tru10qmar312013.htm

0001415889-13-000989.txt : 20130515 0001415889-13-000989.hdr.sgml : 20130515 20130515163356 ACCESSION NUMBER: 0001415889-13-000989 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20130331 FILED AS OF DATE: 20130515 DATE AS OF CHANGE: 20130515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: True Drinks Holdings, Inc. CENTRAL INDEX KEY: 0001134765 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] IRS NUMBER: 841575085 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-32420 FILM NUMBER: 13847704 BUSINESS ADDRESS: STREET 1: 18552 MACARTHUR BOULEVARD STREET 2: SUITE 325 CITY: IRVINE STATE: CA ZIP: 91612 BUSINESS PHONE: 9492033500 MAIL ADDRESS: STREET 1: 18552 MACARTHUR BOULEVARD STREET 2: SUITE 325 CITY: IRVINE STATE: CA ZIP: 91612 FORMER COMPANY: FORMER CONFORMED NAME: BAZI INTERNATIONAL, INC. DATE OF NAME CHANGE: 20100803 FORMER COMPANY: FORMER CONFORMED NAME: XELR8 HOLDINGS, INC. DATE OF NAME CHANGE: 20070321 FORMER COMPANY: FORMER CONFORMED NAME: VITACUBE SYSTEMS HOLDINGS INC DATE OF NAME CHANGE: 20040331 10-Q 1 tru10qmar312013.htm FORM 10-Q MARCH 31 2013 tru10qmar312013.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _________ to _________

Commission file number 001-15757

TRUE DRINKS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		84-1575085
(State or Other Jurisdiction of Incorporation		(IRS Employer Identification No.)
or Organization)

18552 MacArthur Blvd., Suite 325

Irvine, CA 92612

(Address of Principal Executive Offices)

(949) 203-3500

(Registrant’s Telephone Number, Including Area Code)

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

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 [X] No [ ]

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-12 of the Exchange Act). Yes [ ] No [X]

The number of shares of common stock, with $0.001 par value, outstanding on May 13, 2013 was 27,773,043.

TRUE DRINKS HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2013

INDEX

			Page
PART I.	FINANCIAL INFORMATION

	ITEM 1.	FINANCIAL STATEMENTS	1

		Condensed Consolidated Balance Sheets as of March 31, 2013 (unaudited) and December 31, 2012	1
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012 (unaudited)	2
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012 (unaudited)	3
		Notes to unaudited Condensed Consolidated Financial Statements	4

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	18
	ITEM 4.	Controls and Procedures	18

PART II.	OTHER INFORMATION

	ITEM 1.	Legal Proceedings	18
	ITEM 1A.	Risk Factors	19
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
	ITEM 3.	Defaults Upon Senior Securities	19
	ITEM 4.	Mine Safety Disclosures	19
	ITEM 5.	Other Information	19
	ITEM 6.	Exhibits	19

SIGNATURES

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PART I

ITEM 1. FINANCIAL STATEMENTS

TRUE DRINKS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2013			December 31, 2012
	(Unaudited)
ASSETS
Current Assets:
Cash	$	31,581		$	4,449
Accounts receivable, net		181,684			130,909
Inventory		529,669			832,874
Prepaid expenses and other current assets		286,083			268,716
Total Current Assets		1,029,017			1,236,948

Restricted Cash		81,008			81,270
Property and Equipment, net		19,173			25,399
Patents, net		1,458,823			1,494,118
Trademarks, net		86,016			98,516
Goodwill		3,474,502			3,474,502
Other Assets		3,948			3,948
Total Assets	$	6,152,487		$	6,414,701

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Accounts payable and accrued expenses	$	1,040,828		$	1,292,147
Convertible notes payable		1,686,000			772,000
Total Liabilities		2,726,828			2,064,147

Commitments and Contingencies (Note 5)

Stockholders’ Equity:
Common stock, $0.001 par value, 40,000,000 shares authorized, 26,889,402 and 1,337,335 shares outstanding at March 31, 2013 and December 31, 2012, respectively		26,889			1,337
Preferred stock (liquidation preference of $10 per share), $0.001 par value, 5,000,000 shares authorized, 0 and 1,544,565 shares outstanding at March 31, 2013 and December 31, 2012, respectively		-			1,545
Additional paid in capital		8,075,011			7,467,015
Accumulated deficit		(4,676,241	)		(3,119,343	)

Total Stockholders’ Equity		3,425,659			4,350,554

Total Liabilities and Stockholders’ Equity	$	6,152,487		$	6,414,701

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

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TRUE DRINKS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2013			2012

Net Sales	$	410,801		$	-

Cost of Sales		263,950			-

Gross Profit		146,851			-

Operating Expenses:
Selling and marketing		430,486			43,216
General and administrative		1,045,064			349,213
Total operating expenses		1,475,550			392,429

Operating Loss		(1,328,699	)		(392,429	)

Other Expense
Interest expense		228,199			-
		228,199			-

Net Loss	$	(1,556,898	)	$	(392,429	)

Basic and diluted net loss per share	$	(0.06	)	$	(0.03	)

Weighted average common shares outstanding, basic and diluted (1)		26,810,744			15,155,050

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

(1)

The weighted average common shares outstanding number was calculated based on as-converted to common stock figures for the preferred stock that was granted to shareholders of True Drinks, Inc. upon the merger with Bazi Intl. on October 15, 2012. The 100 for 1 reverse stock split executed on January 18, 2013 was retrospectively reflected in weighted average common shares outstanding.

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TRUE DRINKS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,556,898	)	$	(392,429	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		6,226			-
Amortization		47,795			-
Stock issued to founders		-			855
Fair value of stock issued for services		195,600			-
Stock based compensation		436,403			3,281
Change in operating assets and liabilities:
Accounts receivable		(50,775	)		-
Inventory		303,205			(32,263	)
Prepaid expenses and other current assets		(17,367	)		(65,448	)
Other assets		-			(686,223	)
Accounts payable and accrued expenses		(251,319	)		187,668
Net cash used in operating activities		(887,130	)		(984,559	)

CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		262			(81,000	)
Net cash used in investing activities		262			(81,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		-			1,625,000
Proceeds from notes payable		1,049,000			-
Repayments on notes payable		(135,000	)		-
Net cash provided by financing activities		914,000			1,625,000

NET INCREASE IN CASH		27,132			559,441

CASH- beginning of period		4,449			-

CASH- end of period	$	31,581		$	559,441

SUPPLEMENTAL DISCLOSURES
Interest paid in cash	$	13,795		$	-
Non-cash transactions:
Conversion of preferred stock to common stock	$	25,304		$	-

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

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TRUE DRINKS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2013

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

Overview

True Drinks, Inc. (the "Company", "us", "True Drinks" or "we") was formed on January 19, 2012 in Delaware to create and commercialize all-natural, vitamin-enhanced drinks. Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall™ Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles. We distribute AquaBall™ nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online. We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed through select retail channels, online, and through our existing database of customers.

On June 7, 2012, True Drinks, Inc., Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Bazi International, Inc., and Bazi International, Inc. entered into an agreement and tax-free plan of merger (the “Merger Agreement”), wherein Merger Sub merged with and into the Company and True Drinks continued as the surviving corporation (the "Merger"). As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company. The Merger closed on October 15, 2012 (the “Closing Date”). As a result of Merger, True Drinks, Inc.’s former shareholders owned approximately 95.5% of the combined post-Merger entity via voting convertible preferred stock issued as part of the merger, on an as-converted basis (See Recent Developments below). The Company subsequently changed its name from “Bazi International, Inc.” to “True Drinks Holdings, Inc.” The Merger was accounted for as a public company “reverse merger,” and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. within the capital structure of Bazi International, Inc.

True Drinks, Inc. was formerly named GT Beverage Company, Inc., which was formed in January 2012 and acquired GT Beverage Company, LLC on March 31, 2012 in a business combination primarily to acquire the spherical bottle patent held by GT Beverage Company, LLC. Subsequently as discussed above, GT Beverage Company, Inc. entered into a public company reverse merger with Bazi International, Inc. accounted for as a business combination, since Bazi International, Inc. was not a public shell as defined by rules of the Securities and Exchange Commission. GT Beverage Company, Inc. took over the capital structure of Bazi International, Inc. and was renamed True Drinks, Inc.

Bazi International, Inc. was originally incorporated in the state of Nevada in January 2001. True Drinks, Inc. (“True Drinks”), previously GT Beverage Company, Inc., is incorporated in the state of Delaware.

Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock, par value $0.001 (“Common Stock”) is currently listed for quotation on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol TRUU.

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Developments During the Quarter

On January 18, 2013, we filed an amendment to our Articles of Incorporation (the “Amendment”) to (i) to change our name to True Drinks Holdings, Inc., (ii) increase the total number of authorized shares of Common Stock from 200,000,000 to 4,000,000,000 shares; and (iii) reverse split our common stock on the basis of one share for each 100 shares issued and outstanding (“Reverse Split”). Accordingly, our authorized common stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding common stock decreased from 133,733,469 to 1,337,335 shares. As a result of the Reverse Split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of public company reverse merger) to reflect the Reverse Split.

Upon the filing of the Amendment, the shares of Series A Preferred issued to former True Drinks shareholders automatically converted into approximately 25,304,017 post-split shares of our common stock.

The loss per common share and all other per-share disclosures in the accompanying financial statements of the Company and the related notes are based on the appropriate number of post-split common shares as adjusted for the Reverse Split.

On January 14, 2013, we entered into a Warrant Agreement (the “Warrant Agreement”) with Ashworth Holding, LLC, a Utah limited liability company (“Ashworth”), pursuant to which we granted Ashworth the option to purchase up to 860,086 shares of common stock for a price of $0.549 per share. This warrant had an expiration date of April 30, 2013 or upon Ashworth’s full exercise of the warrant. In May, 2013, the expiration date of the Warrant Agreement was extended through November 29, 2013 in connection with the concurrent extension by Ashworth Holdings, LLC of $500,000 of bridge loans which had a maturity date of April 30, 2013 to November 29, 2013. The warrant was valued at $395,640 and was expensed during the quarter.

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Basis of Presentation and Going Concern

The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of March 31, 2013, for the three-month periods ended March 31, 2013 and 2012, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of True Drinks Holdings, Inc. as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on April 5, 2013.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. As of and for the three months ended March 31, 2013, the Company incurred a net loss of $1,556,898, has negative working capital of $1,697,811, and an accumulated deficit of $4,676,241. A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation

The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Inc., Bazi, Inc. and GT Beverage Company, LLC. All inter-company accounts and transactions have been eliminated in the preparation of these consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates.

Revenue Recognition

In accordance with Staff Accounting Bulletin ("SAB") No. 104 “Revenue Recognition in Financial Statements”, revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, slotting fees, discounts and freight and handling charges. With approved credit, we provide wholesale customers payment terms of up to net 30 days. Amounts received for unshipped merchandise are recorded as customer deposits and are included in accrued expenses.

Restricted Cash

The Company has $81,008 in restricted cash with a financial institution securing a letter of credit. The letter of credit matures in August 2015 and was issued as part of contractual obligations related to one of our licensing agreements with Disney Consumer Products, Inc.

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Accounts Receivable

We maintain an allowance for doubtful accounts, which is analyzed on a periodic basis to ensure that it is adequate to the best of management’s knowledge. Management develops an estimate of the allowance for doubtful accounts receivable based on its own judgment as to the likelihood of ultimate payment. Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts. The allowance for doubtful accounts was approximately $54,000 at March 31, 2013.

Concentrations

The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with two financial institutions. There are no funds in excess of the federally insured amount of $250,000 through March 31, 2013, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal.

During 2012, the Company relied on one supplier for 100% of its purchases of AquaBall™ Naturally Flavored Water and Bazi® held for sale. In the quarter ended March 31, 2013, the Company began production of AquaBall™ with a second supplier. The Company owns the formula for both the AquaBall™ and Bazi®, and management believes that its purchasing requirements can be readily met from alternative sources.

A significant portion of our revenue comes from sales of the AquaBall™ Naturally Flavored Water. For the quarter ended March 31, 2013, sales of AquaBall™ accounted for 65% of the Company’s total revenue. The remaining 35% was related to sales of Bazi® All Natural Energy. The Company expects AquaBall™ to account for a much larger percentage of overall sales during the remainder of 2013.

Inventory

Inventory is stated at the lower of cost or market on a FIFO (first-in first-out) basis. Provisions are made to reduce excess or obsolete inventory to the estimated net realizable value. The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement.

Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value. Changes in economic conditions or customer demand could result in obsolete or slow moving inventory that cannot be sold or must be sold at reduced prices and could result in an inventory reserve. No inventory reserves were considered necessary as of March 31, 2013.

Inventory is comprised of the following:

	March 31, 2013		December 31, 2012
Purchased materials	$	345,879	$	473,383
Finished goods		183,790		359,491
Total	$	529,669	$	832,874

Property and Equipment

Property and equipment are stated at cost. The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years. Property and equipment is not significant to the condensed consolidated financial statements as of, or for the three months ended March 31, 2013.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset. An impairment was not deemed necessary in the three months ended March 31, 2013.

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Intangible Assets

Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Company’s products, customer list, and the estimated value of GT Beverage Company, LLC’s interlocking spherical bottle patent acquired on March 31, 2012. The Company’s intangible assets are amortized over their estimated remaining useful lives. The Company evaluates the useful lives of its intangible assets annually and adjusts the lives according to the expected useful life. No impairment was deemed necessary as of March 31, 2013.

Goodwill

Goodwill represents the future economic benefits arising from other assets acquired that are individually identified and separately recognized. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually.

Income Taxes

For the quarters ended March 31, 2013 and 2012, the Company incurred tax net operating losses, and accordingly, had no income tax provision. At March 31, 2013, the Company had tax net operating loss carryforwards and a related deferred tax asset, which had a full valuation allowance.

Stock-Based Compensation

Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the three months ended March 31, 2013 was $436,403.

The Company uses a Black-Scholes option-pricing model (the “Black-Scholes Model”) to estimate the fair value of the stock option and warrants. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the contractual term of the option. The expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. Currently it is based on the simplified approach provided by SAB 107. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant (see Note 3, "Stock Options and Warrants").

Net Loss Per Share

Loss per common share was computed using the weighted average number of shares of common stock outstanding during the period. Not used in the computation since their effect would be antidilutive were 1,686,000 shares of convertible notes payable, 980,039 Common Stock purchase warrants and 3,870,389 Common Stock options for a total of 26,536,428 shares.

Weighted average common shares outstanding retrospectively reflect the 100 to 1 reverse split in January 2013 as if such split occurred on January 19, 2012 (inception). Also reflected from inception is the conversion of common shares outstanding at a 1,638 to 1 conversion ratio reflecting the conversion of common shares to preferred shares in October 2012 and then conversion to common shares in January 2013.

Research and Development

Research and development costs are expensed as incurred.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective accounting pronouncements and has concluded that there are no recently issued, but not yet effective pronouncements that may have a material impact on the Company’s future financial statements.

NOTE 2 — SHAREHOLDERS’ EQUITY

On January 18, 2013, upon the filing of the Amendment to the Articles of Incorporation, the Company converted 1,544,565 shares of Series A Preferred issued to former True Drinks shareholders into 25,304,017 post-split shares of the Company’s Common Stock.

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Between January and March 2013, the Company issued 209,800 shares of its Common Stock to certain accredited investors in connection with bridge loans made to the Company. Such loans have short-term maturities of approximately four months. The Company expensed the fair value of the common stock issued of $157,350 to interest expense immediately.

In March 2013, the Company issued 38,250 shares of its Common Stock in connection with two consulting agreements. The Company expensed the fair value of the common stock issued of $38,250 to consulting expense.

NOTE 3 — STOCK OPTIONS AND WARRANTS

Warrants

A summary of the Company’s warrant activity for the three months ended March 31, 2013 is presented below:

	Warrants Outstanding		Weighted Average Exercise Price
Outstanding, December 31, 2012		132,340	$	42.53
Granted		860,086		0.549
Exercised		-		-
Expired		12,387		187.09
Outstanding, March 31, 2013		980,039	$	3.86

As of March 31, 2013, the Company had the following outstanding warrants to purchase its common stock:

Warrants Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Yrs)
	118,953	$	27.58		2.06
	1,000	$	30.00		2.67
	860,086	$	0.55		0.08
	980,039	$	3.86		0.32

Non-Qualified Stock Options

The Company did not issue any stock options during the three months ended March 31, 2013.

Stock option activity during the three months ended March 31, 2013 is summarized as follows:

	Number of Shares		Weighted-Average Exercise Price
Options outstanding at December 31, 2012		3,870,389	$	0.69
Exercised		-		-
Granted		-		-
Forfeited		-		-
Expired		-		-
Options outstanding at March 31, 2013		3,870,389	$	0.69

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The following table summarizes information about the Company’s stock options outstanding as of March 31, 2013:

		Outstanding Options
				Weighted Average				Exercisable Options
				Remaining		Aggregate				Aggregate
Range of				Contractual Life		Intrinsic				Intrinsic
Exercise Prices		Number		(Years)		Value		Number		Value
$	0.01		3,133,172		2.29	$	4,355,109		982,950	$	1,366,309
$	1.017		737,217		2.44	$	724,684		-	$	-
Totals			3,870,389		2.32	$	5,079,793		982,950	$	1,366,309

NOTE 4 — CONVERTIBLE NOTES

Between October and December 2012, the Company consummated the sale of senior secured convertible notes (“Bridge Notes”) to a limited number of accredited investors, resulting in net proceeds to the Company of $725,000. As additional consideration for the purchase of the Bridge Notes, each investor received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased. Each Bridge Note has a term of 120 days, and accrues interest at 9% per annum. A fee of 10% was added to each Bridge Note, as a lender’s fee. The principal, interest and lender’s fee are convertible, at the option of the holder, into shares of the Company’s common stock at a price of $1.00 per share. Certain notes have matured through the date of this report, have not been repaid and are now considered past due. The remaining notes mature at various dates through April 30, 2013. The Company is currently in discussion regarding the extension of the maturity dates of the notes.

In December 2012, the Company issued promissory notes to certain investors, resulting in net proceeds of to the Company of $47,000. These promissory notes have a term of 30 days, and included a lender’s fee of 10%. These promissory notes were repaid in full in January 2013.

