraint issue. For the three months ended June 30, 2012 net sales from our operations were $174,104 compared to $658,527 for the same period last year. The decrease in net sales is also primarily due to capital constraints which resulted in the temporary cessation of operation.Contents

~~Cost~~Results of ~~sales~~Continuing ~~decreased~~Operations ~~to $169,128~~ for the ~~six~~Three ~~months~~and ~~period~~Nine ~~ending~~Months ~~June~~Ended ~~30,~~September ~~2012 compared to $1,053,262 for the same period in 2011. The decrease of $884,134 or 84 % was a result of lower sales. Our gross profit margin for the six month periods ended June~~ 30, 2012 ~~was~~and ~~3.0%, compared to 22% for the same period in~~ 2011. The overall decrease of 19 percentage points in gross profit margin is primarily due to lower sales. For the three months ended June 30, 2012 cost of sales decreased to $148,400 for the three months period ending June 30, 2012 compared to $496,144 for the same period in 2011. The decrease of $ 347,744 or 70 % was primarily a result of lower sales. Our gross profit margin for the three month periods ended June 30, 2012 was 15%, compared to 25% for the same period in 2011. The overall decrease of ten percentage points in gross profit margin is primarily due to lower sales volume.

~~Shipping~~Net ~~and~~sales ~~handling~~from ~~expenses~~our ~~were~~continuing ~~$18~~operations,~~294~~ New Leaf Brands, for the ~~six~~nine months ~~period~~ ended ~~June~~September 30, 2012 were $257,471 ~~and~~compared to $~~212~~1,~~522~~474,909 for the same period inlast ~~the prior~~ year. ~~The~~Management ~~decrease~~continues ofto ~~$194,228~~actively orwork ~~91% was due primarily~~ to ~~the~~increase ~~temporary~~capital ~~cessation~~formation. ofFor ~~activity during~~ the ~~six~~three months ended ~~June~~September 30, 2012. ~~Marketing~~net ~~expenses~~sales ~~decreased~~from ~~$942,090,~~our oroperations ~~81%~~were ~~from~~ $183,~~165,364~~367 ~~for~~compared ~~the six months ended June 30, 2011~~ to $~~223~~128,~~274~~796 infor the same period inlast ~~2012~~year. The decrease ~~was~~in ~~attributable~~net tosales ~~management’s~~is ~~decision~~also toprimarily ~~restrain~~due ~~marketing~~to ~~spending pending resolution of our~~ capital constraints. ~~General~~which ~~and~~resulted Administrative costs were $3,296,076 for the first half year of 2012 and $1,025,653 for the first half year of 2011. The increase of $2,270,423 or 221% was due to planned cost reductions and option and an increase in ~~stock compensation expenses related to~~ the ~~Fuselier~~temporary ~~Agreement’s~~cessation ~~nonrecurring restructuring expenses. Depreciation and amortization expense was $98,082 in the first six months~~ of ~~2012, and $258,585 in the first six months of 2011~~operation.

~~Shipping~~Cost ~~and~~of ~~handling~~sales ~~expenses~~decreased ~~were~~to $14242,~~886~~354 for the ~~three~~nine months period ~~ended~~ending ~~June~~September 30, 2012, ~~and~~compared to $841,~~689~~168,540 for the same period in ~~the prior year~~2011. The decrease of $69926,~~803~~186 or 8279 % was ~~due~~a ~~primarily~~result toof ~~the~~lower ~~temporary~~sales. ~~cessation~~Our ofgross ~~activity~~profit ~~during~~margin for the ~~three~~nine ~~months~~month periods ended ~~June~~September 30, 2012. ~~Marketing~~was ~~expenses decreased $426,821, or 78~~6% ~~from $547~~,~~367~~ ~~for~~compared ~~the three months ended June 30, 2011~~ to ~~$120,546~~21% infor the same period in ~~2012~~2011. The overall decrease ~~was~~of ~~attributable~~15 topercentage ~~management’s~~points ~~decision~~in togross ~~restrain~~profit ~~marketing~~margin ~~expenditures~~is ~~pending~~primarily ~~resolution~~due ~~its~~to ~~capital~~lower ~~constraints~~sales. ~~General~~For ~~and~~the ~~Administrative~~three ~~costs~~months ~~were~~ended $September ~~580~~30,~~360~~ ~~for~~2012 ~~the~~cost ~~second~~of ~~quarter~~sales indecreased ~~2012~~to ~~and~~$73,226 compared to $~~455~~115,~~824~~277 for the ~~second~~same ~~quarter~~period in 2011. The ~~increase~~decrease of $~~124~~ 42,~~536~~051 or 2736 % was ~~due to~~ a ~~reduction~~result inof ~~operating~~lower ~~expenses~~sales. ~~and~~Our angross ~~increase~~profit inmargin ~~option~~for ~~and~~the ~~stock~~three ~~compensation~~month ~~expenses.~~periods ~~Depreciation~~ended ~~and~~September ~~amortization~~30, ~~expense~~2012 was ~~$47~~12%,~~430~~ incompared to 10% for the ~~second~~same ~~quarter~~period in 2011. The overall increase of ~~2012,~~two ~~and~~percentage ~~$129,293~~points in ~~the~~gross ~~second~~profit ~~quarter~~margin ofis ~~2011~~primarily due to lower sales volume.

31Shipping and handling expenses were $40,390 for the nine months period ending September 30, 2012, and $246,872 for the same period in the prior year. The decrease of $206,482 or 84% was due primarily to the temporary cessation of activity during the nine months ended September 30, 2012. Selling and Marketing expenses decreased $1,594,799 or 86% from $1,855,373 for the nine months ended September 30, 2011 to $260,574 in the same period in 2012. The decrease was attributable to management’s decision to restrain marketing spending pending resolution of our capital constraints. General and Administrative costs were $3,526,372 for the first nine months of 2012 and $1,564,355 for the first nine months of 2011. The increase of $1,962,017 or 125% was due to an increase in stock compensation expenses related to the Fuselier Agreement’s nonrecurring restructuring expenses.