In January 2013, we completed a private placement, wherein we issued an aggregate principal amount of $660,000 in unsecured convertible promissory notes (the “January Notes”) to certain purchasers. As additional consideration for the purchase of the January Notes, each purchaser received 5,000 post-split shares of the Company’s common stock per $25,000 of principal amount purchased. The January Notes have a term of 120 days and accrue interest at a rate of 9% per annum. At maturity, the holders of the January Notes have the right to convert all principal and accrued but unpaid interest into shares of common stock at a conversion price equal to $1.00 per share. In May 2013, the maturity date of certain January Notes in the aggregate principal amount of $500,000 was extended to November 29, 2013, and the remaining balance of the January Notes, totaling $180,568 of principal and accrued interest, were converted into 180,568 shares of the Company’s common stock.

In February and March 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $389,000 (the “March Notes”) to certain purchasers. As additional consideration for the purchase of the March Notes, each purchaser received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased. The March Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the March Notes, each note is convertible into shares of the Company’s common stock at a conversion price equal to $1.00 per share. In May 2013, March Notes in the aggregate principal amount, plus accrued interest, of $233,927 was converted into 233,927 shares of the Company’s Common Stock.

In April 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $195,000 (the “April Notes”) to certain purchasers. As additional consideration for the purchase of the April Notes, each purchaser received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased. The April Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the April Notes, the April Notes are convertible into shares of the Company’s common stock at a conversion price equal to $1.00 per share. In May 2013, April Notes totaling $69,485 of principal and accrued interest was converted into 69,485 shares of the Company’s common stock.

In May 2013, a total of $372,661 of principal plus accrued interest from certain notes issued in 2012 was converted into 372,661 shares of the Company’s common stock.

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NOTE 5 — COMMITMENTS AND CONTINGENCIES

The Company has entered in a number of agreements with various consultants. Termination of any of these agreements could result in termination fees.

The Company leases its office in Irvine, California for a one-year term. Total rent expense related to the Company's operating lease for the three months ended March 31, 2013 was approximately $11,367. Total remaining payments on the lease through July 31, 2013 is approximately $14,356.

The Company maintains employment agreements with certain key management. The agreements provide for minimum base salaries, eligibility for stock options, performance bonuses and severance payments.

Legal Proceedings

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur. In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Company’s financial position or results of operations.

On July 1, 2011, a lawsuit was filed in the United States District Court, the Southern District of Ohio, Cincinnati Division, against GT Beverage Company, LLC (“GT LLC”) by Dominion Liquid Technologies, LLC. The lawsuit alleges that GT LLC breached terms of a 2010 co-packing agreement, which governed the relationship between the parties. As of February 2013, Dominion amended its complaint to add the Company as a defendant in the case. The Company has not yet filed responsive pleadings. Dominion is seeking monetary damages in an amount exceeding $800,000. GT LLC has filed its answer denying all of Dominion’s claims and expects to vigorously defend the suit. Discovery is ongoing, and the case is currently set for trial in November 2013.

NOTE 6 — RELATED PARTY TRANSACTIONS

On May 11, 2012, the Company loaned Environmental Packaging Technologies, Inc. (“EPT”) the sum of $150,000 in exchange for a 50-day promissory note. The promissory note accrues interest at 10% per annum and includes a fee equal to 10% of principal balance of the note, payable to the Company. The Company sent EPT a notice of default on October 18, 2012 demanding payment of the original principal amount of $150,000, accrued interest of $6,575 and the 10% fee in the amount of $15,000. True Drinks’ former chairman and current investor is the chairman for EPT. The Company is currently involved in settlement discussions with EPT.

NOTE 7 — SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date the accompanying condensed consolidated financial statements were filed with the SEC, and noted no other significant subsequent events not elsewhere disclosed in these notes to consolidated financial statements.

In May 2013, we completed a private placement, wherein we issued unsecured promissory notes in the aggregate principal amount of $600,000 (the “May Notes”) and unsecured convertible promissory notes in the aggregate principal amount of $150,000 (the “Convertible May Notes”) to certain purchasers. As additional consideration for the purchase of the Convertible May Notes, each purchaser received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased.

The May Notes mature on August 6, 2013 and accrue interest at a rate of 12% per annum. In connection with, and as further consideration for the purchase of the May Notes, the Company issued a total of 600,000 5-year warrants to purchase shares of the Company’s common stock at a price of $1.10 per share to the purchasers. The Convertible May Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Each Convertible May Note is convertible into shares of the Company’s common stock at a conversion price equal to $1.00 per share.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend to identify forward-looking statements in this report by using words such as “believes,” “intends,” “expects,” “may,” “will,” “should,” “plan,” “projected,” “contemplates,” “anticipates,” “estimates,” “predicts,” “potential,” “continue,” or similar terminology. These statements are based on our beliefs as well as assumptions we made using information currently available to us. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. These risks include changes in demand for our products, changes in the level of operating expenses, our ability to expand our network of customers, changes in general economic conditions that impact consumer behavior and spending, product supply, the availability, amount, and cost of capital to us and our use of such capital, and other risks discussed in this report. Additional risks that may affect our performance are discussed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

The following discussion of the financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements included elsewhere within this Quarterly Report. Fluctuations in annual and quarterly results may occur as a result of factors affecting demand for our products such as the timing of new product introductions by us and by our competitors and our customers’ political and budgetary constraints. Due to such fluctuations, historical results and percentage relationships are not necessarily indicative of the operating results for any future period.

Overview

True Drinks, Inc. (the “Company”) is a beverage company that specializes in all-natural, vitamin-enhanced drinks. Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall™ Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles. We distribute the AquaBall™ nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online. We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed online and through our existing database of customers.

The Company was originally incorporated in the state of Delaware in January 2012.

Recent Developments

Reverse Merger with Bazi International, Inc. (“Bazi Intl.”)

On June 7, 2012, the Company, Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of the Bazi Intl., and True Drinks entered into an agreement and plan of merger (the “Merger Agreement”), wherein Merger Sub merged with and into True Drinks and True Drinks continued as the surviving corporation (the “Merger”). As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company. The Merger closed on October 15, 2012 (the “Closing Date”). The Merger was accounted for as a public company “reverse merger,” and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. as the accounting acquiror within the new capital structure of the Company effective on the closing date.

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On the Closing Date, the executives and Board of Directors of True Drinks, Inc. were appointed to the same positions within True Drinks Holdings, Inc. Lance Leonard was appointed as our Chief Executive Officer, Daniel Kerker as our Chief Financial Officer, and Kevin Sherman, former President of the Company, as our Vice President of Marketing. We also appointed Timothy Lane, Carl Wistreich, Lou Imbrogno and Lance Leonard to fill the vacancies on our Board of Directors created as a result of the resignation of the former directors of Bazi International, Inc.

Creation of the Series A Preferred

Upon closing the Merger, the Company filed a Certificate of Designation, Preferences, Rights and Limitations of Series A Convertible Preferred Stock (“Series A Preferred”) (the “Certificate of Designation”), creating 1,544,565 shares of Series A Preferred. On the Closing Date, former True Drinks shareholders exchanged all outstanding capital stock of True Drinks for a total of 1,544,565 Series A Preferred, which shares represent on an as-converted basis at a conversion rate of $0.00610403 per share approximately 95.5% of the total Common Stock outstanding at December 31, 2012. As explained below, the Series A Preferred automatically converted into a total of 25,304,017 post-split shares of Common Stock on January 18, 2013.

Financings

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In May 2013, a total of $372,661 of principal plus accrued interest from certain notes issued in 2012 was converted into 372,661 shares of the Company’s common stock.

Amendment to our Articles of Incorporation and Reverse Stock Split.

Upon the filing of the Amendment, the shares of Series A Preferred issued to former True Drinks shareholders automatically converted into 25,304,017 post-split shares of our common stock.

The name change and Reverse Split became effective with the Over−the−Counter Bulletin Board at the opening of trading on January 22, 2013.

Warrant Agreement

On January 14, 2013, we entered into a Warrant Agreement (the “Warrant Agreement”) with Ashworth Holdings, LLC, a Utah limited liability company (“Ashworth”), pursuant to which we granted Ashworth the option to purchase up to 860,086 shares of common stock for a price of $0.549 per share. This warrant had an expiration date of April 30, 2013 or upon Ashworth’s exercise of the warrant. In May, 2013, the expiration date of the Warrant Agreement was extended through November 29, 2013 in connection with the concurrent extension by Ashworth Holdings, LLC of $500,000 of bridge loans which had a maturity date of April 30, 2013 to November 29, 2013. The warrant was valued at $395,640 and were expensed during the quarter.

Critical Accounting Polices and Estimates

Discussion and analysis of our financial condition and results of operations are based upon financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates; including those related to collection of receivables, inventory obsolescence, sales returns and non-monetary transactions such as stock and stock options issued for services. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

In accordance with ASC Topic 605 (Staff Accounting Bulletin 104 “Revenue Recognition in Financial Statements”), revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, sales of marketing tools to independent distributors and freight and handling charges. With the exception of retail customers, we receive the net sales price from all of our orders in the form of cash or credit card payment prior to shipment.

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Allowance for Doubtful Accounts

We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Based on our estimations, we recorded an allowance for doubtful accounts of approximately $54,000 as of March 31, 2013.

Inventory Valuation

Inventories are stated at the lower of cost or market on a first-in first-out basis. Inventory is periodically reviewed and obsolete inventories are written off. No inventory was written off as obsolete for the period ended March 31, 2013.

Stock Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards in accordance with ASC Topic 718, which requires compensation costs related to share-based transactions, including employee stock options, to be recognized in the financial statements based on fair value, and the Securities and Exchange Commission’s (the “SEC”) Staff Accounting Bulletin No. 107 (“SAB 107”) interpreting ASC Topic 718 and the valuation of share-based payments for public companies. The Company records compensation expense on a straight-line basis. The fair value of options granted are estimated at the date of grant using a Black-Scholes option pricing model with assumptions for the risk-free interest rate, expected life, volatility, dividend yield and forfeiture rate.

Intangible Assets

Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Company’s products, customer first, and the estimated value of GT Beverage Company, LLC’s interlocking spherical bottle patent acquired on March 31, 2012. The Company’s intangible assets, are amortized over their estimated useful remaining lives. The Company evaluates the useful lives of its intangible assets annually and adjusts the lives according to the expected useful life. No impairment was deemed necessary as of March 31, 2013.

Goodwill

Comparison of the Three Months Ended March 31, 2013 to the Three Months Ended March 31, 2012.

Net Sales

Net sales for the three months ended March 31, 2013 were $410,801. There were no sales during the three months ended March 31, 2012 as the Company was in the formulation process for AquaBallTM Naturally Flavored Water. In January 2013, the Company introduced its new zero calorie, sugar free formula for AquaBall. The Company’s sales were limited in the three months ended March 31, 2013 due to the early stage of this new product’s sales cycle.

The percentage that each product category represented of our net sales is as follows:

Product Category	Three Months Ended March 31, 2013 (% of Sales)
AquaBall™		65	%
Bazi®		35	%

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Gross Profit

Gross profit for the three months ended March 31, 2013 was $146,851. Gross profit as a percentage of revenue (gross margin) during three months ended March 31, 2013 was 36%. This figure was affected by the high costs of our raw materials due to the low volume of product manufactured during the year.

Sales, General and Administrative Expense

Sales, general and administrative expenses were $1,475,550 for the three months ended March 31, 2013 as compared to $392,429 for the three months ended March 31, 2011. This increase is due to the Company’s launch of its new zero calorie, sugar free formula of AquaBallTM in the first three months of 2013.

Interest Expense

Interest expense for the three months ended March 31, 2013 was $228,066 as compared to $0 for the three months ended March 31, 2012. The increase was due to the Company’s use of convertible note financing beginning in the fourth quarter of 2012, as well as the recording of shares issued and lender’s fees in connection with the issuance of the convertible notes being recorded to interest expense. In the first three months of 2012, the Company was funded through equity financing resulting in no interest expenses being recorded.

Income Taxes

There is no income tax expense recorded for the periods ended March 31, 2013 and 2012, due to the Company's net losses. As of March 31, 2013, the Company has tax net operating loss carryforwards and a related deferred tax asset, offset by a full valuation allowance.

Net Loss

Our net loss for the three months ended March 31, 2013 was $1,556,898 as compared to a net loss of $392,429 for the three months ended March 31, 2012. On a per share basis, our loss was $0.06 and $0.03 per share for the three months ended March 31, 2013 and 2012, respectively.

Liquidity and Capital Resources

Our auditors have included a paragraph in their report on our consolidated financial statements, included in out Annual Report on Form 10-K for the fiscal year ended December 31, 2012, indicating that there is substantial doubt as to the ability of the Company to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. As of and for the three months ended March 31, 2013, the Company incurred a net loss of $1,556,898, has negative working capital of $1,697,811, and an accumulated deficit of $4,676,241. A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically possible. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company financed its operations through sales of equity and, to a lesser degree, cash flow provided by sales of AquaBall Naturally Flavored Water. Despite recent sales of debt securities following consummation of the Merger, as described below, funds generated from sales of our Common Stock and cash flow provided by AquaBall™ sales are currently insufficient to fund our operating requirements for the next twelve months. As a result we will require additional capital to continue operating as a going concern. While we are currently seeking additional financing to fund our working capital requirements, and continue as a going concern, no assurances can be given that we will be successful.

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Private Placement

In May 2013, a total of $372,661 of principal plus accrued interest from certain notes issued in 2012 was converted into 372,661 shares of the Company’s common stock.

Off-Balance Sheet Items

We had no off-balance sheet items as of March 31, 2013.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that this information is accumulated and communicated to our management, including our principal executive and financial officers, to allow timely decisions regarding required disclosure.

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective based on our material weakness in the form of lack of segregation of duties, which stems from our early stage status and limited capital resources to hire additional financial and administrative staff.

(b) Changes in internal controls over financial reporting.

The Company’s Chief Executive Officer and Chief Financial Officer have determined that there have been no changes, in the Company’s internal control over financial reporting during the period covered by this report identified in connection with the evaluation described in the above paragraph that have materially affected, or are reasonably likely to materially affect, Company’s internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

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ITEM 1A. RISK FACTORS

Our results of operations and financial condition are subject to numerous risks and uncertainties described in our Annual Report on Form 10-K for our fiscal year ended December 31, 2012, filed on April 5, 2013. You should carefully consider these risk factors in conjunction with the other information contained in this Quarterly Report. Should any of these risks materialize, our business, financial condition and future prospects could be negatively impacted. As of March 31, 2013, there have been no material changes to the disclosures made in the above-referenced Form 10-K.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a)		EXHIBITS

10.1		Form of Senior Promissory Note
10.2		Form of Senior Convertible Promissory Note
10.3		Form of Five-Year Warrant
31.1		Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)
31.2		Certification of the Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a)
32.1		Certification by the Principal Executive Officer and Principal Financial and Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed note filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

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SIGNATURES

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

Date: May 15, 2013		TRUE DRINKS HOLDINGS, INC.

		By: /s/ Lance Leonard
		Lance Leonard President, Chief Executive Officer, and Director (Principal Executive Officer)

Date: May 15, 2013		By: /s/ Daniel Kerker
		Daniel Kerker Chief Financial Officer (Principal Financial and Accounting Officer)

EX-10.1 2 ex10-1.htm FORM OF SENIOR PROMISSORY NOTE ex10-1.htm

Exhibit 10.1

THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND APPLICABLE STATE SECURITIES LAWS AND THIS SECURITY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION UNDER SUCH LAWS OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF BAZI INTERNATIONAL, INC. (THE “COMPANY”) AND ITS AGENTS THAT, ABSENT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE AND OTHER SECURITIES LAWS, AS CONFIRMED TO THE COMPANY BY AN OPINION OF COUNSEL TO THE HOLDER IF REQUESTED BY THE COMPANY, SUBJECT AT ALL TIMES TO COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY JURISDICTION.

Senior Note

$[_______]

Irvine, California

May [__], 2013

FOR VALUE RECEIVED, the undersigned, TRUE DRINKS HOLDINGS, INC., a corporation organized under the laws of Nevada (the “Company”), hereby promises to pay to the order of [___________] (the “Payee”), at the address specified for Payee below, or such other place as the Payee may designate to Company in writing from time to time, the principal sum of $[_______] in lawful money of the United States of America on August 6, 2013 (the “Maturity Date”), with interest thereon at the rate of 12% per annum as provided herein. All interest shall be calculated on the basis of a 365-day year counting the actual days elapsed.

1. Payment Terms

(a) The Company promises to pay interest (“Interest”) on the outstanding principal amount of this Note at the rate of twelve percent (12%) per annum. The principal of this Note and any accrued and unpaid Interest shall be due on the Maturity Date. Interest shall be paid to Payee in arrears on a monthly basis, no more than 15 days after the last day of each month.

(b) The Company shall have the right to prepay this Note at any time, upon five days’ notice to the Payee, subject to the Payee’s election to convert this Note into Common Stock (as defined below) on the terms set forth herein prior to prepayment.

(c) In connection with, and as partial consideration for, the purchase of the Note, the Company shall issue to Payee a five (5) year share purchase warrant (the “Warrant”) in substantially the form attached hereto as Exhibit A, to purchase shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001 (“Common Stock”), in an amount equal to the product of (i) one-hundred percent (100%) multiplied by (ii) the principal amount of the Note.

(d) In the event that any date referred to hereunder is a day on which banks in the State of New York are required or authorized to be closed, then the payment that would be due on such day shall instead be due and payable on the next day which is not such a non-banking day, with additional Interest for such delay at the rate then in effect hereunder.

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2. Other Terms

(a) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of principal and Interest hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a holder and delivery for cancellation and reissuance of the Note, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 7. The Company shall maintain records showing the amounts converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be).

(b) Adjustments for Mergers or Reorganizations, etc. If at any time there shall occur any reclassification, reorganization, recapitalization, consolidation, sale of all or substantially all of the Company’s assets, property or business, or any merger involving the Company, in each case in which the Common Stock is converted into or exchanged for securities (including warrants or other subscription or purchase rights), cash or other property, or pursuant to which any such securities, cash or other property is to be received by or distributed to the holders of Common Stock of the Company (other than a transaction covered by Sections 2(g)) (each, a “Reorganization Event”), then, following any such Reorganization Event, and without payment by the Payee of any additional consideration thereof, the Payee shall receive upon the exercise hereof the kind and amount of securities, cash or other property which the Payee would have been entitled to receive if, immediately prior to such Reorganization Event, the Payee had held the number of shares of Common Stock subject to this Note, giving application to all adjustments called for during such period under this Note with respect to the rights of the Payee. The Company shall not effect any Reorganization Event unless, prior to the consummation thereof, the successor or surviving entity (if other than the Company) and, if an entity different from the successor or surviving entity, the entity whose stock, securities, assets or other property the holders of Common Stock are entitled to receive as a result of such Reorganization Event, assumes by written instrument (A) the obligations to deliver to the Payee such shares of stock, securities, assets or other property as, in accordance with the foregoing provisions, the Payee may be entitled to acquire and (B) the due and punctual observance and performance of each and every covenant and condition contained in this Note to be performed and observed by the Company and all the obligations and liabilities hereunder, in order to provide for adjustments of shares of the Common Stock into which this Note is convertible which shall be as nearly equivalent as practicable to the adjustments provided for in Section 2. The foregoing provisions shall similarly apply to successive Reorganization Events and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Note. If the per share consideration payable to the holder hereof for shares of Common Stock in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined reasonably and in good faith by the board of directors of the Company. In all events, appropriate adjustment (as determined reasonably and in good faith by the board of directors of the Company) shall be made in the application of the provisions of this Note with respect to the rights and interests of the Payee after the transaction, to the end that the provisions of this Note shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Note. Notwithstanding any other provision to the contrary herein, in no event shall any transaction or other event associated with the Merger Agreement (as defined below) be construed to be a Reorganization Event.

(c) Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time, the Common Stock issuable upon exercise of this Note is changed into the same or a different number of shares of any class or classes of stock, this Note will thereafter represent the right to acquire such number and kind of securities as would have been issuable as a result of exercise of this Note and the Conversion Price therefor shall be appropriately adjusted, such adjustment to be determined by the Company’s board of directors in its sole and absolute discretion, all subject to further adjustment in this Section 2.

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(d) Certain Limitations. The Company will take no action to increase the par value of the Common Stock to an amount in excess of the Conversion Price, including entering into any transaction which, by reason of any adjustment hereunder, would cause the Conversion Price to be less than the par value per share of Common Stock, and the Company will not enter into any agreements inconsistent with the rights of the Payee hereunder.

(e) Automatic Conversion into Subsequent Financing. In the event that the Company completes a secured debt financing for an amount greater than $1,000,000 prior to the Maturity Date, this Note shall be automatically exchanged for a note in connection with such debt financing. All Warrants issued in connection with this Note shall also be exchanged for a warrant in the form of that used in connection with such debt financing in the quantity of Warrant Shares defined by this Note. The Maturity Date shall be reset at such time to the maturity date of the subsequent secured debt financing.

3. Security. This Note shall be unsecured.

4. Default. It shall be an event of default (“Event of Default”), and the entire unpaid principal of this Note, together with accrued Interest and any Lender Fees, shall become immediately due and payable, at the election of Payee, upon the occurrence of any of the following events:

(a) any failure on the part of the Company to make any payment under this Note when due, and such failure continues for fifteen (15) days after receipt of written notice of such failure from the Payee;

(b) the Company’s commencement (or taking any action for the purpose of commencing) of any proceeding under any bankruptcy, or for the reorganization of any party liable hereon, whether as maker, endorser, guarantor, surety or otherwise, or for the readjustment of any of the debts of any of the foregoing parties, under the Federal Bankruptcy Code, as amended, or any part thereof, or under any other laws, whether state or Federal, for the relief of debtors, now or hereafter existing, by any of the foregoing parties, or against any of the foregoing parties, which shall not be discharged within forty-five (45) days of their commencement;

(c) a proceeding shall be commenced against the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute and relief is ordered against such party, or the proceeding is controverted but is not dismissed within sixty (60) days after the commencement thereof;

(d) the appointment of a receiver, trustee or custodian for all or substantially all of the assets of the Company, which appointment remains in place for at least one hundred twenty (120) days, the dissolution or liquidation of the Company; or

(e) the admission by the Company of its inability to pay its debts as they mature, or an assignment for the benefit of the creditors of the Company.

5. Waiver.

(a) The Company and every endorser or guarantor, if any, of this Note regardless of time, order, or place of signing, waive demand, presentment, protest, notice of protest, notice of dishonor with respect to this Note and notices of every kind and assent to any one or more extensions or postponements of the time of payment or any other indulgences, to any substitutions and to any additions or releases of any other parties or persons primarily or secondarily liable with respect to this Note.

(b) The parties hereto agree that a waiver of rights under this Note shall not be deemed to be made by a party hereto unless such waiver shall be in writing, duly signed by the applicable party, and each such waiver, if any, shall apply only with respect to the specific instance involved and shall in no way impair the rights of the parties hereto in any other respect at any other time.

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6. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. THE COMPANY AND THE PAYEE HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION OF ALL STATE DISTRICT COURTS OF ORANGE COUNTY SITTING IN THE STATE OF CALIFORNIA IN CONNECTION WITH ANY ACTION OR PROCEEDING UNDER OR IN RESPECT OF THIS NOTE, AND WAIVE TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.

7. Assignment of Note. The Company may not assign or transfer this Note or any of its obligations under this Note in any manner whatsoever without the prior written consent of Payee. The Note may be assigned at any time by the Payee.

8. Miscellaneous.

(a) This Note may be altered only by prior written agreement signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. This Note may not be modified by an oral agreement, even if supported by new consideration.

(b) Subject to Section 7, the covenants, terms, and conditions contained in this Note apply to and bind the heirs, successors, executors, administrators and assigns of the parties.

(c) The Payee, by acceptance of this Note, acknowledges that this Note and any shares of Common Stock which may be issued pursuant to any conversion hereunder have not been registered under the Securities Act of 1933 (the “Securities Act”) or applicable state securities laws. The Payee, by acceptance of this Note and any shares of Common Stock, represents that it is fully informed as to the applicable limitations upon any distribution or resale of these securities under the Securities Act or any applicable state securities laws and agrees not to distribute or resell such securities if such distribution or resale would constitute a violation of the Securities Act or any applicable state securities laws or would cause the issuance by the Company of the Common Stock to be in violation of the Securities Act or any applicable state securities laws. Any exercise hereof by the Payee shall constitute a representation by the Payee that the Payee is an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act, as amended by the Dodd-Frank Act and related interpretations of the Securities and Exchange Commission, and that the Common Stock is not being acquired with the view to, or for resale in connection with, any distribution or public offering thereof in violation of the Securities Act or applicable state securities laws.

(d) The term “Payee” shall include the initial party to whom payment is designated to be made and, in the event of an assignment of this Note, the successor assignee or assignees, and, as to each successive additional assignment, such successor assignee or assignees.

(e) Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be mailed by certified mail, return receipt requested (or by the most nearly comparable method if mailed from or to a location outside of the United States of America) or by FedEx, Express Mail, or similar internationally recognized overnight delivery or courier service, or delivered in person or by facsimile, or similar telecommunications equipment, against receipt therefore at the address of such party set forth in this Section 8(e) (or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 8(e)).

Payee: [________________]

[________________]

Company: True Drinks Holdings, Inc.

18552 MacArthur Boulevard, Suite 325

Irvine, California 92612

Telephone: (949) 203-3500

Attention: Dan Kerker, CFO

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Such addresses may be changed by notice given as provided in this subsection. Notices shall be effective upon the date of receipt; provided, however, that a notice (other than a notice of a changed address) sent by certified or registered U.S. mail, with postage prepaid, shall be presumed received not later than three (3) business days following the date of sending.

(f) All agreements herein made are expressly limited so that in no event whatsoever, whether by reason of advancement of proceeds hereof, acceleration of maturity of the unpaid balance hereof or otherwise, shall the amount paid or agreed to be paid to the Payee for the use of the money advanced or to be advanced hereunder exceed the maximum rate of interest allowed to be charged under applicable law (the “Maximum Legal Rate”). If, from any circumstances whatsoever, the fulfillment of any provision of this Note or any other agreement or instrument now or hereafter evidencing, securing or in any way relating to the indebtedness evidenced hereby shall involve the payment of interest in excess of the Maximum Legal Rate, then the obligation to pay interest or other amounts hereunder shall be reduced to the Maximum Legal Rate; and if from any circumstance whatsoever, the Payee shall ever receive interest, the amount of which would exceed the amount collectible at the Maximum Legal Rate, such amount as would be excessive interest shall be applied to any other indebtedness of the Company to the Payee. This provision shall control every other provision in any and all other agreements and instruments existing or hereafter arising between the Company and the Payee with respect to the indebtedness evidenced hereby.

(g) The Company represents and warrants that the issuance of this Note has been duly authorized by all necessary corporate action and the execution, delivery and repayment of this Note does not and will not violate any agreement to which it is a party.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Note as of the date first set forth above.

BORROWER:

TRUE DRINKS HOLDINGS, INC.


By:
	Dan Kerker
	CFO

	ACKNOWLEDGED:

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Exhibit A

Form of Warrant

EX-10.2 3 ex10-2.htm FORM OF SENIOR CONVERTIBLE PROMISSORY NOTE ex10-2.htm

Exhibit 10.2

Senior Convertible Note

$[_______]	Irvine, California
	February [__], 2013

FOR VALUE RECEIVED, the undersigned, TRUE DRINKS HOLDINGS, INC., a corporation organized under the laws of Nevada (the “Company”), hereby promises to pay to the order of [___________] (the “Payee”), at the address specified for Payee below, or such other place as the Payee may designate to Company in writing from time to time, the principal sum of $[_______] in lawful money of the United States of America on November 29, 2013 (the “Maturity Date”), with interest thereon at the rate of 9% per annum as provided herein. All interest shall be calculated on the basis of a 365-day year counting the actual days elapsed.

1. Payment Terms

(a) The Company promises to pay interest (“Interest”) on the outstanding principal amount of this Note at the rate of nine percent (9%) per annum. The principal of this Note and any accrued and unpaid Interest shall be due on the Maturity Date.

(c) In consideration for making this Note, the Company shall pay to Payee a fee equal to ten percent (10%) of the original principal amount of this Note on the Maturity Date or in accordance with any prepayment of this Note (the “Lender Fee”).

2. Conversion of Notes. This Note shall be convertible into shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), on the terms and conditions set forth in this Section 2.

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(a) Optional Conversion Right. Subject to the provisions of Section 2(c), at any time or times during the period beginning on the date hereof and ending on the Maturity Date, the Payee shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and non-assessable shares of Common Stock in accordance with Section 2(c), at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

(b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 2(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”). “Conversion Amount” means the portion of the unpaid principal, Interest, and Lender Fee to be converted, redeemed or otherwise with respect to which this determination is being made. “Conversion Price” means, as of any Conversion Date or other date of determination, $1.00, subject to adjustment as provided herein.

(c) Mechanics of Conversion. To convert any Conversion Amount into shares of Common Stock, the Payee (A) shall transmit by facsimile (or otherwise deliver), for receipt on or prior to 11:59 a.m. on the Maturity Date, or if earlier, within three days of receiving notice of an intent to prepay from the Company, New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”) to the Company and (B) surrender this Note on the same day on which the Conversion Notice is delivered to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction) (the date on which the Conversion Notice and Note referred to in (A) and (B) are received being the “Conversion Date”). On or before the second (2nd) business day following the Conversion Date, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Conversion Notice to the Payee and the Company’s transfer agent (the “Transfer Agent”). On or before the tenth (10th) business day following the date of receipt of a Conversion Notice and this Note (or indemnification undertaking) (the “Share Delivery Date”), the Company shall issue and deliver the number of shares of Common Stock to which the Payee shall be entitled. If this Note is physically surrendered for conversion (or indemnification undertaking is delivered) and the outstanding principal, Interest, and/or Lender Fee of this Note is greater than the principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than ten (10) business days after receipt of this Note (or indemnification undertaking) and at its own expense, issue and deliver to the Payee (or its designee) (i) a new Note representing the outstanding amount not converted, or (ii) if the Conversion Notice is received within ten (10) days prior to the Maturity Date, pay the remaining balance due on this Note after deducting the Conversion Amount as set forth in the Conversion Notice.

(d) Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to the Payee within ten (10) business days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise) and this Note (or indemnification undertaking), the number of shares of Common Stock to which the Payee is entitled and register such shares of Common Stock on the Company’s share register for such number of shares of Common Stock upon Payee’s conversion of any Conversion Amount (a “Conversion Failure”), then, in addition to all other remedies available to the Payee, the Payee, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned (as the case may be) any portion of this Note that has not been converted pursuant to such Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to the terms of this Note.

(e) Registration; Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of principal and Interest hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by a holder and delivery for cancellation and reissuance of the Note, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 7. The Company shall maintain records showing the amounts converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be).

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(f) Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company shall convert from each holder of Notes electing to have Notes converted on such date a pro rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to the holder in connection with a conversion of this Note, the Company shall issue to such holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with the provisions of this Note.

(g) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company shall at any time or from time to time effect a subdivision (by any stock split or otherwise) of the outstanding Common Stock into a greater number of shares, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time combine (by reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately before the combination shall be proportionately increased. Any preceding adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

(h) Adjustments for Mergers or Reorganizations, etc. If at any time there shall occur any reclassification, reorganization, recapitalization, consolidation, sale of all or substantially all of the Company’s assets, property or business, or any merger involving the Company, in each case in which the Common Stock is converted into or exchanged for securities (including warrants or other subscription or purchase rights), cash or other property, or pursuant to which any such securities, cash or other property is to be received by or distributed to the holders of Common Stock of the Company (other than a transaction covered by Sections 2(g)) (each, a “Reorganization Event”), then, following any such Reorganization Event, and without payment by the Payee of any additional consideration thereof, the Payee shall receive upon the exercise hereof the kind and amount of securities, cash or other property which the Payee would have been entitled to receive if, immediately prior to such Reorganization Event, the Payee had held the number of shares of Common Stock subject to this Note, giving application to all adjustments called for during such period under this Note with respect to the rights of the Payee. The Company shall not effect any Reorganization Event unless, prior to the consummation thereof, the successor or surviving entity (if other than the Company) and, if an entity different from the successor or surviving entity, the entity whose stock, securities, assets or other property the holders of Common Stock are entitled to receive as a result of such Reorganization Event, assumes by written instrument (A) the obligations to deliver to the Payee such shares of stock, securities, assets or other property as, in accordance with the foregoing provisions, the Payee may be entitled to acquire and (B) the due and punctual observance and performance of each and every covenant and condition contained in this Note to be performed and observed by the Company and all the obligations and liabilities hereunder, in order to provide for adjustments of shares of the Common Stock into which this Note is convertible which shall be as nearly equivalent as practicable to the adjustments provided for in Section 2. The foregoing provisions shall similarly apply to successive Reorganization Events and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Note. If the per share consideration payable to the holder hereof for shares of Common Stock in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined reasonably and in good faith by the board of directors of the Company. In all events, appropriate adjustment (as determined reasonably and in good faith by the board of directors of the Company) shall be made in the application of the provisions of this Note with respect to the rights and interests of the Payee after the transaction, to the end that the provisions of this Note shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Note. Notwithstanding any other provision to the contrary herein, in no event shall any transaction or other event associated with the Merger Agreement (as defined below) be construed to be a Reorganization Event.

(i) Other Adjustments; Deemed Purchase Price. If at any time or from time to time the Company shall take any action in respect of its Common Stock, other than an action described in Section 2, then, unless such action will not have a materially adverse effect upon the rights of Payee, the Conversion Price shall be adjusted in such manner as may be equitable in the circumstances, such adjustment to be determined by the Company’s board of directors in its sole and absolute discretion.

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(j) Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time, the Common Stock issuable upon exercise of this Note is changed into the same or a different number of shares of any class or classes of stock, this Note will thereafter represent the right to acquire such number and kind of securities as would have been issuable as a result of exercise of this Note and the Conversion Price therefor shall be appropriately adjusted, such adjustment to be determined by the Company’s board of directors in its sole and absolute discretion, all subject to further adjustment in this Section 2.

(k) Certain Limitations. The Company will take no action to increase the par value of the Common Stock to an amount in excess of the Conversion Price, including entering into any transaction which, by reason of any adjustment hereunder, would cause the Conversion Price to be less than the par value per share of Common Stock, and the Company will not enter into any agreements inconsistent with the rights of the Payee hereunder.

(l) Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of the Conversion Price provided for in Section 2:

(i) When Adjustments to Be Made. The adjustments required by Section 2 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 2(g)) up to, but not beyond, the date of conversion if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock into which this Note is convertible immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 2 and not previously made, would result in a minimum adjustment or on the date of exercise, whichever is earlier.

(ii) Fractional Interests. In computing adjustments under this Section 2, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share.

(m) Additional Common Stock. As additional consideration for making this Note, subject to the prior occurrence of the Preferred Conversion, the Company shall issue to the Payee [________] shares of Common Stock, subject to adjustment consistent with Section 2(g), within ten (10) business days of the earlier of the following occurrences: (i) the Maturity Date or (ii) the date on which the Company receives a Conversion Notice and other documents referred to herein such that the Company no longer owes any amounts of principal, Interest, or Lender Fees hereunder.

3. Security. This Note shall be unsecured.

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(e) the admission by the Company of its inability to pay its debts as they mature, or an assignment for the benefit of the creditors of the Company.

5. Waiver.

8. Miscellaneous

(b) Subject to Section 7, the covenants, terms, and conditions contained in this Note apply to and bind the heirs, successors, executors, administrators and assigns of the parties.

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Payee: [________________]

[________________]

Company: True Drinks Holdings, Inc.

18552 MacArthur Boulevard, Suite 325

Irvine, California 92612

Telephone: (949) 203-3500

Attention: Dan Kerker, CFO

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Note as of the date first set forth above.

BORROWER:

TRUE DRINKS HOLDINGS, INC.


By:
	Dan Kerker
	CFO

	ACKNOWLEDGED:

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Exhibit A

Notice of Conversion

-8-

TRUE DRINKS HOLDINGS, INC.

CONVERSION NOTICE

Reference is made to the Senior Convertible Note (the “Note”) issued to the undersigned by True Drinks Holdings, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, par value $0.001 per share (the “Common Stock”), of the Company, as of the date specified below.

Date of Conversion: ________________________________________________________

Aggregate Conversion Amount to be converted: ___________________________________

Please confirm the following information:

Conversion Price: ___________________________________________________________

Number of shares of Common Stock to be issued: ____________________________________

Please issue the Common Stock into which the Note is being converted in the following name and to the following address:

Issue to: __________________________________________________________________

__________________________________________________________________________

Facsimile Number: ___________________________________________________________

Authorization: ______________________________________________________________

By: __________________________________________________________________

Title: __________________________________________________________

Dated: ___________________________________________________________________________

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ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs ____________________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, from the Company and acknowledged and agreed to by _________________________.

TRUE DRINKS HOLDINGS, INC.

By: ________________________

Name:

Title:

EX-10.3 4 ex10-3.htm FORM OF FIVE-YEAR WARRANT ex10-3.htm

Exhibit 10.3

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUED UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

TRUE DRINKS HOLDINGS, INC.