~~Tables~~The Company evaluates intangible assets for potential impairment on an annual basis or whenever events or circumstances indicate that impairment may have occurred using a two-step process. The first step of ~~Contents~~the impairment test, used to identify potential impairment, compares the estimated undiscounted cash flow attributable to the intangible with the related carrying amount. If the estimated undiscounted cash flows attributable to the intangibles exceed its carrying amount, the intangible is not considered to be impaired and the second step is unnecessary. If the carrying amount of the intangibles exceeds the estimated undiscounted cash flows, the Company performs the second step of the impairment test to determine the amount of the impairment loss. The second step of the impairment test involves comparing the implied fair value of the intangibles with its carrying amount to measure the amount of impairment loss, if any.

The Company evaluates intangible assets for potential impairment on an annual basis or whenever events or circumstances indicate that impairment may have occurred using a two-step process. The first step of the impairment test, used to identify potential impairment, compares the estimated fair value of the intangible with the related carrying amount. If the estimated fair value of the intangibles exceeds its carrying amount, the intangible is not considered to be impaired and the second step is unnecessary. During the quarter ended September 30, ~~2011~~2012, the Company determined that a triggering event occurred and performed an interim impairment analysis. The interim impairment analysis resulted in an impairment of $1845,~~100,~~000 for the third quarter of ~~2011~~2012. ~~During the year ended December 31, 2011, the Company determined that the economic uncertainty surrounding the Company’s ability to remain in business triggered an impairment analysis.~~ The Company’s interim ~~and annual~~ tests, ~~using~~use ~~predominately~~ a discounted cash flow model derived from internal budgets into ~~assuming~~estimate fair values for the impairment testing. Factors that could change the result of our impairment test include, but are not limited to, different assumptions used to forecast future net sales, expenses, capital expenditures and resources, and liquidity and working capital requirements used in our cash flow models. In addition, selection of a risk-adjusted discount rate on the estimated undiscounted cash flow is susceptible to future changes in market conditions, and when unfavorable, can adversely affect our original estimates of fair value. The Company’s key assumptions used in its ~~annual~~interim impairment analysis included the following: a discount rate of 1814% based on the estimated weighted average cost of capital from the market participant point of view; royalty rate of 4.05%; an average perpetual growth rate of 66% for six years and a tax rate of 38%. An increase in the discount rate of 1% or a 1% deterioration of the perpetual revenue growth rate would increase the impairment loss by approximately $382,000 or $111,000, respectively. The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. For the ~~year~~nine months ended ~~December~~September 3130, ~~2011~~2012, the impairment of the Company’s brand value mainly resulted infrom the decline in its projected revenues and operating results and cash flows. ~~The~~However, the Company ~~has~~believes ~~concluded~~ that ~~impairment~~the ~~had~~remaining ~~existed~~amount ~~at December 31, 2011 and has~~ recorded anrepresents ~~impairment charge, measured as~~ the ~~amount~~current byfair ~~which~~value ~~the carrying amount~~ of ~~the long-lived asset exceeds~~ its ~~fair~~intangible ~~value,~~assets ofif ~~$2,155,000~~they ~~for~~were ~~the~~to ~~year~~be ~~ended~~sold ~~December~~to ~~31,~~a ~~2011.~~market participant. In conjunction with preparing the revised forecasts, the Company reevaluated the remaining estimated useful lives of the long-lived intangibles and concluded there is no change in its estimated remaining useful lives. ~~The Company evaluated the long-lived intangibles for impairment for the three months ended June 30, 2012 and concluded that no impairment existed.~~

Total other income ~~(expense)~~ for the ~~six~~nine month periods ended ~~June~~September 30, 2012 and 2011 was $~~343~~222,~~876~~680 and $8821,~~061~~984, respectively. The change of $~~255~~200,~~815~~696 or ~~290~~913% was due primarily to the change of fair values related to derivative liability, amortization of debt discount and gain on extinguishment of debt. Total other ~~income~~ (expense) for the three month periods ended ~~June~~September 30, 2012 and 2011 was $ ~~210~~(121,~~717~~196) and $~~389~~(66,~~727~~076), respectively. The ~~change~~increase of $~~179~~55,~~010~~120 or 4683% was due primarily to the change in fair value of derivative ~~liability~~liabilities and ~~gain~~amortization ~~on extinguishment~~ of debt.

During the ~~three~~nine months ended ~~June~~September 30, 2012, the Company sold NSI and recorded a gain on disposal of discontinued operations of $758,490. The Company did not have discontinued operations for the ~~three~~nine months ended ~~June~~September 30, 2011.

There is no income tax benefit recorded for any of the periods because any potential benefit of the income tax net operating loss carry forwards has been equally offset by an increase in the valuation allowance on the deferred income tax asset.

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Liquidity and Capital Resources

As of ~~June~~September 30, 2012, we had $ ~~422~~578,~~064~~422 in current assets of which $~~123~~132,~~296~~257, or 2923%, was cash and receivables. Inventories were $6570,~~115~~966 at ~~June~~September 30, 2012, a decrease of $9892,~~594~~743 over the December 31, 2011 balance of $163,709. The decrease in inventories was primarily due to the efforts to convert the maximum possible inventory to cash. Total current liabilities at ~~June~~September 30, 2012 totaled $3,~~372~~743,~~242,~~965 of which $~~769~~907,~~514~~606, or 2324%, represented trade and operating payables. This represents a ratio of current assets to current liabilities of .1315 to 1 at ~~June~~September 30, 2012.

At ~~June~~September 30, 2012, we had a net working capital deficiency of $23,~~950~~165,~~178~~543. Our need for cash during the ~~six~~nine months ended ~~June~~September 30, 2012 was primarily funded through the issuance of, exercise of warrants and borrowings (including borrowings from related parties) totaling approximately $~~837~~729,~~618~~000.

~~During~~We ~~the~~have ~~six~~historically ~~months~~funded ~~ended~~our ~~June~~working 30capital needs through product sales, ~~2012~~management of working capital components of our business, ~~the~~and ~~Company~~by ~~issued~~cash 12received from private offerings of our common stock,~~609~~ preferred stock,~~852~~ warrants to purchase shares of ~~its~~our common stock inand ~~settlement~~convertible ofnotes. ~~accounts~~We ~~payable~~believe that our existing cash resources, combined with projected cash flows from operations will not be sufficient to execute our business plan and ~~recorded~~continue aoperations ~~gain~~for onthe ~~extinguishment~~next twelve months. We have taken steps to reduce our operating expense. Additionally, we are evaluating our strategic direction aimed at achieving profitability and positive cash flow. We intend to continue to initiate a private placement of debt ofor $1equity securities in order to raise additional capital. However,~~043~~ we may not be successful in obtaining additional financing on acceptable terms,~~491~~ on a timely basis, or at all, in which case, we may be forced to make further cutbacks or cease operations.

On April 9, 2012 the Company completed the sale of its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). The terms of the divestiture included consideration of $1.00 plus the assumption of certain liabilities by DSCL. In addition, the Company issued DSCL 6,000,000 shares of the Company’s stock valued at $180,000 as a reserve against possible offsets. The transaction reduced liabilities of the Company by approximately $928,000.

We have historically funded our working capital needs through product sales, management of working capital components of our business, and by cash received from private offerings of our common stock, preferred stock, warrants to purchase shares of our common stock and convertible notes. We believe that our existing cash resources, combined with projected cash flows from operations may not be sufficient to execute our business plan and continue operations for the next twelve months. We have taken steps to reduce our operating expense. Additionally, we are evaluating our strategic direction aimed at achieving profitability and positive cash flow. We intend to continue to initiate a private placement of debt or equity securities in order to raise additional capital. However, we may not be successful in obtaining additional financing on acceptable terms, on a timely basis, or at all, in which case, we may be forced to make further cutbacks or cease operations.

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Contractual obligations and commitments

The Company’s various equity financings are detailed under Item 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES – Recent Sales of Unregistered Securities. The Company’s various borrowings are set forth below.

On June 15, 2011, the Company entered into a Secured Factoring Loan with a principal amount of $426,680 with four lenders, the total amount received on the Secured Factoring Loans was $400,000 of which $125,000 was purchased by a ~~then-~~director of the Company and $200,000 was purchased by a principal shareholder. These notes matured on August 20, 2011 and are secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities. On August 24, 2011 these notes were converted into the Secured Convertible Subordinated Notes described below.

On July 14, 2011, July 28, 2011 and July 29, 2011 wethe Company issued Original Issue Discount Notes to three lenders receiving amounts of $75,000 from a principal shareholder, $50,000 and $25,000 respectively from other investors. These notes ~~matured~~were to mature on January 14, 2012 at $170,458 and ~~are~~were secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities, of which $85,227 was due to ~~Lorraine DiPaolo,~~ a principal shareholder. On August 24, 2011 these notes were converted into the recast notes as described below.

On August 24, 2011, wethe ~~recast~~Company recasted $606,381 (principal plus accrued interest) in existing secured loans with six parties (entered into between June and July 2011), one ~~of whom~~ was ~~then~~ a director of the Company, for $120,517, another ~~of whom~~ is an executive officer and director of the Company for $30,100 and another ~~of whom~~ is a principal shareholder for $298,227, in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) ~~which~~and ~~Notes~~shares ~~were~~of ~~coupled with~~ common stock. Each Secured Note is collateralized by all of the Company’s assets and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them. We determined that the conversion of the secured notes into the secured recast notes was more than the carrying value of the obligation on the date of the conversion and recorded a loss on extinguishment of debt of $144,392 for the year ended December 31, 2011.

Between September 13 and 16, 2011, wethe Company borrowed $250,000 from two investors, one of whom is a principal shareholder, for $125,000 and refinanced an existing unsecured loan with one officer in the amount of $30,100. WeThe Company issued to these investors the same 10% Secured Convertible Subordinated Notes weas ~~had~~ issued to the lenders reported in the above paragraph. Additionally, such investors received an additional 5 shares of our common stock for each $1.00 invested totaling 1,450,000 common shares (625,000 included in shares issuable). The fair value of the common shares ~~were~~on ~~valued~~the atdate of issuance of $31,250 was recorded as ~~discount~~a debt ~~and~~discount which will be amortized over the term of the notes.

On September 20, 2011 the Company entered into Secured Purchase Order Financing agreements with certain suppliers for additional trade credit to produce and ship approximately $750,000 in orders to Company customers. The agreements were secured by certain future sales and inventory provided by the suppliers. The agreement included repayment of $307,563 of existing accounts payable and $ 443,000 in additional trade credit. The Company further agreed to segregate all cash proceeds from specific sales to certain customers (the “Customers”) to enable the Company to pay the suppliers. The Company entered into an Escrow Agreement with the Suppliers and an escrow agent for the purpose of establishing a segregated account controlled by an independent escrow agent to disburse the cash proceeds from such Customer accounts directly to each Supplier based upon a predetermine percentage. In connection with this facility, the Company also received consent from Secured Note holders to consent to (a) the Company entering into an escrow agreement with the escrow agent and the Suppliers for the benefit of each Supplier, and (b) consent to the Company’s segregation of proceeds from Customer accounts receivable to the escrow account and waive each such Secured Note holder’s security interest in and lien on all cash proceeds in the escrow account so long as the escrow agreement and the escrow account remained in place. As of December 31, 2011 the Company’s accounts payable to those Suppliers was $460,490 of which $306,037 represented Purchase Order Financing. The escrow agent received aggregate proceeds of $444,526, all of which have been disbursed to the Suppliers.35

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On September 20, 2011 the Company entered into Secured Purchase Order Financing agreements with certain suppliers for additional trade credit to produce and ship approximately $750,000 orders to Company customers. The agreements were secured by certain future sales and inventory provided by the suppliers. The agreement provided for the repayment of $307,563 of outstanding accounts payable at September 30, 2011 and $ 443,000 in additional trade credit by the Company. The Company further agreed to segregate all cash proceeds from specific sales to certain customers (the “Customers”) to enable the Company to pay the suppliers. The Company entered into an Escrow Agreement with the Suppliers and an escrow agent for the purpose of establishing a segregated account controlled by an independent escrow agent to disburse the cash proceeds from such Customer accounts directly to each Supplier based upon a predetermine percentage. In connection with this facility, the Company also received consent from Secured Note holders to consent to (a) the Company entering into an escrow agreement with the escrow agent and the Suppliers for the benefit of each Supplier, and (b) consent to the Company’s segregation of proceeds from customer accounts receivable to the escrow account and waive each such Secured Note holder’s security interest in and lien on all cash proceeds in the escrow account so long as the escrow agreement and the escrow account remains in place. As of September 30, 2012 the Company’s accounts payable to those suppliers was $82,893 of which none represented Purchase Order Financing.