FIVE-YEAR WARRANT

TO PURCHASE

[____________] SHARES

OF COMMON STOCK

Warrant No.: ___ Date of Issuance: April __, 2013

FOR VALUE RECEIVED, TRUE DRINKS HOLDINGS, INC., a Nevada corporation (together with its successors and assigns, the “Company”), hereby certifies that, ___________ or its Permitted Transferees (as hereinafter defined) (the “Holder”), is entitled to purchase from the Company up to a total of _________ (____) shares of common stock, $0.001 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, collectively, the “Warrant Shares”) at an initial exercise price of $1.10 per share of Common Stock (as adjusted from time to time as provided in Section 7 hereof, the “Exercise Price”), at any time and from the date hereof until it expires at 5:00 p.m., Eastern time, on the fifth (5th) anniversary of this Warrant (the “Expiration Date”), and subject to the following terms and conditions. The term “Common Stock,” as used herein shall include, unless the context otherwise requires, the stock and other securities and property at the time receivable upon the exercise of this Warrant. The term “Warrants,” as used herein, shall mean this Warrant and any other Warrants delivered in substitution or exchange therefor as provided herein.

This Warrant is issued pursuant to that certain Senior Note (the “Note”), dated May ___, 2013, by and between the Company and the holder identified therein.

1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Note.

2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3. List of Transfers; Restrictions on Transfer.

(a) This Warrant and the Warrant Shares are subject to the restrictions on transfer set forth in this Section 3. The Holder agrees that it will only sell or otherwise transfer this Warrant and any Warrant Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom.

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(b) The Company shall register any such transfer and/or assignment, made in accordance with the terms hereof, of any portion of this Warrant to one or more Persons (each a “Permitted Transferee”) of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant to the Company at its address set forth herein, with the Form of Assignment attached hereto as Exhibit B, duly completed and signed. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred, shall be issued to the Permitted Transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the Permitted Transferee thereof shall be deemed the acceptance by such Permitted Transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant. For the purposes hereof, the term “Person” means an individual, entity, corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust or unincorporated organization.

(c) In the event that a registration statement covering the Warrant Shares is not effective at any time that this Warrant is exercised, (i) the Warrant Shares issuable upon such exercise shall be “restricted securities,” and (ii) the stock certificate evidencing the Warrant Shares shall bear a restrictive legend referring to the Securities Act of 1933, as amended (the “1933 Act”), in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT.

(d) The legend referred to in Section 3(c) above and the stock transfer instructions and record notations with respect to such restricted securities shall be removed and the Company shall issue a certificate without such legend to the Holder of such securities if (i) such securities are registered for resale under the 1933 Act or (ii) such Holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that a sale or transfer of such securities may be made without registration or qualification.

4. Exercise and Duration of Warrants.

(a) This Warrant shall be exercisable, in whole or in part, by the registered Holder at any time and from time to time on or after the date hereof until it expires at 5:00 p.m., Eastern time, on the Expiration Date.

(b) Mechanics of Exercise.

(i) Delivery of Exercise Notice and Payment. The Holder may exercise this Warrant by delivering to the Company at the address provided herein (i) an exercise notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised, which may take the form of a “cashless exercise” if so indicated in the Exercise Notice in accordance with Section 8 of this Warrant, and the date such items have been delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” This Warrant shall be deemed to have been exercised on the Exercise Date. The Warrant Shares shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become for all purposes a holder of record of the Warrant Shares issuable to such Holder or other person pursuant to the Exercise Date. In no event is the Holder required to deliver a Warrant to effectuate an exercise of this Warrant.

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(ii) Delivery of Certificates Upon Exercise. Certificates for the Warrant Shares purchased pursuant to an Exercise Notice shall be transmitted by the Company’s transfer agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of such Warrant Shares to or resale of the Warrant Shares by the Holder and the Holder agrees in writing to make any resale of the Warrant Shares in accordance with such registration statement or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the address specified by the Holder in the Exercise Notice by the date (the “Warrant Share Delivery Date”) that is three (3) Trading Days after the Exercise Date. The term “Trading Day” shall mean a day that the OTCQB is open for trading for three or more hours, but shall exclude any day on which less than 1,000 shares of Common Stock are traded.

(iii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of such Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(iv) Failure to Deliver Certificates. If, in the case of any Exercise Notice, such certificate or certificates for Warrant Shares issuable pursuant to such Exercise Notice are not delivered to or as directed by the applicable Holder by the Warrant Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Exercise Notice, in which event the Company shall promptly return to the Holder any Warrant certificate delivered to the Company by such Holder and the Holder shall promptly return to the Company any Common Stock certificates issued to such Holder pursuant to the rescinded Exercise Notice.

(v) Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Warrant Shares upon conversion of this Warrant in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to such Holder in connection with the issuance of such Warrant Shares. In the event a Holder shall elect to convert this Warrant into all or any portion of the shares of Common Stock issuable pursuant to this Warrant, the Company may not refuse to exercise this Warrant based on any claim that such Holder or any Person associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining exercise of all or part of this Warrant of such Holder shall have been sought and obtained, and the Company posts a surety bond for the benefit of such Holder in the amount of 200% of the payment to be provided by the Holder to the Company pursuant to such Exercise Notice or if Warrant Shares are issued by means of a cashless exercise, as if payment would have be made by the Holder to purchase the Warrant Shares, which bond shall remain in effect until the completion of arbitration/litigation (including, but not limited to, through any and all appeals process), of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue the Warrant Shares and, if applicable, cash, upon receipt of an Exercise Notice from a Holder pursuant hereto. If the Company fails to deliver to a Holder any certificate or certificates for Warrant Shares by the Warrant Share Delivery Date applicable to such Exercise Notice, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, $200 per Trading Day (increasing to $400 per Trading Day on the fifth (5th) Trading Day after such damages begin to accrue) for each Trading Day after the Warrant Share Delivery Date until such certificates (which must be unlegended if the Warrant Shares are registered for resale pursuant to an effective registration statement or eligible for resale without restrictions pursuant to Rule 144) are delivered or the Holder rescinds such Exercise Notice. Nothing herein shall limit a Holder’s right to pursue actual damages hereof for the Company’s failure to deliver Warrant Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

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(vi) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to a Holder the applicable certificate or certificates by the Warrant Share Delivery Date (a “Delivery Default”), and if after such Warrant Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Warrant Shares which such Holder was entitled to receive upon the conversion relating to such Warrant Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount, if any, by which (x) such Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the exercise at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) a Warrant to purchase such number of shares of Common Stock as submitted for exercise in the Exercise Notice in question (in which case, such exercise shall be deemed rescinded) or deliver to such Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements herein. For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of the Warrant with respect to which the actual sale price of the Warrant Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay such Holder $1,000. The Holder shall provide to the Company written notice indicating the amounts payable to such Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, in law or equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of all or any portion of this Warrant as required pursuant to the terms hereof.

(c) Exercise Disputes. In the case of any dispute with respect to, among other items related to this Warrant, the number of Warrant Shares to be issued upon exercise of this Warrant, the calculations and/or entries set forth on the Exercise Notice shall control in the absence of manifest or mathematical error.

5. Charges, Taxes and Expenses. Issuance and delivery of certificates for Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liabilities that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

6. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, two hundred (200%) percent of the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (after giving effect to the adjustments and restrictions of Section 7, if any). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed.

7. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 7.

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(a) Adjustment for Dividends in Other Stock and Property Reclassifications. In case at any time or from time to time after the date of the original issuance of this Warrant pursuant to the Note (the “Original Issuance Date”) and before the Expiration Date, the holders of the Common Stock shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor,

(i) other or additional stock or other securities or property (other than cash) by way of dividend,

(ii) any cash or other property paid or payable out of any source other than retained earnings (determined in accordance with generally accepted accounting principles), or

(iii) other or additional stock or other securities or property (including cash) by way of stock-split, spin-off, reclassification, combination of shares or similar corporate rearrangement (other than (x) additional shares of Common Stock or any other stock or securities into which such Common Stock shall have been changed, (y) any other stock or securities convertible into or exchangeable for such Common Stock or such other stock or securities or (z) any stock purchase rights, issued as a stock dividend or stock-split, adjustments in respect of which shall be covered by the terms of Section 7 (c) or Section 7 (d) or Section 7(e)),

then and in each such case, a Holder, upon any conversion of this Warrant (or any portion hereof), shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in clauses (i) and (ii) above) which such Holder would have been entitled to receive had such Holder been the holder of record, on the date of any such issuances described in clauses (i), (ii) or (iii), of the number of shares of Common Stock into which this Warrant (or any portion thereof) is being converted, giving effect to all adjustments called for during such period by Section 7 (a) and Section 7 (b).

(b) Adjustment for Reorganization, Consolidation and Merger. In case of any reorganization of the Company after the Original Issuance Date and before the Expiration Date, the Company (or any such other corporation) shall consolidate with or merge into another corporation or entity or convey all or substantially all its assets to another corporation or entity (any such reorganization or other event hereafter being referred to as a “Reorganization”), then and in each such case this Warrant (or any portion thereof), upon conversion, as and at any time after the consummation of such Reorganization, shall be converted into, in lieu of the stock or other securities and property into which this Warrant (or any portion thereof) would have been convertible prior to such Reorganization, such stock or other securities or property to which this Warrant (or any portion thereof) would have converted if they had been converted immediately prior to any such Reorganization, subject to further adjustment as provided in this Section 7.

(c) Adjustment for Certain Dividends and Distributions. If the Company at any time, or from time to time, makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event, the Exercise Price then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Exercise Price then in effect by a fraction (A) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (B) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date as the case may be, plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Exercise Price shall be recomputed accordingly as of the close of business on such record date, and thereafter the Exercise Price shall be adjusted pursuant to this Section 7 (c) as of the time of actual payment of such dividends or distributions.

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(d) Stock Split and Reverse Stock Split. If the Company at any time, or from time to time, effects a stock split or subdivision of the outstanding Common Stock, the Exercise Price then in effect immediately before that stock split or subdivision shall be proportionately reduced. If the Company at any time, or from time to time, effects a reverse stock split or combines the outstanding shares of Common Stock into a smaller number of shares, the Exercise Price then in effect immediately before that reverse stock split or combination shall be proportionately increased. Each adjustment under this Section 7 (d) shall become effective at the close of business on the date the stock split, subdivision, reverse stock split or combination becomes effective.

(e) Sale of Shares below Exercise Price. Subject to the exceptions set forth in Section 7 (e)(iii), commencing on the Original Issuance Date and terminating on the Expiration Date, if the Company at any time, or from time to time, issues or sells, or is deemed by the provisions of this Section 7(e) to have issued or sold, Additional Shares of Common Stock (as hereinafter defined), for an Effective Price (as hereinafter defined) that is less than the then existing Exercise Price, then and in each such case the then existing Exercise Price shall be reduced, as of the opening of business on the date of such issue or sale, concurrently with such issuance of Additional Shares of Common Stock (a “Diluting Issuance”), to the Effective Price of the Additional Shares of Common Stock sold (or deemed sold) that gave rise to an adjustment in the Exercise Price pursuant to this Section 7(e).

(i) For the purpose of making any adjustment required under this Section 7 (e), the consideration received by the Company for any issue or sale of securities shall (i) to the extent it consists of cash be computed at the amount of cash received by the Company, (ii) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Company’s board of directors (the “Board”), (iii) if Additional Shares of Common Stock, Convertible Securities (as hereinafter defined) or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options, and (iv) be computed after reduction for all expenses payable by the Company in connection with such issue or sale.

(ii) For the purpose of the adjustment required under this Section 7 (e), if the Company issues or sells any rights, warrants and/or options for the purchase of, or stock or other securities convertible into or exchangeable for, Additional Shares of Common Stock (such convertible or exchangeable stock or securities being hereinafter referred to as “Convertible Securities”) and if the Effective Price of such Additional Shares of Common Stock is less than the Exercise Price then in effect, then the Company shall be deemed to have issued at the time of the issuance of such rights, warrants and/or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise, conversion or exchange thereof and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights, warrants and/or options or Convertible Securities, plus, in the case of such rights or options, the minimum amounts of consideration, if any, payable (or in the event of such rights or options containing a cashless exercise feature, the minimum amounts of consideration the Company would have otherwise received in the absence of such feature) to the Company upon the exercise of such rights, warrants and/or options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion or exchange thereof.

(iii) “Additional Shares of Common Stock” shall mean all securities issued by the Company on or after the Original Issuance Date, whether or not subsequently reacquired or retired by the Company other than (A) shares of Common Stock issuable upon exercise of any Warrants issued by the Company to purchasers of the Notes, (B) shares of Common Stock issuable upon exercise of warrants and/or options prior to the Original Issuance Date, (C) shares of Common Stock issued pursuant to any employee stock option plan adopted by the Board of and the shareholders of the Company or previously granted to officers and/or directors of the Company, or (D) shares of Common Stock issued in consideration with a merger, acquisition and/or reorganization provided any such transaction is with a non-affiliated third party and is approved by the unanimous written consent of the Board.

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(iv) The “Effective Price” of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 7 (e), into the aggregate consideration received, or deemed to have been received, by the Company for such issue under this Section 7 (e), for such Additional Shares of Common Stock.

(v) Reductions in Price of Outstanding Securities. Other than a reduction pursuant to its applicable provisions under this Section 7 (e), any reduction in the conversion price of any Convertible Security, whether outstanding on the Original Issuance Date or thereafter, or the subscription price of any option, warrant or right to purchase Common Stock or any Convertible Security (whether such option, warrant or right is outstanding on the Original Issuance Date or thereafter), to an Effective Price less than the Fair Market Value (as defined below) or the then applicable conversion price shall be deemed to be an issuance of such Convertible Security and the issuance of all such options, warrants or subscription rights, and the provisions of Section 7 (e) shall apply thereto mutatis mutandis.

(vi) “Fair Market Value” shall mean, as of any date: (i) if shares of the Common Stock are listed on a national securities exchange, the average of the closing prices as reported for composite transactions during the ten (10) consecutive Trading Days preceding the Trading Day immediately prior to such date or, if no sale occurred on a Trading Day, then the mean between the closing bid and ask prices on such exchange on such Trading Day; (ii) if shares of the Common Stock are not so listed but are traded on the OTCQB, the average of the highest reported bid and lowest reported asked prices as reported by the OTCQB or the National Quotations Bureau, as the case may be; or (iii) if the shares of the Common Stock are not then publicly traded, the fair market price of the Common Stock as determined in good faith by the Holders owning no less than 67% of Warrant Shares issuable upon exercise of then issued and outstanding Warrants.

(f) Certain Record Dates. In case the Company shall take a record of the holders of shares of its stock of any class for the purpose of entitling them (a) to receive a dividend or a distribution payable in Common Stock or in Convertible Securities, or (b) to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the Additional Shares of Common Stock issued or sold or deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution, or the date of the granting of such rights of subscription, purchase or other acquisition, as the case may be.

(g) No Adjustment in Certain Circumstances. No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least $.005 in such price; provided, however, that any adjustments which by reason of this Section 7 are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, and shall be subject to any proportionate adjustments as contemplated under Section 7(d).

(h) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 7 and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Holders of the Warrants against impairment.

(i) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Exercise Price pursuant to this Section 7, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of any Warrants a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of any Holder of any Warrants, furnish or cause to be furnished to such holder a like certificate setting forth (a) such adjustments and readjustments, (b) the Exercise Price at the time in effect, and (c) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the exercise of the Warrants held by the Holder.

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(j) Stock Purchase Rights. If at any time, or from time to time, the Company grants or issues to the record holders of the Common Stock any options, warrants or rights (collectively, “Stock Purchase Rights”) entitling any holder of Common Stock to purchase Common Stock or any security convertible into or exchangeable for Common Stock or to purchase any other stock or securities of the Company, the Holders of Warrants shall be entitled to acquire, upon the terms applicable to such Stock Purchase Rights, the aggregate Stock Purchase Rights which such Holders of Warrants could have acquired if they had been the record holder of the maximum number of shares of Common Stock issuable upon conversion of their Warrants on both (x) the record date for such grant or issuance of such Stock Purchase Rights, and (y) the date of the grant or issuance of such Stock Purchase Rights.

(k) Fundamental Transaction. If, at any time while any Warrants are outstanding, (A) the Company effects any merger, consolidation or similar transaction of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”), then, upon any exercise of this Warrant, the Holder shall have the right to receive, for each share of Common Stock that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring Person or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation, or disposition of assets or other similar transaction by a holder of the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such event. For purposes of any such exercise, the determination of the conversion price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving Person to comply with the provisions of this Section 7 and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

(l) Adjustment for Default. In addition to any other rights available to the Holder, if the Company at any time, or from time to time, commits a Delivery Default, defaults on any obligation under the Note or this Warrant, , then the Exercise Price then in effect shall be decreased to the lower of (i) $0.55 per share of Common Stock or (ii) the VWAP (as defined below) for the ten (10) Trading Day period ending on the date of such default.

8. Payment of Exercise Price. The Holder shall satisfy its obligation to pay the Exercise Price by either (i) payment by check, in immediately available funds or in any other reasonable method (a “cash exercise”), or (ii) provided that at the time of exercise of this Warrant no registration statement covering the resale of the Warrant Shares to be issued shall be effective, a “cashless exercise” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

	X = Y [(A-B)/A]
where:
	X = the number of Warrant Shares to be issued to the Holder.

	Y = the number of Warrant Shares with respect to which this Warrant is being exercised (prior to cashless exercise).

	A = the VWAP for the ten (10) Trading Days immediately prior to (but not including) the Exercise Date.

	B = the Exercise Price.

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For the purposes hereof, the term “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded, but shall exclude any day on which less than 1,000 shares of Common Stock are traded.

For purposes of this Section 8, “VWAP” means the volume weighted average of the VWADP (defined hereafter) of the Common Stock for the applicable number of consecutive Trading Days as provided elsewhere herein (the “Trading Period”), determined as follows:

(1) The percentage of the total trading volume for the entire Trading Period being so calculated for each Trading Day, during the applicable Trading Period, by dividing the number of shares traded on each such Trading Day by the total trading volume for the entire Trading Period (the “Trading Day Volume Percentage”);

(2) Next, the Trading Day Volume Percentage for each Trading Day is multiplied by the applicable VWADP for each such Trading Day resulting in the Trading Day Weighted Daily Price (the “TDWDP”); and

(3) The VWAP is then computed by obtaining the sum of the TDWDP for all of the Trading Days during the Trading Period.