On October 18, 2011, the Company borrowed $50,000 from two lenders in exchange for 10% Secured Convertible Subordinated Notes which Notes were coupled with common stock. One of the purchasers was a principal shareholder who subscribed for $25,000. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

On November 1, 2011, the Company borrowed $50,000 from a then-director in exchange for 10% Secured Convertible Subordinated Note which Note was coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company's trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

On November 14, 2011, we borrowed aggregate gross proceeds of $60,000 from two investors, one of whom was a principal shareholder ($30,000) in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) which Notes were coupled with common stock,. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

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On November 22, 2011 we entered into an investor relations maintenance agreement. In addition to the cash compensation of $50,000 (of which $25,000 was) paid, the party was granted 3,000,000 restricted shares of common stock and we assigned to the principal plus a warrant to purchase 5 million shares of common stock at a strike price of $0.25 per share.

On December 1, 2011, we borrowed $175,000 from one investor in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) which Notes were coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.01 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them. Additionally, for arranging this facility which will total $330,000 assignee of the Lender was granted a Revenue Participation Agreement. This agreement grants the lender a revenue participation of 2% of the Company’s annual net sales of the first $2 million and 3% of any net sales in excess of the first $2 million in annual net sales.

On December 14, 2011, the Company reached an agreement with a former employee to grant common stock and warrants to in exchange for satisfaction of deferred salary of $7,516 and an outstanding note to his wife in the amount of $4,800. We intend to grant 400,000 restricted shares of common to them.

On December 22, 2011, we borrowed $155,000 from one investor in exchange for 10% Secured Convertible Subordinated Note (“Secured Note”) which Note was coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.01 per share. This loan triggered the Revenue Participation Agreement that was referenced in the discussion of the December 1, 2011 Secured Note.

~~On December 23rd, 2011 the Company received the required consent to:~~36

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On December 23, 2011 the Company received the required consent to:

● Amend the Certificate of Designation of the Corporation for the Series K Preferred Stock (the “Certificate of Designation”) to eliminate paragraph (f) of Section 9 of the Certificate of Designation, “Protective Provisions,” which limits the Company’s ability to enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, other than “Permitted Indebtedness”

● Amend the Security Purchase Agreement for the Series K Preferred Stock (the “Security Purchase Agreement”), to eliminate paragraph 8.2 “Subsequent Equity Sales,” in its entirety; and to eliminate paragraph 8.3 “Participation in Future Financing,” in its entirety;

In consideration of same, the Company agreed to reduce the conversion price of its Series K Preferred to 3 cents per share and to exchange every 5 Warrants (of the X, Y and Z Series) into 1 share of common stock.

Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”), which Notes were coupled with warrants. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided. The Company has accounted for these share based provisions at fair value due to the variable conversion price will require the Company to issue additional shares and accordingly has recorded an additional liability to the notes of approximately $88,000 of which approximately $47,000 has been recorded as change in fair value for the nine months ended September 30, 2012. The Company will fair value these provisions at each reporting period until either settled or forfeited.

On May 16, 2012, the Company borrowed $20,000 from CSCCS Healthcare, a related party, in exchange for an 8% 18 month Unsecured Promissory Notes (“Unsecured Note”).

On May 31, 2012 the Company granted a financial advisor 700,000 restricted shares of common stock, per the agreement dated May 31, 2012.

On June 26, 2012, the Company reached an agreement with related party Fuselier Bridge Capital, LLC (owned by the Company’s CEO) to provide a secured working capital loan facility up to $300,000. The loan facility is secured by all Company assets including general intangibles (including trademarks, formulations, customer lists) and accounts receivables, fixed assets, inventory (all raw, work in progress and finished goods including labels) present and hereafter acquired. Each advance under the loan facility bears an interest rate of 1.5% per month and is due in full ten months after the issuance date. ~~The~~On ~~investors~~June ~~also~~26 ~~received up to 10,000,000 5 year warrants at a strike price of $0.03 per share~~ and upAugust ~~to 10~~18,~~000,000~~ ~~shares of common stock at a price of $0.03 per share. On June 26,~~ 2012, the Company borrowed $50,000 ~~under~~and ~~this loan facility. On August 18, 2012, the Company borrowed an additional~~ $100, 913, respectively under this loan facility. ~~Fuselier~~and ~~Bridge~~issued ~~Capital~~1,666,666 ~~LLC~~and ~~has~~3,363,767 ~~waived~~warrants, ~~its right to the issuance of the common stock on the borrowings~~respectively.

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We believe that our existing cash resources, combined with projected cash flows from operations will not be sufficient to execute our business plan and continue operations for the next twelve months. We continue to explore various longer term capital options which we believe will be necessary to provide for the growth of our business. Additionally, we are evaluating our strategic direction aimed at achieving profitability and positive cash flow. We intend to continue to issue debt or equity securities in order to raise additional capital. If we issue additional common stock or securities that could convert into our common stock, our current stockholders will be diluted and the trading price of our common stock may decrease. Additionally, we may not be successful in obtaining additional financing on acceptable terms, on a timely basis, or at all, in which case, we may be forced to make further cutbacks or ultimately cease operations.

Off Balance Sheet Arrangements

We do not have off-balance sheet arrangements, financing, or other relationships with un entities or other persons, also known as “variable interest entities”.

~~ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~37

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that our disclosure controls and procedures, including internal control over financial reporting, were not effective as of ~~June~~September 30, 2012 to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, with our Company have been detected.

Our management identified control deficiencies during 2009 that continued to exist in the ~~six~~three and nine months ended ~~June~~September 30, 2012 because we lacked adequate controls in place to properly evaluate and account for all the complex characteristics of the debt and equity transactions executed by our Company in accordance with U.S. generally accepted accounting principles. In addition, management concluded that there were not adequate controls in place to properly evaluate and account for stock-based awards issued by our Company in accordance with U.S. generally accepted accounting principles. These deficiencies are the result of the complexity of the individual debt and equity transactions entered into by our Company and the limited amount of personnel available to provide for the proper level of oversight needed in accounting for these transactions. Management has determined that these control deficiencies represent material weaknesses. In addition, we lacked sufficient staff to segregate accounting duties. Based on our review of our accounting controls and procedures, we believe this control deficiency resulted primarily because we have one person performing all accounting-related duties. As a result, we did not maintain adequate segregation of duties within our critical financial reporting applications. Management believes these are “material weaknesses.”

A material weakness is defined as a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

In preparing our financial statements and in reviewing the effectiveness of the design and operation of our internal accounting controls and procedures and our disclosure controls and procedures for the ~~six~~three and nine months ended ~~June~~September 30, 2012, we performed transaction reviews and control activities in connection with reconciling and compiling our financial records for the ~~six~~nine months ended ~~June~~September 30, 2012. These reviews and procedures were undertaken in order to confirm that our financial statements for the three, six and ~~six~~nine months ended ~~June~~September 30, 2012 were prepared in accordance with generally accepted accounting principles, fairly presented and free of material errors.

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Our management is in the process of actively addressing and remediating the material weaknesses in internal control over financial reporting described above. During 2009, we undertook actions to remediate the material weaknesses identified, including installation of a new ERP software system to allow for appropriate checks and reviews of internal control record-keeping and reporting.

We believe the step outlined above will strengthen our internal control over financial reporting and addresses the material weaknesses described above. However, we continue to have only one person who performs our accounting and reporting functions. Our management will test and evaluate these additional controls to be implemented in 2012 to assess whether they will be operating effectively.

We intend to continue to remediate material weaknesses and enhance our internal controls, but cannot guarantee that our efforts will result in remediation of our material weakness or that new issues will not be exposed in this process.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On December 27, 2007, Farmatek IC VE DIS TIC, LTD, STI, a former distributor of Nutritional Specialties, filed a claim in the Superior Court of California, County of Orange, against our wholly-owned subsidiary, Nutritional Specialties. Farmatek alleges breach of contract and a violation of California Business and Professional Code. Farmatek was seeking $4,000,000 plus punitive damages and costs. In February 2009, we reached a settlement with Farmatek to pay Farmatek an aggregate of $250,000 over the following twelve months. We paid $200,000 during 2009 and had a remaining balance of $50,000 at December 31, 2009, accrued remaining $8,668 in accrued liabilities in the accompanying balance sheet at December 31, 2010. Further disputes arose between the parties following the settlement, and Farmatek accepted a payment of $13,826 on January 24, 2011 in full settlement of all outstanding amounts.

On January 29, 2009, we were notified that we were named as a defendant, along with 54 other defendants, in a class action lawsuit under California Proposition 65 for allegedly failing to disclose the amount of lead in one of our products. Although the product in question was sold as part of our Asset Sale to Nutra, Inc. we remain as a named defendant in the case. We believe this case is without merit and we plan to defend it vigorously. We believe this suit will not have a material adverse effect on our results of operations, cash flows or financial condition.

On December 7, 2009, we received a demand notice for payment for $822,920 (see Footnote 7, Long Term Debt) from the estate of a former owner of Nutritional Specialties, Inc. Without acknowledging liability, we offered to settle any claims against us in this matter for cash and restricted common stock. Our offer lapsed before it was accepted. We intend to continue to attempt to negotiate a settlement for this debt. We have accrued for this payment of $822,920 as of December 31, 2010 as a current portion of long-term debt. On July 7, 2010, the Company was served with a Complaint demanding payment of the remaining balance of a $1,200,000 note payable with a current balance of $822,920 from the estate of a former owner of Nutritional Specialties, Inc. We are hopeful that this may be amicably resolved. As discussed in Note 14 “Subsequent Events” on April 9, 2012 the Company completed the sale its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). As part of the security purchase agreement, DSCL assumed this obligation and indemnified the Company for the note payable and accrued interest with a current balance of $915,390 from the estate of a former owner of Nutritional Specialties, Inc

In December 2010, the Company’s Chief Operating Officer, William Sipper, resigned following an alleged incident involving a prospective employee of the Company. The Company insurance carrier settled this matter in March 2012.

On January 21, 2011, The Company filed a Certificate of Designation to its Certificate of Incorporation which created a class of 1,000 shares of Series K 10% Convertible Preferred Stock with a par value of $.001 per share. As of June 30, 2012, Series K 10% Preferred stock dividends of $ 191,275 are accrued.

On July 11, 2011, the Company was served with a complaint from Bett-A-Way Traffic Systems, Inc. demanding payment of $90,928 in an accounts payable collection matter. The parties settled this matter on April 15, 2012 for a combination of stock and cash. The stock component has been paid and the cash component remains open. At ~~December~~September 2012, the parties continue to discuss payment of the cash component. The remaining balance is included in accounts payable at September 30, 2012.

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37On July 17, 2012, former CEO Eric Skae served a notice of default on the Settlement and Mutual Release Agreement and the Consulting Agreement signed on February 15, 2012. Amounts owed under the Settlement and Mutual Release Agreement are included in the Notes Payable to related parties totaling $300,000.

~~Tables~~On January 9, 2013, we received a complaint from Stephen Gould Corporation alleging that we were in breach of ~~Contents~~contract and sought $47,587 for such breach and are included in accrued expenses. The Company’s counsel is reviewing the complaint.

On February 4, 2012, we were served with a complaint by Hartford Meir, Inc demanding payment of $160,009 in a collection matter. The Company reached a settlement agreement with this creditor which was completed on July 18, 2012.

Except as described above, we are not a party to any other legal proceeding that we believe would have a material adverse effect on our business, results of operations or financial condition. We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will or will not have a material effect on our operations or liquidity. Other than as set forth above, we are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or liquidity.

ITEM 1A. - RISK FACTORS

There have been no material changes from the risk factors as previously disclosed under 1A of our annual report on Form 10-K for the fiscal year ended December 31, 2011.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 28, 2010, wethe Company agreed with certain vendors and converted their trade payable in the amount of $85,000 into 170,000 shares of our common stock.

On February 22, 2010, wethe Company closed a private placement of common stock and warrants with certain accredited investors. Pursuant to the private placement, wethe Company sold an aggregate of 1,988,889 (1,222,219 shares was issued in 2009) shares of ~~our~~ common stock, plus warrants to purchase 1,057,727 (649,999 warrants was issued in 2009) shares of ~~our~~ common stock at an exercise price of $0.55 per share, subject to adjustment. Gross proceeds from the private placement were approximately $895,000 ($550,000 was received in 2009).