(A) “VWADP” shall mean the price determined by the first of the following clauses which applies: (i) the daily volume weighted average of the Common Stock for such date on the OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg (based on a Trading Day) from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time); (ii) the average of the highest bid price and the lowest ask price of any market makers for such security as reported in the OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg (based on a Trading Day) from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time); or (iii) the value of such security as mutually agreed upon in good faith by Holders owning no less than 67% of the aggregate value of all Warrants then outstanding and the Company, provided that if such agreement cannot be made no later than five (5) Trading Days following the date such VWADP must be determined as provided herein, the VWADP shall be determined in good faith by Holders owning no less than 67% of the aggregate value of all Warrants then outstanding. For purposes of determining VWADP, the Company shall rely on the information provided by the Holders, which absent manifest error shall be binding. Any claim of manifest error by the Company must be made no later than five (5) Trading Days after VWADP is determined by the Holders and provided to the Company.

For purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued (provided the Securities and Exchange Commission continues to take the position that such treatment is proper at the time of such exercise).

9. Limitation on Exercise.

(a) Other than as provided elsewhere in this Section 9 (a), at no time may a Holder of this Warrant exercise this Warrant if the number of Warrant Shares to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock beneficially owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning more than 4.99% of all of the Common Stock outstanding at such time; provided, however, that upon a Holder providing the Company with sixty-one (61) days notice (the “4.99% Waiver Notice”) that such Holder would like to waive this Section 9 (a) with regard to any or all shares of the Warrant Shares issuable upon exercise of this Warrant, this Section 9 (a) shall be of no force or effect with regard to those Warrant Shares referenced in the 4.99% Waiver Notice.

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(b) Other than as provided elsewhere in this Section 9 (b), at no time may a Holder of this Warrant exercise this Warrant if the number of Warrant Shares to be issued pursuant to such exercise would exceed, when aggregated with all other shares of Common Stock beneficially owned by such Holder at such time, the number of shares of Common Stock which would result in such Holder beneficially owning in excess of 9.99% of all of the Common Stock outstanding at such time; provided, however, that upon a Holder providing the Company with sixty-one (61) days notice (the “9.99% Waiver Notice”) that such Holder would like to waive this Section 9 (b) with regard to any or all shares of the Warrant Shares issuable upon exercise of this Warrant, this Section 9 (b) shall be of no force or effect with regard to those Warrant Shares referenced in the 9.99% Waiver Notice.

10. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant, but shall instead round each fractional share up to another whole share.

11. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified below prior to 5:00 p.m. (New York City time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified below on a day that is not a Business Day or later than 5:00 p.m. (New York City time) on a Business Day, (iii) the Business Day following the date of mailing if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses and facsimile numbers for such communications shall be:

If to the Company:

True Drinks Holdings, Inc.

18552 MacArthur Boulevard

Suite 325

Irvine, CA 91612

Telephone: (949) 203-3500

Fax No: 949-825-5995

Attention: Dan Kerker

If to the Holder:

[______________________________]

Telephone:_____________

Facsimile:______________

Attention:______________

or to such other address, email, facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. As used herein, the term “Business Day” shall mean any day other than (a) a Saturday or Sunday and (b) any day on which banks are required or permitted to be closed in New York, New York. All references to “days” shall mean calendar days unless otherwise stated.

12. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation and/or other entity into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

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13. Automatic Conversion upon Expiration. In the event that, upon the Expiration Date, the closing price per share of Common Stock (or other security issuable upon the exercise hereof) is greater than the Exercise Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted on a cashless exercise basis pursuant to Section 8 hereof as to all Warrant Shares (or such other securities) for which it shall not previously have been exercised. Upon surrender of this Warrant, the Company shall promptly deliver a certificate representing the Warrant Shares (or such other securities) issued upon such conversion to the Holder.

14. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it (in the exercise of reasonable discretion) of the ownership of and the loss, theft, destruction or mutilation of any Warrant and (in the case of mutilation) upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant of like tenor.

15. Miscellaneous.

(a) Assignment; Binding Agreement. Subject to the restrictions on transfer set forth in Section 3, this Warrant may be transferred or assigned by the Holder to a Permitted Transferee pursuant to Section 3 provided, that, among other things, the Permitted Transferee covenants to be bound by the terms hereof. This Warrant may not be assigned by the Company, except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.

(b) No Interference. The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, seek to call or redeem this Warrant or avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Holder against dilution or other impairment. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, (ii) will take all such action as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares, free from all taxes, liens, security interests, encumbrances, preemptive or similar rights and charges of stockholders (other than those imposed by the Holders), on the exercise of the Warrant, and (iii) will not close its stockholder books or records in any manner which interferes with the timely exercise of this Warrant.

(c) Remedies; Specific Performance. The Company acknowledges and agrees that there would be no adequate remedy at law to the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or omission by the Holder hereof in exercising any right or remedy accruing upon any such breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

(d) Amendments and Waivers. No terms of this Warrant may be amended, waived or modified except by the express written consent of the Company and the Holder.

-11-

(e) Governing Law; Venue; Waiver Of Jury Trial, Etc. This Warrant shall be governed by and construed solely and exclusively under and pursuant to the laws of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York. Each of the parties hereto expressly and irrevocably (1) agree that any legal suit, action or proceeding arising out of or relating to this Warrant will be instituted exclusively in either the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (2) waive any objection they may have now or hereafter to the venue of any such suit, action or proceeding, and (3) consent to the in personam jurisdiction of either the New York State Supreme Court, County of New York, or the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the parties hereto further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in either the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon it mailed by certified mail to its address herein will be deemed in every respect effective service of process upon it, in any such suit, action or proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS WARRANT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. THE PARTY PREVAILING THEREIN SHALL BE ENTITLED TO PAYMENT FROM THE OTHER PARTY HERETO OF ALL OF ITS REASONABLE COUNSEL FEES AND DISBURSEMENTS.

(f) Headings The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(g) Partial Invalidity. In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

16. Failure to Pay. Notwithstanding anything to the contrary provided herein or elsewhere, if any payment hereunder or elsewhere is due to a Holder, and such payment is not made (even if a payment is not permitted to be paid because insufficient capital is available under applicable law to make such payment), interest on such payment (in addition to any other interest and/or penalties that become due), shall accrue at the rate of the lesser of (i) 17% per annum, and (ii) the maximum amount permitted by applicable law, and all interest shall accumulate daily until all payments are made, including interest and penalties. Nothing in this Section 16 shall be deemed to constitute a waiver and/or election of remedies by a Holder, all of which other remedies a Holder reserves its rights to pursue, whether in law or equity.

17. Counterparts. This Warrant may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or a signature transmitted by email shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or emailed signature.

[Signature Page Follows]

-12-

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

TRUE DRINKS HOLDINGS, INC.

By:

Name:

Title:

[PURCHASER’S NAME]

By:_________________________

Name:

Title:

-13-

EXHIBIT A

FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To: TRUE DRINKS HOLDINGS, INC.

The undersigned is the Holder of Warrant No. _______ (the “Warrant”) issued by True Drinks Holdings, Inc., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

(a)	The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.

(b)	The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

(c)	The Holder shall make Payment of the Exercise Price as follows (check one):

______ “Cash Exercise” under Section 8

______ “Cashless Exercise” under Section 8

(d)	If the holder is making a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

(e)	Pursuant to this exercise, the Company shall deliver to the holder ______________ Warrant Shares in accordance with the terms of the Warrant.

(f)	Following this exercise, the Warrant shall be exercisable to purchase a remaining total of ______________ Warrant Shares.

(g)

Notwithstanding anything to the contrary contained herein, this Exercise Notice shall constitute a representation by the Holder that, after giving effect to the exercise provided for in this Exercise Notice, the Holder (together with its affiliates) will not have beneficial ownership (together with the beneficial ownership of such Person’s affiliates) of a number of shares of Common Stock which exceeds the Maximum Percentage of the total outstanding shares of Common Stock as determined pursuant to the provisions of Section 9 of the Warrant.

(h)	The Holder represents that, as of the date of exercise:

i.	the Warrant Shares being purchased pursuant to this Exercise Notice are being acquired solely for the Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale; and

ii.	the Holder is an “accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the 1933 Act.

(i)

If the Holder cannot make the representations required in Section (h), above, because any such representation would be factually incorrect, it shall be a condition to the exercise of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the issuance of securities upon exercise of this Warrant shall not violate any United States or other applicable securities laws.

Dated: ,
		(Print name of the warrant holder)

		(Signature) (Signature must conform in all respects to name of holder as specified on the face of the Warrant)

		(Name and title of signatory, if applicable)
		Address: _______________________________ _______________________________

-14-

EXHIBIT B

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of True Drinks Holdings, Inc. to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of True Drinks Holdings, Inc. with full power of substitution in the premises.

The undersigned transferee agrees to be bound by the covenants of the Holder during the term of the Warrant.

The undersigned transferee agrees, represents and warrants that:

i.	the Warrant being purchased pursuant to this Assignment is being acquired solely for the transferee’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale; and

ii.	the undersigned transferee is an “accredited investor” as such term is defined in Rule501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the 1933 Act.

If the undersigned transferee cannot make the representations required in clause (ii) above because any such representation would be factually incorrect, it shall be a condition to the transfer of the Warrant that the Company receive such other representations as the Company considers necessary, acting reasonably, to assure the Company that the transfer of this Warrant shall not violate any United States or other applicable securities laws.

Dated: ______________, ____

TRANSFEROR	TRANSFEREE
______________________________________ (Print name of Transferor)	______________________________________ (Print name of Transferee)
______________________________________ (Signature of Transferor)	______________________________________ (Signature of Transferee)
______________________________________ (Print name of signatory, if applicable)	______________________________________ (Print name of signatory, if applicable)
______________________________________ (Print title of signatory, if applicable)	______________________________________ (Print title of signatory, if applicable)
Address: ______________________________________ ______________________________________	Address: ______________________________________ ______________________________________

EX-31.1 5 ex31-1.htm ex31-1.htm

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Lance Leonard, certify that:

1. I have reviewed this quarterly report on Form 10-Q of True Drinks Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2013

	/s/ Lance Leonard
	Lance Leonard
	Chief Executive Officer

EX-31.2 6 ex31-2.htm ex31-2.htm

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Dan Kerker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of True Drinks Holdings, Inc.;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2013

	/s/ Dan Kerker
	Dan Kerker
	Chief Financial Officer and Principal Accounting Officer

EX-32.1 7 ex32-1.htm ex32-1.htm

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of True Drinks Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lance Leonard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Lance Leonard
	Lance Leonard
	Chief Executive Officer

May 15, 2013

EX-32.2 8 ex32-2.htm ex32-2.htm

Exhibit 32.2

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of True Drinks Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dan Kerker, Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Dan Kerker
	Dan Kerker
	Chief Financial Officer and Principal Accounting Officer

May 15, 2013

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The Company has reviewed all recently issued, but not yet effective accounting pronouncements and has concluded that there are no recently issued, but not yet effective pronouncements that may have a material impact on the Companys future financial statements.

Research and development costs are expensed as incurred.

Loss per common share was computed using the weighted average number of shares of common stock outstanding during the period. Not used in the computation since their effect would be antidilutive were 1,686,000 shares of convertible notes payable, 980,039 Common Stock purchase warrants and 3,870,389 Common Stock options for a total of 26,536,428 shares.   Weighted average common shares outstanding retrospectively reflect the 100 to 1 reverse split in January 2013 as if such split occurred on January 19, 2012 (inception).  Also reflected from inception is the conversion of common shares outstanding at a 1,638 to 1 conversion ratio reflecting the conversion of common shares to preferred shares in October 2012 and then conversion to common shares in January 2013.

Total stock-based compensation expense, for all of the Companys stock-based awards recognized for the three months ended March 31, 2013 was $436,403.    The Company uses a Black-Scholes option-pricing model (the Black-Scholes Model) to estimate the fair value of the stock option and warrants.  The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs.  Expected volatility is calculated based on the historical volatility of the Companys stock price over the contractual term of the option.  The expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior.  Currently it is based on the simplified approach provided by SAB 107.  The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant (see Note 3, Stock Options and Warrants).

For the quarters ended March 31, 2013 and 2012, the Company incurred tax net operating losses, and accordingly, had no income tax provision.  At March 31, 2013, the Company had tax net operating loss carryforwards and a related deferred tax asset, which had a full valuation allowance.

Goodwill represents the future economic benefits arising from other assets acquired that are individually identified and separately recognized.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually.

Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Companys products, customer list, and the estimated value of GT Beverage Company, LLCs interlocking spherical bottle patent acquired on March 31, 2012.  The Companys intangible assets are amortized over their estimated remaining useful lives.  The Company evaluates the useful lives of its intangible assets annually and adjusts the lives according to the expected useful life.  No impairment was deemed necessary as of March 31, 2013.

The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset.  An impairment was not deemed necessary in the three months ended March 31, 2013.

Property and equipment are stated at cost.  The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years.  Property and equipment is not significant to the condensed consolidated financial statements as of or for the three months ended March 31, 2013.

Inventory is stated at the lower of cost or market on a FIFO (first-in first-out) basis.  Provisions are made to reduce excess or obsolete inventory to the estimated net realizable value.  The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement.    Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value.  Changes in economic conditions or customer demand could result in obsolete or slow moving inventory that cannot be sold or must be sold at reduced prices and could result in an inventory reserve.  No inventory reserves were considered necessary as of March 31, 2013.    Inventory is comprised of the following:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">December 31, 2012</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Purchased materials</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">345,879</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">473,383</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Finished goods</td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">183,790</td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">359,491</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Total</td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">529,669</td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">832,874</td> <td style="line-height: 115%"> </td></tr> </table>

The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company maintains the majority of its cash balances with two financial institutions.  There are no funds in excess of the federally insured amount of $250,000 through March 31, 2013, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal.    During 2012, the Company relied on one supplier for 100% of its purchases of AquaBall Naturally Flavored Water and Bazi® held for sale.  In the quarter ended March 31, 2013, the Company began production of AquaBall with a second supplier.  The Company owns the formula for both the AquaBall and Bazi®, and management believes that its purchasing requirements can be readily met from alternative sources.    A significant portion of our revenue comes from sales of the AquaBall Naturally Flavored Water.  For the quarter ended March 31, 2013, sales of AquaBall accounted for 65% of the Companys total revenue.  The remaining 35% was related to sales of Bazi® All Natural Energy.  The Company expects AquaBall to account for a much larger percentage of overall sales during the remainder of 2013.

We maintain an allowance for doubtful accounts, which is analyzed on a periodic basis to ensure that it is adequate to the best of managements knowledge.  Management develops an estimate of the allowance for doubtful accounts receivable based on its own judgment as to the likelihood of ultimate payment.  Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts.  The allowance for doubtful accounts was approximately $54,000 at March 31, 2013.

The Company has $81,008 in restricted cash with a financial institution securing a letter of credit.  The letter of credit matures in August 2015 and was issued as part of contractual obligations related to one of our licensing agreements with Disney Consumer Products, Inc.

In accordance with Staff Accounting Bulletin ("SAB") No. 104 Revenue Recognition in Financial Statements, revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, slotting fees, discounts and freight and handling charges. With approved credit, we provide wholesale customers payment terms of up to net 30 days. Amounts received for unshipped merchandise are recorded as customer deposits and are included in accrued expenses.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates.

The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Inc., Bazi, Inc. and GT Beverage Company, LLC.  All inter-company accounts and transactions have been eliminated in the preparation of these consolidated financial statements.

The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of March 31, 2013, for the three-month periods ended March 31, 2013 and 2012, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of True Drinks Holdings, Inc. as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on April 5, 2013.    The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.  As of and for the three months ended March 31, 2013, the Company incurred a net loss of $1,556,898, has negative working capital of $1,697,811, and an accumulated deficit of $4,676,241.  A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations.  These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable.  The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Overview    True Drinks, Inc. (the "Company", "us", "True Drinks" or "we") was formed on January 19, 2012 in Delaware to create and commercialize all-natural, vitamin-enhanced drinks.  Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles.  We distribute AquaBall nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online.  We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed through select retail channels, online, and through our existing database of customers.    On June 7, 2012, True Drinks, Inc., Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Bazi International, Inc., and Bazi International, Inc. entered into an agreement and tax-free plan of merger (the Merger Agreement), wherein Merger Sub merged with and into the Company and True Drinks continued as the surviving corporation (the "Merger").  As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company.  The Merger closed on October 15, 2012 (the Closing Date).  As a result of Merger, True Drinks, Inc.s former shareholders owned approximately 95.5% of the combined post-Merger entity via voting convertible preferred stock issued as part of the merger, on an as-converted basis (See Recent Developments below).  The Company subsequently changed its name from Bazi International, Inc. to True Drinks Holdings, Inc.  The Merger was accounted for as a public company reverse merger, and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. within the capital structure of Bazi International, Inc.    True Drinks, Inc. was formerly named GT Beverage Company, Inc., which was formed in January 2012 and acquired GT Beverage Company, LLC on March 31, 2012 in a business combination primarily to acquire the spherical bottle patent held by GT Beverage Company, LLC.  Subsequently as discussed above, GT Beverage Company, Inc. entered into a public company reverse merger with Bazi International, Inc. accounted for as a business combination, since Bazi International, Inc. was not a public shell as defined by rules of the Securities and Exchange Commission.  GT Beverage Company, Inc. took over the capital structure of Bazi International, Inc. and was renamed True Drinks, Inc.    Bazi International, Inc. was originally incorporated in the state of Nevada in January 2001.  True Drinks, Inc. (True Drinks), previously GT Beverage Company, Inc., is incorporated in the state of Delaware.    Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com.  Our common stock is currently listed for quotation on the Over-the-Counter Bulletin Board (OTCBB) under the symbol TRUU.   Developments During the Quarter    On January 18, 2013, we filed an amendment to our Articles of Incorporation (the Amendment) to (i) to change our name to True Drinks Holdings, Inc., (ii) increase the total number of authorized shares of common stock from 200,000,000 to 4,000,000,000 shares; and (iii) reverse split our common stock on the basis of one share for each 100 shares issued and outstanding (Reverse Split).  Accordingly, our authorized common stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding common stock decreased from 133,733,469 to 1,337,335 shares.  As a result of the Reverse Split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of public company reverse merger) to reflect the Reverse Split.    Upon the filing of the Amendment, the shares of Series A Preferred issued to former True Drinks shareholders automatically converted into approximately 25,304,017 post-split shares of our common stock.    The loss per common share and all other per-share disclosures in the accompanying financial statements of the Company and the related notes are based on the appropriate number of post-split common shares as adjusted for the Reverse Split.    On January 14, 2013, we entered into a Warrant Agreement (the Warrant Agreement) with Ashworth Holding, LLC, a Utah limited liability company (Ashworth), pursuant to which we granted Ashworth the option to purchase up to 860,086 shares of common stock for a price of $0.549 per share.  This warrant had an expiration date of April 30, 2013 or upon Ashworths full exercise of the warrant.  In May, 2013, the expiration date of the Warrant Agreement was extended through November 29, 2013 in connection with the concurrent extension by Ashworth Holdings, LLC of $500,000 of bridge loans which had a maturity date of April 30, 2013 to November 29, 2013.  The warrant was valued at $395,640 and was expensed during the quarter.

Inventory is comprised of the following:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">December 31, 2012</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Purchased materials</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">345,879</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">473,383</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Finished goods</td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">183,790</td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">359,491</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Total</td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">529,669</td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">832,874</td> <td style="line-height: 115%"> </td></tr> </table>

0.955

.09

0.12

.09

P3M28D

660000

389000

195000

600000

150000

180568

233927

69485

372661

5000 5000 5000 500000

180568

233927

69485

372661

25304017

On January 18, 2013, upon the filing of the Amendment to the Articles of Incorporation, the Company converted 1,544,565 shares of Series A Preferred issued to former True Drinks shareholders into 25,304,017 post-split shares of the Companys common stock.   Between January and March 2013, the Company issued 209,800 shares of its common stock to certain accredited investors in connection with bridge loans made to the Company.  Such loans have short-term maturities of approximately four months.  The Company expensed the fair value of the common stock issued of $157,350 to interest expense immediately.   In March 2013, the Company issued 38,250 shares of its common stock in connection with two consulting agreements.  The Company expensed the fair value of the common stock issued of $38,250 to consulting expense

1544565

157350

38250

209800

Warrants    A summary of the Companys warrant activity for the three months ended March 31, 2013 is presented below:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Warrants Outstanding</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="3" style="border-bottom: black 1pt solid"> Weighted Average Exercise Price</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Outstanding, December 31, 2012</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 8%; text-align: right; line-height: 115%">132,340</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">  42.53</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Granted</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">860,086</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">0.549</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Exercised</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Expired</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">12,387</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">187.09</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Outstanding, March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">980,039</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="text-align: right; line-height: 115%">3.86</td> <td style="line-height: 115%"> </td></tr> </table>    As of March 31, 2013, the Company had the following outstanding warrants to purchase its common stock:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Warrants Outstanding</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Weighted Average Exercise Price Per Share</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Weighted Average Remaining Life (Yrs)</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 9%; line-height: 115%"> </td> <td style="width: 17%; text-align: right; line-height: 115%">118,953</td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 10%; line-height: 115%">$</td> <td style="width: 25%; text-align: right; line-height: 115%">27.58</td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 8%; line-height: 115%"> </td> <td style="width: 16%; text-align: center; line-height: 115%">2.06</td> <td style="width: 3%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">1,000</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="text-align: right; line-height: 115%">30.00</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: center; line-height: 115%">2.67</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">860,086</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%">$</td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">0.55</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">0.08</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">980,039</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">3.86</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: center; line-height: 115%">0.32</td> <td style="line-height: 115%"> </td></tr> </table>   Non-Qualified Stock Options    The Company did not issue any stock options during the three months ended March 31, 2013.    Stock option activity during the three months ended March 31, 2013 is summarized as follows:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Number of Shares</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Weighted-Average Exercise Price</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Options outstanding at December 31, 2012</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 8%; text-align: right; line-height: 115%">3,870,389</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">0.69</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Exercised</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Granted</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Forfeited</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Expired</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Options outstanding at March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">3,870,389</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">0.69</td> <td style="line-height: 115%"> </td></tr> </table>    The following table summarizes information about the Companys stock options outstanding as of March 31, 2013:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="10" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Outstanding Options</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Weighted Average</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Exercisable Options</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Remaining</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Aggregate</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Aggregate</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="text-align: center; line-height: 115%">Range of</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Contractual Life</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Intrinsic</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Intrinsic</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Exercise Prices</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Number</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">(Years)</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Value</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Number</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Value</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 3%; line-height: 115%">$</td> <td style="width: 11%; text-align: right; line-height: 115%">0.01</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; text-align: right; line-height: 115%">3,133,172</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 5%; text-align: right; line-height: 115%"> </td> <td style="width: 30%; text-align: right; line-height: 115%">2.29</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%">$</td> <td style="width: 9%; text-align: right; line-height: 115%">4,355,109</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 9%; text-align: right; line-height: 115%">982,950</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%">$</td> <td style="width: 9%; text-align: right; line-height: 115%">1,366,309</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="border-bottom: black 1pt solid; line-height: 115%">$</td> <td style="text-align: right; line-height: 115%">1.017</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">737,217</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">2.44</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">724,684</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">-</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td colspan="2" style="line-height: 115%">Totals</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">3,870,389</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">2.32</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">5,079,793</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">982,950</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">1,366,309</td> <td style="line-height: 115%"> </td></tr> </table>

A summary of the Companys warrant activity for the three months ended March 31, 2013 is presented below:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Warrants Outstanding</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="3" style="border-bottom: black 1pt solid"> Weighted Average Exercise Price</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Outstanding, December 31, 2012</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 8%; text-align: right; line-height: 115%">132,340</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">  42.53</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Granted</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">860,086</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">0.549</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Exercised</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Expired</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">12,387</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">187.09</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Outstanding, March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">980,039</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="text-align: right; line-height: 115%">3.86</td> <td style="line-height: 115%"> </td></tr> </table>

Stock option activity during the three months ended March 31, 2013 is summarized as follows:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Number of Shares</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Weighted-Average Exercise Price</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Options outstanding at December 31, 2012</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 8%; text-align: right; line-height: 115%">3,870,389</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">0.69</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Exercised</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Granted</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Forfeited</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Expired</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; padding-left: 27pt; text-align: right; line-height: 115%; text-indent: -0.25in">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Options outstanding at March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">3,870,389</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">0.69</td> <td style="line-height: 115%"> </td></tr> </table>

The following table summarizes information about the Companys stock options outstanding as of March 31, 2013:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="10" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Outstanding Options</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Weighted Average</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="6" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Exercisable Options</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Remaining</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Aggregate</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Aggregate</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="text-align: center; line-height: 115%">Range of</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Contractual Life</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Intrinsic</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="text-align: center; line-height: 115%">Intrinsic</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Exercise Prices</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Number</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">(Years)</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Value</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Number</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Value</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 3%; line-height: 115%">$</td> <td style="width: 11%; text-align: right; line-height: 115%">0.01</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 9%; text-align: right; line-height: 115%">3,133,172</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 5%; text-align: right; line-height: 115%"> </td> <td style="width: 30%; text-align: right; line-height: 115%">2.29</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%">$</td> <td style="width: 9%; text-align: right; line-height: 115%">4,355,109</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 9%; text-align: right; line-height: 115%">982,950</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%">$</td> <td style="width: 9%; text-align: right; line-height: 115%">1,366,309</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="border-bottom: black 1pt solid; line-height: 115%">$</td> <td style="text-align: right; line-height: 115%">1.017</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">737,217</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">2.44</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">724,684</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">-</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">-</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td colspan="2" style="line-height: 115%">Totals</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">3,870,389</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">2.32</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">5,079,793</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">982,950</td> <td style="text-align: right; line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">1,366,309</td> <td style="line-height: 115%"> </td></tr> </table>

As of March 31, 2013, the Company had the following outstanding warrants to purchase its common stock:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Calibri, Helvetica, Sans-Serif; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">Warrants Outstanding</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Weighted Average Exercise Price Per Share</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid"> Weighted Average Remaining Life (Yrs)</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 9%; line-height: 115%"> </td> <td style="width: 17%; text-align: right; line-height: 115%">118,953</td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 10%; line-height: 115%">$</td> <td style="width: 25%; text-align: right; line-height: 115%">27.58</td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 3%; line-height: 115%"> </td> <td style="width: 8%; line-height: 115%"> </td> <td style="width: 16%; text-align: center; line-height: 115%">2.06</td> <td style="width: 3%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">1,000</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%">$</td> <td style="text-align: right; line-height: 115%">30.00</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: center; line-height: 115%">2.67</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">860,086</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%">$</td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">0.55</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">0.08</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">980,039</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">3.86</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; text-align: center; line-height: 115%">0.32</td> <td style="line-height: 115%"> </td></tr> </table>

860086

.549

14356

800000

Management has evaluated subsequent events through the date the accompanying condensed consolidated financial statements were filed with the SEC, and noted no other significant subsequent events not elsewhere disclosed in these notes to consolidated financial statements.    In May 2013, we completed a private placement, wherein we issued unsecured promissory notes in the aggregate principal amount of $600,000 (the May Notes) and unsecured convertible promissory notes in the aggregate principal amount of $150,000 (the Convertible May Notes) to certain purchasers. As additional consideration for the purchase of the Convertible May Notes, each purchaser received 5,000 shares of the Companys common stock per $25,000 of principal amount purchased.   The May Notes mature on August 6, 2013 and accrue interest at a rate of 12% per annum. In connection with, and as further consideration for the purchase of the May Notes, the Company issued a total of 600,000 5-year warrants to purchase shares of the Companys common stock at a price of $1.10 per share to the purchasers. The Convertible May Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Each Convertible May Note is convertible into shares of the Companys common stock at a conversion price equal to $1.00 per share.

600000

1.1

1.00

5000

Between October and December 2012, the Company consummated the sale of senior secured convertible notes (Bridge Notes) to a limited number of accredited investors, resulting in net proceeds to the Company of $725,000.   As additional consideration for the purchase of the Bridge Notes, each investor received 5,000 shares of the Companys common stock per $25,000 of principal amount purchased. Each Bridge Note has a term of 120 days, and accrues interest at 9% per annum. A fee of 10% was added to each Bridge Note, as a lenders fee. The principal, interest and lenders fee are convertible, at the option of the holder, into shares of the Companys common stock at a price of $1.00 per share. Certain notes have matured through the date of this report, have not been repaid and are now considered past due.  The remaining notes mature at various dates through April 30, 2013.  The Company is currently in discussion regarding the extension of the maturity dates of the notes.   In December 2012, the Company issued promissory notes to certain investors, resulting in net proceeds of to the Company of $47,000. These promissory notes have a term of 30 days, and included a lenders fee of 10%. These promissory notes were repaid in full in January 2013.   In January 2013, we completed a private placement, wherein we issued an aggregate principal amount of $660,000 in unsecured convertible promissory notes (the January Notes) to certain purchasers. As additional consideration for the purchase of the January Notes, each purchaser received 5,000 post-split shares of the Companys common stock per $25,000 of principal amount purchased. The January Notes have a term of 120 days and accrue interest at a rate of 9% per annum. At maturity, the holders of the January Notes have the right to convert all principal and accrued but unpaid interest into shares of common stock at a conversion price equal to $1.00 per share. In May 2013, the maturity date of certain January Notes in the aggregate principal amount of $500,000 was extended to November 29, 2013, and the remaining balance of the January Notes, totaling $180,568 of principal and accrued interest, were converted into 180,568 shares of the Companys common stock.   In February and March 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $389,000 (the March Notes) to certain purchasers. As additional consideration for the purchase of the March Notes, each purchaser received 5,000 shares of the Companys common stock per $25,000 of principal amount purchased. The March Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the March Notes, each note is convertible into shares of the Companys common stock at a conversion price equal to $1.00 per share. In May 2013, March Notes in the aggregate principal amount, plus accrued interest, of $233,927 was converted into 233,927 shares of the Companys Common Stock.   In April 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $195,000 (the April Notes) to certain purchasers. As additional consideration for the purchase of the April Notes, each purchaser received 5,000 shares of the Companys common stock per $25,000 of principal amount purchased. The April Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the April Notes, the April Notes are convertible into shares of the Companys common stock at a conversion price equal to $1.00 per share. In May 2013, April Notes totaling $69,485 of principal and accrued interest was converted into 69,485 shares of the Companys common stock.   In May 2013, a total of $372,661 of principal plus accrued interest from certain notes issued in 2012 was converted into 372,661 shares of the Companys common stock.

47000

725000

P30D P3M28D .1 0.1

Organization and Business   Overview    True Drinks, Inc. (the "Company", "us", "True Drinks" or "we") was formed on January 19, 2012 in Delaware to create and commercialize all-natural, vitamin-enhanced drinks.  Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles.  We distribute AquaBall nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online.  We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed through select retail channels, online, and through our existing database of customers.    On June 7, 2012, True Drinks, Inc., Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Bazi International, Inc., and Bazi International, Inc. entered into an agreement and tax-free plan of merger (the Merger Agreement), wherein Merger Sub merged with and into the Company and True Drinks continued as the surviving corporation (the "Merger").  As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company.  The Merger closed on October 15, 2012 (the Closing Date).  As a result of Merger, True Drinks, Inc.s former shareholders owned approximately 95.5% of the combined post-Merger entity via voting convertible preferred stock issued as part of the merger, on an as-converted basis (See Recent Developments below).  The Company subsequently changed its name from Bazi International, Inc. to True Drinks Holdings, Inc.  The Merger was accounted for as a public company reverse merger, and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. within the capital structure of Bazi International, Inc.    True Drinks, Inc. was formerly named GT Beverage Company, Inc., which was formed in January 2012 and acquired GT Beverage Company, LLC on March 31, 2012 in a business combination primarily to acquire the spherical bottle patent held by GT Beverage Company, LLC.  Subsequently as discussed above, GT Beverage Company, Inc. entered into a public company reverse merger with Bazi International, Inc. accounted for as a business combination, since Bazi International, Inc. was not a public shell as defined by rules of the Securities and Exchange Commission.  GT Beverage Company, Inc. took over the capital structure of Bazi International, Inc. and was renamed True Drinks, Inc.    Bazi International, Inc. was originally incorporated in the state of Nevada in January 2001.  True Drinks, Inc. (True Drinks), previously GT Beverage Company, Inc., is incorporated in the state of Delaware.    Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com.  Our common stock is currently listed for quotation on the Over-the-Counter Bulletin Board (OTCBB) under the symbol TRUU.   Developments During the Quarter    On January 18, 2013, we filed an amendment to our Articles of Incorporation (the Amendment) to (i) to change our name to True Drinks Holdings, Inc., (ii) increase the total number of authorized shares of common stock from 200,000,000 to 4,000,000,000 shares; and (iii) reverse split our common stock on the basis of one share for each 100 shares issued and outstanding (Reverse Split).  Accordingly, our authorized common stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding common stock decreased from 133,733,469 to 1,337,335 shares.  As a result of the Reverse Split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of public company reverse merger) to reflect the Reverse Split.    Upon the filing of the Amendment, the shares of Series A Preferred issued to former True Drinks shareholders automatically converted into approximately 25,304,017 post-split shares of our common stock.    The loss per common share and all other per-share disclosures in the accompanying financial statements of the Company and the related notes are based on the appropriate number of post-split common shares as adjusted for the Reverse Split.     On January 14, 2013, we entered into a Warrant Agreement (the Warrant Agreement) with Ashworth Holding, LLC, a Utah limited liability company (Ashworth), pursuant to which we granted Ashworth the option to purchase up to 860,086 shares of common stock for a price of $0.549 per share.  This warrant had an expiration date of April 30, 2013 or upon Ashworths full exercise of the warrant.  In May, 2013, the expiration date of the Warrant Agreement was extended through November 29, 2013 in connection with the concurrent extension by Ashworth Holdings, LLC of $500,000 of bridge loans which had a maturity date of April 30, 2013 to November 29, 2013.  The warrant was valued at $395,640 and was expensed during the quarter.   Basis of Presentation and Going Concern    The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of March 31, 2013, for the three-month periods ended March 31, 2013 and 2012, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of True Drinks Holdings, Inc. as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on April 5, 2013.    The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.  As of and for the three months ended March 31, 2013, the Company incurred a net loss of $1,556,898, has negative working capital of $1,697,811, and an accumulated deficit of $4,676,241.  A significant amount of additional capital will be necessary to advance the marketability of the Company's products to the point at which the Company can sustain operations.  These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans are to continue to raise capital through equity and debt offerings, and to expand sales as rapidly as economically viable.  The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.   Principles of Consolidation    The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries True Drinks, Inc., Bazi, Inc. and GT Beverage Company, LLC.  All inter-company accounts and transactions have been eliminated in the preparation of these consolidated financial statements.   Use of Estimates    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, provision for losses on accounts receivable, allowances for obsolete and slow moving inventory, stock compensation, deferred tax asset valuation allowances, and the realization of long-lived and intangible assets, including goodwill. Actual results could differ from those estimates.   Revenue Recognition    In accordance with Staff Accounting Bulletin ("SAB") No. 104 Revenue Recognition in Financial Statements, revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, slotting fees, discounts and freight and handling charges. With approved credit, we provide wholesale customers payment terms of up to net 30 days. Amounts received for unshipped merchandise are recorded as customer deposits and are included in accrued expenses.   Restricted Cash    The Company has $81,008 in restricted cash with a financial institution securing a letter of credit.  The letter of credit matures in August 2015 and was issued as part of contractual obligations related to one of our licensing agreements with Disney Consumer Products, Inc.   Accounts Receivable    We maintain an allowance for doubtful accounts, which is analyzed on a periodic basis to ensure that it is adequate to the best of managements knowledge.  Management develops an estimate of the allowance for doubtful accounts receivable based on its own judgment as to the likelihood of ultimate payment.  Although the Company expects to collect amounts due, actual collections may differ from these estimated amounts.  The allowance for doubtful accounts was approximately $54,000 at March 31, 2013.   Concentrations    The Company has no significant off-balance sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company maintains the majority of its cash balances with two financial institutions.  There are no funds in excess of the federally insured amount of $250,000 through March 31, 2013, or that are subject to credit risk, and the Company believes that the financial institutions are financially sound and the risk of loss is minimal.    During 2012, the Company relied on one supplier for 100% of its purchases of AquaBall Naturally Flavored Water and Bazi® held for sale.  In the quarter ended March 31, 2013, the Company began production of AquaBall with a second supplier.  The Company owns the formula for both the AquaBall and Bazi®, and management believes that its purchasing requirements can be readily met from alternative sources.    A significant portion of our revenue comes from sales of the AquaBall Naturally Flavored Water.  For the quarter ended March 31, 2013, sales of AquaBall accounted for 65% of the Companys total revenue.  The remaining 35% was related to sales of Bazi® All Natural Energy.  The Company expects AquaBall to account for a much larger percentage of overall sales during the remainder of 2013.   Inventory   Inventory is stated at the lower of cost or market on a FIFO (first-in first-out) basis.  Provisions are made to reduce excess or obsolete inventory to the estimated net realizable value.  The Company purchases for resale a vitamin-enhanced flavored water beverage and a liquid dietary supplement.    Management reviews the carrying value of inventory in relation to its sales history and industry trends to determine an estimated net realizable value.  Changes in economic conditions or customer demand could result in obsolete or slow moving inventory that cannot be sold or must be sold at reduced prices and could result in an inventory reserve.  No inventory reserves were considered necessary as of March 31, 2013.   Inventory is comprised of the following:   <table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">March 31, 2013</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center; line-height: 115%">December 31, 2012</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 78%; line-height: 115%">Purchased materials</td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">345,879</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; text-align: right; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 8%; text-align: right; line-height: 115%">473,383</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="line-height: 115%">Finished goods</td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">183,790</td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1pt solid; text-align: right; line-height: 115%">359,491</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%">Total</td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">529,669</td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">832,874</td> <td style="line-height: 115%"> </td></tr> </table>   Property and Equipment    Property and equipment are stated at cost.  The Company provides for depreciation of property and equipment using the straight-line method based on estimated useful lives of between three and ten years.  Property and equipment is not significant to the condensed consolidated financial statements as of or for the three months ended March 31, 2013.   Long-Lived Assets    The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset.  An impairment was not deemed necessary in the three months ended March 31, 2013.   Intangible Assets    Intangible assets consists of the direct costs incurred for application fees and legal expenses associated with trademarks on the Companys products, customer list, and the estimated value of GT Beverage Company, LLCs interlocking spherical bottle patent acquired on March 31, 2012.  The Companys intangible assets are amortized over their estimated remaining useful lives.  The Company evaluates the useful lives of its intangible assets annually and adjusts the lives according to the expected useful life.  No impairment was deemed necessary as of March 31, 2013.   Goodwill    Goodwill represents the future economic benefits arising from other assets acquired that are individually identified and separately recognized.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are tested for impairment at least annually.   Income Taxes    For the quarters ended March 31, 2013 and 2012, the Company incurred tax net operating losses, and accordingly, had no income tax provision.  At March 31, 2013, the Company had tax net operating loss carryforwards and a related deferred tax asset, which had a full valuation allowance.          Stock-Based Compensation    Total stock-based compensation expense, for all of the Companys stock-based awards recognized for the three months ended March 31, 2013 was $436,403.    The Company uses a Black-Scholes option-pricing model (the Black-Scholes Model) to estimate the fair value of the stock option and warrants.  The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs.  Expected volatility is calculated based on the historical volatility of the Companys stock price over the contractual term of the option.  The expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior.  Currently it is based on the simplified approach provided by SAB 107.  The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant (see Note 3, Stock Options and Warrants).     Net Loss Per Share   Loss per common share was computed using the weighted average number of shares of common stock outstanding during the period. Not used in the computation since their effect would be antidilutive were 1,686,000 shares of convertible notes payable, 980,039 Common Stock purchase warrants and 3,870,389 Common Stock options for a total of 26,536,428 shares.   Weighted average common shares outstanding retrospectively reflect the 100 to 1 reverse split in January 2013 as if such split occurred on January 19, 2012 (inception).  Also reflected from inception is the conversion of common shares outstanding at a 1,638 to 1 conversion ratio reflecting the conversion of common shares to preferred shares in October 2012 and then conversion to common shares in January 2013.   Research and Development    Research and development costs are expensed as incurred.   Recent Accounting Pronouncements    The Company has reviewed all recently issued, but not yet effective accounting pronouncements and has concluded that there are no recently issued, but not yet effective pronouncements that may have a material impact on the Companys future financial statements.