In February 2010, wethe Company issued a side letter to investors in the private placements which had closed in December 2009 and February 2010 effectively amending the terms of the private placements to ~~grant~~contain a price protection clause through April 30, 2010. The price protection clause required usthe Company to issue additional ~~common stock and~~ warrants to these investors, based upon a formula contained in the side letter, in the event that common stock was issued during the price protection period at an effective price less than the purchase price paid by such investors, subject to certain exceptions. This side letter resulted in the warrants being classified as derivative liability instruments.

The commencement of the private placement in April 6, 2010 triggered the price protection clause contained in the side letter which we issued to certain investors on February 16, 2010. Accordingly, we issued such investors 568,253 shares of common stock and warrants to purchase 1,499,410 shares of common stock at an exercise price of $0.45 per share. The warrants are fully vested, with a five year term and provide their holders with certain anti-dilution and cashless exercise provisions.

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On February 22, 2010, we agreed to issue for services rendered (fair value of $1,106,225), 3,000,000 shares of common stock, which consist of 2,557,500 shares issued on February 24, 2010 and the remaining 422,500 shares were to be issued on May 22, 2010. Prior to issuance of the remaining shares on May 22, 2010 the contract was rescinded.

In January and February 2010, we agreed with certain vendors to convert their trade payables in the amount of $78,781 into 270,923 shares of our common stock. Also on February 24, 2010, we agreed to issue for services rendered (fair value of $54,830), a warrant for 150,000 shares of our common stock with an exercise price of $0.49 per share and an expiration date of March 2015.

On April 6, 2010, we commenced a private placement of common stock and warrants with certain accredited investors. Pursuant to the private placement, we agreed to issue an aggregate of 1,821,414 shares of common stock and warrants to purchase 1,821,414 shares of common stock at an exercise price of $0.45 per share for net proceeds of $637,500. The warrants issued in connection with the private placement are fully vested, have a five year term and provide their holders with certain anti-dilution and cashless exercise provisions.

On May 28, 2010, we issued a side letter to investors in the private placement which commenced in April 2010 which effectively amended the terms of the private placement to contain a price protection clause through August 31, 2010. The price protection clause requires us to issue additional common stock to these investors, based upon a formula contained in the side letter, in the event that common stock is issued during the price protection period at an effective price less than the purchase price paid by such investors, subject to certain exceptions.

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In August 2010, we issued a side letter to investors in the private placement which commenced on April 6, 2010 which effectively amended the terms of the private placement to extend the price protection clause provided to such investors in a side letter issued to them in May 2010 through September 25, 2010. The price protection clause required us to issue additional common stock to these investors, based upon a formula contained in the side letter, in the event that common stock or common stock equivalents were issued during the price protection period at an effective price less than the purchase price paid by such investors, subject to certain exceptions.

The commencement of the October 8, 2010 promissory note issuance (see below) triggered the price protection clause contained in the side letter which we issued to certain investors on August 26, 2010. Accordingly we issued such investors 728,586 shares of common stock.

In April 2010, the holders of $212,500 of notes agreed to convert the outstanding note balance into 531,250 shares of common stock in exchange for us agreeing to pay all unpaid interest which had accrued on the notes.

In May 2010, we issued 360,000 shares of common stock to the holders of $1,500,000 of notes in exchange for extending the maturity date to June 2010. In June 2010, we issued 4,500,000 shares of common stock to the same holders in exchange for further extending the maturity date to September 2010. In August 2010, the holders agreed to extend the term of these notes to December 24, 2010. In October 2010, the holders agreed to extend the maturity date to January 12, 2011. On January 21, 2011 theses notes were converted into 60 shares of our Preferred Series K shares and Series Y warrants to purchase 5,000,000 shares of common stock at a strike price of $0.15.

In September 2010, we consummated a private placement of promissory notes with a face value of $1,782,955 and detachable warrants to purchase 2,139,546 shares of common stock to accredited investors, excluding related parties which are described later in Note 6, pursuant to a private placement memorandum. The promissory notes were issued at an original issuance discount of $213,955, did not have a stated interest rate and matured on the three month anniversary of their issuance date in December 2010 or January 2011. In addition, the notes are automatically convertible upon the consummation of a qualified offering, as defined, into the type of securities issued in such offering at a conversion price equivalent to the price of the securities sold. The warrants are fully vested and provide its holder with the right to purchase the specified number of shares of common stock at an exercise price of $0.25 per share during its five year term. The warrants also provide its holders with certain anti-dilution and cashless exercise provisions. The terms of the offering also provide investors with a reset feature which gives them the right, for as long as the notes are outstanding, to exchange the promissory notes for securities issued in a subsequent offering in the event that the Company enters into any subsequent transaction other than the qualified offering, as defined, on terms more favorable than those governing the current offering.

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As a result of the private placement of promissory notes and warrants we issued to the placement agent 266,760 warrants that are fully vested and provide its holder with the right to purchase the specified number of shares of common stock at an exercise price of $0.25 per share during its five year term. The warrants also provide its holder with certain anti-dilution and cashless exercise provisions.

On January 12, 2011 our note holders agreed to extend the maturity date of such notes to January 17, 2011.

On January 14, 2011 the Company received consent from all its September OID note holders to:

1.	Lower the amount of a “Qualified Offering” to $1,200,000.”
2.	Extend the “Maturity Date” to “January 21, 2011.”

1.	Lower the amount of a “Qualified Offering” to $1,200,000.”
2.	Extend the “Maturity Date” to “January 21, 2011.”
3.	Waive the full ratchet anti-dilution protection on their Warrant

3. Waive the full ratchet anti-dilution protection on their Warrant

On January 21, 2011, the Company completed a unit offering of an aggregate of $1,215,000 of its Series K 10% Convertible Preferred Stock (“Series K Preferred Stock”) and three series (Series X, Y and Z) of common stock purchase warrants (“Warrants”) to 11 accredited investors. Each unit sold consisted of one share of $25,000 stated value (and liquidation preference) of Series K Preferred Stock and Warrants to purchase up to an aggregate of 333,333 shares of common stock at $0.15 per share, subject to adjustment. A total of 48.6 units were sold. The Series X Warrants are 5 year warrants, exercisable immediately to purchase an aggregate of 4,049,999 shares of common stock. The Series Y Warrants are exercisable until 45 days after the effectiveness of a certain registration statement that the Company is obliged to file (see below) and are exercisable to purchase an aggregate of 4,049,999 shares of common stock. The Series Z Warrants are five year warrants whose effectiveness is conditional upon the exercise of the holder’s Y warrants and are exercisable to purchase an aggregate of 8,100,001 shares of common stock. Pursuant to a Registration Rights Agreement described below, investors also received the right to demand that the Company file one or more registration statements covering the securities into which the Series K Preferred Stock is convertible and as to which the Warrants are exercisable as further described below. The offering was made under Rule 506 under the Securities Act of 1933, as amended, and was made exclusively to “accredited investors”. As a condition to consummation of the offering, certain individuals converted outstanding debt in the original principal amount of $2,050,000 into the Company’s Series K Preferred Stock. Additionally, all subscribers to the Company’s 12% Original Issue Discount Notes sold in September and October 2010, whose then current balances on such Notes aggregated $2,081,176, were automatically converted into 83.16 shares of the Company’s Series K Preferred Stock and were issued X, Y and Z warrants pari passu to the current unit investors (an aggregate of 6,930,571 Series X warrants, 6,930,571 Series Y warrants and 13,861,139 Series Z warrants).