The Company has entered in a number of agreements with various consultants.  Termination of any of these agreements could result in termination fees.    The Company leases its office in Irvine, California for a one-year term. Total rent expense related to the Companys operating lease for the three months ended March 31, 2013 was approximately $11,367.  Total remaining payments on the lease through July 31, 2013 is approximately $14,356.     The Company maintains employment agreements with certain key management.  The agreements provide for minimum base salaries, eligibility for stock options, performance bonuses and severance payments.   Legal Proceedings    From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation.  Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur.  In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Companys financial position or results of operations.    On July 1, 2011, a lawsuit was filed in the United States District Court, the Southern District of Ohio, Cincinnati Division, against GT Beverage Company, LLC (GT LLC) by Dominion Liquid Technologies, LLC.  The lawsuit alleges that GT LLC breached terms of a 2010 co-packing agreement, which governed the relationship between the parties.  As of February 2013, Dominion amended its complaint to add the Company as a defendant in the case.  The Company has not yet filed responsive pleadings.  Dominion is seeking monetary damages in an amount exceeding $800,000.  GT LLC has filed its answer denying all of Dominions claims and expects to vigorously defend the suit.  Discovery is ongoing, and the case is currently set for trial in November 2013.

On May 11, 2012, the Company loaned Environmental Packaging Technologies, Inc. (EPT) the sum of $150,000 in exchange for a 50-day promissory note.  The promissory note accrues interest at 10% per annum and includes a fee equal to 10% of principal balance of the note, payable to the Company.  The Company sent EPT a notice of default on October 18, 2012 demanding payment of the original principal amount of $150,000, accrued interest of $6,575 and the 10% fee in the amount of $15,000.  True Drinks former chairman and current investor is the chairman for EPT.  The Company is currently involved in settlement discussions with EPT.

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RELATED PARTY TRANSACTIONS (Details Narrative) (EPT Note [Member], USD $)	3 Months Ended
	Mar. 31, 2013
EPT Note [Member]
Loan principal amount	$ 150,000
Promissory note interest	10.00%
Promissory note term	1 month 20 days
Accrued interest	6,575
Default fee	$ 15,000

- Definition

The increase (decrease) during the reporting period in the amount owed to the reporting entry (during the current year or operating cycle) in the form of loans and obligations (generally evidenced by promissory notes) made to the following types of related parties: a parent company and its subsidiaries; subsidiaries of a common parent; an entity and trust for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of the entity's management; an entity and its principal owners, management, or member of their immediate families; affiliates; or other parties with the ability to exert significant influence.

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CONVERTIBLE NOTES

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

CONVERTIBLE NOTES

Between October and December 2012, the Company consummated the sale of senior secured convertible notes (“Bridge Notes”) to a limited number of accredited investors, resulting in net proceeds to the Company of $725,000. As additional consideration for the purchase of the Bridge Notes, each investor received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased. Each Bridge Note has a term of 120 days, and accrues interest at 9% per annum. A fee of 10% was added to each Bridge Note, as a lender’s fee. The principal, interest and lender’s fee are convertible, at the option of the holder, into shares of the Company’s common stock at a price of $1.00 per share. Certain notes have matured through the date of this report, have not been repaid and are now considered past due. The remaining notes mature at various dates through April 30, 2013. The Company is currently in discussion regarding the extension of the maturity dates of the notes.

In January 2013, we completed a private placement, wherein we issued an aggregate principal amount of $660,000 in unsecured convertible promissory notes (the “January Notes”) to certain purchasers. As additional consideration for the purchase of the January Notes, each purchaser received 5,000 post-split shares of the Company’s common stock per $25,000 of principal amount purchased. The January Notes have a term of 120 days and accrue interest at a rate of 9% per annum. At maturity, the holders of the January Notes have the right to convert all principal and accrued but unpaid interest into shares of common stock at a conversion price equal to $1.00 per share. In May 2013, the maturity date of certain January Notes in the aggregate principal amount of $500,000 was extended to November 29, 2013, and the remaining balance of the January Notes, totaling $180,568 of principal and accrued interest, were converted into 180,568 shares of the Company’s common stock.

In February and March 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $389,000 (the “March Notes”) to certain purchasers. As additional consideration for the purchase of the March Notes, each purchaser received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased. The March Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the March Notes, each note is convertible into shares of the Company’s common stock at a conversion price equal to $1.00 per share. In May 2013, March Notes in the aggregate principal amount, plus accrued interest, of $233,927 was converted into 233,927 shares of the Company’s Common Stock.

In April 2013, we completed a private placement, wherein we issued unsecured convertible promissory notes in the aggregate principal amount of $195,000 (the “April Notes”) to certain purchasers. As additional consideration for the purchase of the April Notes, each purchaser received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased. The April Notes mature on November 29, 2013 and accrue interest at a rate of 9% per annum. Pursuant to the terms of the April Notes, the April Notes are convertible into shares of the Company’s common stock at a conversion price equal to $1.00 per share. In May 2013, April Notes totaling $69,485 of principal and accrued interest was converted into 69,485 shares of the Company’s common stock.

In May 2013, a total of $372,661 of principal plus accrued interest from certain notes issued in 2012 was converted into 372,661 shares of the Company’s common stock.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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M;G0Z(#$P<'0@5&EM97,@3F5W(%)O;6%N+"!4:6UE6QE/3-$)V)O6QE/3-$)V)O6QE/3-$)VQI;F4M:&5I9VAT.B`Q,34E)SXF(S$V,#L\ M+W1D/@T*("`@(#QT9"!C;VQS<&%N/3-$,B!S='EL93TS1"=B;W)D97(M8F]T M=&]M.B!B;&%C:R`Q<'0@'0M86QI9VXZ(&-E;G1E XML 19 R8.htm IDEA: XBRL DOCUMENT

STOCK OPTIONS AND WARRANTS

3 Months Ended

Mar. 31, 2013

Stock Options And Warrants

STOCK OPTIONS AND WARRANTS

Warrants

A summary of the Company’s warrant activity for the three months ended March 31, 2013 is presented below:

	Warrants Outstanding		Weighted Average Exercise Price
Outstanding, December 31, 2012		132,340	$	42.53
Granted		860,086		0.549
Exercised		-		-
Expired		12,387		187.09
Outstanding, March 31, 2013		980,039	$	3.86

As of March 31, 2013, the Company had the following outstanding warrants to purchase its common stock:

Warrants Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Yrs)
	118,953	$	27.58		2.06
	1,000	$	30.00		2.67
	860,086	$	0.55		0.08
	980,039	$	3.86		0.32

Non-Qualified Stock Options

The Company did not issue any stock options during the three months ended March 31, 2013.

Stock option activity during the three months ended March 31, 2013 is summarized as follows:

	Number of Shares		Weighted-Average Exercise Price
Options outstanding at December 31, 2012		3,870,389	$	0.69
Exercised		-		-
Granted		-		-
Forfeited		-		-
Expired		-		-
Options outstanding at March 31, 2013		3,870,389	$	0.69

The following table summarizes information about the Company’s stock options outstanding as of March 31, 2013:

		Outstanding Options
				Weighted Average				Exercisable Options
				Remaining		Aggregate				Aggregate
Range of				Contractual Life		Intrinsic				Intrinsic
Exercise Prices		Number		(Years)		Value		Number		Value
$	0.01		3,133,172		2.29	$	4,355,109		982,950	$	1,366,309
$	1.017		737,217		2.44	$	724,684		-	$	-
Totals			3,870,389		2.32	$	5,079,793		982,950	$	1,366,309

XML 20 R2.htm IDEA: XBRL DOCUMENT

CONSOLIDATED BALANCE SHEET (USD $)	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Cash	$ 31,581	$ 4,449
Accounts receivable, net	181,684	130,909
Inventory	529,669	832,874
Prepaid expenses and other current assets	286,083	268,716
Total current assets	1,029,017	1,236,948
Restricted Cash	81,008	81,270
Property and equipment, net	19,173	25,399
Patents, net	1,458,823	1,494,118
Trademarks, net	86,016	98,516
Goodwill	3,474,502	3,474,502
Other Assets	3,948	3,948
Total assets	6,152,487	6,414,701
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	1,040,828	1,292,147
Convertible notes payable	1,686,000	772,000
Total liabilities	2,726,828	2,064,147
Commitments and Contingencies (Note 5)
Stockholders' Equity
Common stock, $0.001 par value, 40,000,000 shares authorized, 26,889,402 and 1,337,335 shares outstanding at March 31, 2013 and December 31, 2012, respectively	26,889	1,337
Preferred stock (liquidation preference of $10 per share), $0.001 par value, 5,000,000 shares authorized, 0 and 1,544,565 shares outstanding at March 31, 2013 and December 31, 2012, respectively		1,545
Additional paid in capital	8,075,011	7,467,015
Accumulated deficit	(4,676,241)	(3,119,343)
Total stockholders' equity	3,425,659	4,350,554
Total liabilities and shareholders' equity	$ 6,152,487	$ 6,414,701

XML 21 R6.htm IDEA: XBRL DOCUMENT

ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2013

Organization Operations And Basis Of Presentation

ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION

Organization and Business

Overview

True Drinks, Inc. (the "Company", "us", "True Drinks" or "we") was formed on January 19, 2012 in Delaware to create and commercialize all-natural, vitamin-enhanced drinks. Our primary business is the development, marketing, sale and distribution of our flagship product, AquaBall™ Naturally Flavored Water, a vitamin-enhanced, naturally flavored water drink packaged in our patented stacking spherical bottles. We distribute AquaBall nationally through select retail channels, such as grocery stores, mass merchandisers, drug stores and online. We also market and distribute Bazi® All Natural Energy, a liquid nutritional supplement drink, which is currently distributed through select retail channels, online, and through our existing database of customers.

On June 7, 2012, True Drinks, Inc., Bazi Acquisition Sub Inc. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of Bazi International, Inc., and Bazi International, Inc. entered into an agreement and tax-free plan of merger (the “Merger Agreement”), wherein Merger Sub merged with and into the Company and True Drinks continued as the surviving corporation (the "Merger"). As a result of the Merger, True Drinks became a wholly-owned subsidiary of the Company. The Merger closed on October 15, 2012 (the “Closing Date”). As a result of Merger, True Drinks, Inc.’s former shareholders owned approximately 95.5% of the combined post-Merger entity via voting convertible preferred stock issued as part of the merger, on an as-converted basis (See Recent Developments below). The Company subsequently changed its name from “Bazi International, Inc.” to “True Drinks Holdings, Inc.” The Merger was accounted for as a public company “reverse merger,” and, as such, the consolidated financial statements reported herein reflect the operations of True Drinks, Inc. within the capital structure of Bazi International, Inc.

Bazi International, Inc. was originally incorporated in the state of Nevada in January 2001. True Drinks, Inc. (“True Drinks”), previously GT Beverage Company, Inc., is incorporated in the state of Delaware.

Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock is currently listed for quotation on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol TRUU.

Developments During the Quarter

On January 18, 2013, we filed an amendment to our Articles of Incorporation (the “Amendment”) to (i) to change our name to True Drinks Holdings, Inc., (ii) increase the total number of authorized shares of common stock from 200,000,000 to 4,000,000,000 shares; and (iii) reverse split our common stock on the basis of one share for each 100 shares issued and outstanding (“Reverse Split”). Accordingly, our authorized common stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding common stock decreased from 133,733,469 to 1,337,335 shares. As a result of the Reverse Split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of public company reverse merger) to reflect the Reverse Split.

On January 14, 2013, we entered into a Warrant Agreement (the “Warrant Agreement”) with Ashworth Holding, LLC, a Utah limited liability company (“Ashworth”), pursuant to which we granted Ashworth the option to purchase up to 860,086 shares of common stock for a price of $0.549 per share. This warrant had an expiration date of April 30, 2013 or upon Ashworth’s full exercise of the warrant. In May, 2013, the expiration date of the Warrant Agreement was extended through November 29, 2013 in connection with the concurrent extension by Ashworth Holdings, LLC of $500,000 of bridge loans which had a maturity date of April 30, 2013 to November 29, 2013. The warrant was valued at $395,640 and was expensed during the quarter.

Basis of Presentation and Going Concern

The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of March 31, 2013, for the three-month periods ended March 31, 2013 and 2012, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of True Drinks Holdings, Inc. as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on April 5, 2013.

Principles of Consolidation

Use of Estimates

Revenue Recognition

In accordance with Staff Accounting Bulletin ("SAB") No. 104 “Revenue Recognition in Financial Statements”, revenue is recognized at the point of shipment, at which time title is passed. Net sales include sales of products, slotting fees, discounts and freight and handling charges. With approved credit, we provide wholesale customers payment terms of up to net 30 days. Amounts received for unshipped merchandise are recorded as customer deposits and are included in accrued expenses.

Restricted Cash

Accounts Receivable

Concentrations

Inventory

Inventory is comprised of the following:

	March 31, 2013		December 31, 2012
Purchased materials	$	345,879	$	473,383
Finished goods		183,790		359,491
Total	$	529,669	$	832,874

Property and Equipment

Long-Lived Assets

Intangible Assets

Goodwill

Income Taxes

Stock-Based Compensation

Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the three months ended March 31, 2013 was $436,403.

The Company uses a Black-Scholes option-pricing model (the “Black-Scholes Model”) to estimate the fair value of the stock option and warrants. The use of a valuation model requires the Company to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on the historical volatility of the Company’s stock price over the contractual term of the option. The expected life is based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. Currently it is based on the simplified approach provided by SAB 107. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of the grant (see Note 3, “Stock Options and Warrants”).

Net Loss Per Share

Research and Development

Research and development costs are expensed as incurred.

Recent Accounting Pronouncements

XML 22 R22.htm IDEA: XBRL DOCUMENT

STOCK OPTIONS AND WARRANTS (Details 3) (USD $)	Mar. 31, 2013
Number of options	3,870,389
Weighted Average Remaining Contractual Life	2 years 6 months 26 days
Aggregate Intrinsic Value	$ 5,079,793
Number of options exercisable	982,950
Aggregate Intrinsic Value	1,366,309
Range of exercise price 0.01
Number of options	3,133,172
Weighted Average Remaining Contractual Life	2 years 6 months 15 days
Aggregate Intrinsic Value	4,355,109
Number of options exercisable	982,950
Aggregate Intrinsic Value	1,366,309
Range of exercise price 1.017
Number of options	737,217
Weighted Average Remaining Contractual Life	2 years 8 months 9 days
Aggregate Intrinsic Value	724,684
Number of options exercisable
Aggregate Intrinsic Value

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COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
Total rent expense related to operating leases	$ 11,367
Remaining lease payments	14,356
Monetary damages	$ 800,000

- Definition

Amount of required minimum rental payments for leases having an initial or remaining non-cancelable letter-terms in excess of one year.

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SHAREHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2013

Shareholders Equity

SHAREHOLDERS' EQUITY

Between January and March 2013, the Company issued 209,800 shares of its common stock to certain accredited investors in connection with bridge loans made to the Company. Such loans have short-term maturities of approximately four months. The Company expensed the fair value of the common stock issued of $157,350 to interest expense immediately.

In March 2013, the Company issued 38,250 shares of its common stock in connection with two consulting agreements. The Company expensed the fair value of the common stock issued of $38,250 to consulting expense

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Preferred stock liquidation preference	$ 10	$ 10
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	1,544,565
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares outstanding	26,889,402	1,337,335

- Definition

Number of shares of common stock outstanding. Common stock represent the ownership interest in a corporation.

+ References+ Details

- Definition

The per share liquidation preference (or restrictions) of nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) that has a preference in involuntary liquidation considerably in excess of the par or stated value of the shares. The liquidation preference is the difference between the preference in liquidation and the par or stated values of the share.

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- Definition

Face amount or stated value per share of nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer); generally not indicative of the fair market value per share.

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ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Series A Preferred convesrion into post-split shares	25,304,017
Net loss	$ (1,556,898)	$ (392,429)
Negative working capital	1,697,811
Accumulated deficit	(4,676,241)		(3,119,343)
Share-based compensation expense	436,403
Shares of common stock equivalents outstanding	26,889,402		1,337,335
Restricted cash	81,008		81,270
Accounts receivable allowance for doubtful accounts	54000
January Note [Member]
Shareholders and owners ownership	95.50%
Unsecured promissory notes issued	660,000
Unsecured promissory notes term	3 months 28 days
Unsecured promissory notes interest rate	9.00%
Conversion price notes	$ 1
Post-split shares of stock received	5,000
January notes extended	500,000
Principal converted into stock	180,568
Stock issued upon conversion of note	180,568
March Notes [Member]
Unsecured promissory notes issued	389,000
Unsecured promissory notes interest rate	9.00%
Conversion price notes	$ 1
Post-split shares of stock received	5,000
Principal converted into stock	233,927
Stock issued upon conversion of note	233,927
April Notes [Member]
Unsecured promissory notes issued	195,000
Unsecured promissory notes interest rate	9.00%
Conversion price notes	$ 1
Post-split shares of stock received	5,000
Principal converted into stock	69,485
Stock issued upon conversion of note	69,485
May Notes Conversion [Member]
Unsecured promissory notes issued	600,000
Principal converted into stock	$ 372,661
Stock issued upon conversion of note	372,661

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Document and Entity Information (USD $)	3 Months Ended
Document and Entity Information (USD $)	Mar. 31, 2013	May 13, 2013	Jun. 30, 2012
Document And Entity Information
Entity Registrant Name	True Drinks Holdings, Inc.
Entity Central Index Key	0001134765
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 6,873,500
Entity Common Stock, Shares Outstanding		27,773,043
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

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SHAREHOLDERS' EQUITY (Details Narrative) (USD $)	3 Months Ended
SHAREHOLDERS' EQUITY (Details Narrative) (USD $)	Mar. 31, 2013
Shareholders Equity Details Narrative
Series A Preferred convesrion into post-split shares	25,304,017
Series A Shares converted	1,544,565
Shares issued to accredited investors	209,800
Fair value of common stock issued	$ 157,350
Stock issued in connection to consulting agreements	38,250
Fair value of consulting shares	$ 38,250

- Definition

The number of shares converted in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.

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CONSOLIDATED STATEMENT OF OPERATIONS (USD $)

3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Income Statement [Abstract]

Net sales

$ 410,801

Cost of Sales

263,950

Gross Profit

146,851

Operating expenses

Selling and marketing

430,486

43,216

General and administrative

1,045,064

349,213

Total operating expenses

1,475,550

392,429

Operating Loss

(1,328,699)

(392,429)

Other Expense

Interest expense

228,199

Total other expense

228,199

Net loss

$ (1,556,898)

$ (392,429)

Basic and diluted net loss per share

$ (0.06)

$ (0.03)

Weighted average common shares outstanding, basic and diluted

26,810,744

^[1]

15,155,050

[1]

XML 31 R12.htm IDEA: XBRL DOCUMENT

SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

In May 2013, we completed a private placement, wherein we issued unsecured promissory notes in the aggregate principal amount of $600,000 (the “May Notes”) and unsecured convertible promissory notes in the aggregate principal amount of $150,000 (the “Convertible May Notes”) to certain purchasers. As additional consideration for the purchase of the Convertible May Notes, each purchaser received 5,000 shares of the Company’s common stock per $25,000 of principal amount purchased.

XML 32 R11.htm IDEA: XBRL DOCUMENT

RELATED PARTY TRANSACTIONS	3 Months Ended
RELATED PARTY TRANSACTIONS	Mar. 31, 2013
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	On May 11, 2012, the Company loaned Environmental Packaging Technologies, Inc. (“EPT”) the sum of $150,000 in exchange for a 50-day promissory note. The promissory note accrues interest at 10% per annum and includes a fee equal to 10% of principal balance of the note, payable to the Company. The Company sent EPT a notice of default on October 18, 2012 demanding payment of the original principal amount of $150,000, accrued interest of $6,575 and the 10% fee in the amount of $15,000. True Drinks’ former chairman and current investor is the chairman for EPT. The Company is currently involved in settlement discussions with EPT.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 850

-SubTopic 10

-Section 50

-Paragraph 6

-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 850

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 850

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 57

-Paragraph 1-4

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 850

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 850

-SubTopic 10

-Section 50

-Paragraph 5

-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(k))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 04

-Paragraph b

-Article 3A

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph k

-Article 4

+ Details

XML 33 R23.htm IDEA: XBRL DOCUMENT

CONVERTIBLE NOTES (Details Narrative) (USD $)	3 Months Ended
CONVERTIBLE NOTES (Details Narrative) (USD $)	Mar. 31, 2013
Bridge notes net proceeds	$ 47,000
Bridge note term	30 days
Bridge note lender fee	10.00%
Oct to Dec Notes [Member]
Bridge notes net proceeds	725,000
Bridge note term	3 months 28 days
Bridge note lender fee	10.00%
January Note [Member]
Post-split shares of stock received per $25K bridge note	5,000
Conversion price notes	$ 1
Shareholders and owners ownership	95.50%
Unsecured promissory notes issued	660,000
Unsecured promissory notes term	3 months 28 days
Unsecured promissory notes interest rate	9.00%
January notes extended	500,000
Principal converted into stock	180,568
Stock issued upon conversion of note	180,568
March Notes [Member]
Post-split shares of stock received per $25K bridge note	5,000
Conversion price notes	$ 1
Unsecured promissory notes issued	389,000
Unsecured promissory notes interest rate	9.00%
Principal converted into stock	233,927
Stock issued upon conversion of note	233,927
April Notes [Member]
Post-split shares of stock received per $25K bridge note	5,000
Conversion price notes	$ 1
Unsecured promissory notes issued	195,000
Unsecured promissory notes interest rate	9.00%
Principal converted into stock	69,485
Stock issued upon conversion of note	69,485
May Notes Conversion [Member]
Unsecured promissory notes issued	600,000
Principal converted into stock	$ 372,661
Stock issued upon conversion of note	372,661

XML 34 R19.htm IDEA: XBRL DOCUMENT

STOCK OPTIONS AND WARRANTS (Details) (USD $)	3 Months Ended
STOCK OPTIONS AND WARRANTS (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Warrant Outstanding
Exercised
Expired
Outstanding	3,870,389	3,870,389
Weighted average exercise price
Exercised
Expired
Outstanding Weighted Average Exercise Prices	$ 0.69	$ 0.69
Warrant [Member]
Warrant Outstanding
Outstanding	132,340
Granted	860,086
Exercised
Expired	12,387
Outstanding	980,039
Weighted average exercise price
Outstanding Weighted Average Exercise Prices	$ 42.53
Granted	$ 0.549
Exercised
Expired	$ 187.09
Outstanding Weighted Average Exercise Prices	$ 3.86

XML 35 R15.htm IDEA: XBRL DOCUMENT

STOCK OPTIONS AND WARRANTS (Tables)

3 Months Ended

Mar. 31, 2013

Stock Options And Warrants Tables

Summary warrant activity

A summary of the Company’s warrant activity for the three months ended March 31, 2013 is presented below:

	Warrants Outstanding		Weighted Average Exercise Price
Outstanding, December 31, 2012		132,340	$	42.53
Granted		860,086		0.549
Exercised		-		-
Expired		12,387		187.09
Outstanding, March 31, 2013		980,039	$	3.86

Outstanding warrants to purchase its common stock

As of March 31, 2013, the Company had the following outstanding warrants to purchase its common stock:

Warrants Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Yrs)
	118,953	$	27.58		2.06
	1,000	$	30.00		2.67
	860,086	$	0.55		0.08
	980,039	$	3.86		0.32

Weighted average assumption

Stock option activity during the three months ended March 31, 2013 is summarized as follows:

	Number of Shares		Weighted-Average Exercise Price
Options outstanding at December 31, 2012		3,870,389	$	0.69
Exercised		-		-
Granted		-		-
Forfeited		-		-
Expired		-		-
Options outstanding at March 31, 2013		3,870,389	$	0.69

Stock Option Outstanding

The following table summarizes information about the Company’s stock options outstanding as of March 31, 2013:

		Outstanding Options
				Weighted Average				Exercisable Options
				Remaining		Aggregate				Aggregate
Range of				Contractual Life		Intrinsic				Intrinsic
Exercise Prices		Number		(Years)		Value		Number		Value
$	0.01		3,133,172		2.29	$	4,355,109		982,950	$	1,366,309
$	1.017		737,217		2.44	$	724,684		-	$	-
Totals			3,870,389		2.32	$	5,079,793		982,950	$	1,366,309

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References+ Details

XML 36 R13.htm IDEA: XBRL DOCUMENT

ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION (Policies)

3 Months Ended

Mar. 31, 2013

Organization Operations And Basis Of Presentation Policies

Organization and Business

Overview

Our principal place of business is 18552 MacArthur Boulevard, Suite 325, Irvine, California, 92612. Our telephone number is (949) 203-2500. Our corporate website address is http://www.truedrinks.com. Our common stock is currently listed for quotation on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol TRUU.

Developments During the Quarter

On January 18, 2013, we filed an amendment to our Articles of Incorporation (the “Amendment”) to (i) to change our name to True Drinks Holdings, Inc., (ii) increase the total number of authorized shares of common stock from 200,000,000 to 4,000,000,000 shares; and (iii) reverse split our common stock on the basis of one share for each 100 shares issued and outstanding (“Reverse Split”). Accordingly, our authorized common stock decreased from 4,000,000,000 to 40,000,000 shares and our issued and outstanding common stock decreased from 133,733,469 to 1,337,335 shares. As a result of the Reverse Split, all previously reported share amounts, including options in the accompanying consolidated financial statements and related notes have been retrospectively restated back to October 15, 2012 (date of public company reverse merger) to reflect the Reverse Split.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of March 31, 2013, for the three-month periods ended March 31, 2013 and 2012, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of True Drinks Holdings, Inc. as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on April 5, 2013.

Principles of Consolidation

Inventory is comprised of the following:

	March 31, 2013		December 31, 2012
Purchased materials	$	345,879	$	473,383
Finished goods		183,790		359,491
Total	$	529,669	$	832,874

Property and Equipment

Stock-Based Compensation

Total stock-based compensation expense, for all of the Company’s stock-based awards recognized for the three months ended March 31, 2013 was $436,403.

Net Loss Per Share

Research and Development

Research and development costs are expensed as incurred.

Recent Accounting Pronouncements

XML 37 R14.htm IDEA: XBRL DOCUMENT

ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION (Tables)

3 Months Ended

Mar. 31, 2013

Organization Operations And Basis Of Presentation Tables

Inventory

Inventory is comprised of the following:

	March 31, 2013		December 31, 2012
Purchased materials	$	345,879	$	473,383
Finished goods		183,790		359,491
Total	$	529,669	$	832,874

XML 38 R16.htm IDEA: XBRL DOCUMENT

ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Inventory
Purchased materials	$ 345,879	$ 473,383
Finished goods	183,790	359,491
Total	$ 529,669	$ 832,874

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STOCK OPTIONS AND WARRANTS (Details 2) (USD $)
3 Months Ended

Mar. 31, 2013

Number of shares

Outstanding 3,870,389

Exercised

Granted

Forfeited

Expired

Outstanding 3,870,389

Weighted average exercise price

Outstanding Weighted Average Exercise Prices $ 0.69

Exercised

Granted

Forfeited

Expired

Outstanding Weighted Average Exercise Prices $ 0.69

XML 41 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6

SUBSEQUENT EVENTS (Details Narrative) (USD $)
3 Months Ended

Mar. 31, 2013

May Notes Subsequent [Member]

Unsecured promissory notes issued $ 600,000

Stock issued with notes per $25K note 5,000

Unsecured promissory notes interest rate 12.00%

Warrants issued 600,000

Warrant share price $ 1.1

Convertible May Notes [Member]

Unsecured promissory notes issued 150,000

Stock issued with notes per $25K note 5,000

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May Notes Conversion [Member]

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
3 Months Ended

Mar. 31, 2013

Mar. 31, 2012

Cash flows from operating activities:

Net loss $ (1,556,898) $ (392,429)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation 6,226

Amortization 47,795

Stock issued to founders    855

Fair value of stock issued for services 195,600

Stock based compensation 436,403 3,281

Accounts receivable (50,775)

Inventory 303,205 (32,263)

Prepaid expenses and other current assets (17,367) (65,448)

Other assets    (686,223)

Accounts payable and accrued expenses (251,319) 187,668

Net cash used in operating activities (887,130) (984,559)

Cash flows from investing activities:

Change in restricted cash 262 (81,000)

Net cash provided by investing activities 262 (81,000)

Cash flow from financing activities:

Proceeds from issuance in common stock    1,625,855

Proceeds from notes payable 1,049,000

Repayments on notes payable (135,000)

Net cash provided by financing activities 914,000 1,625,855

NET INCREASE IN CASH 27,132 559,441

CASH - beginning of period 4,449

CASH - end of period 31,581 559,441

SUPPLEMENTAL DISCLOSURES

Interest paid in cash 13,795

Non-cash transactions:

Conversion of preferred stock to common stock $ 25,304

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COMMITMENTS AND CONTINGENCIES
3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

The Company has entered in a number of agreements with various consultants. Termination of any of these agreements could result in termination fees.

The Company leases its office in Irvine, California for a one-year term. Total rent expense related to the Company’s operating lease for the three months ended March 31, 2013 was approximately $11,367.  Total remaining payments on the lease through July 31, 2013 is approximately $14,356.

The Company maintains employment agreements with certain key management.  The agreements provide for minimum base salaries, eligibility for stock options, performance bonuses and severance payments.

Legal Proceedings

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation.  Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur.  In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Company’s financial position or results of operations.

On July 1, 2011, a lawsuit was filed in the United States District Court, the Southern District of Ohio, Cincinnati Division, against GT Beverage Company, LLC (“GT LLC”) by Dominion Liquid Technologies, LLC.  The lawsuit alleges that GT LLC breached terms of a 2010 co-packing agreement, which governed the relationship between the parties.  As of February 2013, Dominion amended its complaint to add the Company as a defendant in the case.  The Company has not yet filed responsive pleadings.  Dominion is seeking monetary damages in an amount exceeding $800,000.  GT LLC has filed its answer denying all of Dominion’s claims and expects to vigorously defend the suit.  Discovery is ongoing, and the case is currently set for trial in November 2013.

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STOCK OPTIONS AND WARRANTS (Details 1) (USD $)

Mar. 31, 2013

Dec. 31, 2012

Warrants outstanding 3,870,389

Outstanding Weighted Average Exercise Prices $ 0.69 $ 0.69

Warrant [Member]

Warrants outstanding 118,953

Outstanding Weighted Average Exercise Prices $ 27.58

Weighted average remaining life (Yrs) 2 years 22 days

Warrant [Member]

Warrants outstanding 1,000

Outstanding Weighted Average Exercise Prices $ 30

Weighted average remaining life (Yrs) 2 years 8 months

Warrant [Member]

Warrants outstanding 860,086

Outstanding Weighted Average Exercise Prices $ 0.55

Weighted average remaining life (Yrs) 29 days

Warrant [Member]

Warrants outstanding 206,039

Outstanding Weighted Average Exercise Prices $ 42.53

Weighted average remaining life (Yrs) 9 months 4 days

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STOCK OPTIONS AND WARRANTS (Details 2) (USD $)	3 Months Ended
STOCK OPTIONS AND WARRANTS (Details 2) (USD $)	Mar. 31, 2013
Number of shares
Outstanding	3,870,389
Exercised
Granted
Forfeited
Expired
Outstanding	3,870,389
Weighted average exercise price
Outstanding Weighted Average Exercise Prices	$ 0.69
Exercised
Granted
Forfeited
Expired
Outstanding Weighted Average Exercise Prices	$ 0.69

SUBSEQUENT EVENTS (Details Narrative) (USD $)	3 Months Ended
SUBSEQUENT EVENTS (Details Narrative) (USD $)	Mar. 31, 2013
May Notes Subsequent [Member]
Unsecured promissory notes issued	$ 600,000
Stock issued with notes per $25K note	5,000
Unsecured promissory notes interest rate	12.00%
Warrants issued	600,000
Warrant share price	$ 1.1
Convertible May Notes [Member]
Unsecured promissory notes issued	150,000
Stock issued with notes per $25K note	5,000
Unsecured promissory notes interest rate	9.00%
Warrant share price	$ 1.00
May Notes Conversion [Member]
Unsecured promissory notes issued	$ 600,000

CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)	3 Months Ended
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net loss	$ (1,556,898)	$ (392,429)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	6,226
Amortization	47,795
Stock issued to founders		855
Fair value of stock issued for services	195,600
Stock based compensation	436,403	3,281
Accounts receivable	(50,775)
Inventory	303,205	(32,263)
Prepaid expenses and other current assets	(17,367)	(65,448)
Other assets		(686,223)
Accounts payable and accrued expenses	(251,319)	187,668
Net cash used in operating activities	(887,130)	(984,559)
Cash flows from investing activities:
Change in restricted cash	262	(81,000)
Net cash provided by investing activities	262	(81,000)
Cash flow from financing activities:
Proceeds from issuance in common stock		1,625,855
Proceeds from notes payable	1,049,000
Repayments on notes payable	(135,000)
Net cash provided by financing activities	914,000	1,625,855
NET INCREASE IN CASH	27,132	559,441
CASH - beginning of period	4,449
CASH - end of period	31,581	559,441
SUPPLEMENTAL DISCLOSURES
Interest paid in cash	13,795
Non-cash transactions:
Conversion of preferred stock to common stock	$ 25,304