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Additionally, in conjunction with the closing of the Preferred K Offering on January 21, 2011:

1.	Lorraine DiPaolo agreed to convert her $1,500,000 in secured debt into 60 Series Preferred shares plus 5,000,000 Series Y common stock Warrants.
2.	O. Lee Tawes agreed to convert his $500,000 in unsecured debt into 20 Series K Preferred Shares plus 1,666,667 Series Y common stock Warrants

1.	Lorraine DiPaolo agreed to convert her $1,500,000 in secured debt into 60 Series Preferred shares plus 5,000,000 Series Y common stock Warrants.
2.	O. Lee Tawes agreed to convert his $500,000 in unsecured debt into 20 Series K Preferred Shares plus 1,666,667 Series Y common stock Warrants
3.	Eric Skae agreed to convert his $50,000 in unsecured debt into 2 Series K Preferred Shares plus 166,667 of Series Y common stock Warrants
4.	Eric Skae agreed to amend his current Earn Out Agreement, by waiving the earn-out of $325,000 earned in 2010 and extending the earn-out for through 2012 to waive certain sums due him and extend the term of the earn-out.

3.	Eric Skae agreed to convert his $50,000 in unsecured debt into 2 Series K Preferred Shares plus 166,667 of Series Y common stock Warrants
4.	Eric Skae agreed to amend his current Earn Out Agreement, by waiving the earn-out of $325,000 earned in 2010 and extending the earn-out for through 2012 to waive certain sums due him and extend the term of the earn-out.

On February 8, 2011, we agreed to issue for investor relation services rendered 1,000,000 common shares. The initial aggregate value of these shares was valued at the closing market price on February 8, 2011 of $0.14 per share.

On April 29, 2011:

We received majority consent to:

Amend the Certificate of Designation for the Company’s Series K Preferred Stock (the “Certificate of Designation”)

●	to eliminate the full ratchet anti-dilution provision contained in Section 6(a)(ii) thereof, “Subsequent Equity Sales,”
●	to add a clause to paragraph (f) of Section 9 thereof permitting an asset-based credit line or factoring agreement pursuant to which the Company may obtain loans in an amount of up to $1.5 million, under certain conditions; and

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Amend the Registration Rights Agreement, dated as of January 21, 2011, between the Company and each of the parties thereto to eliminate Section 2(b) to remove the liquidated damages provisions from the agreement.

On April 29, 2011, we closed a private placement of common stock with certain accredited investors. We sold an aggregate of 6,866,667 shares of our common stock. Gross proceeds from the private placement were approximately $515,000.

Also on April 29, 2011, we closed an offer to existing Series K Preferred stockholders to convert their Series K Preferred shares into common stock at a lowered price based upon a formula of 112% of original investment/ $0.10. Of the original 217.77 Series K Preferred Shares, investors owning 187.61 Series K Preferred Shares converted them into 52,531,893 shares of common stock.

Also on April 29, 2011, we closed an offer to existing X, Y and Z Warrant holders to exercise their warrants into common stock at a reduced price of 0.075 per share. 6,666,665 X, Y and Z Warrants were exercised in the process and one warrant holder also voluntarily surrendered 6,400,000 Warrants on the same date.

On July 14, 2011, July 28, 2011 and July 29, 2011 we issued Original Issue Discount Notes with lenders who lent $75,000, $50,000 and $25,000 respectively. These notes mature on January 14, 2012 at $170,458 and are secured by all of the Company assets, subject to subordinations of certain assets to present and future factoring facilities.

On August 24, 2011, the Company recast $570,281 (principal plus accrued interest) in existing secured loans with six parties (entered into between June and July 2011), one of whom is a director of the Company for $120,517, and another who is a principal shareholder for $298,227, in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) which Notes were coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them totaling 2,881,405 common shares. The Company determined that the conversion of the secured notes into the secured recast notes was greater than the carrying value of the obligation on the date of the conversion and recorded a loss on extinguishment of debt of $144,392 for the year ended December 31, 2011

Between September 13 and 16, 2011, we borrowed aggregate gross proceeds of $250,000 from two investors and recast an existing unsecured loan from one investor. We issued to these investors the same 10% Secured Convertible Subordinated Notes we had issued to the lenders reported in the above paragraph. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such investors received an additional 5 shares of our common stock for each $1.00 invested totaling 1,400,500 common shares (625,000 included in shares issuable).

On September 20, 2011 the Company entered into secured Purchase Order Financing agreements with certain suppliers for additional trade credit to produce and ship approximately $750,000 in orders to Company customers. The agreements are secured by certain future sales and inventory provided by the suppliers. The agreement included repayment of $307,563 of existing accounts payable and $443,000 in additional trade credit.

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The Company further agreed to segregate all cash proceeds from specific sales to certain customers (the “Customers”) to enable the Company to pay the suppliers. The Company entered into an Escrow Agreement with the Suppliers and an escrow agent for the purpose of establishing a segregated account controlled by the Escrow Agent to disburse the cash proceeds from such Customer accounts directly to each Supplier based upon a predetermined percentage. In connection with this facility, the Company also received consent from Secured Note holders to consent to (a) the Company entering into the Escrow Agreement with the Escrow Agent and the Suppliers for the benefit of each Supplier, and (b) consent to the Company’s segregation of proceeds from Customer accounts receivable to the Escrow Account and waive each such Secured Note holder’s security interest in and lien on all cash proceeds in the Escrow Account so long as the Escrow Agreement and the Escrow Account remains in place. As of December 31, 2011 the Company’s accounts payable to those Suppliers was $460,490 of which $306,037 represented Purchase Order Financing.

On October 18, 2011, the Company borrowed $50,000 in exchange for 10% Secured Convertible Subordinated Notes which Notes were coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

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On November 1, 2011, the Company borrowed $50,000 from a director in exchange for 10% Secured Convertible Subordinated Note which Notes were coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

On November 14, 2011, we borrowed aggregate gross proceeds of $60,000 from two existing investor in exchange for 10% Secured Convertible Subordinated Notes (“Secured Notes”) which Notes were coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into common stock at a conversion price of $0.05 per share. Additionally, such lenders were granted an additional 5 shares of our common stock for each $1.00 of interest and principal due them.

On December 1, 2011, we borrowed $175,000 from one investor in exchange for a 10% Secured Convertible Subordinated Note (“Secured Note”) which Note was coupled with common stock. The Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into 875,000 restricted common shares at a conversion price of $0.01 per share. Additionally, such lender was granted an additional 5 shares of our common stock for each $1.00 of interest and principal due him. Additionally, for arranging this facility total $330,000, an assignee of the Lender was granted a Revenue Participation Agreement. This agreement grants the lender a revenue participation of 2% of the Company’s annual net sales of the first $2 million and 3% of any net sales in excess of the first $2 million in annual net sales.

On December 22, 2011, we borrowed aggregate gross proceeds of $155,000 from one investor in exchange for a 10% Secured Convertible Subordinated Note (“Secured Note”) which Note was coupled with common stock. Each Secured Note is collateralized by all of the Company’s assets and an assignment of the Company’s trademark with the US Patent and Trademark Office and is convertible into 775,000 restricted common shares at a conversion price of $0.01 per share. This loan triggered the Revenue Participation Agreement that was referenced in the discussion of the December 1, 2011 Secured Note.

On December 23rd, 2011 the Company received the required consent to:

● Amend the Security Purchase Agreement for the Series K Preferred Stock (the “Security Purchase Agreement”) to eliminate paragraph 8.2 “Subsequent Equity Sales,” in its entirety and eliminate paragraph 8.3 “Participation in Future Financing,” in its entirety;

In consideration for same, the Company agreed to reduce the conversion price of its Series K Preferred to 3 cents per share and to exchange every 5 Warrants (of the X, Y and Z Series) into 1 share of common stock.

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Between February 15, 2012 and March 2, 2012, the Company received proceeds of $250,000 from four investors in exchange for 8% 18 month Unsecured Convertible Notes (“Unsecured Note”), which Notes were coupled with warrants. Each Unsecured Note is convertible thirteen months after their respective issuance dates into common stock at a conversion price equal to the greater of (i) the Variable Conversion Price of 50% of the Market Price and (ii) the Fixed Conversion Price of $0.01. The investors also received 25,000,000 5 year warrants at a strike price of $0.03 per share. In addition the investors received the right to invest in new notes on the same basis as provided.

On March 2, 2012 the Company entered into a public relations agreement with a consultant. In addition to the cash compensation of $7,000 paid, the party was also granted 1,000,000 restricted shares of common stock.

On March 7,2012 the Company commenced a warrant reset and exercise offer to eligible holders of its outstanding warrants, pursuant to which all issued and outstanding warrants to purchase common stock of the Company issued, irrespective of current exercise price or expiration date, may, in each holder’s sole discretion, be exercised at $0.03 per share during the offer period. Approximately 15 investors elected to exercise their warrants for which the Company received $400,147 and issued 13,338,225 shares of common stock.

On March 21, 2012 the Company granted 25,000,000 restricted shares of common stock to an investor who loaned the Company $330,000 on December 1, 2011 and December 22, 2011.

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Additionally, for arranging this facility which totaled $330,000 the assignee of the Lender was granted a Revenue Participation Agreement. This agreement granted the lender a revenue participation of 2% of the Company’s annual net sales of the first $2 million and 3% of any net sales in excess of the first $2 million in annual net sales. On March 22, 2012 the Company and the assignee of the lender agreed to terminate the Revenue Participation Agreement.

Between February 14, 2012 and March 30, 2012 the Company settled approximately $1.7 million in 105 vendor claims against the Company for approximately $333,454 in cash and 24,400,704 shares valued at $467,567 in common stock.

On March 30, 2012 the Company granted approximately 7,000,000 shares of common stock to six key distribution partners as inducement for their continued support and 17,606,556 shares of common stock to 35 vendors to settle certain outstanding claims.

On March 30, 2012 the Company granted certain contract employees and consultants 9,000,000 shares of common stock and warrants to purchase 3,750,000 shares of common stock at $0.03 per share.

With respect to the issuance of our securities as described above, we relied on Section 4(2) exemption from securities registration under the federal securities laws for transactions not involving any public offering. No advertising or general solicitation was employed in offering the securities and the securities were sold to accredited investors. The securities were offered for investment purposes only, and not for the purpose of resale or distribution and the transfer thereof was restricted by us.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

WeThe ~~are~~Company was in negotiation with ~~certain~~the estate of a former ~~shareholders~~owner of Nutritional Specialties, Inc. (“NSI”) to settle payment for the outstanding notes payable. The value of these notes as of March 31, 2012 in the aggregate amount of $822,920 plus accrued interest of $102,876. As of March 31, 2012, wethe ~~are~~Company was in default and therefore this amount iswas reflected as currently due. InOn April 9, 2012, wethe ~~sold~~Company completed the sales of NSI to Deep South Capital, LLC (“DSCL”). As part of the security purchase agreement, DSCL assumed this obligation and indemnified the Company for the note payable with a current balance of $822,920 from the estate of a former owner of Nutritional Specialties, Inc.

ITEM 5 - OTHER INFORMATION

Item 1.01 Entry into a Material Definitive Agreement.

ITEM 6 - EXHIBITS

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NEW LEAF BRANDS, INC.
Date: April 2 , 2013	By:	/s/ David Fuselier
Date: June 27 , 2013	By:	/s/ David Fuselier
		David N. Fuselier
		Chairman of the Board, President, and
		Chief Executive Officer
Date: April 2 , 2013	By:	/s/ David Fuselier
Date: June 27, 2013	By:	/s/ David Fuselier
		David N. Fuselier
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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